Document:

Exhibit 10.1 Centrica SPA

EXHIBIT 10.1

LNG SALE AND PURCHASE AGREEMENT
(FOB)

Dated    March 22, 2013

BETWEEN
SABINE PASS LIQUEFACTION, LLC
(Seller)
AND
CENTRICA PLC
(Buyer)

Table of Contents
	
				
	 
	 
	 
	Page No.

	1.
	Definitions and Interpretation
	 1

	 
	1.1
	Definitions
	 1

	 
	1.2
	Interpretation
	 14

	 
	1.3
	Replacement of Rates and Indices No Longer Available
	 15

	2.
	Approvals and Conditions Precedent
	 16

	 
	2.1
	Approvals
	 16

	 
	2.2
	Conditions Precedent
	 17

	3.
	Subject Matter
	 18

	 
	3.1
	Sale and Purchase
	 18

	 
	3.2
	Facilities
	 19

	 
	3.3
	Destination
	 20

	4.
	Term
	 20

	 
	4.1
	Term
	 20

	 
	4.2
	Date of First Commercial Delivery
	 21

	 
	4.3
	Early First Window Period
	 22

	 
	4.4
	Delayed Date of First Commercial Delivery
	 22

	 
	4.5
	Contract Year
	 23

	5.
	Quantities
	 23

	 
	5.1
	ACQ
	 23

	 
	5.2
	Adjusted Annual Contract Quantity
	 24

	 
	5.3
	Round-Up/Round-Down Quantities
	 24

	 
	5.4
	Major Scheduled Maintenance and Inspections
	 25

	 
	5.5
	Buyer's Purchase Obligation
	 26

	 
	5.6
	Seller's Delivery Obligation
	 27

	 
	5.7
	Buyer's Right to Suspend Deliveries
	 27

	6.
	Delivery Point, Title and Risk
	 29

	 
	6.1
	Delivery Point
	 29

	 
	6.2
	Title and Risk
	 30

	7.
	Transportation and Loading
	 30

	 
	7.1
	Transportation by Buyer
	 30

	 
	7.2
	Sabine Pass Facility
	 30

	 
	7.3
	Compatibility of the Sabine Pass Facility with LNG Tankers
	 32

	 
	7.4
	Buyer Inspection Rights in Respect of the Sabine Pass Facility
	 32

	 
	7.5
	LNG Tankers
	 33

	 
	7.6
	LNG Tanker Inspections; LNG Tanker Vetting Procedures; Right to Reject LNG Tanker
	 36

	 
	7.7
	Port Liability Agreement
	 37

	 
	7.8
	Sabine Pass Marine Operations Manual
	 38

	 
	7.9
	Loading of LNG Tankers
	 39

	 
	7.10
	Notice of Readiness
	 40

	 
	7.11
	Berthing Assignment
	 41

	 
	7.12
	Berth Laytime
	 42

	 
	7.13
	LNG Transfers at the Sabine Pass Facility
	 43

	 
	 
	 
	 

	 
	 
	 
	 

 i

	
				
	 
	7.14
	LNG Tanker Not Ready for LNG Transfer; Excess Laytime
	 44

	 
	7.15
	Cooperation
	 46

	 
	7.16
	Cool-Down and Gas-Up of LNG Tankers
	 46

	8.
	Annual Delivery Program
	 48

	 
	8.1
	Programming Information
	 48

	 
	8.2
	Determination of Annual Delivery Program
	 49

	 
	8.3
	Changes to Annual Delivery Program
	 50

	 
	8.4
	Ninety Day Schedule
	 51

	 
	8.5
	Force Majeure Affecting LNG Tanker
	 51

	9.
	Contract Sales Price
	 51

	 
	9.1
	Contract Sales Price
	 51

	10.
	Invoicing and Payment
	 53

	 
	10.1
	Invoices
	 53

	 
	10.2
	Payment
	 54

	 
	10.3
	Disputed Invoice
	 55

	 
	10.4
	Delay in Payment
	 56

	 
	10.5
	Audit Rights
	 56

	 
	10.6
	Seller's Right to Suspend Performance
	 57

	 
	10.7
	Final Settlement
	 57

	11.
	Taxes
	 58

	 
	11.1
	Responsibility
	 58

	 
	11.2
	Seller Taxes
	 58

	 
	11.3
	Buyer Taxes
	 58

	 
	11.4
	Withholding Taxes
	 59

	 
	11.5
	Sales Tax
	 59

	 
	11.6
	Mitigation
	 59

	 
	11.7
	Refunds
	 60

	12.
	Quality
	 60

	 
	12.1
	Specification
	 60

	 
	12.2
	Determining LNG Specifications
	 61

	 
	12.3
	Off-Specification LNG
	 61

	13.
	Measurements and Tests
	 63

	 
	13.1
	LNG Measurement and Tests
	 63

	 
	13.2
	Parties to Supply Devices
	 63

	 
	13.3
	Selection of Devices
	 63

	 
	13.4
	Tank Gauge Tables of LNG Tanker
	 63

	 
	13.5
	Gauging and Measuring LNG Volumes Loaded
	 64

	 
	13.6
	Samples for Quality Analysis
	 64

	 
	13.7
	Quality Analysis
	 64

	 
	13.8
	Operating Procedures
	 64

	 
	13.9
	MMBtu Quantity Delivered
	 64

	 
	13.10
	Verification of Accuracy and Correction for Error
	 64

	 
	13.11
	Costs and Expenses
	 65

	14.
	Force Majeure
	 65

	 
	14.1
	Force Majeure
	 65

	 
	14.2
	Limitations on Force Majeure
	 66

	 
	 
	 
	 

	 
	 
	 
	 

 ii

	
				
	 
	14.3
	Notification
	 68

	 
	14.4
	Measures
	 68

	 
	14.5
	No Extension of Term
	 68

	 
	14.6
	Settlement of Industrial Disturbances
	 68

	 
	14.7
	Foundation Customer Priority
	 68

	15.
	Liabilities and Indemnification
	 69

	 
	15.1
	General
	 69

	 
	15.2
	Limitations on Liability
	 69

	 
	15.3
	Buyer's Credit; Credit Support
	 71

	 
	15.4
	Third Party Liability
	 71

	 
	15.5
	Seller's Insurance
	 73

	 
	15.6
	Buyer's Insurance
	 73

	16.
	Safety
	 73

	 
	16.1
	General
	 73

	 
	16.2
	Third Parties
	 74

	17.
	Representations, Warranties and Undertakings
	 74

	 
	17.1
	Representations and Warranties of Buyer
	 74

	 
	17.2
	Representations and Warranties of Seller
	 74

	 
	17.3
	Business Practices
	 75

	18.
	Exchange of Information
	 75

	19.
	Confidentiality
	 75

	 
	19.1
	Duty of Confidentiality
	 75

	 
	19.2
	Permitted Disclosures
	 76

	 
	19.3
	Duration of Confidentiality
	 77

	20.
	Default and Termination
	 77

	 
	20.1
	Termination Events
	 77

	 
	20.2
	Termination
	 79

	 
	20.3
	Survival
	 80

	21.
	Dispute Resolution and Governing Law
	 80

	 
	21.1
	Dispute Resolution
	 80

	 
	21.2
	Expert Determination
	 83

	 
	21.3
	Governing Law
	 84

	 
	21.4
	Immunity
	 84

	22.
	Assignments
	 85

	 
	22.1
	Merger, Consolidation
	 85

	 
	22.2
	Assignment by Buyer
	 85

	 
	22.3
	Assignments by Seller
	 86

	 
	22.4
	Seller Financing
	 86

	23.
	Contract Language
	 87

	24.
	Miscellaneous
	 88

	 
	24.1
	Disclaimer of Agency
	 88

	 
	24.2
	Entire Agreement
	 88

	 
	24.3
	Third Party Beneficiaries
	 88

	 
	24.4
	Amendments and Waiver
	 88

	 
	24.5
	Exclusion
	 88

	 
	24.6
	Further Assurances
	 88

	 
	 
	 
	 

	 
	 
	 
	 

 iii

	
				
	 
	24.7
	Severability
	 89

	25.
	Notices
	 89

	 
	25.1
	Form of Notice
	 89

	 
	25.2
	Effective Time of Notice
	 90

	26.
	Business Practices
	 90

	 
	26.1
	Trade Law Compliance
	 90

	 
	26.2
	Use of LNG
	 91

	 
	26.3
	Prohibited Practices
	 91

	 
	26.4
	Records; Audit
	 92

	 
	26.5
	Indemnity
	 92

	
		
	 
	 

	Exhibit A
	Measurements

	Exhibit B
	Form of Port Liability Agreement

	Exhibit C
	Form of Guaranty

	Exhibit D
	Form of Direct Agreement

	Exhibit E
	Form of Tug Services Agreement

	Exhibit F
	Tug Characteristics

 iv

LNG SALE AND PURCHASE AGREEMENT
THIS LNG SALE AND PURCHASE AGREEMENT (“Agreement”) is made and entered into as of March 22, 2013 (the “Effective Date”), by and between Sabine Pass Liquefaction, LLC, a Delaware limited liability company whose principal place of business is located at 700 Milam St., Suite 800, Houston, TX 77002 (“Seller”), and Centrica plc, a company registered in England and Wales whose principal place of business is located at Millstream, Maidenhead Road, Windsor, SL4 5GD, United Kingdom (“Buyer”).  Buyer and Seller are each referred to herein as a “Party” and collectively as the “Parties”.
Recitals
		
	(1)
	Seller's Affiliate, Sabine Pass LNG, L.P. (“SPLNG”), owns and operates a liquefied natural gas (“LNG”) receiving and regasification terminal situated on the Pass Channel of the Sabine Neches Waterway in southwest Cameron Parish, Louisiana;

		
	(2)
	Seller is developing and intends to construct, own and operate liquefaction facilities of up to six (6) modules, each capable of producing approximately four decimal two (4.2) million tonnes per annum of LNG production capacity, which will be operated simultaneously with a portion of the currently existing LNG import capacity at the Sabine Pass Facility, making the Sabine Pass Facility a bi-directional LNG import and export terminal;

		
	(3)
	SPLNG provides berthing, storage, regasification, and other services at the Sabine Pass Facility to Seller;

		
	(4)
	Buyer desires to purchase LNG at the Sabine Pass Facility and transport such LNG to one or more Discharge Terminals; and

		
	(5)
	 Seller and Buyer desire to execute a definitive agreement setting out the Parties' respective rights and obligations in relation to the sale and purchase of LNG.

It is agreed:
		
	1.
	Definitions and Interpretation

		
	1.1
	Definitions

The words and expressions below shall, unless the context otherwise requires, have the meanings respectively assigned to them:
		
	AAA:
	as defined in Section 21.1.2;

		
	Acceptable Credit Rating:
	two Credit Ratings that are each  equal to or better than the following: (i) Baa3 by Moody's Investors Service, Inc., (ii) BBB- by Standard & Poor's Rating Services, a division of McGraw-Hill Companies, (iii) BBB- by Fitch, Inc., or (iv) any comparable Credit Ratings by any other nationally recognized statistical rating organizations registered with the U.S. Securities and Exchange Commission, including any 

successors to Moody's Investors Service, Inc., Standard & Poor's Rating Services, or Fitch, Inc.;
		
	Acceptable Guarantor:
	an Affiliate of Buyer that has an Acceptable Credit Rating;

		
	ACQ:
	as defined in Section 5.1.1;

		
	Actual Laytime:
	as defined in Section 7.12.2;

Adjusted Annual Contract Quantity
		
	or AACQ:
	as defined in Section 5.2;

		
	Adverse Weather Conditions:
	weather or sea conditions actually experienced at or near the Sabine Pass Facility that are sufficiently severe: (i) to prevent an LNG Tanker from proceeding to berth, or loading or departing from berth, in accordance with one or more of the following: (a) regulations published by a Governmental Authority; (b) an Approval; or (c) an order of a Pilot; (ii) to cause an actual determination by the master of an LNG Tanker that it is unsafe for such LNG Tanker to berth, load, or depart from berth; or (iii) to prevent or severely limit the production capability of the Sabine Pass Facility;

		
	Affiliate:
	with respect to any Person, any other Person which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with such Person; for purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the direct or indirect ownership of fifty percent (50%) or more of the voting rights in a Person or the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or otherwise;

		
	Agreement:
	this agreement, including the Schedules and Exhibits hereto, as the same may be amended, modified or replaced from time to time;

 2

		
	Allotted Laytime:
	as defined in Section 7.12.1;

		
	Annual Delivery Program or ADP:
	as defined in Section 8.2.3;

		
	Applicable Laws: 
	in relation to matters covered by this Agreement, all applicable laws, statutes, rules, regulations, ordinances, codes, standards and rules of common law, and judgments, decisions, interpretations, orders, directives, injunctions, writs, decrees, stipulations, or awards of any applicable Governmental Authority or duly authorized official, court or arbitrator thereof, in each case, now existing or which may be enacted or issued after the Effective Date;

		
	Approvals:
	any and all permits (including work permits), franchises, authorizations, approvals, grants, licenses, visas, waivers, exemptions, consents, permissions, registrations, decrees, privileges, variances, validations, confirmations or orders granted by or, where applicable, filed with any Governmental Authority, including the Export Authorizations;

		
	Bankruptcy Event:
	with respect to any Person: (i) such Person's suspension of payment of, or request to any court for a moratorium on payment of, all or a substantial part of such Person's debts, (ii) such Person's making of a general assignment or any composition with or for the benefit of its creditors except to the extent otherwise permitted by Section 22, (iii) any filing, or consent by answer by such Person to the filing against it, of a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, or (iv) any order under the bankruptcy or insolvency laws of any jurisdiction: (a) entered for the winding up, bankruptcy, liquidation, dissolution, custodianship or administration with respect to such Person or any substantial part of such Person's property; (b) constituting an order for relief with respect to such Person; (c) approving a petition for relief or reorganization or any other petition in bankruptcy or insolvency law with respect to such Person; or (d) approving any petition filed in bankruptcy or insolvency law against such Person;

 3

		
	Btu:
	the amount of heat equal to one thousand fifty-five decimal zero five six (1,055.056) Joules;

		
	Business Day:
	any Day (other than Saturdays, Sundays and national holidays in the United States of America) on which commercial banks are normally open to conduct business in the United States of America;

		
	Buyer:
	as defined in the Preamble;

		
	Buyer Taxes:
	as defined in Section 11.3;

		
	Cargo DoP Payment:
	as defined in Section 5.6.2;

		
	Cargo DoP Quantity:
	as defined in Section 5.6.2;

		
	Cargo Shortfall Quantity:
	as defined in Section 5.5.2;

		
	Claim: 
	all claims, demands, legal proceedings, or actions that may exist, arise, or be threatened currently or in the future at any time following the Effective Date, whether or not of a type contemplated by any Party, and whether based on federal, state, local, statutory or common law or any other Applicable Law;

		
	Composite ADP: 
	as defined in Section 8.2.4;

		
	Conditions Precedent:
	as defined in Section 2.2.1;

		
	Confidential Information:
	as defined in Section 19.1;

		
	Connecting Pipeline:
	each of the Creole Trail Pipeline, the Kinder Morgan Louisiana Pipeline, or such other pipeline as may be interconnected to the Sabine Pass Facility, as applicable;

		
	Contract Year:
	as defined in Section 4.5;

		
	Cover Damages:
	as defined in Section 5.5.3(a);

		
	CP Deadline:
	as defined in Section 2.2.3;

		
	CP Fulfillment Date:
	as defined in Section 2.2.2;

 4

		
	Credit Rating:
	a credit rating in respect of the senior, unsecured, long-term debt (not supported by third party credit enhancement) of a Person;

		
	Creole Trail Pipeline:
	that certain Gas pipeline, owned and operated by the Cheniere Creole Trail Pipeline, L.P., which interconnects with the Sabine Pass Facility in Cameron Parish, Louisiana, and extending for approximately ninety-two (92) miles to a point of interconnection with major interstate Gas pipelines near De Quincy, Louisiana; and which may in the future be extended by approximately fifty (50) miles (upon such election by Cheniere Creole Trail Pipeline, L.P.) to a point of interconnection with a major interstate Gas pipeline near Rayne, Louisiana;

		
	CSP:
	as defined in Section 9.1.1;

		
	Cubic Meter:
	in relation to Gas, the quantity of dry ideal Gas, at a temperature of fifteen (15) degrees Celsius and a pressure of one hundred one decimal three two five (101.325) kilopascals absolute contained in a volume of one (1) cubic meter;

		
	Date of First Commercial Delivery:
	as defined in Section 4.2;

		
	Day:
	a period of twenty-four (24) consecutive hours starting at 00:00 hours local time in Cameron Parish, Louisiana;

		
	Delivery Point:
	as defined in Section 6.1;

		
	Delivery Window:
	a twenty-four (24) hour period starting at 6:00 a.m. Central Time on a specified Day and ending twenty-four (24) consecutive hours thereafter that is allocated to Buyer under the ADP or Ninety Day Schedule, as applicable;

		
	Demurrage Event:
	as defined in Section 7.12.3;

		
	Designated Train:
	the fifth LNG production train that is commercially operable, as determined in accordance with Section 4.3, at the Sabine Liquefaction Facility including those facilities included in the Sabine Pass Facility that are necessary to enable Seller to fulfill its obligations to Buyer from such LNG production train; 

 5

		
	Direct Agreement:
	as defined in Section 22.4.2;

		
	Discharge Terminal:
	with respect to each cargo of LNG taken or scheduled to be taken by Buyer pursuant to this Agreement, the facilities intended by Buyer to be utilized for the unloading, reception, discharge, storage, treatment (if necessary), and regasification of the LNG and the processing and send-out of Gas or regasified LNG, and other relevant infrastructure, including marine facilities (such as breakwaters and tugs) for the safe passage to berth of LNG Tankers, terminal facilities for the berthing and discharging of LNG Tankers, LNG storage tanks and the regasification plant as specified in the ADP or Ninety Day Schedule, as applicable;

		
	Dispute:
	any dispute or difference of whatsoever nature arising under, out of, in connection with or in relation (in any manner whatsoever) to this Agreement or the subject matter of this Agreement, including (a) any dispute or difference concerning the initial or continuing existence of this Agreement or any provision of it, or as to whether this Agreement or any provision of it is invalid, illegal or unenforceable (whether initially or otherwise); or (b) any dispute or claim which is ancillary or connected, in each case in any manner whatsoever, to the foregoing;

		
	Effective Date:
	as defined in the Preamble;

		
	ETA:
	with respect to an LNG Tanker, the estimated time of arrival of such LNG Tanker at the PBS;

		
	Expert:
	a Person agreed upon or appointed in accordance with Section 21.2.1;

		
	Export Authorizations:
	the FTA Export Authorization and the Non-FTA Export Authorization, either individually or together (as the context requires);

		
	FID:
	as defined in Section 2.2.1(c);

		
	Final Contract Year:
	as defined in Section 4.5(b);

		
	Final Window Period:
	as defined in Section 4.2.4;

 6

		
	First Contract Year:
	as defined in Section 4.5(a);

		
	First Window Period:
	as defined in Section 4.2.1;

		
	Force Majeure:
	as defined in Section 14.1;

		
	Foundation Customer:
	(a) Buyer; and (b) any other customer of Seller, other than an Affiliate of Seller, that enters into an LNG purchase agreement for the purchase and export of no less than zero decimal seven (0.7) million metric tonnes per annum of LNG from the Sabine Pass Facility, with a minimum term of twenty (20) years and an effective date on or prior to the FID for such customer's designated LNG production train located at the Sabine Pass Facility;

		
	Foundation Customer Priority:
	as defined in Section 14.7;

		
	FTA Export Authorization:
	an order from the Office of Fossil Energy of the U.S. Department of Energy granting to Seller the long-term authorization to export the volume per annum of LNG sold and delivered pursuant to this Agreement by vessel from the Sabine Pass Facility to countries that have entered into a free trade agreement with the United States of America, for a specific term, as the same may be supplemented, amended, modified, changed, superseded or replaced from time to time;

		
	Gas:
	any hydrocarbon or mixture of hydrocarbons consisting predominantly of methane that is in a gaseous state;

		
	Governmental Authority:
	any national, regional, state, or local government, or any subdivision, agency, commission or authority thereof (including any maritime authorities, port authority or any quasi-governmental agency), having jurisdiction over a Party (or any Affiliate or direct or indirect owner thereof), a Connecting Pipeline, Gas in a Connecting Pipeline or the Sabine Pass Facility, the Sabine Pass Facility, LNG in the Sabine Pass Facility, an LNG Tanker, a Transporter, the last disembarkation port of an LNG Tanker, a Discharge Terminal, or any Gas pipeline which interconnects with a Connecting Pipeline and which transports Gas to or from a Connecting Pipeline, as the case may be, and acting within its legal authority;

 7

		
	Gross Heating Value:
	the quantity of heat expressed in Btu produced by the complete combustion in air of one (1) cubic foot of anhydrous gas, at a temperature of sixty (60) degrees Fahrenheit and at an absolute pressure of fourteen decimal six nine six (14.696) pounds per square inch, with the air at the same temperature and pressure as the gas, after cooling the products of the combustion to the initial temperature of the gas and air, and after condensation of the water formed by combustion;

		
	Guarantor:
	any Acceptable Guarantor executing a Guaranty for delivery to Seller hereunder; 

		
	Guaranty:
	an irrevocable payment guaranty, in the form attached as Exhibit C hereto, which is executed by a Guarantor in favor of Seller; 

		
	HH:
	the final settlement price (in USD per MMBtu) for the New York Mercantile Exchange's Henry Hub natural gas futures contract for the Month in which the relevant cargo's Delivery Window is scheduled to begin;

		
	ICC:
	as defined in Section 21.2.1;

		
	Indemnified Party:
	as defined in Section 15.4(a);

		
	Indemnifying Party:
	as defined in Section 15.4(a);

		
	Inspection Maintenance Quantity:
	as defined in Section 5.4.2;

		
	International LNG Terminal Standards:
	to the extent not inconsistent with the express requirements of this Agreement, the international standards and practices applicable to the design, construction, equipment, operation or maintenance of LNG receiving and regasification terminals or LNG liquefaction terminals, as the case may be, established by the following (such standards to apply in the following order of priority): (i) a Governmental Authority having jurisdiction over the Sabine Pass Facility, Seller, or Seller's operator; (ii) the Society of International Gas Tanker and Terminal Operators (to the extent applicable); and (iii) any other internationally recognized non-governmental agency or organization with whose standards and practices it is customary for Reasonable and Prudent Operators 

 8

of LNG receiving and regasification terminals or LNG liquefaction terminals, as the case may be, to comply, provided, however, that in the event of a conflict between any of the priorities noted above, the priority with the lowest roman numeral noted above shall prevail;
		
	International LNG Vessel Standards:
	the standards and practices from time to time in force applicable to the ownership, design, equipment, operation or maintenance of LNG vessels established by: (i) the International Maritime Organization; (ii) the Oil Companies International Marine Forum (OCIMF); (iii) the Society of International Gas Tanker and Terminal Operators (SIGTTO) (or any successor body of the same); (iv) the International Navigation Association (PIANC); (v) the International Association of Classification Societies; and (vi) any other internationally recognized agency or non-governmental organization with whose standards and practices it is customary for Reasonable and Prudent Operators of LNG vessels similar to those applicable to this Agreement, to comply, provided, however, that in the event of a conflict between any of the priorities noted above, the priority with the lowest roman numeral noted above shall prevail;

		
	International Standards: 
	(i) with respect to Buyer, the International LNG Vessel Standards; (ii) with respect to Seller, the International LNG Terminal Standards;

		
	In-Transit Final Notice:
	as defined in Section 7.9.3(d);

		
	In-Transit First Notice:
	as defined in Section 7.9.2;

		
	In-Transit Second Notice:
	as defined in Section 7.9.3(a);

		
	In-Transit Third Notice:
	as defined in Section 7.9.3(c);

		
	Kinder Morgan Louisiana Pipeline:
	a high pressure gas pipeline owned and operated by Kinder Morgan Louisiana Pipeline LLC, a Delaware limited liability company, which extends approximately one hundred and thirty-seven (137) miles east and north  from, and interconnects with, the Sabine Pass Facility;

 9

		
	Lender:
	any Person, other than a shareholder of either Party, duly authorized in its principal place of business to lend monies, to finance or to provide financial support in any form in respect of the Sabine Pass Facility, including any export credit agency, funding agency, bondholder, insurance agency or similar institution in relation to the provision of finance or financial support;

		
	Lenders' Agent:
	as defined in Section 22.4.1;

		
	LIBOR:
	on or from any Day, the percentage rate per annum published two (2) London Banking Days before that Day (or, if that Day is not a London Banking Day, published two (2) London Banking Days before the nearest preceding London Banking Day) at 11:00 a.m. London time, by the British Bankers Association that appears on the Reuters Screen LIBOR01 page as three (3) Month USD LIBOR or, if no such rate is published, such other rate representing the cost of three (3) Month USD funds in the London interbank lending market on that Day as reasonably agreed by the Parties;

		
	LNG:
	Gas in a liquid state at or below its point of boiling and at or near atmospheric pressure;

		
	LNG Tanker(s):
	an ocean-going vessel suitable for transporting LNG which complies with the requirements of this Agreement and which Buyer uses, or intends to use, in connection with this Agreement;

		
	Loading Port:
	the port where the Sabine Pass Facility is located, in the vicinity of Cameron Parish, Louisiana, or the port at an alternate supply source pursuant to Section 3.1.2;

		
	London Banking Day:
	any Day (other than Saturdays, Sundays and national holidays in London, England) on which banks are normally open to conduct business in London, England;

		
	Loss:
	any and all losses, liabilities, damages, costs, judgments, settlements and expenses (whether or not resulting from Claims by Third Parties), including interest and penalties with respect thereto and reasonable attorneys' and accountants' fees and expenses;

 10

		
	Major Scheduled Maintenance Quantity:
	as defined in Section 5.4.1;

		
	Measurement Dispute:
	as defined in Section 21.2.1;

		
	Mitigation Sale:
	as defined in Section 5.5.3(b);

		
	MMBtu:
	one million (1,000,000) Btus;

		
	Month:
	each period of time which starts at 00:00 local time in Cameron Parish, Louisiana on the first Day of each calendar month and ends at 24:00 local time in Cameron Parish, Louisiana on the last Day of the same calendar month;

		
	Ninety Day Schedule:
	as defined in Section 8.4;

		
	Non-FTA Export Authorization:
	an order from the Office of Fossil Energy of the U.S. Department of Energy granting to Seller the long-term authorization to export the volume per annum of LNG sold and delivered pursuant to this Agreement by vessel from the Sabine Pass Facility, to all countries that have not entered into a free trade agreement with the United States of America requiring the national treatment for trade in natural gas, which currently has or in the future develops the capacity to import LNG, and with which trade is not prohibited by United States law or policy, for a specific term, as the same may be supplemented, amended, modified, changed, superseded or replaced from time to time;

		
	Notice of Readiness or NOR:
	the notice of readiness issued by an LNG Tanker in accordance with Section 7.10.1;

		
	Off-Spec LNG:
	as defined in Section 12.3.1;

		
	Operational Tolerance:
	as defined in Section 5.5.3(c);

		
	P&I Club:
	a Protection and Indemnity Club that is a member of the International Group of P&I Clubs;

		
	P&I Insurance:
	as defined in Section 15.6(b);

		
	Party:
	Buyer or Seller, and Parties means both Buyer and Seller;

		
	Payor:
	as defined in Section 11.4;

 11

		
	PBS:
	the customary Pilot boarding station at the Loading Port where the Pilot boards the LNG Tanker, as determined by the applicable Governmental Authority or other entity with authority to regulate transit and berthing of vessels at the Loading Port;

		
	Person:
	any individual, corporation, partnership, trust, unincorporated organization or other legal entity, including any Governmental Authority;

		
	Pilot:
	any Person engaged by Transporter to come on board the LNG Tanker to assist the master in pilotage, mooring and unmooring of such LNG Tanker;

		
	Port Charges:
	all charges of whatsoever nature (including rates, tolls, dues, fees, and imposts of every description) in respect of an LNG Tanker entering or leaving the Loading Port or loading LNG, including wharfage fees, in-and-out fees, line handling charges, and charges imposed by fire boats, tugs and escort vessels, the U.S. Coast Guard, a Pilot, and any other authorized Person assisting an LNG Tanker to enter or leave the Loading Port, and further including port use fees, throughput fees and similar fees payable by users of the Loading Port (or by Seller or its operator on behalf of such users) to the West Cameron, Louisiana Port Commission and Jefferson County, Texas Waterway and Navigation District;

		
	Port Liability Agreement:
	an agreement for use of the port and marine facilities located at the Loading Port, to be entered into as described in Section 7.7.1, in the form attached in Exhibit B hereto as may be amended pursuant to Section 7.7.4;

		
	Provisional Invoice:
	as defined in Section 10.1.8(a);

		
	Reasonable and Prudent Operator:
	a Person seeking in good faith to perform its contractual obligations, and in so doing, and in the general conduct of its undertaking, exercising that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced operator, complying with all applicable International Standards and practices and regulations and approvals of Governmental Authorities, engaged in the same type 

 12

of undertaking under the same or similar circumstances and conditions;
		
	Regasification Capacity Users:
	from time to time, Persons purchasing LNG terminalling services from SPLNG, regardless of the short-term or long-term duration of the underlying terminal use agreement;

		
	Round-Down Quantity:
	as defined in Section 5.3.2;

		
	Round-Up Quantity:
	as defined in Section 5.3.1;

		
	Rules:
	as defined in Section 21.1.2;

		
	Sabine Liquefaction Facility:
	the facilities that Seller is developing and intends to construct, own and operate adjacent to, or at the same location as the existing LNG receiving and regasification terminal in Cameron Parish, Louisiana owned by SPLNG, including the liquefaction trains and associated facilities, both inside and outside the LNG plant, the Gas pretreatment and processing facilities, and all other related facilities inclusive of the Designated Train and all other trains;

		
	Sabine Pass Facility:
	(i) the existing LNG receiving and regasification terminal owned by SPLNG, including storage tanks, utilities, jetties, berthing and marine facilities, and all other related facilities; and (ii) the Sabine Liquefaction Facility;

		
	Sabine Pass Marine Operations Manual:
	as defined in Section 7.8;

		
	SCF:
	for Gas, the quantity of anhydrous Gas that occupies one (1) cubic foot of space at a temperature of sixty (60) degrees Fahrenheit and a pressure of fourteen decimal six nine six (14.696) pounds per square inch absolute;

		
	Scheduled Cargo Quantity:
	the quantity of LNG (in MMBtus) identified in the ADP or Ninety Day Schedule to be loaded onto an LNG Tanker in a Delivery Window in accordance with Section 8;

		
	Second Window Period:
	as defined in Section 4.2.2;

		
	Seller:
	as defined in the Preamble;

 13

		
	Seller Aggregate Liability:
	as defined in Section 15.2.6(b);

		
	Seller Liability Cap:
	as defined in Section 15.2.6(c);

		
	Seller Taxes:
	as defined in Section 11.2;

		
	SI:
	the International System of Units;

		
	Specifications:
	as defined in Section 12.1.1;

		
	SPLNG:
	as defined in the Recitals;

		
	Suspension Fee:
	as defined in Section 5.7.2;

		
	Term:
	as defined in Section 4.1.1;

		
	Terminating Party:
	as defined in Section 20.2.1;

		
	Termination Events:
	as defined in Section 20.1;

		
	Third Party:
	a Person other than a Party;

		
	Third Party Claim:
	as defined in Section 15.4(a);

		
	Third Window Period:
	as defined in Section 4.2.3;

		
	Transporter:
	any Person who is a registered or disponent owner of, or any Person who contracts with the same or with Buyer for the purposes of providing, operating, or chartering any of the LNG Tankers;

		
	USD or US$:
	the lawful currency from time to time of the United States of America; 

		
	X0:
	the constant applicable on the Effective Date and equal to USD three decimal zero zero per MMBtu (US$3.00/MMBtu); and

		
	Xy:
	the constant applicable for a given Contract Year expressed in USD per MMBtu and calculated in accordance with Section 9.1.2

		
	1.2
	Interpretation

For purposes of this Agreement:

 14

		
	1.2.1
	The titles, headings, and numbering in this Agreement are included for convenience only and will have no effect on the construction or interpretation of this Agreement.

		
	1.2.2
	References in this Agreement to Sections and Exhibits are to those of this Agreement unless otherwise indicated.  References to this Agreement and to agreements and contractual instruments will be deemed to include all exhibits, schedules, appendices, annexes, and other attachments thereto and all subsequent amendments and other modifications to such instruments, to the extent such amendments and other modifications are not prohibited by the terms of this Agreement.

		
	1.2.3
	The word “include” or “including” will be deemed to be followed by “without limitation.”  The term “will” has the same meaning as “shall,” and thus imposes an obligation.

		
	1.2.4
	Whenever the context so requires, the singular includes the plural and the plural includes the singular, and the gender of any pronoun includes the other gender.

		
	1.2.5
	Unless otherwise indicated, references to any statute, regulation or other law will be deemed to refer to such statute, regulation or other law as amended or any successor law.

		
	1.2.6
	All references to a Person shall include such Person's successors and permitted assigns.

		
	1.2.7
	Unless otherwise indicated, any reference to a time of Day shall be to Central Time in the United States of America.

		
	1.2.8
	Approximate conversions of any unit of measurement contained in parenthesis following the primary unit of measurement included in Sections 1 through 26 of this Agreement are inserted as a matter of operational convenience only to show the approximate equivalent in such different measurement.  The obligations of the Parties under Sections 1 through 26 of this Agreement will be undertaken in respect of the primary unit of measurement and not in respect of any such approximate conversion.

		
	1.3
	Replacement of Rates and Indices No Longer Available

		
	1.3.1
	If (a) a publication that contains a rate or index used in this Agreement ceases to be published for any reason or (b) such a rate or index ceases to exist, is materially modified, or no longer is used as a liquid trading point for Gas (as applicable), so as systematically to change its economic result, or is disaggregated, displaced or abandoned, for any reason, the Parties shall promptly discuss, with the aim of jointly selecting a rate or index or rates or 

 15

indices to be used in place of such rates and indices that maintains the intent and economic effect of those original rates or indices.
		
	1.3.2
	If the Parties fail to agree on a replacement rate or index within thirty (30) Days, the Parties may submit such issue to an Expert pursuant to Section 21.2, as amended by the provisions of this Section 1.3.2. Any Expert selected shall be instructed to select the published rate or index, or a combination of published rates or indices, with adjustments as necessary or appropriate, that most nearly preserves the intent and economic result of the original rates or indices. If the Parties are not able to agree upon an Expert within ten (10) Days after the receipt of the notice of request for expert determination, either Party may elect to refer the determination of the replacement rate or index for arbitration in accordance with Section 21.1.

		
	1.3.3
	If any rate used in this Agreement is not published for a particular date, but the publication containing such rate continues to be published and the rate itself continues to exist, the Parties shall use the published rate in effect for the date such rate was most recently published prior to the particular date, unless otherwise provided in this Agreement.

		
	1.3.4
	If any index used in this Agreement is not published for a particular date, but the publication containing such index continues to be published and the index itself continues to exist, the Parties shall use the index from the geographic location closest in proximity to the unpublished index from the same publication in effect for the particular date adjusted by the difference between the same indices from the most recent publication published prior to the particular date, unless otherwise provided in this Agreement.

		
	1.3.5
	If an incorrect value is published for any rate or index used in this Agreement and such error is corrected and published within ninety (90) Days of the date of the publication of such incorrect rate or index, such corrected rate or index will be substituted for the incorrect rate or index and any calculations involving such rate or index will be recalculated and the Parties will take any necessary actions based upon these revised calculations, including adjustments of amounts previously invoiced and/or paid.

		
	2.
	Approvals and Conditions Precedent

		
	2.1
	Approvals

		
	2.1.1
	Seller shall obtain and maintain, or cause to be obtained and maintained, in force the Export Authorizations at all times commencing no later than the CP Deadline, except as may be excused by Force Majeure.  Buyer and Seller shall use reasonable efforts to obtain and maintain in force, and shall use reasonable efforts to cause its Affiliates to obtain and maintain in force, the other Approvals (other than the Export Authorizations) which are required 

 16

for the performance of this Agreement, and shall cooperate fully with each other whenever necessary for this purpose.
		
	2.1.2
	If the laws of the United States of America do not require maintenance of or compliance with one or both Export Authorization(s) to export LNG from the United States of America, then for so long as the laws of the United States of America do not require such maintenance or compliance, the Parties agree that this Agreement shall be read and construed to omit those provisions of this Agreement relating to such affected Export Authorization(s) and neither Party shall have any rights or obligations (including obligations to maintain such affected Export Authorization(s), rights to terminate this Agreement and claims of Force Majeure) in respect of any such Export Authorization(s).

		
	2.2
	Conditions Precedent

		
	2.2.1
	The Parties recognize and agree that this Agreement (other than the provisions of this Section 2.2 and Sections 1, 2.1, 4.1, 14.1 to 14.6, and 15 to 26, which shall all be in full force and effect as of the Effective Date) shall not become effective unless and until each of the following conditions precedent (the “Conditions Precedent”) have been satisfied or waived:

		
	(a)
	Seller has received all Approvals required to construct and operate the Designated Train and any new or modified existing facilities at the Sabine Pass Facility needed to enable Seller to fulfill its obligations under this Agreement (not including any Approvals which will not be issued until after construction is commenced);

		
	(b)
	Seller has secured the necessary financing arrangements to construct and operate the Sabine Liquefaction Facility and any new or modified existing facilities related thereto in respect of the Designated Train.

		
	(c)
	Seller has taken a positive final investment decision in respect of the Designated Train (“FID”), in its sole discretion, to construct the liquefaction facilities and to construct any other required facilities, or modify existing facilities, in relation to the addition of any liquefaction facilities in respect of the Designated Train; 

		
	(d)
	Seller has obtained the FTA Export Authorization and the Non-FTA Export Authorization; 

		
	(e)
	the Approvals required for Seller to export LNG from the Designated Train are in full force and effect; and

		
	(f)
	Seller has issued to the Person primarily responsible for construction of the Designated Train and any other facilities at the Sabine Pass 

 17

Facility needed to enable Seller to fulfill its obligations under this Agreement, an unconditional full notice to proceed with the construction of Designated Train and any other facilities at the Sabine Pass Facility needed to enable Seller to fulfill its obligations under this Agreement.
		
	2.2.2
	Promptly upon satisfaction of each of the Conditions Precedent, Seller shall notify Buyer of such satisfaction.  Except in respect of the Condition Precedent set forth in Section 2.2.1(d) (which can be waived only by agreement of both Parties), satisfaction of each Condition Precedent can be waived only by Seller upon notice to Buyer.  The date that the last of the Conditions Precedent is fulfilled or waived shall be the “CP Fulfillment Date”.  At Buyer's request, Seller shall meet with Buyer on a reasonably frequent basis (but not less than one meeting every three (3) Months) to advise Buyer on the progress of the satisfaction of each of the Conditions Precedent.

		
	2.2.3
	Seller shall endeavor in good faith to satisfy or procure the satisfaction of each Condition Precedent by June 30, 2015 (as may be revised in accordance with Section 2.2.4, the “CP Deadline”).

		
	2.2.4
	If any Condition Precedent is not satisfied by the CP Deadline (as such CP Deadline may be revised pursuant to this Section 2.2.4), in circumstances other than where it has been waived in accordance with Section 2.2.2, Seller shall give notice to that effect to Buyer and, if requested by Buyer, shall provide an explanation of the reason for the delay in satisfaction of the Conditions Precedent and the revised date by which it is reasonably expected that all Conditions Precedent will be satisfied.  If the Parties agree in writing to change the deadline for satisfaction of the Conditions Precedent to the revised date notified by Seller or another later date, such revised date shall be deemed the CP Deadline for all purposes of this Agreement.

		
	2.2.5
	If any Condition Precedent has been neither satisfied nor waived by the CP Deadline (as such CP Deadline may be revised pursuant to Section 2.2.4), then at any time after such CP Deadline either Party may give to the other Party a notice of termination of this Agreement.  Such notice of termination shall be effective in accordance with Section 20.2 if any Condition Precedent remains neither satisfied nor waived prior to such date.

		
	3.
	Subject Matter

		
	3.1
	Sale and Purchase

		
	3.1.1
	Seller shall sell and make available for delivery, or compensate Buyer if not made available for delivery, LNG in cargoes at the Delivery Point, and Buyer shall take and pay for, or compensate Seller if not taken, such LNG, in the 

 18

quantities and at the prices set forth in and otherwise in accordance with and subject to the provisions of this Agreement.
		
	3.1.2
	Seller intends to load cargoes from the Sabine Pass Facility, but, subject to the prior written consent of Buyer (such consent not to be unreasonably withheld), Seller may deliver cargoes to Buyer from any alternate source; provided, that:

		
	(a)
	LNG from such alternate source shall, when made available by Seller to Buyer, comply with the Specifications;

		
	(b)
	Seller has agreed to reimburse Buyer an amount equal to Buyer's reasonable estimate of the increased costs that would be incurred as a result of the delivery of LNG at such alternate source;

		
	(c)
	the delivery of LNG at an alternate source is necessitated by operational conditions affecting the Sabine Pass Facility that have reduced the capability of the Sabine Pass Facility to produce or load LNG, despite Seller having acted as a Reasonable and Prudent Operator;

		
	(d)
	the receipt of LNG at an alternate source will not affect the ability of LNG Tankers to perform other cargo receipts and deliveries in a timely fashion;

		
	(e)
	the facilities at the alternate source are compatible with LNG Tankers;

		
	(f)
	the alternate source and the voyage thereto do not present added risks or dangers to any LNG Tanker or personnel of Buyer or any Affiliate of Buyer; and

		
	(g)
	any other condition reasonably imposed by Buyer has been satisfied by Seller to Buyer's reasonable satisfaction.

If the alternate Gas liquefaction facility proposed by Seller is located in the  United States of America Gulf Coast and is owned and operated by Seller or an Affiliate of Seller, then the condition set forth in Section 3.1.2(c) above shall not apply.
		
	3.2
	Facilities

		
	3.2.1
	During the period from the Effective Date and continuing through the Date of First Commercial Delivery, Seller shall proceed diligently to construct, test, commission, maintain and operate the Sabine Pass Facility in accordance with the standards and specifications set forth in Section 7.2.2, or cause same to occur, so as to enable Seller to fulfill its obligations to Buyer under this Agreement.

 19

		
	3.2.2
	Subject to Section 2.1.1, Seller covenants that, acting as a Reasonable and Prudent Operator, it shall at all relevant times from the Date of First Commercial Delivery and continuing throughout the Term own, or have access to and use of, and maintain and operate or cause to be maintained and operated, consistent with International Standards and subject to all Applicable Laws, the Sabine Pass Facility so as to enable Seller to fulfill its obligations to Buyer under this Agreement.

		
	3.3
	Destination

Subject to Section 26.1 and notwithstanding the Discharge Terminal corresponding to any cargo in the ADP or Ninety Day Schedule, Buyer shall be free to (i) sell such LNG free on board at the Sabine Pass Facility or at any other point during a voyage, or at or after the unloading of any LNG purchased hereunder and (ii) transport the LNG to, and market the LNG at, any destination of its choosing, in accordance with the provisions of this Agreement.
		
	4.
	Term

		
	4.1
	Term

		
	4.1.1
	Term.  This Agreement shall enter into force and effect as set forth in Section 2.2.1 and, subject to Section 20, shall continue in force and effect until the twentieth (20th) anniversary of the Date of First Commercial Delivery, unless extended pursuant to Section 4.1.2 (the “Term”).

		
	4.1.2
	Extension of Term.

		
	(a)
	On or before the seventeenth (17th) anniversary of the Date of First Commercial Delivery, Buyer may, by notice to Seller, extend the Term of this Agreement as to any portion of the ACQ by a period of up to ten (10) years beyond the initial twenty (20) years as set forth in Section 4.1.1, provided that:

		
	(i)
	(x) the sum of the portion of the ACQ that Buyer has elected to extend, and the ACQs of all other customers purchasing LNG or liquefaction services from the Sabine Liquefaction Facility at all times during the extension period elected by Buyer is equal to or greater than one hundred eighty-two million five hundred thousand (182,500,000) MMBtu, or (y) Buyer agrees to increase its ACQ during the extension period elected by Buyer such that the sum of Buyer's ACQ and the ACQs of all other customers purchasing LNG or liquefaction services from the Sabine Liquefaction Facility during the extension period elected by Buyer is equal to or greater than one hundred eighty-two million five hundred thousand (182,500,000) MMBtu; and

 20

		
	(ii)
	Seller is able, by the exercise of reasonable efforts, to maintain in effect all Approvals, including LNG export licenses, necessary for the continued operation of the Sabine Liquefaction Facility during the extension period elected by Buyer.

		
	(b)
	If Seller is unable to maintain in effect all such Approvals during the entire extension period elected by Buyer, Seller shall inform Buyer of the period during which it can maintain such Approvals, and Buyer may, by giving Seller notice no later than thirty (30) Days following receipt of Seller's notice pursuant to this Section 4.1.2(b): (i) modify its election made pursuant to Section 4.1.2(a) such that the extension period is coincident with or less than the period during which Seller can maintain such Approvals or (ii) withdraw its election made pursuant to Section 4.1.2(a).

		
	(c)
	If the Term is extended pursuant to this Section 4.1.2, the Parties shall make such revisions to this Agreement as are necessary to give effect to such extension, including Sections 5.1.1, 5.4.1(e), and 7.16.1(a).

		
	4.2
	Date of First Commercial Delivery

Subject to Section 4.3, the Day notified by Seller to Buyer on which Seller anticipates that the Designated Train will become commercially operable shall be the “Date of First Commercial Delivery”, which Day shall be determined by taking into account development and construction schedules, as set forth below.
		
	4.2.1
	The period that begins on the first Day of the Month that follows the date that is fifty (50) Months after the CP Fulfillment Date and ends one hundred eighty (180) Days later shall be the “First Window Period”.

		
	4.2.2
	Seller shall notify Buyer, at least one hundred twenty (120) Days prior to the commencement of the First Window Period of a ninety (90) Day period falling within the First Window Period (“Second Window Period”) during which the Date of First Commercial Delivery shall occur, or, in the absence of notification by Seller in accordance with this Section 4.2.2, the Second Window Period shall be deemed to be the last ninety (90) Days of the First Window Period.

		
	4.2.3
	Seller shall notify Buyer at least ninety (90) Days prior to the commencement of the Second Window Period of a sixty (60) Day period falling within the Second Window Period (“Third Window Period”) during which the Date of First Commercial Delivery shall occur, or, in the absence of notification by Seller in accordance with this Section 4.2.3, the Third Window Period shall be deemed to be the last sixty (60) Days of the Second Window Period.

 21

		
	4.2.4
	Seller shall notify Buyer at least sixty (60) Days prior to the commencement of the Third Window Period of a thirty (30) Day period falling within the Third Window Period (“Final Window Period”) during which the Date of First Commercial Delivery shall occur, or, in the absence of notification by Seller in accordance with this Section 4.2.4, the Final Window Period shall be deemed to be the last thirty (30) Days of the Third Window Period.

		
	4.2.5
	Seller shall notify Buyer at least forty-five (45) Days prior to the commencement of the Final Window Period of the Day within the Final Window Period which shall be the Date of First Commercial Delivery, or, in the absence of notification by Seller in accordance with this Section 4.2.5, the Date of First Commercial Delivery shall be deemed to be the last Day of the Final Window Period.

		
	4.2.6
	Subject to Section 4.3, the Date of First Commercial Delivery shall be the date so notified pursuant to this Section 4.2, regardless of whether any LNG is scheduled for delivery to Buyer or whether any LNG is in fact so delivered.  Seller will provide non-binding good faith estimates of the Date of First Commercial Delivery from time to time, as credible and relevant information is available (but not less frequently than one (1) update every six (6) Months).  Each window period identified in this Section 4.2 may be extended, and the Date of First Commercial Delivery may be deferred on a Day-for-Day basis, in the event of Force Majeure affecting Seller that delays the Designated Train becoming commercially operable; provided that such extension or deferral shall not exceed four hundred fifty-five (455) Days.

		
	4.3
	Early First Window Period

Buyer and Seller shall each use their reasonable efforts to reduce the fifty (50) Month period between the CP Fulfillment Date and the first (1st) Day of the First Window Period indicated in Section 4.2.1.  Without affecting the other rights and obligations of the Parties hereunder and beginning upon the CP Fulfillment Date, Buyer and Seller shall meet periodically (but in any event not less than once every sixty (60) Days) to discuss the progress of construction of the Designated Train, the time at which the Designated Train is anticipated by Seller to be “commercially operable” as defined in Section 4.4.1, and any additional reasonable efforts that may be made by Seller or Buyer to accelerate the First Window Period.
		
	4.4
	Delayed Date of First Commercial Delivery

		
	4.4.1
	Notwithstanding Section 4.2 to the contrary, if the Designated Train has not become commercially operable by the last Day of the Final Window Period as specified in Section 4.2.4, the Date of First Commercial Delivery shall be the first Day on which the Designated Train is commercially operable, as notified by Seller.  For all purposes of this Agreement, the Designated Train shall not be considered “commercially operable” unless it has been 

 22

commissioned, it is capable of delivering LNG in quantities sufficient and quality necessary to permit Seller to perform its obligations hereunder, and it is constructed in compliance with Section 7.2.2.
		
	4.4.2
	If the Date of First Commercial Delivery does not occur within one hundred eighty (180) Days after the last Day of the Final Window Period (as such window period may have been extended pursuant to Section 4.2.6 due to Force Majeure), Buyer may elect to terminate this Agreement pursuant to Section 20.1.9 by delivering notice of such election to Seller no later than two hundred ten (210) Days after the last Day of the Final Window Period (as such window period may have been extended pursuant to Section 4.2.6 due to Force Majeure). 

		
	4.5
	Contract Year

References to a “Contract Year” mean a period of time from and including January 1st through and including December 31st of the same calendar year, provided that:
		
	(a)
	the first Contract Year is the period of time beginning on the Date of First Commercial Delivery and ending on December 31st of the same calendar year (the “First Contract Year”); and

		
	(b)
	the final Contract Year is the period of time beginning on the January 1st immediately preceding the final Day of the Term and ending on the final Day of the Term (the “Final Contract Year”).

		
	5.
	Quantities

		
	5.1
	ACQ

		
	5.1.1
	Subject to Section 5.1.4, the annual contract quantity (“ACQ”) for any Contract Year shall be an amount equal to ninety-one million two hundred fifty thousand (91,250,000) MMBtu.

		
	5.1.2
	The ACQ for purposes of determining all obligations under this Agreement shall be the amount expressed in MMBtus.  All references in this Agreement to cargoes or other quantities are solely for operational convenience.

		
	5.1.3
	With respect to each Contract Year, the AACQ for the relevant Contract Year shall be scheduled for delivery in the relevant ADP on a reasonably even and ratable basis throughout the relevant Contract Year, taking into consideration planned maintenance at the Sabine Pass Facility.

		
	5.1.4
	If the First Contract Year does not commence on January 1st and/or if the Final Contract Year does not end on December 31st then the ACQ will be proportionally reduced in each such Contract Year by the proportion that the number of Days in each such Contract Year bears to the total number of Days in the calendar year in which each such Contract Year occurs.

 23

		
	5.2
	Adjusted Annual Contract Quantity

The “Adjusted Annual Contract Quantity” or “AACQ”, expressed in MMBtu, for each Contract Year shall be equal to the ACQ for the relevant Contract Year, plus the following:
		
	5.2.1
	Round-Up Quantity for such Contract Year, determined in accordance with Section 5.3.1; and

		
	5.2.2
	Round-Down Quantity for the previous Contract Year, determined in accordance with Section 5.3.2, and carried forward to the current Contract Year;

less any of the following:
		
	5.2.3
	Major Scheduled Maintenance Quantities or Inspection Maintenance Quantities for such Contract Year, if any, determined in accordance with Section 5.4;

		
	5.2.4
	Round-Up Quantity taken in the previous Contract Year, determined in accordance with Section 5.3.1, and carried forward as a deduction to the current Contract Year; and

		
	5.2.5
	Round-Down Quantity for the current Contract Year, determined in accordance with Section 5.3.2.

		
	5.3
	Round-Up/Round-Down Quantities

		
	5.3.1
	If, during the development of the Annual Delivery Program, it appears that the delivery during such Contract Year of the ACQ plus the quantities specified in Section 5.2.2, less the quantities specified in Sections 5.2.3 and 5.2.4 would require Seller to make available and Buyer to take a quantity of LNG that is less than a full cargo lot, then Buyer may request, pursuant to Section 8.1.2, that the AACQ be increased by a quantity of LNG sufficient to deliver the AACQ in full cargo lots, and Seller shall use reasonable efforts to accommodate such request.  Any quantity included in the Annual Delivery Program pursuant to this Section 5.3.1 shall be considered a “Round-Up Quantity”.  In granting requests for Round-Up Quantities, Seller shall act in a non-discriminatory manner among Foundation Customers and shall give priority to the requests of Foundation Customers over the requests of other customers.

		
	5.3.2
	If, during the development of the Annual Delivery Program, it appears that the delivery during such Contract Year of the ACQ plus the quantities specified in Section 5.2.2 less the quantities specified in Sections 5.2.3 and 5.2.4 would require Seller to make available and Buyer to take a quantity of LNG that is less than a full cargo lot, but Buyer does not request an increase 

 24

in the AACQ, or Buyer requests an increase but Seller is unable by the exercise of reasonable efforts to accommodate such request, then the AACQ shall be reduced by an amount (the “Round-Down Quantity”) such that the resulting AACQ can be delivered in full cargo lots.
		
	5.4
	Major Scheduled Maintenance and Inspections

		
	5.4.1
	Seller shall be entitled to reduce the AACQ in order to perform major scheduled maintenance to the Sabine Liquefaction Facility (the “Major Scheduled Maintenance Quantity”) subject to the following conditions:

		
	(a)
	Seller may only exercise its right to such reduction in a Contract Year to the extent it determines, as a Reasonable and Prudent Operator, that major scheduled maintenance is required for operational reasons;

		
	(b)
	Seller shall exercise reasonable efforts to schedule such reduction during the Months of April through September;

		
	(c)
	Seller shall notify Buyer of its exercise of, and the amount of, Major Scheduled Maintenance Quantity pursuant to Section 8.1.1(b);

		
	(d)
	the Major Scheduled Maintenance Quantity reduction elected by Seller during any Contract Year may not exceed six percent (6%) of the ACQ for such Contract Year; and

		
	(e)
	the cumulative amount of all Major Scheduled Maintenance Quantity reductions elected by Seller pursuant to this Section 5.4.1 shall not exceed thirty percent (30%) of the ACQ during the initial Term.

		
	5.4.2
	Seller shall be entitled to reduce the AACQ in order to perform comprehensive inspections on the Designated Train (the “Inspection Maintenance Quantity”), subject to the following conditions:

		
	(a)
	Seller may only exercise its right to such reduction with respect to (i) the initial eighteen (18) Month period following the Date of First Commercial Delivery and (ii) the initial twelve (12) Month period following the tenth (10th) anniversary of the Date of First Commercial Delivery;

		
	(b)
	Seller may only exercise its right to such reduction to the extent it is necessary to accommodate a reduction in LNG production from the Designated Train due to the performance of such comprehensive inspection;

 25

		
	(c)
	Seller shall notify Buyer of its exercise of, and the amount of, Inspection Maintenance Quantity pursuant to Section 8.1.1(b);

		
	(d)
	the Inspection Maintenance Quantity reduction elected by Seller during any Contract Year may not exceed eight decimal three percent (8.3%) of the ACQ for such Contract Year;

		
	(e)
	Seller shall not elect a Major Scheduled Maintenance Quantity and an Inspection Maintenance Quantity in the same Contract Year; and

		
	(f)
	the cumulative amount of all Inspection Maintenance Quantity reductions elected by Seller pursuant to this Section 5.4.2 shall not exceed seventeen percent (17%) of the ACQ during the initial Term.

		
	5.5
	Buyer's Purchase Obligation

		
	5.5.1
	During any Contract Year, Buyer shall take and pay for the Scheduled Cargo Quantity with respect to each cargo included in the AACQ and scheduled in the ADP for such Contract Year, less:

		
	(a)
	any quantities of LNG not made available by Seller for any reasons attributable to Seller (other than quantities for which Seller is excused pursuant to this Agreement from making available due to Buyer's breach of this Agreement) including quantities not made available by Seller due to Force Majeure affecting Seller or the Sabine Pass Facility;

		
	(b)
	any quantities of LNG not taken by Buyer for reasons of Force Majeure;

		
	(c)
	quantities of LNG for which Buyer has provided a notice of suspension pursuant to Section 5.7; and

		
	(d)
	any quantity that the relevant LNG Tanker is not capable of loading due to the Seller's delivery of LNG that has a Gross Heating Value that is less than the value identified by Seller pursuant to Section 8.1.1(a).

		
	5.5.2
	If, with respect to any cargo identified in Section 5.5.1, Buyer does not take all or part of the Scheduled Cargo Quantity of such cargo, and such failure to take is not otherwise excused pursuant to Section 5.5.1, then the amount by which the Scheduled Cargo Quantity for such cargo exceeds the quantity of LNG taken by Buyer in relation to such cargo shall be the “Cargo Shortfall Quantity”.

 26

		
	5.5.3
	With respect to any Cargo Shortfall Quantity, Buyer shall pay to Seller Cover Damages, if Cover Damages are a positive amount.

		
	(a)
	“Cover Damages” shall be equal to: (i) the CSP multiplied by the Cargo Shortfall Quantity; minus (ii) the proceeds of any Mitigation Sale, if any; minus (iii) reasonable and verifiable savings obtained by Seller (including savings related to avoided fuel Gas for LNG production, transportation and Third Party costs avoided) as a result of the Mitigation Sale as opposed to the sale to Buyer; plus (iv) reasonable, verifiable, incremental costs incurred by Seller as a result of such Mitigation Sale (including costs related to transporting, marketing, selling, and delivery of the Cargo Shortfall Quantity).  For purposes of calculating Cover Damages, the CSP shall be determined as of the Month in which the applicable Delivery Window begins.

		
	(b)
	Seller shall use reasonable efforts to mitigate its Losses resulting from Buyer's failure to take such Cargo Shortfall Quantity by reselling such Cargo Shortfall Quantity (whether as LNG, Gas, or regasified LNG) to Third Parties (each such sale a “Mitigation Sale”); except that any sale of a quantity of LNG (or Gas or regasified LNG) by Seller to any Third Party that Seller was already obligated to make at the earlier to occur of (i) Buyer's failure to take such LNG; or (ii) Buyer's notice to Seller that it will not take such LNG, is not a Mitigation Sale.

		
	(c)
	Notwithstanding the foregoing, if the Cargo Shortfall Quantity is within the operational tolerance of two percent (2%) of the Scheduled Cargo Quantity (“Operational Tolerance”) (such Operational Tolerance to be exercised by Buyer only with respect to operational matters regarding the LNG Tanker, and without regard to Gas markets or other commercial considerations), the Cover Damages shall be zero USD (US$0.00).

		
	5.5.4
	Any payment that Buyer makes under this Section 5.5 shall not be treated as an indirect, incidental, consequential or exemplary loss or a loss of income or profits for purposes of Section 15.2.1.

		
	5.6
	Seller's Delivery Obligation

		
	5.6.1
	During any Contract Year, Seller shall make available to Buyer the Scheduled Cargo Quantity with respect to each cargo in the AACQ and scheduled in the ADP for such Contract Year, less:

		
	(a)
	quantities of LNG not taken by Buyer for any reason attributable to Buyer (other than quantities for which Buyer is excused pursuant to 

 27

this Agreement from taking due to Seller's breach of this Agreement), including  Force Majeure; 
		
	(b)
	quantities of LNG for which Buyer has provided a notice of suspension pursuant to Section 5.7; and

		
	(c)
	quantities of LNG not made available by Seller due to Force Majeure.

		
	5.6.2
	Except as otherwise excused in accordance with the provisions of this Agreement, if, during any Contract Year, for any reason other than those specified in Section 5.6.1, Seller does not make available the Scheduled Cargo Quantity with respect to any cargo identified in Section 5.6.1 then the amount by which the Scheduled Cargo Quantity exceeds the quantity of LNG made available by Seller shall be the “Cargo DoP Quantity”.  Seller shall make a payment to Buyer for each MMBtu of the Cargo DoP Quantity in an amount equal to: (a) the actual, documented price incurred by Buyer for the purchase of a replacement quantity of LNG or Gas (not to exceed the MMBtu equivalent of the Cargo DoP Quantity), or, in respect of any Cargo DoP Quantity for which a replacement quantity cannot be purchased, the market price of LNG at such time at the cargo's originally scheduled destination; less (b) the CSP; plus (c) any actual, reasonable, and verifiable costs (if any), incurred by Buyer due to such failure, including costs associated with transportation; plus (d) any actual, verifiable costs incurred by Buyer in respect of idling the LNG Tanker scheduled to load the Cargo DoP Quantity;  less (e) actual, reasonable, and verifiable cost savings realized by Buyer due to Seller's failure to make the Scheduled Cargo Quantity available (the “Cargo DoP Payment”).  For purposes of calculating the Cargo DoP Payment, CSP shall be determined as of the Month in which the applicable Delivery Window begins.

		
	5.6.3
	Notwithstanding the foregoing, if the Cargo DoP Quantity is within the Operational Tolerance (such Operational Tolerance to be exercised by Seller only with respect to operational matters regarding the Sabine Pass Facility, and without regard to Gas markets or other commercial considerations), the Cargo DoP Payment shall be zero USD (US$0.00).

		
	5.6.4
	Buyer shall use reasonable efforts to mitigate Seller's liability to make any payments pursuant to this Section 5.6.

		
	5.6.5
	In the event the ability of the Sabine Pass Facility to produce and deliver LNG is impaired due to an unscheduled services interruption that does not constitute Force Majeure, Seller shall comply with the Foundation Customer Priority in allocating the LNG that is available from the Sabine Pass Facility.

 28

		
	5.7
	Buyer's Right to Suspend Deliveries

		
	5.7.1
	Subject to the remainder of this Section 5.7, Buyer may elect to suspend deliveries of all cargoes scheduled in the ADP for the relevant Month by providing notice of such election to Seller on or prior to the twentieth (20th) Day of the Month that is two (2) Months prior to the Month for which Buyer is suspending deliveries.  Once cargoes have been suspended pursuant to this Section 5.7.1, Seller shall be relieved of its obligation to make available such cargoes pursuant to Section 5.6.

		
	5.7.2
	During the period of suspension, Buyer shall pay a suspension fee (the “Suspension Fee”) for all cargoes suspended during a Month equal to:

Xy x ∑SCQM 
where:
Xy is as set forth in Section 9.1.2; and
∑SCQM is equal to the sum of all Scheduled Cargo Quantities scheduled in the ADP for the relevant Month of suspension.
Payment of the Suspension Fee shall be paid in accordance with Section 10.2.2. 
		
	5.7.3
	Buyer may elect to resume delivery of cargoes previously suspended by delivering a notice to Seller stating such election.  A notice provided pursuant to this Section 5.7.3 shall be made on or prior to the twentieth (20th) Day of any Month that is two (2) Months prior to the Month for which Buyer is electing to resume delivery of cargoes scheduled in the ADP.  Any period of suspension elected by Buyer pursuant to this Section 5.7 shall not be less than one (1) Month.

		
	5.7.4
	If, at the time of issuance of an ADP for a Contract Year, Buyer has elected suspension of performance pursuant to the terms of this Section 5.7, and Buyer desires such suspension of performance to continue into the Contract Year that is the subject of the newly issued ADP, Buyer shall provide a notice to Seller not later than the twentieth (20th) Day of the eleventh (11th) month of the prior Contract Year stating such election, and the provisions of this Section 5.7 shall apply.

		
	6.
	Delivery Point, Title and Risk

		
	6.1
	Delivery Point

Seller shall deliver LNG to Buyer, subject to the terms and conditions of this Agreement, at the point at which the flange coupling of the LNG loading line at the Sabine Pass Facility joins the flange coupling of the LNG intake manifold of the relevant LNG Tanker (“Delivery Point”).

 29

		
	6.2
	Title and Risk

Title to, and all risks in respect of, the LNG sold by Seller pursuant to this Agreement shall pass from Seller to Buyer as the LNG passes the Delivery Point.
		
	7.
	Transportation and Loading

		
	7.1
	Transportation by Buyer

Buyer shall, in accordance with this Agreement, Applicable Laws, Approvals and International Standards, provide, or cause to be provided, transportation from the Delivery Point of all quantities of LNG delivered hereunder to Buyer.

		
	7.2
	Sabine Pass Facility

		
	7.2.1
	Prior to the Date of First Commercial Delivery and provided the Conditions Precedent set forth in this Agreement are satisfied or waived in accordance herewith, Seller shall cause the Sabine Liquefaction Facility to be constructed and commissioned so as to be able to provide liquefaction services and otherwise to achieve commercial operations completion for making available LNG.  During the Term, Seller shall at all times cause to be provided, maintained and operated the Sabine Pass Facility in accordance with the following:  (a) International Standards; (b) all terms and conditions set forth in this Agreement; (c) Applicable Laws; and (d) to the extent not inconsistent with International Standards, such good and prudent practices as are generally followed in the LNG industry by Reasonable and Prudent Operators of similar LNG liquefaction terminals and similar receiving and regasification terminals.

		
	7.2.2
	The Sabine Pass Facility shall include the following:

		
	(a)
	appropriate systems for communications with LNG Tankers;

		
	(b)
	two berths, each capable of berthing an LNG Tanker having a displacement of no more than one hundred sixty-six thousand (166,000) tons, an overall length of no more than one thousand one hundred forty (1,140) feet (approximately 347 meters), a beam of no more than one hundred seventy-five (175) feet (approximately 53 meters), and a draft of no more than forty (40) feet (approximately 12 meters), which LNG Tankers can safely reach, fully laden, and safely depart, fully laden, and at which LNG Tankers can lie safely berthed and load and unload safely afloat;

		
	(c)
	lighting sufficient to permit loading operations by day or by night, to the extent permitted by Governmental Authorities and Pilots (it being acknowledged, however, that Seller shall in no event be obligated to allow nighttime berthing operations at the Sabine Pass Facility if Seller determines that such operations during nighttime hours could 

 30

pose safety or operational risks to the Sabine Pass Facility, an LNG Tanker, or a Third Party);
		
	(d)
	facilities capable of transferring LNG at a rate of up to an average of twelve thousand (12,000) Cubic Meters per hour at the Delivery Point, with three (3) LNG transfer arms each having a reasonable operating envelope to allow for ship movement and manifold strainers of sixty (60) mesh;

		
	(e)
	a vapor return line system of sufficient capacity to allow for transfer of Gas necessary for safe cargo operations of an LNG Tanker at the required rates, pressures and temperatures;

		
	(f)
	facilities allowing ingress and egress between the Sabine Pass Facility and the LNG Tanker by (i) representatives of Governmental Authorities for purposes of LNG transfer operations; and (ii) an independent surveyor for purposes of conducting tests and measurements of LNG on board the LNG Tanker;

		
	(g)
	emergency shut down systems;

		
	(h)
	LNG storage facilities, with a total gross capacity of approximately three hundred twenty thousand (320,000) Cubic Meters of LNG (expandable at Seller's option by an additional amount up to one hundred sixty thousand  (160,000) Cubic Meters of LNG); and

		
	(i)
	LNG liquefaction facilities with each train having the capacity to liquefy Gas and produce not less than two hundred ninety-one thousand seven hundred (291,700) tonnes per Month of LNG, using the ConocoPhillips Optimized Cascade process under license from ConocoPhillips, six (6) General Electric LM2500+ G4 gas turbine driven compressor sets with inlet air humidification, air cooled heat exchanger systems, and a heavies removal system; a BASF-licensed aMDEA acid gas removal unit and a mercury removal system for the pretreatment of feed Gas received at the inlet of the Sabine Pass Facility; propane, ethylene, and amine storage tanks and control and measurement systems, flares, ancillary systems and tie ins between the facilities owned by Seller and those owned by SPLNG.

		
	7.2.3
	Services and facilities not provided by Seller include the following:  (a) facilities and loading lines for liquid or gaseous nitrogen to service an LNG Tanker; (b) facilities for providing bunkers; (c) facilities for the handling and delivery to the LNG Tanker of ship's stores, provisions and spare parts; and (d) nitrogen rejection or natural gas liquids (NGL) removal.  Towing, escort, line handling, and pilot services will not be provided or made available by Seller; Buyer shall be required to obtain such services as described in Section 7.5.3.

 31

		
	7.3
	Compatibility of the Sabine Pass Facility with LNG Tankers

		
	7.3.1
	Buyer shall ensure, at no cost to Seller, that each of the LNG Tankers is fully compatible with the general specifications set forth in Section 7.2.2 and any modifications made to the Sabine Pass Facility in accordance with Section 7.3.2.  Should an LNG Tanker fail materially either to be compatible with the Sabine Pass Facility, or to be in compliance with the provisions of Sections 7.5 and 7.6, Buyer shall not employ such LNG Tanker until it has been modified to be so compatible or to so comply.

		
	7.3.2
	The Parties agree that, after the Effective Date, Seller shall be entitled to modify the Sabine Pass Facility in any manner whatsoever, provided that: (x) such modifications do not render the Sabine Pass Facility incompatible with an LNG Tanker that is compatible with the general specifications set forth in Section 7.2.2; (y) such modifications, once finalized, do not reduce the ability of Seller to make available LNG in accordance with the terms of this Agreement; and (z) such modifications do not otherwise conflict with Seller's obligations hereunder.  Notwithstanding the foregoing, Seller may modify the Sabine Pass Facility in a manner that would render it incompatible with an LNG Tanker provided that such modification is required by and is made pursuant to a change in Applicable Laws, Approvals, or International Standards, or is required for safety or environmental reasons.

		
	7.4
	Buyer Inspection Rights in Respect of the Sabine Pass Facility

		
	7.4.1
	Upon obtaining Seller's prior written consent, which consent shall not be unreasonably withheld or delayed, a reasonable number of Buyer's designated representatives may from time to time (including during the period of construction of the liquefaction facilities) inspect the operation of the Sabine Pass Facility so long as such inspection occurs from 8:00 a.m. Central Time to 5:00 p.m. Central Time on a business day in the United States of America.  Any such inspection shall be at Buyer's sole risk and expense.  In conjunction with any such inspection, Seller shall provide Buyer access at reasonable times and places (taking into consideration cost and schedule impacts) to (a) relevant qualified employees and contractors of Seller in order to discuss the progress of the construction of the Sabine Liquefaction Facility and the operation and maintenance of the Sabine Pass Facility (as applicable) and (b) relevant documentation, if any, available to Seller in support of such discussions. Buyer (and its designees) shall carry out any such inspection without any interference with or hindrance to the safe and efficient operation of the Sabine Pass Facility.  Buyer's right to inspect and examine the Sabine Pass Facility shall be limited to verifying Seller's compliance with Seller's obligations under this Agreement.  No inspection (or lack thereof) of the Sabine Pass Facility by Buyer hereunder, or any requests or observations made to Seller or its representatives by or on behalf of Buyer in connection with any such inspection, shall (a) modify or amend Seller's obligations, 

 32

representations, warranties and covenants hereunder; or (b) constitute an acceptance or waiver by Buyer of Seller's obligations hereunder.
		
	7.4.2
	Buyer shall indemnify and hold Seller and its Affiliates harmless from any Claims and Losses resulting from Buyer's inspection of the Sabine Pass Facility pursuant to Section 7.4.1.

		
	7.5
	LNG Tankers

		
	7.5.1
	Buyer shall cause each LNG Tanker to comply with the requirements of this Section 7.5 and the requirements of Section 7.6 in all respects.

		
	7.5.2
	Each LNG Tanker shall comply with the regulations of, and obtain all Approvals required by, Governmental Authorities to enable such LNG Tanker to enter, leave and carry out all required operations at the Sabine Pass Facility.  Each LNG Tanker shall at all times have on board valid documentation evidencing all such Approvals.  Each LNG Tanker shall comply fully with the International Safety Management Code for the Safe Operation of Ships and Pollution Prevention effective July 1st, 1998, as amended from time to time, and at all times be in possession of valid documents of compliance and safety management certificates, and can demonstrate that the LNG Tanker has an effective management system in operation that addresses all identified risks, and provides proper controls for dealing with these risks.

		
	7.5.3
	Buyer shall cause Transporter to enter into a tug services agreement (in the form attached hereto as Exhibit E) with Sabine Pass Tug Services, LLC to provide such number and types of tugs, fireboats and escort vessels as are required by Governmental Authorities to attend the LNG Tanker so as to permit safe and efficient movement of the LNG Tanker within the maritime safety areas located in the approaches to and from the Sabine Pass Facility. The fee for tug services pursuant to such tug services agreement shall be as set from time-to-time by Sabine Pass Tug Services, LLC, but shall always be applied on a non-discriminatory basis among all long-term customers (both regasification and liquefaction) of the Sabine Pass Facility.  Buyer and Transporter shall be permitted to use other tugs, fireboats and escort vessels that are materially consistent with (or are equivalent in all material respects with) the specifications set forth in Exhibit F if Sabine Pass Tug Services, LLC is in breach or default under the tug services agreement with Buyer's Transporter or the charterparty with the tug owner.  Seller shall not be required to provide tugs, fireboats and escort vessels to attend any LNG Tanker and shall not be liable to Buyer in connection with Transporter's failure to enter into such arrangements.

 33

		
	7.5.4
	Buyer shall pay or cause to be paid: (a) all Port Charges directly to the appropriate Person; and (b) all charges payable by reason of any LNG Tanker having to shift from berth at the Sabine Pass Facility as a result of the action or inaction of Buyer.

		
	7.5.5
	Each LNG Tanker must satisfy the following requirements:

		
	(a)
	Except as otherwise mutually agreed in writing by the Parties, each LNG Tanker shall be compatible with the specifications of the Sabine Pass Facility identified in Section 7.2.2 and any modifications to the Sabine Pass Facility pursuant to Section 7.3.2, and shall be of a sufficient size to load the applicable Scheduled Cargo Quantity (subject to the Operational Tolerance).  If Buyer's LNG Tanker is not capable of loading the applicable Scheduled Cargo Quantity (subject to the Operational Tolerance), Buyer shall be deemed to have failed to take the shortfall quantity and Section 5.5 shall apply, except to the extent that such failure is attributable to Seller's delivery of LNG that has a Gross Heating Value that is less than the value identified by Seller pursuant to Section 8.1.1(a).

		
	(b)
	Except as otherwise agreed in writing by Seller, which agreement shall not be unreasonably withheld, each LNG Tanker shall have a gross volumetric capacity between one hundred twenty-five thousand (125,000) Cubic Meters and one hundred eighty thousand (180,000) Cubic Meters.

		
	(c)
	Each LNG Tanker shall be, in accordance with International Standards, (i) fit in every way for the safe loading, unloading, handling and carrying of LNG in bulk at atmospheric pressure; and (ii) tight, staunch, strong and otherwise seaworthy with cargo handling and storage systems (including instrumentation) necessary for the safe loading, unloading, handling, carrying and measuring of LNG in good order and condition.

		
	(d)
	Each LNG Tanker shall at all times be maintained in class with any of the following: American Bureau of Shipping, Lloyd's Register, Bureau Veritas, Det Norske Veritas or any other classification society that is (i) a member of International Association of Classification Societies Ltd. (IACS) and (ii) mutually agreeable to the Parties.

 34

		
	(e)
	Each LNG Tanker shall have been constructed to all applicable International Standards (including the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk).

		
	(f)
	Each LNG Tanker shall comply with, and shall be fully equipped, supplied, operated, and maintained to comply with, all applicable International Standards and Applicable Laws, including those that relate to seaworthiness, design, safety, environmental protection, navigation, and other operational matters, and all procedures, permits, and approvals of Governmental Authorities for LNG vessels that are required for the transportation and loading of LNG at the Loading Port.  Unless approved by Seller in writing, which approval shall not be unreasonably withheld or delayed, an LNG Tanker shall be prohibited from engaging in any maintenance, repair or in-water surveys while berthed at the Sabine Pass Facility.  Each LNG Tanker shall comply fully with the guidelines of any Governmental Authority of the United States of America, including the National Oceanographic and Atmospheric Administration (NOAA), in relation to actions to avoid strikes in the waters of the United States of America with protected sea turtles and cetaceans (e.g., whales and other marine mammals) and with regard to the reporting of any strike by the LNG Tanker which causes injury to such protected species.

		
	(g)
	The officers and crew of each LNG Tanker shall have the ability, experience, licenses and training commensurate with the performance of their duties in accordance with internationally accepted standards with which it is customary for Reasonable and Prudent Operators of LNG vessels to comply and as required by Governmental Authorities and any labor organization having jurisdiction over the LNG Tanker or her crew.  Without in any way limiting the foregoing, the master, chief engineer, all cargo engineers and all deck officers shall be fluent in written and oral English and shall maintain all records and provide all reports with respect to the LNG Tanker in English.

		
	(h)
	Each LNG Tanker shall have communication equipment complying with applicable regulations of Governmental Authorities and permitting such LNG Tanker to be in constant communication with the Sabine Pass Facility and with other vessels in the area (including fireboats, escort vessels and other vessels employed in port operations).

		
	(i)
	Provided that the Sabine Pass Facility supplies a suitable vapor return line meeting the requirements of Section 7.2.2, then:

 35

		
	(i)
	an LNG Tanker with an LNG cargo containment capacity less than or equal to one hundred forty thousand (140,000) Cubic Meters shall be capable of loading a full cargo of LNG in a maximum of fifteen (15) hours; and

		
	(ii)
	an LNG Tanker with an LNG cargo containment capacity greater than one hundred forty thousand (140,000) Cubic Meters shall be capable of loading a full cargo of LNG in the number of hours derived after applying the following formula:

15 + x  =  maximum LNG transferring time (in hours)
where:
x   =   y/12,000 Cubic Meters; and
y   =  the LNG cargo containment capacity of the LNG Tanker in excess of one hundred forty thousand (140,000) Cubic Meters.
Time for connecting, cooling, draining, purging and disconnecting of liquid arms shall not be included in the computation of pumping time.
		
	(j)
	Each LNG Tanker shall procure and maintain Hull and Machinery Insurance and P&I Insurance in accordance with Section 15.6.

		
	7.6
	LNG Tanker Inspections; LNG Tanker Vetting Procedures; Right to Reject LNG Tanker

		
	7.6.1
	During the Term, on prior reasonable notice to Buyer, Seller may, at its sole risk, send its representatives (including an independent internationally recognized maritime consultant) to inspect during normal working hours any LNG Tanker as Seller may consider necessary to ascertain whether the LNG Tanker complies with this Agreement.  Seller shall bear the costs and expenses in connection with any inspection conducted hereunder.  Any such inspection may include, as far as is practicable having regard to the LNG Tanker's operational schedule, examination of the records related to the LNG Tanker's hull, cargo and ballast tanks, machinery, boilers, auxiliaries and equipment; examination of the LNG Tanker's deck, engine and official log books; review of records of surveys by the LNG Tanker's classification society and relevant Governmental Authorities; and review of the LNG Tanker's operating procedures and performance of surveys, both in port and at sea.  Any inspection carried out pursuant to this Section 7.6.1: (a) shall not interfere with, or hinder, any LNG Tanker's safe and efficient construction or operation; and (b) shall not entitle Seller or any of its representatives to make 

 36

any request or recommendation directly to Transporter except through Buyer.  No inspection (or lack thereof) of an LNG Tanker hereunder shall:  (i) modify or amend Buyer's obligations, representations, warranties, and covenants hereunder; or (ii) constitute an acceptance or waiver by Seller of Buyer's obligations hereunder.
		
	7.6.2
	Seller shall indemnify and hold Buyer and its Affiliates harmless from any Claims and Losses resulting from Seller's inspection of any LNG Tanker pursuant to Section 7.6.1.

		
	7.6.3
	Buyer shall comply with all LNG Tanker vetting procedures, as set forth in the Sabine Pass Marine Operations Manual.

		
	7.6.4
	Seller shall have the right to reject any LNG vessel that Buyer intends to use to take delivery of LNG hereunder at the Sabine Pass Facility if such LNG vessel does not comply materially with the provisions of this Agreement, provided that:

		
	(a)
	neither the exercise nor the non-exercise of such right shall reduce the responsibility of Buyer to Seller in respect of such LNG vessel and her operation, nor increase Seller's responsibilities to Buyer or Third Parties for the same; and

		
	(b)
	Buyer's obligations under this Agreement shall not be excused or suspended by reason of Buyer's inability (pursuant to the foregoing) to use a vessel as an LNG Tanker.

		
	7.7
	Port Liability Agreement

		
	7.7.1
	Buyer shall cause Transporter or the master of each LNG Tanker (acting on behalf of the ship-owner and charterer) making use of the port or marine facilities at the Sabine Pass Facility or the Loading Port thereof on behalf of Buyer, to execute the Port Liability Agreement prior to such LNG Tanker's arrival at the Sabine Pass Facility or the Loading Port thereof.  In the event the master of an LNG Tanker fails to execute such Port Liability Agreement, Buyer shall indemnify and hold Seller and its Affiliates harmless from any Claims brought against, or Losses incurred by Seller or any of its Affiliates arising from such failure.

		
	7.7.2
	Subject to Section 7.7.1 and without prejudice to the terms of the Port Liability Agreement, Seller releases Buyer, its Affiliates, and their respective shareholders, officers, members, directors, employees, designees, representatives, and agents from liability to Seller incident to all Claims and Losses that may exist, arise or be threatened currently or in the future at any time following the Effective Date and whether or not of a type contemplated by either Party at any time, brought by any Person for injury to, illness or death of any employee of Seller, or for damage to or loss of the Sabine Pass 

 37

Facility, which injury, illness, death, damage or loss arises out of, is incident to, or results from the performance or failure to perform this Agreement by Buyer, or any of its Affiliates, shareholders, officers, members, directors, employees, designees, representatives and agents.
		
	7.7.3
	Subject to Section 7.7.1 and without prejudice to the terms of Section 12 or the Port Liability Agreement, Buyer releases Seller, its Affiliates, and their respective shareholders, officers, members, directors, employees, designees, representatives, and agents from liability to Buyer incident to all Claims and Losses that may exist, arise or be threatened currently or in the future at any time following the Effective Date and whether or not of a type contemplated by either Party at any time, brought by any Person for injury to, illness or death of any employee of Buyer, or for damage to or loss of any LNG Tanker, which injury, illness, death, damage or loss arises out of, is incident to, or results from the performance or failure to perform this Agreement by Seller or its Affiliates, shareholders, officers, members, directors, employees, designees, representatives and agents.

		
	7.7.4
	The form of Port Liability Agreement may be amended from time to time without consent of Buyer only if after any such amendment the revised terms of such Port Liability Agreement: (a) do not negatively impact Buyer's ability to perform its obligations or exercise its rights under this Agreement, (b) treat Transporter in a non-discriminatory manner in comparison to all other owners and charterers of LNG vessels that use or transit the Loading Port, and (c) do not prevent any Transporter from obtaining, on commercially reasonable terms, full P&I indemnity coverage from a P&I Club, and such P&I indemnity will cover all Claims and Losses pursuant to such Port Liability Agreement in relation to use of the Loading Port by an LNG Tanker.  Seller shall promptly notify Buyer upon any amendment to the Port Liability Agreement and shall provide a copy of the amended Port Liability Agreement to Buyer.

		
	7.8
	Sabine Pass Marine Operations Manual

The Parties acknowledge that Seller has delivered to Buyer a copy of the current marine operations manual developed for the Sabine Pass Facility and any amendments thereto as of the Effective Date (as amended, the “Sabine Pass Marine Operations Manual”) which governs activities at the Sabine Pass Facility, consistent with International Standards, and which applies to each LNG Tanker and each other LNG vessel berthing at the Sabine Pass Facility.  In the event of a conflict between this Agreement and the Sabine Pass Marine Operations Manual, the provisions of this Agreement shall control.  Seller shall promptly notify Buyer upon any amendment to the Sabine Pass Marine Operations Manual and shall provide a copy of the amended Sabine Pass Marine Operations Manual to Buyer.  If Buyer notifies Seller of any error or discrepancy in the Sabine Pass Marine Operations Manual or amendment thereto, Seller shall use reasonable efforts to remedy such error or discrepancy promptly.

 38

		
	7.9
	Loading of LNG Tankers

		
	7.9.1
	Except as otherwise specifically provided, the terms of this Section 7.9 shall apply to all LNG Tankers calling at the Sabine Pass Facility.

		
	7.9.2
	As soon as practicable after the LNG Tanker's departure from the point of departure en route to the Sabine Pass Facility, Buyer shall notify, or cause the master of the LNG Tanker to notify, Seller of the information specified below  (“In-Transit First Notice”):

		
	(a)
	name of the LNG Tanker and, in reasonable detail, the dimensions, specifications, tank temperatures, volume of LNG onboard, operator, and owner of such LNG Tanker;

		
	(b)
	any operational deficiencies in the LNG Tanker that may affect its performance at the Sabine Pass Facility or berth; and

		
	(c)
	the ETA.

		
	7.9.3
	With respect to each LNG Tanker scheduled to call at the Sabine Pass Facility, Buyer shall give, or cause the master of the LNG Tanker to give, to Seller the following notices:

		
	(a)
	A second notice (“In-Transit Second Notice”), which shall be sent ninety-six (96) hours prior to the ETA set forth in the In-Transit First Notice or as soon as practicable prior to such ETA if the sea time between the point of departure of the LNG Tanker and the Loading Port is less than ninety six (96) hours, stating the LNG Tanker's then ETA.  If, thereafter, such ETA changes by more than six (6) hours, Buyer shall give promptly, or cause the master of the LNG Tanker to give promptly, to Seller notice of the corrected ETA;

		
	(b)
	The forty-eight (48) hour informational notice as required by the Sabine Pass Marine Operations Manual;

		
	(c)
	A third notice (“In-Transit Third Notice”), which shall be sent twenty-four (24) hours prior to the ETA set forth in the In-Transit Second Notice (as corrected), confirming or amending such ETA.  If, thereafter, such ETA changes by more than three (3) hours, Buyer shall give promptly, or cause the master of the LNG Tanker to give promptly, to Seller notice of the corrected ETA;

		
	(d)
	A fourth notice (“In-Transit Final Notice”), which shall be sent twelve (12) hours prior to the ETA set forth in the In-Transit Third Notice (as corrected), confirming or amending such ETA.  If, thereafter, such ETA changes by more than one (1) hour, Buyer shall 

 39

give promptly, or cause the master of the LNG Tanker to give promptly, to Seller notice of the corrected ETA; and
		
	(e)
	An NOR, which shall be given at the time prescribed in Section 7.10.

		
	7.9.4
	Buyer shall have the right to cause a LNG Tanker to burn Gas as fuel during operations at the Sabine Pass Facility (including while conducting cargo transfer operations).  The quantity of Gas burned as fuel pursuant to this Section 7.9.4 shall be determined in accordance with Exhibit A.  If Buyer exercises its right pursuant to this Section 7.9.4, all amounts of Gas burned as fuel shall be added to the quantity loaded included in Seller's invoice pursuant to Section 10.1.1, but shall have no impact in respect of Buyer's obligations under Section 5.

		
	7.9.5
	All vapor returned to Seller during cool-down or loading operations may be used or disposed of by Seller without compensation to Buyer.

		
	7.10
	Notice of Readiness

		
	7.10.1
	The master of an LNG Tanker arriving at the Sabine Pass Facility, or such master's agent, shall give to Seller its NOR for loading upon arrival of such LNG Tanker at the PBS, provided that such LNG Tanker has all required Approvals from the relevant Governmental Authorities, and is ready, willing, and able, to proceed to berth and load LNG or to commence cool-down operations (as applicable).

		
	7.10.2
	A valid NOR given under Section 7.10.1 shall become effective as follows:

		
	(a)
	For an LNG Tanker arriving at the PBS at any time prior to the Delivery Window allocated to such LNG Tanker, an NOR shall be deemed effective at the earlier of 6:00 a.m. Central Time on such Delivery Window or the time at which the LNG Tanker is all fast at the berth;

		
	(b)
	For an LNG Tanker arriving at the PBS at any time during the Delivery Window allocated to such LNG Tanker, an NOR shall become effective at the time of its issuance; or

		
	(c)
	For an LNG Tanker arriving at the PBS at any time after the expiration of the Delivery Window, an NOR shall become effective upon Seller's notice to the LNG Tanker that it is ready to receive the LNG Tanker at berth.

 40

		
	7.11
	Berthing Assignment

		
	7.11.1
	Seller shall berth an LNG Tanker which has tendered NOR before or during its Delivery Window promptly after Seller determines such LNG Tanker will not interfere with berthing and loading or unloading of any other scheduled LNG vessel with a higher berthing priority but in no event later than the end of the Delivery Window allocated to such LNG Tanker; provided, however, that if Seller does not berth such LNG Tanker by the end of the Delivery Window, but berths such LNG Tanker within seventy-two (72) hours after the end of its Delivery Window, Buyer's sole recourse and remedy for Seller's failure to berth the LNG Tanker by the end of the Delivery Window is demurrage pursuant to Section 7.12.3, payment for excess boil-off pursuant to Section 7.12.4 and provision by Seller of a cool-down pursuant to Section 7.16.1(b).  If, as of the seventy-second (72nd) hour after the end of the Delivery Window, Seller has not berthed the LNG Tanker, and such delay is not attributable to a reason that would result in an extension of Allotted Laytime under Section 7.12.1, Seller shall be deemed to have failed to make the Scheduled Cargo Quantity of the relevant cargo available for delivery and the provisions of Section 5.6.2 shall apply. 

		
	7.11.2
	For each delivery window period, Seller shall determine the berthing priority among LNG vessels which have tendered NOR before or during their scheduled delivery window as follows:

		
	(a)
	The first berthing priority for a delivery window period shall be for an LNG vessel scheduled for such delivery window period.  Priority within this group shall be given to the LNG vessel which has first tendered Seller its NOR.  Once an LNG vessel achieves a first berthing priority pursuant to this Section 7.11.2(a) or 7.11.2(b), such LNG vessel shall maintain such priority until such LNG vessel is berthed, so long as its tendered NOR remains valid; and

		
	(b)
	The second berthing priority for a delivery window period shall be for an LNG vessel scheduled for arrival after such delivery window period.  Priority within this group shall be given to the LNG vessel which has first tendered Seller its NOR.  An LNG vessel with second berthing priority pursuant to this Section 7.11.2(b) will achieve a first berthing priority on its scheduled delivery window pursuant to Section 7.11.2(a) if such LNG vessel has not been berthed prior to such date, so long as its tendered NOR remains valid.

		
	7.11.3
	If an LNG Tanker tenders NOR after the end of its Delivery Window, Seller shall use reasonable efforts to berth such LNG Tanker as soon as reasonably practical; provided, however, that, unless otherwise agreed with Buyer, Seller shall have no obligation to use such efforts to berth an LNG Tanker that tenders NOR more than seventy-two (72) hours after the end of its Delivery 

 41

Window.  If, as of the seventy-second (72nd) hour after the end of the Delivery Window, the LNG Tanker has not tendered NOR, and such delay is not attributable to a reason that would result in an extension of allowed berth time under Section 7.14.2(b), Buyer shall be deemed to have failed to take delivery of the Scheduled Cargo Quantity of the relevant cargo and the provisions of Sections 5.5.2 and 5.5.3 shall apply.
		
	7.11.4
	Seller shall use reasonable efforts (including coordinating with the operator of the Sabine Pass Facility and any Sabine Pass Facility Regasification Capacity Users) to cause the LNG regasification and loading schedules to be established in a manner that will avoid berthing conflicts between LNG Tankers and other LNG vessels.

		
	7.12
	Berth Laytime

		
	7.12.1
	The allotted laytime for each LNG Tanker (“Allotted Laytime”) shall be (i) for an LNG Tanker with an LNG cargo containment capacity of one hundred forty thousand (140,000) Cubic Meters or less, thirty-six (36) hours and (ii) for an LNG Tanker with an LNG cargo containment capacity of greater than one hundred forty thousand (140,000) Cubic Meters, according to the following formula:

36 + x  =  Allotted Laytime (in hours)
where:
x  =  y/12,000 Cubic Meters; and
y  =  the LNG cargo containment capacity of the LNG Tanker in excess of one hundred forty thousand (140,000) Cubic Meters)
Allotted Laytime shall be extended by any period of delay that is caused by:
		
	(a)
	reasons attributable to Buyer, a Governmental Authority, Transporter, the LNG Tanker or its master, crew, owner or operator or any Third Party outside of the reasonable control of Seller;

		
	(b)
	Force Majeure or Adverse Weather Conditions;

		
	(c)
	unscheduled curtailment or temporary discontinuation of operations at the Sabine Pass Facility necessary for reasons of safety, except to the extent such unscheduled curtailment or temporary discontinuation of operations is due to Seller's failure to operate and maintain its facilities as a Reasonable and Prudent Operator; 

 42

		
	(d)
	time at berth during cool-down pursuant to Sections 7.16.1(a) and (c); and  

		
	(e)
	nighttime transit restrictions.

		
	7.12.2
	The actual laytime for each LNG Tanker (“Actual Laytime”) shall commence when the NOR is effective and shall end when (i) the LNG transfer and return lines of the LNG Tanker are disconnected from the Sabine Pass Facility's LNG transfer and return lines, (ii) the cargo documents are on board of the LNG Tanker and (iii) the LNG Tanker is cleared for departure and able to depart.

		
	7.12.3
	In the event Actual Laytime exceeds Allotted Laytime (including any extension in accordance with Section 7.12.1) (“Demurrage Event”), Seller shall pay to Buyer as liquidated damages demurrage in USD (which shall be prorated for a portion of a Day) at a rate of USD eighty thousand (US$80,000) per Day.  If a Demurrage Event occurs, Buyer shall invoice Seller for such demurrage within one hundred eighty (180) Days pursuant to Section 10.1.5.

		
	7.12.4
	If an LNG Tanker is delayed in berthing at the Sabine Pass Facility and/or commencement of LNG transfer due to an event occurring at the Sabine Pass Facility and for a reason that would not result in an extension of Allotted Laytime under Section 7.12.1, and if, as a result thereof, the commencement of LNG transfer is delayed beyond twenty-four (24) hours after NOR is effective, then, for each full hour by which commencement of LNG transfer is delayed beyond such twenty-four (24) hour period, Seller shall pay Buyer as liquidated damages an amount, on account of excess boil-off, equal to the CSP for such Month multiplied by a quantity (in MMBtu) equal to zero decimal zero zero five seven three percent (0.00573%) of the cargo containment capacity of such LNG Tanker; provided that in no event shall the quantity of MMBtu used in the calculation of this Section 7.12.4 exceed the quantity of LNG on board the LNG Tanker at the time it issued its valid NOR.  Buyer shall invoice Seller for such excess boil-off within one hundred eighty (180) Days after the applicable event pursuant to Section 10.1.5.

		
	7.13
	LNG Transfers at the Sabine Pass Facility

		
	7.13.1
	Seller shall cooperate with Transporters (or their agents) and with the master of each LNG Tanker to facilitate the continuous and efficient transfer of LNG hereunder.

		
	7.13.2
	During LNG transfer, Seller shall provide or take receipt of (as applicable), through the Sabine Pass Facility vapor return line, Gas in such quantities as are necessary for the safe transfer of LNG at such rates, pressures and temperatures as may be required by the design of the LNG Tanker.

 43

		
	7.13.3
	Promptly after completion of loading of each cargo, Seller shall send to Buyer a certificate of origin, together with such other documents concerning the cargo as may reasonably be requested by Buyer.

		
	7.13.4
	Buyer, in cooperation with Seller, shall cause the LNG Tanker to depart safely and expeditiously from the berth upon completion of LNG transfer.

		
	7.14
	LNG Tanker Not Ready for LNG Transfer; Excess Laytime

		
	7.14.1
	If any LNG Tanker previously believed to be ready for LNG transfer is determined to be not ready after being berthed, the NOR shall be invalid, and Seller may direct the LNG Tanker's master to vacate the berth and proceed to anchorage, whether or not other LNG vessels are awaiting the berth, unless it appears reasonably certain to Seller that such LNG Tanker can be made ready without disrupting the overall berthing schedule of the Sabine Pass Facility or operations of the Sabine Pass Facility.  When an unready LNG Tanker at anchorage becomes ready for LNG transfer, its master shall notify Seller.  If, as a result of such LNG Tanker's not being ready to load, Buyer fails to take a cargo, the provisions of Sections 5.5.2 and 5.5.3 shall apply.

		
	7.14.2
	The following shall apply with respect to berthing:

		
	(a)
	An LNG Tanker shall complete LNG transfer and vacate the berth as soon as possible but not later than the following allowed laytime:

		
	(i)
	twenty-four (24) hours from the time the LNG Tanker is all fast at the berth, in the case of an LNG Tanker with an LNG cargo containment capacity less than or equal to one hundred forty thousand (140,000) Cubic Meters; or

		
	(ii)
	in accordance with the following formula, in the case of an LNG Tanker with an LNG cargo containment capacity greater than one hundred forty thousand (140,000) Cubic Meters:

24 + x   =   allowed laytime (in hours)
where:
x   =   y/12,000 Cubic Meters; and
y   =  the LNG cargo containment capacity of the LNG Tanker in excess of one hundred forty thousand (140,000) Cubic Meters.

 44

		
	(b)
	Notwithstanding the foregoing, the allowed laytime shall be extended for: (i) reasons attributable to Seller, the operator of the Sabine Pass Facility and any Affiliate of Seller, including SPLNG and Sabine Pass Tug Services, LLC; (ii) reasons attributable to a Governmental Authority; (iii) reasons attributable to any Third Party outside of the reasonable control of Buyer; (iv) time at berth during cool-down pursuant to Sections 7.16.1(a)-(c); (v) unscheduled curtailment or temporary discontinuation of operations at the Sabine Pass Facility necessary for reasons of safety, except to the extent attributable to Buyer or Transporter; (vi) Force Majeure; and (vii) nighttime transit restrictions.

		
	(c)
	If an LNG Tanker fails to depart at the end of its allowed laytime (as extended pursuant to Section 7.14.2(b)), another LNG vessel is awaiting the berth and the LNG Tanker's continued occupancy of the berth will disrupt the overall berthing schedule of the Sabine Pass Facility or operations of the Sabine Pass Facility, Seller may direct the LNG Tanker to vacate the berth and proceed to sea at utmost dispatch.

		
	(d)
	If an LNG Tanker fails to depart the berth at the end of its allowed laytime (as extended pursuant to Section 7.14.2(b)) and as a result the subsequent LNG vessel is prevented from or delayed in loading or unloading (as the case may be), Buyer shall reimburse Seller for any and all actual documented demurrage or excess boil-off that Seller becomes contractually obligated to pay to any Third Party with respect to such subsequent LNG vessel, as a result of the LNG Tanker not completing LNG transfer and vacating the berth as required by this Section 7.14.2; provided that Buyer shall not be required to reimburse Seller for any amounts based on a demurrage rate or excess boil-off rate or price in excess of the amounts specified in Section 7.12.3 and Section 7.12.4, as applicable.  Seller shall invoice Buyer for any amounts due under this Section 7.14.2(d) pursuant to Section 10.1.5 within one hundred eighty (180) Days after the relevant Delivery Window.

		
	(e)
	In the event an LNG Tanker fails to vacate the berth pursuant to this Section 7.14 and Buyer is not taking actions to cause it to vacate the berth, Seller may effect such removal at the expense of Buyer.  

 45

		
	7.15
	Cooperation

		
	7.15.1
	If any circumstance occurs or is foreseen to occur so as to cause delay to an LNG Tanker or any other LNG vessel in berthing, loading, unloading or departing, Buyer and Seller shall, without prejudice to any other provision of this Agreement, discuss the problem in good faith with each other and, if appropriate, with other users of the Loading Port, and the Parties shall use reasonable efforts to minimize or to avoid the delay, and at the same time shall cooperate with each other and with such other users of the Loading Port, as appropriate, to find countermeasures to minimize or to avoid the occurrence of any similar delay in the future.

		
	7.15.2
	With respect to an LNG Tanker scheduled to load a cargo at the Sabine Pass Facility, if such LNG Tanker is unable to berth at the Sabine Pass Facility by the end of its Delivery Window solely due to a Force Majeure event, then the relevant cargo shall be cancelled, to the extent affected; provided, however, that if requested by Buyer, Seller shall use reasonable efforts to change the ADP or Ninety Day Schedule in order to maximize the safe, reliable and efficient usage of the Sabine Pass Facility and to assist Buyer, Regasification Capacity Users, other Foundation Customers, or other buyers having a firm contract to purchase LNG from the Sabine Pass Facility to load or unload quantities of LNG which would otherwise have been loaded or unloaded at the Sabine Pass Facility during such cancelled Delivery Windows or other affected delivery windows allocated to such Regasification Capacity Users, other Foundation Customers, or other buyers having a firm contract to purchase LNG from the Sabine Pass Facility.

		
	7.16
	Cool-Down and Gas-Up of LNG Tankers

		
	7.16.1
	Buyer shall be solely responsible for ensuring that each LNG Tanker elected by Buyer for taking a cargo arrives at the Sabine Pass Facility cold and in a state of readiness.  Notwithstanding the foregoing and subject to Section 7.16.2, Seller shall provide cool-down service to LNG Tankers at Buyer's request as follows:

		
	(a)
	Seller shall use reasonable efforts (taking into account availability of sufficient berth time) to accept Buyer's request to provide cool-down service for any LNG Tanker, subject to Buyer requesting such cool-down service by notice to Seller as far in advance of the relevant cargo's Delivery Window as is reasonably practicable but in no case less than thirty (30) Days before the relevant cargo's Delivery Window, provided that Seller shall accept Buyer's request to provide a cool-down service if (i) Buyer makes such request by notice at the time Buyer proposes its schedule of receipt of cargoes pursuant to Section 8.1.2 for the relevant Contract Year or (ii) at the time of the request, the Composite ADP for the relevant Contract Year indicates 

 46

sufficient available berth time to accommodate such cool-down service.  Seller shall have no obligation to provide a cool-down service pursuant to this Section 7.16.1(a) in excess of: (A) five (5) total cool-downs during any Contract Year and (B) forty-six (46) total cool-downs during the initial Term.  All LNG provided by Seller for cooling such LNG Tankers shall be sold, delivered and invoiced by Seller, and paid for by Buyer, at a price equal to the CSP;
		
	(b)
	Seller shall provide cool-down service without charge to any LNG Tankers requiring cool-down solely as a result of a delay caused by Seller or Seller's Affiliate, but only if such LNG Tanker made no other call between the original Delivery Window and the requested cool-down time; and

		
	(c)
	Seller shall use reasonable efforts, contingent on the availability of sufficient berth time and facilities status to provide cool-down service at any time other than as described in Sections 7.16.1(a)-(b) upon request by Buyer, provided that all LNG provided by Seller for cooling such LNG Tankers shall be sold, delivered and invoiced by Seller, and paid for by Buyer, at a price equal to the CSP.

		
	7.16.2
	The following shall apply to any cool-down service provided by Seller pursuant to Section 7.16.1:

		
	(a)
	the MMBtu content of the total liquid quantities delivered for cooling, measured before evaporation (without deduction of the quantity of vapor returned from the LNG Tanker), shall be determined by reference to the relevant LNG Tanker's cool-down tables;  

		
	(b)
	the Parties will determine by mutual agreement the rates and pressures for delivery of LNG for cool-down, but always in full accordance with safe operating parameters and procedures mutually established and agreed by both the LNG Tanker and the Sabine Pass Facility; and

		
	(c)
	LNG provided during cool down by Seller pursuant to Section 7.16.1 shall not be applied against the Scheduled Cargo Quantity for the relevant cargo. 

		
	7.16.3
	Seller shall use reasonable efforts to obtain all relevant Approvals needed to allow Seller to offer gas-up service to LNG Tankers at the Sabine Pass Facility.

 47

		
	8.
	Annual Delivery Program

		
	8.1
	Programming Information

		
	8.1.1
	No later than one hundred eighty (180) Days before the start of each Contract Year, Seller shall provide Buyer with:

		
	(a)
	Seller's good faith estimate of the Gross Heating Value of LNG to be delivered during the coming Contract Year; and

		
	(b)
	the Major Scheduled Maintenance Quantity or Inspection Maintenance Quantity for the Contract Year, if any.

		
	8.1.2
	No less than one hundred ten (110) Days before the start of each Contract Year, Buyer shall notify Seller of Buyer's proposed schedule of receipt of cargoes for each Month of such Contract Year.  Such schedule shall be on a reasonably even and ratable basis in accordance with Section 5.1.3, and Buyer's notice shall include the following information:

		
	(a)
	the LNG Tanker (if known) for each proposed cargo;

		
	(b)
	the Scheduled Cargo Quantity for each proposed cargo;

		
	(c)
	the proposed Delivery Window for each cargo;

		
	(d)
	Buyer's request (if any) for a Round-Up Quantity for such Contract Year;

		
	(e)
	the anticipated Discharge Terminal for each proposed cargo, subject to Section 26.1; and

		
	(f)
	any other information that may affect annual scheduling.

Buyer shall also inform Seller of any anticipated periods for maintenance to be conducted with respect to the LNG Tankers identified in (a) above.
		
	8.1.3
	Seller will then notify Buyer no less than eighty-five (85) Days before the start of such Contract Year of Seller's proposed schedule of cargoes to be made available in each Month of such Contract Year, exercising reasonable efforts to adopt Buyer's proposed schedule of receipts requested in accordance with Section 8.1.2; provided that if Buyer fails to deliver the notice according to Section 8.1.2, Seller may nevertheless propose a schedule according to the terms of this Section 8.1.3.  Such notice shall include the following information:

		
	(a)
	the AACQ for the Contract Year;

 48

		
	(b)
	the Round-Up Quantity or Round-Down Quantity for the Contract Year;

		
	(c)
	any Round-Down Quantity not taken in the previous Contract Year and carried forward to the current Contract Year;

		
	(d)
	any Round-Up Quantity taken in the previous Contract Year and carried forward as a deduction in the current Contract Year;

		
	(e)
	the Major Scheduled Maintenance Quantity or Inspection Maintenance Quantity (if any) for the Contract Year identified by Seller pursuant to Section 8.1.1(b);

		
	(f)
	for each cargo:

		
	(i)
	the LNG Tanker (if specified by Buyer);

		
	(ii)
	the Scheduled Cargo Quantity specified in the notice sent by Buyer pursuant to Section 8.1.2;

		
	(iii)
	the proposed Delivery Window; and

		
	(iv)
	the Discharge Terminal specified in the notice sent by Buyer pursuant to Section 8.1.2, subject to such Discharge Terminal complying with Section 26.1; and

		
	(g)
	any other information that may affect annual scheduling.

		
	8.2
	Determination of Annual Delivery Program

		
	8.2.1
	Not later than ten (10) Days after receipt of Seller's proposed schedule provided under Section 8.1.3, Buyer shall notify Seller if Buyer desires to consult with Seller regarding the proposed schedule, and Seller shall, no later than fifteen (15) Days after receipt of Buyer's notice, meet and consult with Buyer.

		
	8.2.2
	If, prior to the date that is sixty (60) Days before the start of the coming Contract Year, the Parties have agreed on a schedule of deliveries for such coming Contract Year, then Seller shall issue the delivery schedule agreed by the Parties.  If the Parties are unable to agree on a schedule of deliveries for the coming Contract Year, then not later than sixty (60) Days before the start of such Contract Year, Seller shall issue the delivery schedule for such Contract Year containing the information set forth in Section 8.1.3, modified to reflect any changes agreed by the Parties pursuant to Section 8.2.1.  The schedule promulgated by Seller shall reflect the exercise of reasonable efforts by Seller to (i) assign to Buyer Delivery Windows that are as close as reasonably practicable to the Delivery Windows proposed by Buyer, and (ii) 

 49

specify the Scheduled Cargo Quantity with respect to each LNG Tanker as notified by Buyer pursuant to Section 8.1.2.  In assigning Delivery Windows Seller shall act in a non-discriminatory manner among Foundation Customers and shall give priority to the requests of Foundation Customers over the requests of other customers.
		
	8.2.3
	The schedule for deliveries of LNG during the Contract Year established pursuant to this Section 8.2, as amended from time to time in accordance with Section 8.3, is the “Annual Delivery Program” or “ADP”.  If Seller fails to issue the schedule provided for in Sections 8.1.3 or 8.2.2, if applicable, then the schedule proposed by Buyer under Section 8.1.2 shall be the ADP for the relevant Contract Year.

		
	8.2.4
	Seller shall combine the ADP with the similar schedules for the loading of cargoes for the account of other Persons having contractual rights to receive cargoes from Seller at the Sabine Pass Facility, and shall provide to Buyer a combined schedule (the “Composite ADP”) showing all delivery windows and scheduled cargo quantities that have been committed by Seller, along with available, uncommitted loading windows at the Sabine Pass Facility.  Seller shall promptly update the Composite ADP as the ADP is changed pursuant to Section 8.3 or other Persons' delivery windows are changed pursuant to their respective agreements.

		
	8.3
	Changes to Annual Delivery Program

		
	8.3.1
	Subject to the remainder of this Section 8.3, Buyer may request by notice a change in the ADP or Ninety Day Schedule for a Contract Year for any reason.  Seller may request by notice a change in the Scheduled Cargo Quantity or the Delivery Window for any cargo in the ADP (including any Ninety Day Schedule) for such Contract Year for operational causes affecting Seller, including Force Majeure.

		
	8.3.2
	As soon as possible after notice has been received pursuant to this Section 8.3, the Parties shall consult with one another in order to examine whether such ADP or Ninety Day Schedule can be revised to accommodate such proposed change(s).  Neither Party shall unreasonably withhold its consent to revise the ADP or Ninety Day Schedule in accordance with changes proposed by the other Party; provided that neither Party shall be under any obligation to consent thereto if, in the case of Seller, it is unable to agree after the exercise of reasonable efforts to any necessary changes in its arrangements with Regasification Capacity Users, other Foundation Customers or other buyers of LNG from the Sabine Pass Facility or if, in the case of Buyer, it is unable to agree after the exercise of reasonable efforts to any necessary changes in its arrangements with the LNG Tankers or Buyer's customers or the requested change would impose additional costs or risks upon Buyer.  Seller may not withhold its consent to revise the ADP or Ninety Day Schedule if Buyer's 

 50

proposed change: (a) consists of the movement of a Delivery Window to dates not  committed under the Composite ADP at the time of Buyer's request and does not result in a change to the Scheduled Cargo Quantity; (b) the proposed change is, by the exercise of reasonable efforts on the part of Seller, operationally feasible; and (c) the proposed change does not result in increased costs to Seller.  Seller may not withhold its approval to a requested change on the grounds of Section 8.3.2(c) if Buyer agrees to reimburse Seller for such increased costs.
		
	8.3.3
	Any change to the ADP or Ninety Day Schedule shall not: (a) unless expressly agreed otherwise by both Parties in such amended ADP or Ninety Day Schedule, affect the obligations pursuant to Section 5 of the Party requesting such change; or (b) result in unreasonably unratable deliveries at any time during a Contract Year.

		
	8.3.4
	Upon a change to the Delivery Window for a cargo, the ADP and/or Ninety Day Schedule shall be amended accordingly and an updated ADP and/or Ninety Day Schedule shall promptly be provided in writing by Seller to Buyer.

		
	8.4
	Ninety Day Schedule

No later than the twenty-fifth (25th) Day of each Month, Seller shall issue a forward plan of deliveries for the three (3)-Month period commencing on the first Day of the following Month thereafter (e.g., the Ninety Day Schedule for the three (3)-Month period commencing on May 1st shall be issued no later than the twenty-fifth (25th) Day of April) (such plan, as amended from time to time in accordance with procedures set forth in this Agreement, the “Ninety Day Schedule”).  The Ninety Day Schedule shall set forth by cargo the forecast pattern of deliveries, including the Delivery Window, LNG Tanker and Scheduled Cargo Quantity for each cargo.  In the absence of agreement between the Parties otherwise, the Ninety Day Schedule will maintain the Scheduled Cargo Quantities and Delivery Windows as identified in the Annual Delivery Program.
		
	8.5
	Force Majeure Affecting LNG Tanker

With respect to any particular cargo, Buyer shall not be entitled to claim Force Majeure relief for an event affecting the LNG Tanker nominated for such cargo if such LNG Tanker was affected by, or could reasonably have been expected to be affected by, such Force Majeure event at the time it was nominated by Buyer pursuant to Section 8.1.2 or Section 8.3, as applicable, for the relevant cargo.
		
	9.
	Contract Sales Price 

		
	9.1
	Contract Sales Price

 51

		
	9.1.1
	The contract sales price (“CSP”) (expressed in USD per MMBtu) for all LNG made available by Seller to Buyer shall be as follows:

CSP = (1.15 x HH) + Xy 
where:
		
	Xy = 
	the constant applicable for the current Contract Year, as calculated in accordance with Section 9.1.2.

		
	9.1.2
	Following the Date of First Commercial Delivery, Xy shall be increased annually, effective as of the first Day of each Contract Year, as soon as the relevant data is available from the US Department of Labor Bureau of Labor Statistics on or after January 1st of each calendar year, by adjusting X0 as follows:

Xy = (0.885 + 0.115 x CPI(y-1) / CPI0) x X0 
where:
Xy = the constant for the current Contract Year;
CPI(y-1) = The arithmetic average of the US Department of Labor Bureau of Labor Statistics CPI (All Urban Consumers, U.S., All Items, 1982 - 1984, Not Seasonally Adjusted, Series I.D. CUUR0000SA0) for the twelve (12) Months preceding the relevant January 1st determination date;
CPI0 = The arithmetic average of the US Department of Labor Bureau of Labor Statistics CPI (All Urban Consumers, U.S., All Items, 1982 - 1984, Not Seasonally Adjusted, Series I.D. CUUR0000SA0) for the twelve (12) Month period between January 1st and December 31st during which third (3rd) LNG production train at the Sabine Liquefaction Facility becomes capable, following construction and commissioning, to deliver LNG in quantities sufficient and quality necessary to permit Seller to perform its obligations in respect of such train to any customer who has an LNG sale and purchase agreement for the purchase and export of LNG from such train;
Provided, however, that:
		
	(i)
	if at any time the US Department of Labor Bureau of Labor Statistics CPI (All Urban Consumers, U.S., All Items, 1982 - 1984, Not Seasonally Adjusted, Series I.D. CUUR0000SA0) statistics are adjusted for a relevant period following the adjustment of Xy for that period pursuant to this Section 9.1.2, then (A) Xy during that period shall be 

 52

recalculated pursuant to this Section 9.1.2, (B) all invoices previously issued by Seller  during such period shall be treated as Provisional Invoices, and (C) Seller shall issue a revised invoice reflecting any aggregate credit for Buyer, or debit owed by Buyer, as applicable, in respect of all such Provisional Invoices, as soon as reasonably practicable thereafter;
		
	(ii)
	if at any time prior to the end of the Term, any index is discontinued or otherwise no longer published, a comparable index will be substituted pursuant to Section 1.3; and

		
	(iii)
	if at any time prior to the end of the Term, any index is rebased, the formula in this Section 9.1.2 shall be adjusted accordingly to properly reflect the rebasing.

		
	10.
	Invoicing and Payment

		
	10.1
	Invoices

		
	10.1.1
	Invoices for Cargoes.  Invoices for each cargo made available by Seller and taken by Buyer, together with relevant supporting documents including a certificate of quantity loaded, shall be prepared and delivered by Seller to Buyer promptly following each Delivery Window and receipt of the final inspection certificate applicable to the loading of such cargo.  The invoice amount shall be the CSP, multiplied by the quantity of LNG loaded on Buyer's LNG Tanker net of Gas returned to Seller during loading.

		
	10.1.2
	Invoices for Suspension Fees.  Invoices for the Suspension Fee and for any amounts due pursuant to Section 5.7.2 shall be prepared and delivered by Seller to Buyer on or about the first Day of each Month that a suspension notice is in effect, together with relevant supporting documents showing the basis for the calculation thereof.

		
	10.1.3
	Invoices for Cargo DoP Payments.  Invoices for Cargo DoP Payments owed to Buyer by Seller shall be prepared by Buyer and delivered to Seller promptly following the Delivery Window of each affected cargo and completion of mitigation efforts.

		
	10.1.4
	Invoices for Cover Damages.  Invoices for Cover Damages owed to Seller by Buyer shall be prepared by Seller and delivered to Buyer promptly following the Delivery Window for each affected cargo.

		
	10.1.5
	Invoices for Various Sums Due.  In the event that any sums are due from one Party to the other Party under Section 7.5.4(b), 7.12.3, 7.12.4, 7.14.2(d), 7.16.1, 10.3.3, 10.4.1, 11.5, 12.3.1(c), or 12.3.2(a) of this Agreement, the Party to whom such sums are owed shall furnish an invoice therefor, 

 53

describing in reasonable detail the basis for such invoice and providing relevant documents supporting the calculation thereof.
		
	10.1.6
	Invoices for Other Sums Due.  In the event that any sums are due from one Party to the other Party under this Agreement, other than for a reason addressed in Section 10.1.1 through 10.1.5, the Party to whom such sums are owed shall furnish an invoice therefor, describing in reasonable detail the basis for such invoice and providing relevant documents supporting the calculation thereof.

		
	10.1.7
	Notice.  Invoices shall be sent in accordance with Section 25.

		
	10.1.8
	Provisional Invoices.

		
	(a)
	In the event (i) a rate or index used in the calculation of an amount is not available on a temporary or permanent basis; or (ii) any other relevant information necessary to compute an invoice is not available, the invoicing Party may issue a provisional invoice (“Provisional Invoice”) in an amount calculated, in the case of subsection (i) of this Section 10.1.8(a), in accordance with Section 1.3, and, in the case of subsection (ii) of this Section 10.1.8(a), based on the best estimate of the unavailable information by the Party issuing the Provisional Invoice.  A Provisional Invoice shall be deemed to be an invoice issued pursuant to Section 10.1.1 through 10.1.4, as applicable, for the purposes of the payment obligations of Seller or Buyer, as applicable, and shall be subject to subsequent adjustment in accordance with Section 10.1.8(b).

		
	(b)
	If a Provisional Invoice has been issued, the invoicing Party shall issue a final invoice reflecting any credit or debit, as applicable, to the Provisional Invoice as soon as reasonably practicable after the information necessary to compute the payment has been obtained by such Party.  Seller and Buyer shall settle such debit or credit amount, as the case may be, when payment of the next invoice is due pursuant to Section 10.2 or, if earlier, upon the termination of this Agreement.

		
	10.2
	Payment

All amounts invoiced under this Agreement that are due and payable shall be paid in accordance with this Section 10.2.
		
	10.2.1
	Payments for Cargoes.  Invoices issued in accordance with Section 10.1.1 for cargoes made available and taken shall become due and payable by Buyer on the tenth (10th) Day after the date on which Buyer received such invoice.

		
	10.2.2
	Payments for Suspension Fees.  Invoices issued in accordance with Section 10.1.2 shall become due and payable by Buyer on the later of (a) the fifteenth 

 54

(15th) Day of the Month for which the Suspension Fee applies or (b) ten (10) Days after Buyer receives Seller's invoice.
		
	10.2.3
	Cargo DoP Payments.  Invoices issued in accordance with Section 10.1.2 shall become due and payable on the tenth (10th) Day following receipt by Seller.

		
	10.2.4
	Payments for Cover Damages.  Invoices issued in accordance with Section 10.1.4 shall become due and payable on the tenth (10th) Day following receipt by Buyer.

		
	10.2.5
	Payments for Other Sums Due.  An invoice issued pursuant to Section 10.1.5 or 10.1.6 shall be paid by the paying Party thereunder not later than twenty (20) Days after receipt of such invoice.

		
	10.2.6
	Payment Method.  All invoices shall be settled by payment in USD of the sum due by wire transfer of immediately available funds to an account with the bank designated by the other Party in accordance with Section 10.2.7.

		
	10.2.7
	Designated Bank.  Each Party shall designate a bank in a location reasonably acceptable to the other Party for payments under this Agreement.  A Party shall designate its bank by notice to the other Party initially not later than one hundred twenty (120) Days prior to the Date of First Commercial Delivery and thereafter not less than thirty (30) Days before any redesignation is to be effective.

		
	10.2.8
	Payment Date.  If any invoice issued pursuant to Section 10.1 would result in a Party being required to make a payment on a Day that is not a Business Day, then the due date for such invoice shall be the immediately succeeding Business Day; provided, however, that in no event shall any invoice be due less than five (5) Business Days after receipt by the Party being required to make a payment.

		
	10.3
	Disputed Invoice

		
	10.3.1
	Payment Pending Dispute.  Absent manifest error, each Party invoiced pursuant to Section 10.1.1, 10.1.2, 10.1.3, 10.1.4, or 10.1.5 shall pay all disputed and undisputed amounts due under such invoice without netting or offsetting any amounts owed by the Party receiving the invoice, including taxes (except as provided in Section 11.4), exchange charges, or bank transfer charges.  In the case of manifest error, the correct amount shall be paid disregarding such error, and necessary correction and consequent adjustment shall be made within five (5) Business Days after agreement or determination of the correct amount.

 55

		
	10.3.2
	Timing.  Except with respect to Sections 1.3, 10.3.4, and 14, any invoice may be contested by the receiving Party only pursuant to Section 10.5 or if, within a period of thirteen (13) Months after its receipt thereof, that Party serves notice to the other Party questioning the correctness of such invoice.  Subject to Section 10.5, if no such notice is served, the invoice shall be deemed correct and accepted by both Parties.

		
	10.3.3
	Interest.  The Party who invoiced and received payment of a sum, subsequently determined not to have been payable under this Agreement to such Party, shall pay interest to the other Party on such amount, at a rate per annum equal to two percent (2%) above LIBOR (as in effect on the Day when such sum was originally paid) on and from the Day when such sum was originally paid until the date of its repayment, provided that, without prejudice to the other terms of this Agreement, if such period lasts longer than ninety (90) Days, the applicable LIBOR rate for each successive term of ninety (90) Days during that period shall be that in effect on the first Day of that ninety (90) Day period.  Interest shall accrue from Day to Day and be calculated on the basis of a three hundred sixty (360) Day year.

		
	10.3.4
	Measurement or Analyzing Errors.  Any errors found in an invoice or credit note which are caused by the inaccuracy of any measuring or analyzing equipment or device shall be corrected in accordance with Exhibit A hereto, as applicable, and shall be settled in the same manner as is set out above in this Section 10.3.

		
	10.4
	Delay in Payment

		
	10.4.1
	Interest.  If either Seller or Buyer fails to make payment of any sum as and when due under this Agreement, it shall pay interest thereon to the other Party at a rate per annum equal to two percent (2%) above LIBOR (as in effect on the Day when such sum was originally due) on and from the Day when payment was due until the date of payment, provided that, without prejudice to the other terms of this Agreement, if such period lasts longer than ninety (90) Days, the applicable LIBOR rate for each successive term of ninety (90) Days during that period shall be that in effect on the first Day of that ninety (90) Day period.  Interest shall accrue from Day to Day and be calculated on the basis of a three hundred sixty (360) Day year.

		
	10.4.2
	Costs and Expenses.  Subject to Section 21.1.12, each Party shall bear its own costs (including attorneys' or Experts' fees or costs) in respect of enforcement of such Party's rights in any Dispute proceeding as a result of the other Party failing to perform or failing timely to perform its obligations under this Agreement including failing timely to make any payment in accordance with this Agreement.

		
	10.5
	Audit Rights

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Each Party shall have the right to cause an independent auditor, appointed by such Party at such Party's sole cost and expense, to audit the books, records and accounts of the other Party that are directly relevant to the determination of any amounts invoiced, charged, or credited by the other Party within the previous twelve (12) Months or as otherwise required by this Agreement.  Such audit shall be conducted at the office where the records are located, during the audited Party's regular business hours and on reasonable prior notice, and shall be completed within thirty (30) Days after the audited Party's relevant records have been made available to the auditing Party.  The independent auditor shall be a major international accountancy firm, and the Party appointing such auditor shall cause the auditor to execute a confidentiality agreement acceptable to the Party being audited. If the audit discloses an error in any invoiced amount under this Agreement, then the auditing Party shall, within thirty (30) Days following completion of the audit pertaining to the affected invoice or statement, provide  notice to the audited Party describing the error and the basis therefor.  Promptly thereafter, the Parties shall commence discussions regarding such error in order to expeditiously, and in good faith, achieve resolution thereof, provided that any adjustments arising from such audit shall be made and all credits or charges finalized within forty-five (45) Days of completion of any relevant audit.
		
	10.6
	Seller's Right to Suspend Performance

If Seller has not received payment in respect of any amounts due under any invoice(s) under this Agreement totaling in excess of USD thirty million (US$30,000,000) within five (5) Business Days after the due date thereof, or if at any time Buyer is not in compliance with Section 15.3, then without prejudice to any other rights and remedies of Seller arising under this Agreement or by Applicable Laws or otherwise, upon giving five (5) Business Days' notice to Buyer:
		
	10.6.1
	Seller may suspend delivering any or all subsequent cargoes until the amounts outstanding under such invoice(s) and interest thereon have been paid in full and Buyer is in compliance with Section 15.3.

		
	10.6.2
	In the event of such suspension, Buyer shall not be relieved of any of its obligations under this Agreement, including its obligation to take any LNG, and Section 5.5 will apply with respect to each cargo scheduled in the Annual Delivery Program or Ninety Day Schedule which is not delivered during the suspension.

		
	10.6.3
	During the period that such suspension is effective, Seller shall have no obligation to make available any cargoes to Buyer.

		
	10.7
	Final Settlement

Within sixty (60) Days after expiration of the Term or the earlier termination of this Agreement, Seller and Buyer shall determine the amount of any final reconciliation payment.  After the amount of the final settlement has been determined, Seller shall 

 57

send a statement to Buyer, or Buyer shall send a statement to Seller, as the case may be, for amounts due under this Section 10.7, and Seller or Buyer, as the case may be, shall pay such final statement no later than twenty (20) Business Days after the date of receipt thereof.
		
	11.
	Taxes

		
	11.1
	Responsibility

Buyer shall indemnify and hold Seller and its direct or indirect owners and Affiliates harmless from any and all Buyer Taxes, and Seller shall indemnify and hold Buyer and its Affiliates harmless from any and all Seller Taxes.
		
	11.2
	Seller Taxes

“Seller Taxes” means any taxes imposed from time to time:
		
	(a)
	solely on account of the corporate existence of Seller or its Affiliates;

		
	(b)
	in respect of the property, revenue, income, or profits of Seller or its Affiliates (other than taxes required to be deducted or withheld by Buyer from or in respect of any payments (whether in cash or in kind) under this Agreement);

		
	(c)
	subject to Section 11.5, in the United States of America or any political subdivision thereof, that may be levied or assessed upon the sale, use or purchase of LNG up to and at the Delivery Point;

		
	(d)
	in the United States of America or any political subdivision thereof, that may be levied or assessed upon the export, loading, storage, processing, transfer, transport, ownership of title, or delivery of LNG, up to and at the Delivery Point; and

		
	(e)
	payable by Buyer by reason of a failure by Seller to properly deduct, withhold or pay any taxes described in Section 11.4.

		
	11.3
	Buyer Taxes

“Buyer Taxes” means any taxes imposed from time to time:
		
	(a)
	solely on account of the corporate existence of Buyer or its Affiliates;

		
	(b)
	in respect of the revenue, income, or profits of Buyer or its Affiliates (other than taxes required to be deducted or withheld by Seller from or in respect of payments (whether in cash or in kind) under this Agreement);

 58

		
	(c)
	in the United States of America or any political subdivision thereof or in any jurisdiction in which any of Buyer's Discharge Terminals are located, or any jurisdiction through which any LNG Tanker transits or on which any LNG Tanker calls, any taxes that may be levied or assessed upon the sale, use, purchase, import, unloading, export, loading, storage, processing, transfer, transport, ownership of title, receipt or delivery of LNG after the Delivery Point; and

		
	(d)
	payable by Seller by reason of a failure by Buyer to properly deduct, withhold or pay any taxes described in Section 11.4.

		
	11.4
	Withholding Taxes

If Seller or Buyer (in either case, the “Payor” for purposes of this Section 11.4), is required to deduct or withhold taxes from or in respect of any payments (whether in cash or in kind) to the other Party under this Agreement, then:  (a) the Payor shall make such deductions and withholdings; (b) the Payor shall pay the full amount deducted or withheld to the appropriate Governmental Authority in accordance with Applicable Laws; (c) the Payor shall promptly furnish to the other Party the original or a certified copy of a receipt evidencing such payment; and (d) the sum payable by the Payor to the other Party shall be increased by such additional sums as necessary so that after making all required deductions and withholdings of taxes (including deductions and withholdings of taxes applicable to additional sums payable under this Section 11.4), the other Party receives an amount equal to the sum it would have received had no such deductions or withholdings of taxes been made.
		
	11.5
	Sales Tax

Buyer shall provide to Seller evidence of exemption and/or exclusion, if any, from sales and use tax imposed by the State of Louisiana and any of its political subdivisions in respect of the purchase of LNG for export pursuant to this Agreement.  Notwithstanding the foregoing, in the event that the State of Louisiana or any of its political subdivisions levies or assesses sales or use tax on the sale and purchase of such LNG pursuant to the Agreement, Seller shall remit the sales or use tax owing to the State of Louisiana or any of its political subdivisions and Buyer shall reimburse Seller for the amount of such tax.  Pursuant to Section 10.1.5, Seller shall furnish Buyer with an invoice of the taxes required to be reimbursed to Seller.  Buyer shall pay such invoice in accordance with Section 10.2.5.
		
	11.6
	Mitigation

Each Party shall use reasonable efforts to take actions or measures requested by the other Party in order to minimize taxes for which the other Party is liable under this Section 11, including providing applicable sales and use tax resale or exemption certificates, provided that the other Party shall pay such Party's reasonable costs and expenses in relation thereto.

 59

		
	11.7
	Refunds

If a Party has made an indemnification payment to the other Party pursuant to this Section 11 with respect to any amount owed or paid by the indemnified Party and the indemnified Party thereafter receives a refund or credit of any such amount, such indemnified Party shall pay to the indemnifying Party the amount of such refund or credit promptly following the receipt thereof.  The indemnified Party shall provide such assistance as the indemnifying Party may reasonably request to obtain such a refund or credit.
		
	12.
	Quality

		
	12.1
	Specification

		
	12.1.1
	LNG delivered under this Agreement shall, when converted into a gaseous state, comply with the following specifications (“Specifications”):

Minimum Gross Heat Content (dry)         1000 BTU/SCF
Maximum Gross Heat Content (dry)        1150 BTU/SCF
Minimum methane (C1)        84.0 MOL%
Maximum H2S        0.25 grains per 100 SCF
Maximum Sulfur        1.35 grains per 100 SCF
Maximum N2        1.5 MOL%
Maximum Ethane (C2)        11 MOL%
Maximum Propane (C3)        3.5 MOL%
Maximum Butane (C4) and heavier        2 MOL%
LNG shall contain no water, active bacteria or bacterial agents (including sulfate-reducing bacteria or acid producing bacteria) or other contaminants or extraneous material.
		
	12.1.2
	With respect to each cargo to be delivered to Buyer under this Agreement, Seller shall provide Buyer with a report indicating Seller's best estimate of what the actual loaded quality composition of the LNG to be delivered to Buyer in such cargo is likely to be.  Seller shall endeavor to provide such report as early as possible during the thirty (30) Day period immediately preceding the relevant cargo's Delivery Window.

 60

		
	12.2
	Determining LNG Specifications

LNG shall be tested pursuant to Exhibit A to determine whether such LNG complies with the Specifications.
		
	12.3
	Off-Specification LNG

		
	12.3.1
	If Seller, acting as a Reasonable and Prudent Operator, determines prior to loading a cargo that the LNG is expected not to comply with the Specifications (“Off-Spec LNG”) upon loading, then:

		
	(a)
	Seller shall give notice to Buyer of the extent of the expected variance as soon as practicable (but in no case later than the commencement of loading of the cargo);

		
	(b)
	Buyer shall use reasonable efforts, including coordinating with the Transporter and the operator of the Discharge Terminal, to accept such LNG where the LNG would be acceptable to the Transporter and the operator of the Discharge Terminal, each of them acting in their sole discretion (unless Transporter or such operator is Buyer or an Affiliate of Buyer), and would not prejudice the safe and reliable operation of any LNG Tanker, the Discharge Terminal, and any downstream facilities being supplied regasified LNG;

		
	(c)
	if Buyer can accept delivery of such cargo, then Buyer shall notify Seller of Buyer's estimate of the direct costs to be incurred by Buyer, any Affiliate of Buyer, Transporter, and the operator of the Discharge Terminal in transporting and treating such Off-Spec LNG (or to otherwise make such LNG marketable), and, to the extent Seller agrees to such estimate, Buyer shall take delivery of such cargo, and Seller shall reimburse Buyer for all reasonable documented direct costs incurred by Buyer (including costs owed to any Affiliate of Buyer, Transporter, and the operator of the Discharge Terminal in transporting and treating such Off-Spec LNG (or to otherwise make such LNG marketable) prior to and at the Discharge Terminal), provided, however, that Seller's liability shall not exceed one hundred and twenty percent (120%) of the estimate notified by Buyer and agreed by Seller; and

		
	(d)
	if Buyer determines in good faith that it cannot, using reasonable efforts, receive such cargo, or (1) Seller rejects the cost estimate or (2) Buyer anticipates that it might be liable for costs that would not otherwise be reimbursed pursuant to Section 12.3.1(c), then Buyer shall be entitled to reject such cargo by giving Seller notice of rejection within seventy-two (72) hours of Buyer's receipt of Seller's notice.

 61

		
	12.3.2
	If Off-Spec LNG is delivered to Buyer without Buyer being made aware of the fact that such Off-Spec LNG does not comply with the Specifications, or without Buyer being made aware of the actual extent to which such Off-Spec LNG does not comply with the Specifications, then:

		
	(a)
	if Buyer is able, using reasonable efforts, to transport and treat the Off-Spec LNG to meet the Specifications (or to otherwise make such LNG marketable), then Seller shall reimburse Buyer for all reasonable documented direct costs incurred by Buyer (including direct costs owed to any Affiliate of Buyer, Transporter, and the operator of the Discharge Terminal in transporting and treating such Off-Spec LNG received at the Discharge Terminal to meet the Specifications (or to otherwise make such LNG marketable)), in an amount not exceeding one hundred percent (100%) of the product of the delivered quantity of such Off-Spec LNG and the CSP; provided, however, that Buyer, any Affiliate of Buyer, Transporter, and the operator of the Discharge Terminal shall not be required to incur costs in excess of those reimbursable by Seller; or

		
	(b)
	if Buyer determines in good faith that it cannot, using reasonable efforts, transport and treat such Off-Spec LNG to meet the Specifications (or to make such LNG marketable), then: (i) Buyer shall be entitled to reject such Off-Spec LNG by giving Seller notice of such rejection as soon as practicable, and in any case within ninety-six (96) hours after (A) Seller notifies Buyer in writing that such LNG is Off-Spec LNG and the actual extent to which such Off-Spec LNG does not comply with the Specifications or (B) Buyer becomes aware that such LNG is Off-Spec LNG, whichever occurs first; (ii) Buyer shall be entitled to dispose of the loaded portion of such Off-Spec LNG (or regasified LNG produced therefrom) in any manner that Buyer, acting in accordance with the standards of a Reasonable and Prudent Operator, deems appropriate including by directing Seller to offload such Off-Spec LNG at the Loading Port; and (iii) Seller shall reimburse Buyer in respect of and indemnify and hold Buyer harmless from all direct loss, damage, costs and expenses incurred by Buyer, any Affiliate of Buyer, or Transporter as a result of the delivery of such Off-Spec LNG, including in connection with the handling, treatment or safe disposal of such Off-Spec LNG or other LNG being held at the Discharge Terminal or being carried onboard the LNG Tanker which was contaminated by it, cleaning or clearing the LNG Tanker and Discharge Terminal, and damage caused to the LNG Tanker and Discharge Terminal.

 62

		
	12.3.3
	If Buyer rejects a cargo in accordance with Section 12.3.1(d) or 12.3.2(b), Seller shall be deemed to have failed to make available such cargo and Section 5.6.2 shall apply.

		
	13.
	Measurements and Tests

		
	13.1
	LNG Measurement and Tests

LNG delivered to Buyer, and Gas used as fuel by Buyer, pursuant to this Agreement shall be measured and tested in accordance with Exhibit A.
		
	13.2
	Parties to Supply Devices

		
	13.2.1
	Buyer shall supply, operate and maintain, or cause to be supplied, operated and maintained, suitable gauging devices for the LNG tanks of the LNG Tanker, as well as pressure and temperature measuring devices, in accordance with Section 13.3 and Exhibit A, and any other measurement, gauging or testing devices which are incorporated in the structure of such LNG Tanker or customarily maintained on shipboard.

		
	13.2.2
	Seller shall supply, operate and maintain, or cause to be supplied, operated and maintained, devices required for collecting samples and for determining quality and composition of the delivered LNG, in accordance with Section 13.3 and Exhibit A, and any other measurement, gauging or testing devices which are necessary to perform the measurement and testing required hereunder at the Loading Port.

		
	13.3
	Selection of Devices

Each device provided for in this Section 13 shall be selected and verified in accordance with Exhibit A.  Any devices that are provided for in this Section 13 not previously used in an existing LNG trade shall be chosen by written agreement of the Parties and shall be such as are, at the time of selection, accurate and reliable in their practical application. The required degree of accuracy of such devices shall be agreed in writing by Buyer and Seller in advance of their use, and such degree of accuracy shall be verified by an independent surveyor who is agreed by Buyer and Seller.

		
	13.4
	Tank Gauge Tables of LNG Tanker

Buyer shall furnish to Seller, or cause Seller to be furnished, a certified copy of tank gauge tables as described in Exhibit A for each LNG tank of the LNG Tanker and of tank gauge tables revised as a result of any recalibration of an LNG tank of an LNG Tanker.

 63

		
	13.5
	Gauging and Measuring LNG Volumes Loaded

Volumes of LNG delivered under this Agreement will be determined by gauging the LNG in the LNG tanks of the LNG Tanker immediately before and after loading in accordance with the terms of Exhibit A.
		
	13.6
	Samples for Quality Analysis

Representative samples of the delivered LNG shall be obtained by Seller as provided in Exhibit A.
		
	13.7
	Quality Analysis

The samples referred to in Section 13.6 shall be analyzed, or caused to be analyzed, by Seller in accordance with the terms of Exhibit A, in order to determine the molar fractions of the hydrocarbons and components in the sample.
		
	13.8
	Operating Procedures

		
	13.8.1
	Prior to carrying out measurements, gauging and analyses hereunder, the Party responsible for such operations shall notify the designated representative(s) of the other Party, allowing such representative(s) a reasonable opportunity to be present for all operations and computations; provided, however, that the absence of such representative(s) after notification and reasonable opportunity to attend shall not affect the validity of any operation or computation thereupon performed.

		
	13.8.2
	At the request of either Party, any measurements, gauging and/or analyses provided for in Sections 13.5, 13.6, 13.7 and 13.10.1 shall be witnessed and verified by an independent surveyor agreed upon in writing by Buyer and Seller. The results of verifications and records of measurement shall be maintained in accordance with the terms of Exhibit A.

		
	13.9
	MMBtu Quantity Delivered

The number of MMBtus sold and delivered shall be calculated at the Delivery Point by Seller and witnessed and verified by a mutually appointed independent surveyor agreed upon in writing by the Parties following the procedures set forth in Exhibit A.
		
	13.10
	Verification of Accuracy and Correction for Error

		
	13.10.1
	Each Party shall test and verify the accuracy of its devices at intervals to be agreed between the Parties. In the case of gauging devices of the LNG Tanker, such tests and verifications shall take place during each scheduled dry-docking, provided that the interval between such dry dockings shall not exceed five (5) years.  Indications from any redundant determining devices should be reported to the Parties for verification purposes.  Each Party shall have the right to inspect and if a Party reasonably questions the accuracy of 

 64

any device, to require the testing or verification of the accuracy of such device in accordance with the terms of Exhibit A.
		
	13.10.2
	Permissible tolerances of the measurement, gauging and testing devices shall be as described in Exhibit A.

		
	13.11
	Costs and Expenses

		
	13.11.1
	Except as provided in this Section 13.11, all costs and expenses for testing and verifying measurement, gauging or testing devices shall be borne by the Party whose devices are being tested and verified; provided, however, that representatives of the Parties attending such tests and verifications shall do so at the cost and risk of the Party they represent.

		
	13.11.2
	In the event that a Party inspects or requests the testing/verification of any of the other Party's devices on an exceptional basis in each case as provided in Section 13.10.1, the Party requesting the testing/verification shall bear all costs thereof.

		
	13.11.3
	The costs of the independent surveyor:

		
	(a)
	requested by a Party in accordance with Section 13.8.2 shall be borne by the requesting Party; and

		
	(b)
	referred to in Section 13.9 shall be borne equally by Buyer and Seller.

		
	14.
	Force Majeure

		
	14.1
	Force Majeure

Neither Party shall be liable to the other Party for any delay or failure in performance under this Agreement if and to the extent such delay or failure is a result of Force Majeure.  To the extent that the Party so affected fails to use commercially reasonable efforts to overcome or mitigate the effects of such events of Force Majeure, it shall not be excused for any delay or failure in performance that would have been avoided by using such commercially reasonable efforts. Subject to the provisions of this Section 14, the term “Force Majeure” shall mean any act, event or circumstance, whether of the kind described herein or otherwise, that is not reasonably within the control of, does not result from the fault or negligence of, and would not have been avoided or overcome by the exercise of reasonable diligence by, the Party claiming Force Majeure or an Affiliate of the Party claiming Force Majeure, such Party and, as applicable, its Affiliate having observed a standard of conduct that is consistent with a Reasonable and Prudent Operator, and that prevents or delays in whole or in part such Party's performance of one or more of its obligations under this Agreement.

 65

		
	14.1.1
	Force Majeure may include circumstances of the following kind, provided that such circumstances satisfy the definition of Force Majeure set forth above:

		
	(a)
	acts of God, the government, or a public enemy; strikes, lockout, or other industrial disturbances;

		
	(b)
	wars, blockades or civil disturbances of any kind; epidemics, Adverse Weather Conditions, fires, explosions, arrests and restraints of governments or people;

		
	(c)
	the breakdown or failure of, freezing of, breakage or accident to, or the necessity for making repairs or alterations to any facilities or equipment;

		
	(d)
	in respect of the Seller: (i) loss of, accidental damage to, or inaccessibility to or inoperability of (x) the Sabine Pass Facility or any Connecting Pipeline or (y) the liquefaction and loading  facilities at the alternate source agreed by the Parties pursuant to Section 3.1.2 but only with respect to those cargoes which Buyer has agreed may be supplied from such alternate source; and (ii) any event that would constitute an event of force majeure under (A) any agreement that is between Seller and SPLNG and is necessary for Seller to carry out certain obligations hereunder or (B) an agreement between Seller and Cheniere Creole Trail Pipeline, L.P., for Gas transportation services, provided however, that an event of force majeure affecting a party to any such agreement shall constitute Force Majeure under this Agreement only to the extent such event meets the definition of Force Majeure in this Section 14.1;

		
	(e)
	in respect of Buyer, events affecting the ability of any LNG Tanker to receive and transport LNG, subject to Section 14.2.3; and

		
	(f)
	the withdrawal, denial, or expiration of, or failure to obtain, any Approval.

		
	14.1.2
	Nothing in this Section 14.1 shall be construed to require a Party to observe a higher standard of conduct than that required of a Reasonable and Prudent Operator as a condition to claiming the existence of Force Majeure.

		
	14.2
	Limitations on Force Majeure

		
	14.2.1
	Indemnity and Payment Obligations.  Notwithstanding Section 14.1, no Force Majeure shall relieve, suspend, or otherwise excuse either Party from performing any obligation to indemnify, reimburse, hold harmless or otherwise pay the other Party under this Agreement.

 66

		
	14.2.2
	Events Not Force Majeure.  The following events shall not constitute Force Majeure:

		
	(a)
	a Party's inability to finance its obligations under this Agreement or the unavailability of funds to pay amounts when due in the currency of payment;

		
	(b)
	the unavailability of, or any event affecting, any facilities at or associated with any loading port or unloading port other than the Sabine Pass Facility or any alternate source agreed by the Parties pursuant to Section 3.1.2;

		
	(c)
	the ability of Seller or Buyer to obtain better economic terms for LNG or Gas from an alternative supplier or buyer, as applicable;

		
	(d)
	changes in either Party's market factors, default of payment obligations or other commercial, financial or economic conditions, including failure or loss of any of Buyer's or Seller's Gas or LNG markets;

		
	(e)
	breakdown or failure of plant or equipment caused by normal wear and tear or by a failure to properly maintain such plant or equipment; 

		
	(f)
	the non-availability or lack of economically obtainable Gas reserves;

		
	(g)
	in the case of the Seller, any event arising from an action or omission of (i) any Affiliate of Seller, (ii) the contractor or sub-contractor or agent of Seller or Affiliate of Seller, (iii) the operator of any part of the Sabine Pass Facility to the extent that, had the Seller taken such action or experienced such event, such event would not constitute Force Majeure pursuant to the provisions of this Section 14; and

		
	(h)
	the loss of interruptible or secondary firm transportation service on a Connecting Pipeline or any pipeline upstream of a Connecting Pipeline unless the cause of such loss was an event that would satisfy the definition of Force Majeure hereunder and primary in-the-path transportation service on such pipeline was also interrupted as a result of such event.

		
	14.2.3
	Force Majeure relief in respect of Buyer for an event described in Section 14.1.1(e) affecting a specific LNG Tanker shall only be available with respect to cargoes that are scheduled to be transported on such LNG Tanker in the applicable Ninety Day Schedule or ADP for such Contract Year, or (to the extent that the ADP for the following Contract Year has been issued by Seller) in the ADP for the following Contract Year.

 67

		
	14.3
	Notification

A Force Majeure event shall take effect at the moment such an event or circumstance occurs.  Upon the occurrence of a Force Majeure event that prevents, interferes with or delays the performance by Seller or Buyer, in whole or in part, of any of its obligations under this Agreement, the Party affected shall give notice thereof to the other Party describing such event and stating the obligations the performance of which are affected (either in the original or in supplemental notices) and stating, as applicable:
		
	14.3.1
	the estimated period during which performance may be prevented, interfered with or delayed, including, to the extent known or ascertainable, the estimated extent of such reduction in performance;

		
	14.3.2
	the particulars of the program to be implemented to resume normal performance under this Agreement; and

		
	14.3.3
	the anticipated portion of Buyer's AACQ for a Contract Year that will not be made available or taken, as the case may be, by reason of Force Majeure.

Such notices shall thereafter be updated at least monthly during the period of such claimed Force Majeure specifying the actions being taken to remedy the circumstances causing such Force Majeure.
		
	14.4
	Measures

Prior to resumption of normal performance, the Parties shall continue to perform their obligations under this Agreement to the extent not excused by such event of Force Majeure.
		
	14.5
	No Extension of Term

The Term shall not be extended as a result of or by the duration of an event of Force Majeure.
		
	14.6
	Settlement of Industrial Disturbances

Settlement of strikes, lockouts, or other industrial disturbances shall be entirely within the discretion of the Party experiencing such situations, and nothing in this Agreement shall require such Party to settle industrial disputes by yielding to demands made on it when it considers such action inadvisable.
		
	14.7
	Foundation Customer Priority

Notwithstanding any other provision in this Section 14, during any event of Force Majeure affecting Seller, Seller shall apportion the remaining capacity at the Sabine Pass Facility according to the Foundation Customer Priority.  

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“Foundation Customer Priority” means that Buyer and other Foundation Customers will receive priority for receiving LNG from the remaining available LNG production capacity, if any, at the Sabine Pass Facility in the following manner: all such remaining available LNG production capacity at the Sabine Pass Facility (and the LNG produced therefrom) will be allocated, to the extent practicable, to Buyer based upon the proportionate share of Buyer's AACQ to the adjusted annual contract quantities of all Foundation Customers (including Buyer), without regard to whether the underlying event affects the Designated Train or another liquefaction train, and without regard to whether the remaining available LNG production capacity includes the Designated Train.
		
	15.
	Liabilities and Indemnification

		
	15.1
	General

Subject to Section 15.2, and without prejudice to any indemnity provided under this Agreement, Seller shall be liable to Buyer, and Buyer shall be liable to Seller, for any loss which has been suffered as a result of the breach by the Party liable of any one or more of its obligations under this Agreement, to the extent that the Party liable should reasonably have foreseen the loss.
		
	15.2
	Limitations on Liability

		
	15.2.1
	Incidental and Consequential Losses.  Neither Party shall be liable to the other Party hereunder as a result of any act or omission in the course of or in connection with the performance of this Agreement, for or in respect of:

		
	(a)
	any indirect, incidental, consequential or exemplary losses;

		
	(b)
	any loss of income or profits;

		
	(c)
	except as expressly provided in this Agreement, any failure of performance or delay in performance to the extent relieved by the application of Force Majeure in accordance with Section 14; or

		
	(d)
	except as expressly provided in this Agreement, any losses arising from any claim, demand or action made or brought against the other Party by a Third Party.

		
	15.2.2
	Exclusive Remedies.  A Party's sole liability, and the other Party's exclusive remedy, arising under or in connection with Sections 5.5, 5.6, 7.12.3, 7.12.4, 7.14.2(c), and 12.3 and this Section 15 shall be as set forth in each such provision, respectively.

		
	15.2.3
	Liquidated Damages.  The Parties agree that it would be impracticable to determine accurately the extent of the loss, damage and expenditure that either Party would have in the circumstances described in Sections 5.5, 5.6, 7.12.3 and 7.12.4.  Accordingly, the Parties have estimated and agreed in 

 69

advance that the sole liability, and exclusive remedy for such circumstances shall be as provided in those Sections, and neither Party shall have additional liability as a result of any such circumstances.  Each amount described in or determined by the provisions of Sections 5.5, 5.6, 7.12.3 and 7.12.4 is intended to represent a genuine pre-estimate by the Parties as to the loss or damage likely to be suffered by the Party receiving the payment or benefit in each such circumstance.  Each Party waives any right to claim or assert, in any arbitration or expert determination pursuant to Section 21 in any action with respect to this Agreement, that any of the exclusive remedies set forth in Sections 5.5, 5.6, 7.12.3 and 7.12.4 do not represent a genuine pre-estimate by the Parties as to the loss or damage likely to be suffered by the Party receiving the payment or benefit in each such circumstance or otherwise are not valid and enforceable damages.
		
	15.2.4
	Express Remedies.  The Parties agree that Section 15.2.1 shall not impair a Party's obligation to pay the amounts specified in, or the validity of or limitations imposed by, Sections 5.5, 5.6, 5.7, 7.12.3, 7.12.4, 7.14.2(c), and 12.3.  Neither Party shall have a right to make a claim for actual damages (whether direct or indirect) or other non-specified damages under any circumstances for which an express remedy or measure of damages is provided in this Agreement.

		
	15.2.5
	Remedies in Contract.  Except with respect to claims for injunctive relief under Sections 19 and 21.1.11 and without prejudice to Section 20.2.6, a Party's sole remedy against the other Party for nonperformance or breach of this Agreement or for any other claim of whatsoever nature arising out of or in relation to this Agreement shall be in contract and no Party shall be liable to another Party (or its Affiliates and contractors and their respective members, directors, officers, employees and agents) in respect of any damages or losses suffered or claims which arise out of, under or in any alleged breach of statutory duty or tortious act or omission or otherwise.

		
	15.2.6
	Seller Aggregate Liability for Certain Events.

		
	(a)
	Notwithstanding any provision herein to the contrary, the maximum Seller Aggregate Liability as of any given date in respect of any occurrence or series of occurrences shall not exceed the Seller Liability Cap.

		
	(b)
	“Seller Aggregate Liability” shall mean, as of any date of determination, any and all liability of Seller to Buyer under this Agreement, excluding (i) any Seller liabilities under this Agreement for which Seller has already made payment to Buyer as of such date, (ii) any liability caused by the gross negligence or willful misconduct of Seller or an Affiliate of Seller and (iii) any amounts related to an indemnity obligation of Seller.

 70

		
	(c)
	The “Seller Liability Cap” shall be an amount (in USD) equal to:

		
	(i)
	on or prior to the fifth (5th) anniversary of the Date of First Commercial Delivery, USD three hundred million (USD$300,000,000); and

		
	(ii)
	after the fifth (5th) anniversary of the Date of First Commercial Delivery, USD four hundred million (USD$400,000,000).

		
	15.2.7
	EXCEPT FOR WARRANTIES OF TITLE AND NO LIENS OR ENCUMBRANCES, AND SUBJECT TO THE PROVISIONS OF THIS AGREEMENT CONCERNING THE QUALITY OF LNG TO BE DELIVERED UNDER THIS AGREEMENT, SELLER EXPRESSLY NEGATES ANY WARRANTY WITH RESPECT TO LNG DELIVERED UNDER THIS AGREEMENT, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY WITH RESPECT TO CONFORMITY TO SAMPLES, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.

		
	15.3
	Buyer's Credit; Credit Support

If Buyer, or Buyer's guarantor, merges or consolidates, or sells all or substantially all of its assets, and is not the ultimate parent company of the resulting group, then the surviving entity or asset purchaser, as the case may be, shall provide or cause to be provided a guaranty by its ultimate parent company in the form of Exhibit C.
		
	15.4
	Third Party Liability

With respect to Third Party liabilities:
		
	(a)
	If any Third Party shall notify either Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) that may give rise to a claim for indemnification against the other Party (the “Indemnifying Party”) under this Section 15 or elsewhere in this Agreement, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is materially prejudiced.

 71

		
	(b)
	The Indemnifying Party will have the right to defend against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying Party notifies the Indemnified Party in writing within fifteen (15) Days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against any damages the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder; (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; (iv) settlement of, or an adverse judgment with respect to, the Third Party Claim is not in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party; and (v) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.

		
	(c)
	So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 15.4(b):  (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld); and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld).

		
	(d)
	In the event any of the conditions in Section 15.4(b) is or becomes unsatisfied, or a conflict arises, with regard to the Third Party Claim, between the Indemnified Party and the Indemnifying Party in respect of such Third Party Claim the Indemnified Party may defend against the Third Party Claim in any manner it reasonably may deem appropriate.

		
	(e)
	If either Party gives notice to the other Party of a Third Party Claim pursuant to the provisions of Section 15.4(a) and the notified Party does not give notice that it will indemnify the notifying Party in the manner set out in Section 15.4(b), the notifying Party shall 

 72

nevertheless send copies of all pleadings and other documents filed in any such Third Party lawsuit to the notified Party and such notified Party may have the right to participate in the defense of the Third Party Claim in any manner permitted by Applicable Law.
		
	15.5
	Seller's Insurance

		
	15.5.1
	Seller shall obtain and maintain or cause to be obtained and maintained:

		
	(a)
	insurance for the Sabine Pass Facility to the extent required by Applicable Law, and

		
	(b)
	additional insurance, as is reasonably necessary and available on reasonable commercial terms, against such other risks and at such levels as a Reasonable and Prudent Operator of a shared use LNG receiving, regasification and liquefaction terminal would obtain.

		
	15.5.2
	Seller shall obtain or cause to be obtained the insurance required by Section 15.5.1 from a reputable insurer (or insurers) reasonably believed to have adequate financial reserves.  Seller shall exercise its best efforts, or shall cause the applicable insured Person to use its best efforts, to collect any amount due under such insurance policies.

		
	15.6
	Buyer's Insurance

Buyer shall ensure that insurances are procured and maintained for each LNG Tanker in accordance with the following provisions.  In all cases, such insurance shall establish insurance coverages consistent with insurances to the standards which a ship owner operating reputable LNG vessels, as a Reasonable and Prudent Operator, should observe in insuring LNG vessels of similar type, size, age and trade as such LNG Tanker.  In this regard:
		
	(a)
	Hull and Machinery Insurance shall be placed and maintained with reputable marine underwriters; and

		
	(b)
	Protection & Indemnity Insurance (“P&I Insurance”) shall be placed and maintained with full P&I indemnity cover in the ordinary course from a P&I Club, and such LNG Tanker shall be entered for insurance with a P&I Club, including pollution liability standard for LNG vessel and Certificate of Financial Responsibility.

		
	16.
	Safety

		
	16.1
	General

The Parties recognize the importance of securing and maintaining safety in all matters contemplated in this Agreement, including the construction and operation of their respective facilities and the LNG Tankers and transportation of LNG. It is their 

 73

respective intentions to secure and maintain high standards of safety in accordance with the generally accepted standards prevailing in the LNG and LNG transportation industries from time to time.
		
	16.2
	Third Parties

Both Parties shall endeavor to ensure that their respective employees, agents, operators, Transporter, contractors and suppliers shall have due regard to safety and abide by the relevant regulations while they are performing work and services in connection with the performance of this Agreement, including such work and services performed within and around the area of the Sabine Pass Facility and on board the LNG Tankers.
		
	17.
	Representations, Warranties and Undertakings

		
	17.1
	Representations and Warranties of Buyer

As of the Effective Date and until the expiration or termination of this Agreement, Buyer represents, undertakes and warrants that:
		
	17.1.1
	Buyer is and shall remain duly formed and in good standing under the laws of the United Kingdom;

		
	17.1.2
	Buyer has the requisite power, authority and legal right to execute and deliver, and to perform its obligations under, this Agreement;

		
	17.1.3
	Buyer has not 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 this Agreement for which Seller or any of its Affiliates could be liable; and

		
	17.1.4
	neither the execution, delivery, nor performance of this Agreement violates or will violate, results or will result in a breach of or constitutes or will constitute a default under any provision of Buyer's organizational documents, any law, judgment, order, decree, rule, or regulation of any court, administrative agency, or other instrumentality of any Governmental Authority or of any other material agreement or instrument to which Buyer is a party.

		
	17.2
	Representations and Warranties of Seller

As of the Effective Date and until the expiration or termination of this Agreement, Seller represents, undertakes and warrants that:
		
	17.2.1
	Seller is and shall remain duly formed and in good standing under the laws of the State of Delaware and duly qualified to do business in the State of Louisiana;

 74

		
	17.2.2
	Seller has the requisite power, authority and legal right to execute and deliver, and to perform its obligations under this Agreement;

		
	17.2.3
	Seller has not 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 this Agreement for which Buyer or any of its Affiliates could be liable; and

		
	17.2.4
	neither the execution, delivery, nor performance of this Agreement, violates or will violate, results or will result in a breach of, or constitutes or will constitute a default under, any provision of Seller's organizational documents, any law, judgment, order, decree, rule, or regulation of any court, administrative agency, or other instrumentality of any Governmental Authority or of any other material agreement or instrument to which Seller is a party.

		
	17.3
	Business Practices

Each Party represents and warrants to the other, as of the Effective Date, that it has not taken any actions that would, if such actions were undertaken after the Effective Date, conflict with such Party's obligations under Section 26.3.
		
	18.
	Exchange of Information

The Parties shall maintain close communication and mutually provide and shall use reasonable efforts to exchange available information directly relevant to the fulfillment of the terms and conditions of this Agreement.
		
	19.
	Confidentiality

		
	19.1
	Duty of Confidentiality

The (i) terms of this Agreement and (ii) any information disclosed by either Party to the other Party in connection with this Agreement which is not:
		
	(a)
	already known to the recipient from sources other than the other Party;

		
	(b)
	already in the public domain (other than as a result of a breach of the terms of this Section 19.1); or

		
	(c)
	independently developed by the recipient;

shall be “Confidential Information” and shall, unless otherwise agreed in writing by the disclosing Party, be kept confidential and shall not be used by the receiving Party other than for a purpose connected with this Agreement or, except as provided below, disclosed to Third Parties by the receiving Party.

 75

		
	19.2
	Permitted Disclosures

		
	19.2.1
	The Confidential Information, which either Party receives from the other, may be disclosed by such Party:

		
	(a)
	to any Person who is such Party's legal counsel, other professional consultant or adviser, Transporter, insurer, accountant or construction contractor; provided that such disclosure is solely to assist the purpose for which such Person was so engaged;

		
	(b)
	if required and to the extent required by the rules of any recognized stock exchange or agency established in connection therewith upon which the securities of such Party or a company falling within Section 19.2.1(d) are quoted;

		
	(c)
	if required and to the extent required by the U.S. Department of Energy;

		
	(d)
	without limiting Section 19.2.1(c), if required and to the extent required by any Applicable Laws, or such Party becomes legally required (by oral questions, interrogatories, request for information or documents, orders issued by any Governmental Authority or any other process) to disclose such information; provided that such Party shall, to the extent practicable, give prior notice to the other Party of the requirement and the terms thereof and shall cooperate with the other Party to minimize the disclosure of the information, seek a protective order or other appropriate remedy, and if such protective order or other remedy is not obtained, then such Party will furnish only that portion of such information that it is legally required to furnish;

		
	(e)
	to any of its Affiliates or shareholders (or any company involved in the provision of advice to any such shareholder for the purposes of this Agreement) and any employee of that Party or of a company to which disclosure is permitted pursuant to this Section 19.2.1(e);

		
	(f)
	to any bona fide intended assignees of a Party's interests under this Agreement;

		
	(g)
	to any Third Party as reasonably necessary for the performance of a Party's obligations under this Agreement;

		
	(h)
	to any arbitrator appointed in accordance with Section 21.1.4, or Expert appointed pursuant to Section 21.2.1; or

		
	(i)
	to any Person reasonably required to see such Confidential Information, including the Lenders, in connection with any bona fide financing or offering or sale of securities by Seller or Buyer or any Affiliate of Seller 

 76

or Buyer or any Affiliate of any of the shareholders of Seller or Buyer, to comply with the disclosure or other requirements of Applicable Law or of financial institutions or other participants (including rating agencies) in such financing, offering or sale.
		
	19.2.2
	The Party making the disclosure shall ensure that any Person listed in Section 19.2.1(a), (e), (f), (g) or (i) to which it makes the disclosure (excluding legal counsel) undertakes to hold such Confidential Information subject to confidentiality obligations equivalent to those set out in Section 19.1.  In the case of a disclosure to an employee made in accordance with Section 19.2.1(e), the undertaking shall be given by the company on its own behalf and in respect of all its employees.

		
	19.2.3
	Seller may disclose Confidential Information to its Foundation Customers related to scheduling, operations and other relevant technical information to comply with Seller's performance of Section 8, only to the extent necessary to ensure the effective implementation thereof.

		
	19.2.4
	No press release concerning the execution of this Agreement shall be issued unless agreed by the Parties.

		
	19.3
	Duration of Confidentiality

The foregoing obligations with regard to the Confidential Information shall remain in effect for three (3) years after this Agreement is terminated or expires.
		
	20.
	Default and Termination 

		
	20.1
	Termination Events

The following circumstances (each, a “Termination Event”) shall give rise to the right for either or both of Seller and Buyer (as the case may be) to terminate this Agreement:
		
	20.1.1
	in respect of either Party, if a Bankruptcy Event has occurred with respect to the other Party;

		
	20.1.2
	in respect of either Party, if the other Party fails to pay or cause to be paid any amount or amounts in the aggregate due that are in excess of USD thirty million (US$30,000,000), for a period of ten (10) Days or more following the due date of the relevant invoice;

		
	20.1.3
	in respect of either Party, violation of Sections 17.3 or 26.3.1(ii) by the other Party;

		
	20.1.4
	in respect of either Party, in accordance with Section 2.2.5 of the Agreement;

 77

		
	20.1.5
	in respect of Seller, if: (a) any guaranty  required to be delivered to Seller pursuant to the terms of this Agreement is not delivered to Seller for a period exceeding ten (10) Business Days; (b) any guarantor under any guaranty required to be delivered to Seller pursuant to the terms of this Agreement (other than Centrica plc or its successor in its capacity as guarantor under such a guaranty) is not an Acceptable Guarantor or, at any time when a Guaranty is not in full force and effect, Buyer (other than Centrica plc or its successor) does not have an Acceptable Credit Rating, (c) Centrica plc or its successor (i) in its capacity as Buyer under this Agreement, does not have an Acceptable Credit Rating, or (ii) in its capacity as guarantor under any guaranty required to be delivered  pursuant to the terms of this Agreement, does not have an Acceptable Credit Rating or is not an Affiliate of Buyer, unless a replacement Guaranty has been delivered to Seller, or (d) any guaranty required to be delivered to Seller pursuant to the terms of this Agreement is not in full force and effect for a period exceeding ten (10) Business Days;

		
	20.1.6
	in respect of Seller, if Buyer or any guarantor under any guaranty  required to be delivered to Seller pursuant to the terms of this Agreement fails to execute any Direct Agreement with Seller's Lenders within sixty (60) Days after Seller's request thereof, provided that such Direct Agreement complies with the requirements in Section 22.4.2;

		
	20.1.7
	in respect of Buyer, if (a) Seller has declared Force Majeure one or more times and the interruptions resulting from such Force Majeure total twenty-four (24) Months during any thirty-six (36) Month period, and (b) such Force Majeure has resulted in Seller being prevented from making available fifty percent (50%) or more of the annualized ACQ during such periods of Force Majeure;

		
	20.1.8
	in respect of Seller, if (a) Buyer has declared Force Majeure one or more times and the interruptions resulting from such Force Majeure total twenty-four (24) Months during any thirty-six (36) Month period, and (b) such Force Majeure has resulted in Buyer being prevented from taking fifty percent (50%) or more of the annualized ACQ during such periods of Force Majeure;

		
	20.1.9
	in respect of Buyer, pursuant to the terms of Section 4.4.2;

20.1.10in respect of Seller, violation of Section 26.1 by Buyer;
20.1.11in respect of Seller, violation of Section 26.2 by Buyer;
20.1.12in respect of Buyer, if Seller fails to make available (as such obligation for any cargo is set forth in Section 5.6.1) fifty percent (50%) of the cargoes scheduled in any given twelve (12) Month period; and

 78

20.1.13in respect of Seller, if Buyer fails to take (as such obligation for any cargo is set forth in Section 5.5.1) fifty percent (50%) of the cargoes scheduled in any given twelve (12) Month period.
		
	20.2
	Termination

		
	20.2.1
	Notice of Termination.  Upon the occurrence of any Termination Event, subject to Section 20.2.5, the Party which has the right under Section 20.1 to terminate this Agreement (“Terminating Party”) may give notice thereof to the other Party, specifying in reasonable detail the nature of such Termination Event (except that any termination notice with respect to a Termination Event identified in Section 20.1.12 or 20.1.13 shall only be valid if notice thereof is provided within ninety (90) Days after such Termination Event first arose).

		
	20.2.2
	Timing.  Except with respect to the Termination Events described in Section 20.2.3, at any time after the expiry of a period of forty-five (45) Days after the Terminating Party gave notice of a Termination Event pursuant to Section 20.2.1, unless the circumstances constituting the Termination Event have been fully remedied or have ceased to apply, the Terminating Party may terminate this Agreement with immediate effect by giving notice of such termination to the other Party.

		
	20.2.3
	Certain Events.  Upon the occurrence of a Termination Event described in Sections 20.1.1, 20.1.3, 20.1.5, 20.1.6, 20.1.7, 20.1.8, 20.1.10, 20.1.11, 20.1.12, and 20.1.13 the Terminating Party's notice pursuant to Section 20.2.1 shall terminate this Agreement immediately.

		
	20.2.4
	Rights Accrued Prior to Termination.  Termination of this Agreement shall be without prejudice to the rights and liabilities of the Parties accrued prior to or as a result of such termination or claims for breaches of Section 19 that occur during the three (3) year period after termination of this Agreement.

		
	20.2.5
	Limits to Termination.  Neither Seller nor Buyer, respectively, may terminate this Agreement if the Termination Event occurs solely because of a breach by the non-terminating Party arising from events for which that non-terminating Party would otherwise be entitled to terminate this Agreement.

		
	20.2.6
	Termination for Credit Events.  Without prejudice to any other right available to Seller following a breach by Buyer of any of its obligations under this Agreement, including Seller's rights of suspension and termination of this Agreement, Seller hereby waives any right it may have to seek monetary damages arising solely as a result of the Termination Event set forth in Section 20.1.5(c), provided that such Termination Event is not a result of a transaction pursuant to which Centrica plc or its successor (i) intends to avoid its liabilities under this Agreement or under any guaranty required to be 

 79

delivered to Seller pursuant to the terms of this Agreement, or (ii) transfers assets at an undervalue or assumes or guaranties the liabilities of another Person for less than a reasonably equivalent value and such transfer or assumption has a material adverse effect on the financial condition or business prospects of Centrica plc or its successor.  Nothing in this Section 20.2.6 shall act as a waiver of any right Seller may have to seek monetary damages in respect of (a) any rights accrued prior to Termination as provided in Section 20.2.4, or (b) any other Termination Event, whether or not the circumstances giving rise to such other Termination Event would also have entitled Seller to terminate the Agreement pursuant to Section 20.1.5(c).
		
	20.3
	Survival

The following provisions shall survive expiration or termination of this Agreement: Sections 1, 10, 11, 13.8.2, 15, 19 (to the extent provided therein),  and 21 to 26, in addition to this Section 20.3.
		
	21.
	Dispute Resolution and Governing Law

		
	21.1
	Dispute Resolution

		
	21.1.1
	Arbitration. Any Dispute (other than a Dispute submitted to an Expert under Section 21.2.1) shall be exclusively and definitively resolved through final and binding arbitration, it being the intention of the Parties that this is a broad form arbitration agreement designed to encompass all possible claims and disputes under this Agreement.

		
	21.1.2
	Rules. The arbitration shall be conducted in accordance with the International Arbitration Rules (the “Rules”) of the American Arbitration Association (“AAA”) (as then in effect).

		
	21.1.3
	Number of Arbitrators.  The arbitral tribunal shall consist of three (3) arbitrators, who shall endeavor to complete the final hearing in the arbitration within six (6) Months after the appointment of the last arbitrator.

		
	21.1.4
	Method of Appointment of the Arbitrators.  If there are only two (2) parties to the Dispute, then each party to the Dispute shall appoint one (1) arbitrator within thirty (30) Days of the filing of the arbitration, and the two arbitrators so appointed shall select the presiding arbitrator within thirty (30) Days after the latter of the two arbitrators has been appointed by the parties to the Dispute.  If a party to the Dispute fails to appoint its party-appointed arbitrator or if the two party-appointed arbitrators cannot reach an agreement on the presiding arbitrator within the applicable time period, then the AAA shall serve as the appointing authority and shall appoint the remainder of the three arbitrators not yet appointed.  If the arbitration is to be conducted by three arbitrators and there are more than two parties to the Dispute, then within thirty (30) Days of the filing of the arbitration, all claimants shall jointly 

 80

appoint one arbitrator and all respondents shall jointly appoint one arbitrator, and the two arbitrators so appointed shall select the presiding arbitrator within thirty (30) Days after the latter of the two arbitrators has been appointed by the parties to the Dispute.  For the purposes of appointing arbitrators under this Section 21, (a) Buyer, any guarantor under any guaranty required to be delivered to Seller pursuant to the terms of this Agreement and all persons whose interest in this Agreement derives from them shall be considered as one party; and (b) Seller and all persons whose interest in this Agreement derives from Seller shall be considered as one party.  If either all claimants or all respondents fail to make a joint appointment of an arbitrator, or if the party-appointed arbitrators cannot reach an agreement on the presiding arbitrator within the applicable time period, then the AAA shall serve as the appointing authority and shall appoint the remainder of the three (3) arbitrators not yet appointed.
		
	21.1.5
	Consolidation.  If the Parties initiate multiple arbitration proceedings under this Agreement and/or under any guaranty required to be delivered to Seller pursuant to the terms of this Agreement, the subject matters of which are related by common questions of law or fact and which could result in conflicting awards or obligations, then either Party may request prior to the appointment of the arbitrators for such multiple or subsequent Disputes that all such proceedings be consolidated into a single arbitral proceeding.  Such request shall be directed to the AAA, which shall consolidate appropriate proceedings into a single proceeding unless consolidation would result in undue delay for the arbitration of the Disputes.

		
	21.1.6
	Place of Arbitration.  Unless otherwise agreed by all parties to the Dispute, the place of arbitration shall be Houston, Texas.

		
	21.1.7
	Language.  The arbitration proceedings shall be conducted in the English language, and the arbitrators shall be fluent in the English language.

		
	21.1.8
	Entry of Judgment.  The award of the arbitral tribunal shall be final and binding.  Judgment on the award of the arbitral tribunal may be entered and enforced by any court of competent jurisdiction.  The Parties agree that service of process for any action to enforce an award may be accomplished according to the procedures of Section 25, as well as any other procedure authorized by law.

		
	21.1.9
	Notice.  All notices required for any arbitration proceeding shall be deemed properly given if given in accordance with Section 25.

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21.1.10Qualifications and Conduct of the Arbitrators.  All arbitrators shall be and remain at all times wholly impartial, and, once appointed, no arbitrator shall have any ex parte communications with any of the parties to the Dispute concerning the arbitration or the underlying Dispute other than communications directly concerning the selection of the presiding arbitrator, where applicable.
21.1.11Interim Measures.  Any party to the Dispute may apply to a court in Harris County, Texas for interim measures (a) prior to the constitution of the arbitral tribunal (and thereafter as necessary to enforce the arbitral tribunal's rulings); or (b) in the absence of the jurisdiction of the arbitral tribunal to rule on interim measures in a given jurisdiction.  The Parties agree that seeking and obtaining such interim measures shall not waive the right to arbitration.  The arbitrators (or in an emergency the presiding arbitrator acting alone in the event one or more of the other arbitrators is unable to be involved in a timely fashion) may grant interim measures including injunctions, attachments and conservation orders in appropriate circumstances, which measures may be immediately enforced by court order.  Hearings on requests for interim measures may be held in person, by telephone, by video conference or by other means that permit the parties to the Dispute to present evidence and arguments.
21.1.12Costs and Attorneys' Fees.  The arbitral tribunal is authorized to award costs of the arbitration in its award, including: (a) the fees and expenses of the arbitrators; (b) the costs of assistance required by the tribunal, including its Experts; (c) the fees and expenses of the administrator; (d) the reasonable costs for legal representation of a successful Party; and (e) any such costs incurred in connection with an application for interim or emergency relief and to allocate those costs between the parties to the Dispute.  The costs of the arbitration proceedings, including attorneys' fees, shall be borne in the manner determined by the arbitral tribunal.
21.1.13Interest.  The award shall include pre-award and post-award interest, as determined by the arbitral award, from the date of any default or other breach of this Agreement until the arbitral award is paid in full.  Interest shall accrue at a rate per annum equal to two percent (2%) above LIBOR (as in effect on the Day such award was issued) on and from the Day when such award was issued until the date of its repayment, provided that, without prejudice to the other terms of this Agreement, if such period lasts longer than ninety (90) Days, the applicable LIBOR rate for each successive term of ninety (90) Days during that period shall be that in effect on the first Day of that ninety (90) Day period.  Interest shall accrue from Day to Day and be calculated on the basis of a three hundred sixty (360) Day year.
21.1.14Currency of Award.  The arbitral award shall be made and payable in USD, free of any tax or other deduction.

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21.1.15Waiver of Challenge to Decision or Award.  To the extent permitted by law, the Parties hereby waive any right to appeal from or challenge any arbitral decision or award, or to oppose enforcement of any such decision or award before a court or any governmental authority, except with respect to the limited grounds for modification or non-enforcement provided by any applicable arbitration statute or treaty.
21.1.16Confidentiality.  Any arbitration or expert determination relating to a Dispute (including a settlement resulting from an arbitral award, documents exchanged or produced during an arbitration proceeding, and memorials, briefs or other documents prepared for the arbitration) shall be confidential and may not be disclosed by the Parties, their employees, officers, directors, counsel, consultants, and expert witnesses, except (in accordance with Section 19) to the extent necessary to enforce this Section 21.1.16 or any arbitration award, to enforce other rights of a party to the Dispute, or as required by law; provided, however, that breach of this confidentiality provision shall not void any settlement, expert determination or award.
		
	21.2
	Expert Determination

		
	21.2.1
	General.  In the event of any disagreement between the Parties regarding a measurement under Exhibit A hereto or any other Dispute which the Parties agree to submit to an Expert (in either case, a “Measurement Dispute”), the Parties hereby agree that such Measurement Dispute shall be resolved by an Expert selected as provided in this Section 21.2.1.  The Expert is not an arbitrator of the Measurement Dispute and shall not be deemed to be acting in an arbitral capacity.  The Party desiring an expert determination shall give the other Party to the Measurement Dispute notice of the request for such determination.  If the Parties to the Measurement Dispute are unable to agree upon an Expert within ten (10) Days after receipt of the notice of request for an expert determination, then, upon the request of any of the Parties to the Measurement Dispute, the International Centre for Expertise of the International Chamber of Commerce (“ICC”) shall appoint such Expert and shall administer such expert determination through the ICC's Rules for Expertise.  The Expert shall be and remain at all times wholly impartial, and, once appointed, the Expert shall have no ex parte communications with any of the Parties to the Measurement Dispute concerning the expert determination or the underlying Measurement Dispute.  The Parties to the Measurement Dispute shall cooperate fully in the expeditious conduct of such expert determination and provide the Expert with access to all facilities, books, records, documents, information and personnel necessary to make a fully informed decision in an expeditious manner.  Before issuing a final decision, the Expert shall issue a draft report and allow the Parties to the Measurement Dispute to comment on it.  The Expert shall endeavor to resolve the Measurement Dispute within thirty (30) Days (but no later than sixty (60) 

 83

Days) after his appointment, taking into account the circumstances requiring an expeditious resolution of the matter in dispute.
		
	21.2.2
	Final and Binding. The Expert's decision shall be final and binding on the Parties to the Measurement Dispute unless challenged in an arbitration pursuant to Section 21.1 within thirty (30) Days of the date the Expert's decision.  If challenged, (a) the decision shall remain binding and be implemented unless and until finally replaced by an award of the arbitrators; (b) the decision shall be entitled to a rebuttable presumption of correctness; and (c) the Expert shall not be appointed in the arbitration as an arbitrator or as advisor to either Party without the written consent of both Parties.

		
	21.2.3
	Arbitration of Expert Determination.  In the event that a Party requests expert determination for a Measurement Dispute which raises issues that require determination of other matters in addition to correct measurement under Exhibit A hereto, then either Party may elect to refer the entire Measurement Dispute for arbitration under Section 21.1.1.  In such case, the arbitrators shall be competent to make any measurement determination that is part of a Dispute.  An expert determination not referred to arbitration shall proceed and shall not be stayed during the pendency of an arbitration.

		
	21.3
	Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of New York (United States of America) without regard to principles of conflict of laws that would specify the use of other laws.
		
	21.4
	Immunity

		
	21.4.1
	Each Party, as to itself and its assets, hereby irrevocably, unconditionally, knowingly and intentionally waives any right of immunity (sovereign or otherwise) and agrees not to claim, or assert any immunity with respect to the matters covered by this Agreement in any arbitration, Expert proceeding, or other action with respect to this Agreement, whether arising by statute or otherwise, that it may have or may subsequently acquire, including rights under the doctrines of sovereign immunity and act of state, immunity from legal process (including service of process or notice, pre-judgment or pre-award attachment, attachment in aid of execution, or otherwise), immunity from jurisdiction or judgment of any court, arbitrator, Expert or tribunal (including any objection or claim on the basis of inconvenient forum), and immunity from enforcement or execution of any award or judgment or any other remedy.

		
	21.4.2
	Each Party irrevocably, unconditionally, knowingly and intentionally:

 84

		
	(a)
	agrees that the execution, delivery and performance by it of this Agreement constitute private and commercial acts rather than public or governmental acts;

		
	(b)
	consents in respect of the enforcement of any judgment against it in any such proceedings in any jurisdiction and to the giving of any relief or the issue of any process in connection with such proceedings (including the making, enforcement or execution of any such judgment or any order arising out of any such judgment against or in respect of any property whatsoever irrespective of its use or intended use).

		
	22.
	Assignments

		
	22.1
	Merger, Consolidation

This Agreement shall be binding upon and inure to the benefit of any successor to each of Seller and Buyer by merger or consolidation, provided in the case of Buyer, the guaranty required by Section 15.3, if any, is provided to Seller prior to such event.
		
	22.2
	Assignment by Buyer

		
	22.2.1
	Prior Written Consent.  Buyer may novate or assign this Agreement in its entirety to another Person, for the remainder of the Term, upon the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed), provided that:

		
	(a)
	unless such Person has an Acceptable Credit Rating, a Guaranty is provided to Seller prior to such novation or assignment; and

		
	(b)
	such assignee assumes all of the obligations of Buyer under this Agreement commencing as of the date of the assignment by execution of a copy of this Agreement in its own name (countersigned by Seller) or by execution of a binding assignment and assumption agreement which is enforceable by Seller.

		
	22.2.2
	Without Prior Consent.  Buyer may novate or assign this Agreement in its entirety, for the remainder of the Term, without Seller's prior consent, to an Affiliate of Buyer, provided that:

		
	(a)
	a Guaranty is provided to Seller prior to such novation or assignment;

		
	(b)
	such Affiliate assignee assumes all of the obligations of Buyer under this Agreement commencing as of the date of the novation or the assignment by execution of a copy of this Agreement in its own name (countersigned by Seller) or by execution of a binding assignment and assumption agreement which is enforceable by Seller; and

 85

		
	(c)
	performance of this Agreement by Seller with such Affiliate assignee would comply with Applicable Laws and all relevant Approvals.

		
	22.2.3
	Further Obligations.  Upon a novation or assignment in whole by Buyer in accordance with this Section 22.2, the assignor shall be released from all further obligations, duties and liabilities under this Agreement, other than any obligations, duties and liabilities arising prior to the date of effectiveness of such novation or assignment.

		
	22.3
	Assignments by Seller

		
	22.3.1
	Prior Written Consent.  Seller may novate or assign this Agreement in its entirety, for the remainder of the Term, upon the prior written consent of Buyer (which consent shall not be unreasonably withheld or delayed), provided that the assignee assumes all of the obligations of Seller under this Agreement commencing as of the date of the assignment or novation by execution of a copy of this Agreement in its own name (countersigned by Buyer) or by execution of a binding assignment and assumption agreement which is enforceable by Buyer;  provided, however, that if the assignee is an Affiliate of Seller, will be the sole owner of the Sabine Liquefaction Facility and will have all Approvals and export authorizations equivalent to the Export Authorizations to the extent needed to perform Seller's obligations under this Agreement, Buyer shall be deemed to consent to such assignment or novation of this Agreement.

		
	22.3.2
	Pursuant to Direct Agreement. At any time that an event of default has occurred and is continuing under any loan agreements to which Seller is a party, Seller may novate or assign this Agreement in its entirety, for the remainder of the Term, to the extent that Buyer has so consented in the Direct Agreement.

		
	22.3.3
	Further Obligations.  Upon a novation or  assignment by Seller, in accordance with this Section 22.3, the assignor shall be released from all further obligations, duties and liabilities under this Agreement, other than any obligations, duties and liabilities arising prior to the date of effectiveness of such novation or assignment.

		
	22.4
	Seller Financing

		
	22.4.1
	Lender Financing.  Seller shall have the right to obtain financing from Lenders.  In connection with any financing or refinancing of the Sabine Liquefaction Facility, Buyer, shall, if so requested by Seller, deliver to Seller's Lenders or the agent acting on behalf of any such Lenders (“Lenders' Agent”) certified copies of its corporate charter and by-laws, resolutions, incumbency certificates, financial statements, and such other items as available and upon reasonable request by Lenders or Lenders' Agent.  Buyer 

 86

shall not be required to provide any documents or information which would cause it to be in breach of Applicable Laws, including the rules of any recognized stock exchange on which Buyer's stock is quoted.
		
	22.4.2
	Assignment as Security.  Buyer further acknowledges and agrees that Seller may assign, transfer, or otherwise encumber, all or any of its rights, benefits and obligations under this Agreement or any guaranty required to be delivered to Seller pursuant to the terms of this Agreement to such Lenders or Lenders' Agent as security for its obligations to Lenders.  Accordingly, upon Seller's request pursuant to a notice hereunder, Buyer shall enter into, and shall cause any guarantor under any guaranty required to be delivered to Seller pursuant to the terms of this Agreement to enter into, direct agreements (each, a “Direct Agreement”) that:

		
	(a)
	provide for the assignment and transfer of the assigning Person's rights and obligations under this Agreement or the relevant other agreement to a nominee of Lender following a default by the assigning Person under its lending arrangement; and

		
	(b)
	(i)  are substantially in the form of Exhibit D (or in the case of a guarantor under any guaranty required to be delivered to Seller pursuant to the terms of this Agreement, Exhibit D with appropriate modifications), with such revisions as may be required by the Lenders or Lenders' Agent so long as such changes do not materially affect Buyer's or such guarantor's rights or obligations under this Agreement or any such guaranty, and (ii) contain such further undertakings that are normal and customary in project financings or refinancings of this type; provided, however, that, Buyer shall not be required to provide (or cause to be provided) any guaranty or similar commitment in favor of the Lenders, Seller or any other Person, other than any guaranty required to be delivered to Seller pursuant to the terms of this Agreement.

		
	23.
	Contract Language

This Agreement, together with the Schedules and the Exhibits hereto, shall be made and originals executed in the English language.  In case of any difference in meaning between the English language original version and any translation thereof, the English language original version shall be applicable.

 87

		
	24.
	Miscellaneous

		
	24.1
	Disclaimer of Agency

This Agreement does not appoint either Party as the agent, partner or legal representative of the other for any purposes whatsoever, and neither Party shall have any express or implied right or authority to assume or to create any obligation or responsibility on behalf of or in the name of the other Party.
		
	24.2
	Entire Agreement

This Agreement, together with the Schedules and Exhibits hereto, constitutes the entire agreement between the Parties and includes all promises and representations, express or implied, and supersedes all other prior agreements and representations, written or oral, between the Parties relating to the subject matter. Anything that is not contained or expressly incorporated by reference in this instrument, is not part of this Agreement.
		
	24.3
	Third Party Beneficiaries

The Parties do not intend any term of this Agreement to be for the benefit of, or enforceable by, any Third Party except as expressly provided in Section 7.7.  The Parties may rescind or vary this Agreement, in whole or in part, without the consent of any Third Party, including those Third Parties referred to under Section 7.7, even if as a result such Third Party's rights to enforce a term of this Agreement will be varied or extinguished.
		
	24.4
	Amendments and Waiver

This Agreement may not be supplemented, amended, modified or changed except by an instrument in writing signed by Seller and Buyer and expressed to be a supplement, amendment, modification or change to this Agreement. A Party shall not be deemed to have waived any right or remedy under this Agreement by reason of such Party's failure to enforce such right or remedy.
		
	24.5
	Exclusion

The United Nations Convention on Contracts for the International Sale of Goods (and the Convention on the Limitation Period in the International Sale of Goods) shall not apply to this Agreement and the respective rights and obligations of the Parties hereunder.
		
	24.6
	Further Assurances

Each Party hereby agrees to take all such action as may be necessary to effectuate fully the purposes of this Agreement, including causing this Agreement or any document contemplated herein to be duly registered, notarized, attested, consularized and stamped in any applicable jurisdiction.

 88

		
	24.7
	Severability

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.
		
	25.
	Notices

		
	25.1
	Form of Notice

		
	25.1.1
	Except as expressly set forth herein, any notice, invoice or other communication from one of the Parties to the other Party (or, where contemplated in this Agreement, from or to the Transporter or the master of the LNG Tanker), which is required or permitted to be made by the provisions of this Agreement shall be:

		
	(a)
	made in the English language;

		
	(b)
	made in writing;

		
	(c)
	(i) delivered by hand or sent by courier to the address of the other Party which is shown below or to such other address as the other Party shall by notice require or; (ii) be sent by facsimile to the facsimile number of the other Party which is shown below or to such other facsimile number as the other Party shall by notice require or; (iii) with respect to any notice, invoice or other communication to be sent pursuant to Sections 7, 8 or 12 (or others as may be agreed by the Parties), be sent by electronic mail to the e-mail address of the other Party which is shown below or to such other e-mail address as the other Party shall by notice require; and

		
	(d)
	marked for the attention of the Person(s) there referred to or to such other Person(s) as the other Party shall by notice require.

		
	25.1.2
	The addresses of the Parties for service of notices are as follows:

Seller:    Sabine Pass Liquefaction, LLC
700 Milam Street
Suite 800
Houston, TX 77002
Telephone: (713) 375-5121
Fax: (713) 375-6121
E-mail: Customer.Coordination@Cheniere.com
Attention:  Commercial Operations

 89

Buyer:    Centrica plc
Millstream
Maidenhead Road
Windsor
Berkshire SL4 5GD
Telephone: +44 (0) 1753 494000
Fax: +44 (0) 1753 494001
Email: CLNGops@Centrica.com
Attention:  Head of LNG Trading
		
	25.2
	Effective Time of Notice

		
	25.2.1
	Any notice, invoice or other communication made by one Party to the other Party in accordance with the foregoing provisions of this Section 25 shall be deemed to be received by the other Party if delivered by hand or by courier, on the Day on which it is received at that Party's address or, if sent by facsimile, on the next Day on which the office of the receiving Party is normally open for business following the Day on which it is received in a legible form at the address to which it is properly addressed. The foregoing shall not apply to notices or communications sent by facsimile or e-mail under Sections 7.9.2, 7.9.3, and 7.10, which shall be deemed effective at the time transmitted to the facsimile number shown above or such other number or electronic mail address previously notified by the receiving Party.

		
	25.2.2
	Without limiting the meaning of the word “received” for the purpose of the preceding paragraph, a notice which is delivered by hand or by courier shall be deemed to have been received at a Party's address if it is placed in any receptacle normally used for the delivery of post to the address of that Party.

		
	25.2.3
	Any notice given by facsimile or electronic mail shall be subsequently confirmed by letter, unless otherwise agreed, but without prejudice to the validity of the original notice.

		
	26.
	Business Practices

		
	26.1
	Trade Law Compliance.

Each Party agrees to comply with the Export Authorizations, including incorporating into any resale contract for LNG sold under this Agreement the necessary conditions to ensure compliance with the Export Authorizations.  Buyer shall promptly provide to Seller all information required by Seller to comply with the Export Authorizations.  If any Export Authorization requires conditions to be included in this Agreement then, within fifteen (15) days following the issuance of the Export Authorization imposing such condition, the Parties shall discuss the appropriate changes to be made to this Agreement to comply with such Export Authorization and shall amend this 

 90

Agreement accordingly.  Buyer acknowledges and agrees that it may resell or transfer LNG purchased hereunder for delivery only to the countries identified in an Export Authorization and/or to purchasers that have agreed in writing to limit their direct or indirect resale or transfer of such LNG to such countries.  Buyer represents and warrants that the final delivery of LNG received pursuant to the terms of this Agreement are permitted and lawful under United States of America laws and policies, including the rules, regulations, orders, policies, and other determinations of the United States Department of Energy, the Office of Foreign Assets Control of the United States Department of the Treasury and the Federal Energy Regulatory Commission, and Buyer shall not take any action which would cause any Export Authorization to be withdrawn, revoked, suspended or not renewed.
		
	26.2
	Use of LNG

At all times during the Term, Buyer shall, with respect to all LNG delivered by Seller to Buyer pursuant to this Agreement: (a) utilize such LNG as a refined product or chemical feedstock; (b) use or consume such LNG to produce power for sale to customers; (c) market such LNG to distributors or wholesalers for resale to their own customers; or (d) resell such LNG to other Persons provided that the transfer by Buyer to a Transporter of gas that boils off from a cargo in transit from the Delivery Point shall be considered to be a sale.
		
	26.3
	Prohibited Practices

		
	26.3.1
	Each Party agrees that in connection with this Agreement and the activities contemplated herein, it will take no action, or omit to take any action, which would (i) violate any Applicable Law applicable to that Party, or (ii) cause the other Party to be in violation of any Applicable Law applicable to such other Party, including the U.S. Foreign Corrupt Practices Act, the OECD convention on anti-bribery, the U.K. Bribery Act of 2010, E.U. and E.U. member country anti-bribery and corruption laws, and corruption or any similar statute, regulation, order or convention binding on such other Party, as each may be amended from time to time, and including any implementing regulations promulgated pursuant thereto.

		
	26.3.2
	Without limiting Section 26.3.1, each Party agrees on behalf of itself, its directors, officers, employees, agents, contractors, and Affiliates, not to pay any fees, commissions or rebates to any employee, officer or agent of the other Party or its Affiliates or shareholders nor provide or cause to be provided to any of them any gifts or entertainment of significant cost or value in connection with this Agreement or in order to influence or induce any actions or inactions in connection with the commercial activities of the Parties hereunder.

 91

		
	26.4
	Records; Audit

Each Party shall keep all records necessary to confirm compliance with Sections 26.1, 26.2, 26.3.1(ii), and 26.3.2 for a period of five (5) years following the year for which such records apply.  If either Party asserts that the other Party is not in compliance with Sections 26.1, 26.2, 26.3.1(ii), or 26.3.2, the Party asserting noncompliance shall send a notice to the other Party indicating the type of noncompliance asserted.  After giving such notice, the Party asserting noncompliance may cause an Independent Auditor to audit the records of the other Party in respect of the asserted noncompliance.  The costs of any Independent Auditor under this Section 26.4 shall be paid (i) by the Party being audited, if such Party is determined not to be in compliance with Sections 26.1, 26.2, 26.3.1(ii) or 26.3.2, as applicable, and (ii) by the Party requesting the audit, if the Party being audited is determined to be in compliance with Sections 26.1, 26.2, 26.3.1(ii), or 26.3.2, as applicable.
		
	26.5
	Indemnity

Each Party agrees to indemnify and hold the other Party harmless from any Losses arising out of the indemnifying Party's breach of any or all of Section 26.1, Section 26.3, or Section 26.4 or the breach of the representation and warranty in Section 17.3.

 92

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.
	
					
	SELLER:
	 
	BUYER:

	 
	 
	 
	 
	 

	SABINE PASS LIQUEFACTION, LLC
	 
	CENTRICA PLC

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	/s/ H. Davis Thames
	 
	/s/ Mark Hanafin

	Name:
	H. Davis Thames
	 
	Name:
	Mark Hanafin

	Title:
	Executive Vice President
	 
	Title:
	Director

 93

EXHIBIT A
MEASUREMENT
1.    Parties to Supply Devices
a)    General.  Unless otherwise agreed, Buyer and Seller shall supply equipment and conform to procedures that are in accordance with the latest version of the standards referred to in this document.
b)    Buyer Devices.  Buyer or Buyer's agent shall supply, operate and maintain, or cause to be supplied, operated and maintained, suitable gauging devices for the liquid level in LNG tanks of the LNG Tankers, pressure and temperature measuring devices, and any other measurement or testing devices which are incorporated in the structure of LNG vessels or customarily maintained on board ship.
c)    Seller Devices.  Seller shall supply, operate and maintain, or cause to be supplied, operated and maintained, devices required for collecting samples and for determining quality and composition of the LNG and any other measurement or testing devices which are necessary to perform the measurement and testing required hereunder at the Sabine Pass Facility.
d)    Dispute.  Any Dispute arising under this Exhibit A shall be submitted to an Expert under Section 21.2 of this Agreement.
2.    Selection of Devices
All devices provided for in this Exhibit A shall be approved by Seller, acting as a Reasonable and Prudent Operator.  The required degree of accuracy (which shall in any case be within the permissible tolerances defined herein and in the applicable standards referenced herein) of such devices selected shall be mutually agreed upon by Buyer and Seller.  In advance of the use of any device, the Party providing such device shall cause tests to be carried out to verify that such device has the required degree of accuracy.
3.    Verification of Accuracy and Correction for Error
a)    Accuracy.  Accuracy of devices used shall be tested and verified at the request of either Party, including the request by a Party to verify accuracy of its own devices.  Each Party shall have the right to inspect at any time the measurement devices installed by the other Party, provided that the other Party is notified in advance.  Testing shall be performed only when both Parties are represented, or have received adequate advance notice thereof, using methods recommended by the manufacturer or any other method agreed to by Seller and Buyer.  At the request of any Party hereto, any test shall be witnessed and verified by an independent surveyor mutually agreed upon by Buyer and Seller.  Permissible tolerances shall be as defined herein or as defined in the applicable standards referenced herein.

b)    Inaccuracy.  Inaccuracy of a device exceeding the permissible tolerances shall require correction of previous recordings, and computations made on the basis of those recordings, to zero error with respect to any period which is definitely known or agreed upon by the Parties as well as adjustment of the device.  All invoices issued during such period shall be amended accordingly to reflect such correction, and an adjustment in payment shall be made between Buyer and Seller.  If the period of error is neither known nor agreed upon, and there is no evidence as to the duration of such period of error, corrections shall be made and invoices amended for each delivery of LNG made during the last half of the period since the date of the most recent calibration of the inaccurate device.  However, the provisions of this Paragraph 3 shall not be applied to require the modification of any invoice that has become final pursuant to Section 10.3.2 of this Agreement.
c)    Costs and Expenses of Test Verification.  All costs and expenses for testing and verifying Seller's measurement devices shall be borne by Seller, and all costs and expenses for testing and verifying Buyer's measurement devices shall be borne by Buyer.  The fees and charges of independent surveyors for measurements and calculations shall be borne by the Parties in accordance with Section 13.11.3 of this Agreement.
4.    Tank Gauge Tables of LNG Tankers
a)    Initial Calibration.  Buyer shall arrange or caused to be arranged, for each tank of each LNG Tanker, a calibration of volume against tank level. Buyer shall provide Seller or its designee, or cause Seller or its designee to be provided, with a certified copy of tank gauge tables for each tank of each LNG Tanker verified by a competent impartial authority or authorities mutually agreed upon by the Parties.  Such tables shall include correction tables for list, trim, tank contraction and any other items requiring such tables for accuracy of gauging.
Tank gauge tables prepared pursuant to the above shall indicate volumes in cubic meters expressed to the nearest thousandth (1/1000), with LNG tank depths expressed in meters to the nearest hundredth (1/100).
b)    Presence of Representatives.  Seller and Buyer shall each have the right to have representatives present at the time each LNG tank on each LNG Tanker is volumetrically calibrated.
c)    Recalibration.  If the LNG tanks of any LNG Tanker suffer distortion of such nature as to create a reasonable doubt regarding the validity of the tank gauge tables described herein (or any subsequent calibration provided for herein), Buyer or Buyer's agent shall recalibrate the damaged tanks, and the vessel shall not be employed as an LNG Tanker hereunder until appropriate corrections are made.  If mutually agreed between Buyer and Seller representatives, recalibration of damaged tanks can be deferred until the next time when such damaged tanks are warmed for any reason, and any corrections to the prior tank gauge tables will be made from the time the distortion occurred.  If the time of the distortion cannot be ascertained, the Parties shall mutually agree on the time period for retrospective adjustments.
5.    Units of Measurement and Calibration
The Parties shall co-operate in the design, selection and acquisition of devices to be used for measurements and tests in order that all measurements and tests may be conducted in the SI system 

A-2

of units, except for the quantity delivered which is expressed in MMBtu, the Gross Heating Value (volume based) which is expressed in Btu/SCF and the pressure which is expressed in millibar and temperature in Celsius.  In the event that it becomes necessary to make measurements and tests using a new system of units of measurements, the Parties shall establish agreed upon conversion tables.
6.    Accuracy of Measurement
All measuring equipment must be maintained, calibrated and tested in accordance with the manufacturer's recommendations.  In the absence of a manufacturer's recommendation, the minimum frequency of calibration shall be one hundred eighty (180) days, unless otherwise mutually agreed between the Parties.  Documentation of all tests and calibrations will be made available by the Party performing the same to the other Party.  Acceptable accuracy and performance tolerances shall be:
a)    Liquid Level Gauging Devices.
Each LNG tank of the LNG Tanker shall be equipped with primary and secondary liquid level gauging devices as per Paragraph 7(b) of this Exhibit A.
The measurement accuracy of the primary gauging devices shall be plus or minus seven point five (± 7.5) millimeters and the secondary liquid level gauging devices shall be plus or minus ten (± 10) millimeters.
The liquid level in each LNG tank shall be logged or printed.
b)    Temperature Gauging Devices.
The temperature of the LNG and of the vapor space in each LNG tank shall be measured by means of a number of properly located temperature measuring devices sufficient to permit the determination of average temperature.
The measurement accuracy of the temperature gauging devices shall be as follows:
(i)    in the temperature range of minus one hundred sixty five to minus one hundred forty degree Celsius (-165C to -140°C), the accuracy shall be plus or minus zero point two degree Celsius (± 0.2 °C);
(ii)    in the temperature range of minus one hundred forty to plus forty degree Celsius (-140C to +40 °C), the accuracy shall be plus or minus one point five degree Celsius (± 1.5 °C).
The temperature in each LNG tank shall be logged or printed.
c)    Pressure Gauging Devices.
Each LNG tank of the LNG Tanker shall have one (1) absolute pressure gauging device.
The measurement accuracy of the pressure gauging device shall be plus or minus one percent (± 1%) of the measuring range.

A-3

The pressure in each LNG tank shall be logged or printed.
d)    List and Trim Gauging Devices.
A list gauging device and a trim gauging device shall be installed.  These shall be interfaced with the custody transfer system.
The measurement accuracy of the list and the trim gauging devices shall be better than plus or minus zero point zero five (±0.05) degrees for list and: (i) in respect of LNG Tankers constructed, commissioned and owned by Buyer prior to the Effective Date, plus or minus zero point zero two (±0.02) degrees for trim; or (ii) otherwise, plus or minus zero point zero one (± 0.01) degrees for trim.
7.    Gauging and Measuring LNG Volumes Delivered
a)    Gauge Tables.  Upon Seller's representative and the independent surveyor, if present, arriving on board the LNG Tanker prior to the commencement of or during loading, Buyer or Buyer's representative shall make available to them a certified copy of tank gauge tables for each tank of the LNG Tanker.
b)    Gauges.  Volumes of LNG delivered pursuant to this Agreement shall be determined by gauging the LNG in the tanks of the LNG Tankers before and after loading.  Each LNG Tanker's tank shall be equipped with a minimum of two (2) independent sets of level gauges, each set utilizing preferably a different measurement principle.  Comparison of the two (2) systems, designated as Primary and Secondary Measurement Systems, shall be performed from time to time to ensure compliance with the acceptable performance tolerances stated herein.
c)    Gauging Process.  Gauging the liquid in the tanks of the LNG Tankers and measuring of liquid temperature, vapor temperature and vapor pressure in each LNG tank, trim and list of the LNG Tankers, and atmospheric pressure shall be performed, or caused to be performed, by Buyer before and after loading.  Seller's representative shall have the right to be present while all measurements are performed and shall verify the accuracy and acceptability of all such measurements.  The first gauging and measurements shall be made immediately before the commencement of loading.  The second gauging and measurements shall take place immediately after the completion of loading.
d)    Records.  Copies of gauging and measurement records shall be furnished to Seller immediately upon completion of loading.
e)    Gauging Liquid Level of LNG.  The level of the LNG in each LNG tank of the LNG Tanker shall be gauged by means of the primary gauging device installed in the LNG Tanker for that purpose.  The level of the LNG in each tank shall be logged or printed.
Measurement of the liquid level in each LNG tank of the LNG Tanker shall be made to the nearest millimeter by using the primary liquid level gauging devices. Should the primary devices fail, the secondary device shall be used.

A-4

Five (5) readings shall be made following manufacturer's recommendations on reading interval. The arithmetic average of the readings rounded to the nearest millimeter using one (1) decimal place shall be deemed the liquid level.
f)    Determination of Temperature.  The temperature of the LNG and of the vapor space in each LNG tank shall be measured by means of a sufficient number of properly located temperature measuring devices to permit the determination of average temperature.  Temperatures shall be measured at the same time as the liquid level measurements and shall be logged or printed.
In order to determine the temperature of liquid and vapor respectively in the LNG Tanker one (1) reading shall be taken at each temperature gauging device in each LNG tank.  An arithmetic average of such readings rounded to the nearest zero point one degree Celsius (0.1 °C) using two (2) decimal places with respect to vapor and liquid in all LNG tanks shall be deemed the final temperature of the vapor and liquid respectively.
Buyer shall cause each cargo tank in the LNG Tanker to be provided with a minimum of five (5) temperature measuring devices.  One such measuring device shall be located in the vapor space at the top of each cargo tank, one near the bottom of each cargo tank and the remainder distributed at appropriate intervals from the top to the bottom of the cargo tank.  These devices shall be used to determine the average temperatures of the liquid cargo and the vapor in the cargo tank.
The average temperature of the vapor in an LNG Tanker shall be determined immediately before loading by means of the temperature measuring devices specified above at the same time as when the liquid level is measured.  The temperature measuring devices shall be fully surrounded by the vapor.  This determination shall be made by taking the temperature readings of the temperature measuring devices in question to the nearest zero point zero one degrees Celsius (0.01°C), and if more than one of the devices are fully surrounded by the vapor, by averaging those readings, and rounding to one (1) decimal place.
The average temperature of the liquid in an LNG Tanker shall be determined immediately after loading by means of the temperature measuring devices specified above.
g)    Determination of Pressure.  The pressure of the vapor in each LNG tank shall be determined by means of pressure measuring devices installed in each LNG tank of the LNG Tankers.  The atmospheric pressure shall be determined by readings from the standard barometer installed in the LNG Tankers.  Pressures shall be measured at the same time as the liquid level measurements, and shall be logged or printed.
Buyer shall cause the LNG Tanker to be provided with pressure measuring equipment capable of determining the absolute pressure of the vapor in each cargo tank with an accuracy equal to or better than plus or minus one percent (± 1%) of the measuring range.
The pressure of the vapor in an LNG Tanker shall be determined immediately before loading at the same time as when the liquid level is measured.
Such determination shall be made by taking the pressure readings of the pressure measuring devices to the nearest millibar, then averaging these readings and rounding to a whole millibar.

A-5

h)    Determination of Density.  The LNG density shall be calculated using the revised Klosek-McKinley method. Should any improved data, method of calculation or direct measurement device become available which is acceptable to both Buyer and Seller, such improved data, method or device shall then be used.
8.    Samples for Quality Analysis
a)    General.  Representative liquid samples shall be collected from an appropriate point located as close as practical to the loading line starting one (1) hour after full loading rate is reached and ending one (1) hour before ramping down from the full loading rate.  A sample shall be taken and analyzed at least once every twenty (20) minutes by an on-line chromatograph during this period; provided, however, that no less than forty (40) samples shall be taken per cargo loading operation.  Samples taken when biphasic or overheated LNG is suspected to be in the main transfer line will be disregarded.  These incremental samples will be passed through a vaporizer, and samples of the vaporized liquid will be analyzed.  The resulting analyses, which are generally proportional to time, will be arithmetically averaged to yield an analysis that is representative of the loaded LNG cargo.  This arithmetically averaged analysis shall be used for all appropriate calculations associated with the delivered LNG cargo.  If both Seller and the Buyer agree that the result of the arithmetic average does not give a fair representation of the composition of the LNG, both Parties shall meet and decide in good faith the appropriate method to determine the composition of the LNG. Should the automatic sampling system fail during the loading, manual samples shall be collected and analyzed for accounting purposes.
b)    Manual Samples.  Prior to the end of the loading cycle, three (3) sets of spot samples shall be collected from the vaporizer at the following intervals during loading, when loading is twenty-five percent (25%), fifty percent (50%), and seventy-five percent (75%) complete.  Spot samples shall be collected in accordance with Gas Processors Association (“GPA”) Standard 2166 - Methods for Obtaining Gas Samples for Analysis by Gas Chromatography - or by other mutually agreeable methods.  The samples shall be properly labeled and then distributed to Buyer and Seller.  Seller shall retain one (1) sample for a period of forty (40) days, unless the analysis is in dispute.  If the analysis is in dispute, the sample will be retained until the dispute is resolved.
Sampling and analysis methods and procedures that differ from the above may be employed with the mutual agreement of the Parties.
9.    Quality Analysis
a)    Certification and Deviation.  Chromatograph calibration gasses shall be provided and their composition certified by an independent third party.  From time to time, deviation checks shall be performed to verify the accuracy of the gas composition mole percentages and resulting calculated physical properties.  Analyses of a sample of test gas of known composition resulting when procedures that are in accordance with the above mentioned standards have been applied will be considered as acceptable if the resulting calculated gross heating value is within plus or minus zero point three percent (± 0. 3%) of the known gross heating value of the test gas sample.  If the deviation exceeds the tolerance stated, the gross real heating value, relative density and compressibility previously calculated will be corrected immediately.  Previous analyses will be corrected to the point where the error occurred, if this can be positively identified to the satisfaction of both Parties.  

A-6

Otherwise it shall be assumed that the drift has been linear since the last recalibration and correction shall be based on this assumption.
b)    GPA Standard 2261.  All samples shall be analyzed by Seller to determine the molar fraction of the hydrocarbon and other components in the sample by gas chromatography using a mutually agreed method in accordance with GPA Standard 2261 - Method of Analysis for Gas and Similar Gaseous Mixtures by Gas Chromatography, current as of January 1st, 1990 and as periodically updated or as otherwise mutually agreed by the Parties.  If better standards for analysis are subsequently adopted by GPA or other recognized competent impartial authority, upon mutual agreement of Buyer and Seller, they shall be substituted for the standard then in use, but such substitution shall not take place retroactively.  A calibration of the chromatograph or other analytical instrument used shall be performed by Seller immediately prior to the analysis of the sample of LNG delivered.  Seller shall give advance notice to Buyer of the time Seller intends to conduct a calibration thereof, and Buyer shall have the right to have a representative present at each such calibration; provided, however, Seller will not be obligated to defer or reschedule any calibration in order to permit the representative of Buyer to be present.
c)    GPA Standard 2377 and 2265.  Seller shall determine the presence of Hydrogen Sulfide (H2S) by use of GPA Standard 2377 - Test of Hydrogen Sulfide and Carbon Dioxide in Gas Using Length of Stain Tubes.  If necessary, the concentration of H2S and total sulfur will be determined using one or more of the following methods as is appropriate: gas chromatography, Gas Processors Standard 2265 - Standard for Determination of Hydrogen Sulfide and Mercaptan Sulfur in Gas (Cadmium Sulfate - Iodometric Titration Method) or any other method that is mutually acceptable.  If Hydrogen Sulfide or Carbon Dioxide are detected by the above methods then Seller shall confirm the presence of Hydrogen Sulfide or Carbon Dioxide in accordance with GPA Standard 2261-00 (Analysis for Natural Gas and Similar Gaseous Mixtures by Gas Chromatography).
10.    Operating Procedures
a)    Notice.  Prior to conducting operations for measurement, gauging, sampling and analysis provided in this Exhibit A, the Party responsible for such operations shall notify the appropriate representatives of the other Party, allowing such representatives reasonable opportunity to be present for all operations and computations; provided that the absence of the other Party's representative after notification and opportunity to attend shall not prevent any operations and computations from being performed.
b)    Independent Surveyor.  At the request of either Party any measurement, gauging, sampling and analysis shall be witnessed and verified by an independent surveyor mutually agreed upon by Buyer and Seller.  The results of such surveyor's verifications shall be made available promptly to each Party.
c)    Preservation of Records.  All records of measurement and the computed results shall be preserved by the Party responsible for taking the same, or causing the same to be taken, and made available to the other Party for a period of not less than three (3) years after such measurement and computation.

A-7

11.    Quantities Delivered
a)    Calculation of MMBtu Quantities.  The quantity of MMBtu delivered shall be calculated by Seller and verified by Buyer.  Either Party may, at its own expense, require the measurements and calculations and/or their verification by an independent surveyor, mutually agreed upon by the Parties.  Consent to an independent surveyor proposed by a Party shall not be unreasonably withheld by the other Party.
b)    Determination of Gross Heating Value.  All component values shall be in accordance with the latest revision of GPA Standard 2145 SI (2009) - Physical Constants for Hydrocarbons & Other Compounds of Interest to the Natural Gas Industry and the latest revision of the reference standards therein. Standard reference conditions for Hi component should be 15°C & 101.325 kPa.
c)    Determination of Volume of LNG Loaded.
(i)    The LNG volume in the tanks of the LNG Tanker before and after loading (valves have to be closed) shall be determined by gauging on the basis of the tank gauge tables provided for in Paragraph 6.  During the period when measurement is occurring, no LNG cargo, ballast, boil-off gas, fuel oil or other cargo transfer activity will be carried out on the LNG Tanker.  Measurements shall first be made immediately before loading commences.  Accordingly, after connection of the loading arms, but prior to their cool down, and immediately before opening the manifold ESD valves of the LNG Tanker, the initial gauging shall be conducted upon the confirmation of stoppage of all spray pumps and compressors and shut-off of the gas master valve to the LNG Tanker's boilers or any other gas consuming unit.  The gas master valve to the LNG Tanker's boilers or any other gas consuming unit shall remain closed until after the second gauging, unless a regulatory change requires the consumption of gas during the vessel loading operations and/or upon mutual agreement between all parties upon which event the procedure for the measurement of gas consumed during loading shall be calculated in accordance with Paragraph 12.4 of this Exhibit A.  A second gauging shall be made immediately after loading is completed.  Accordingly, the second gauging shall be conducted upon the confirmation of shut-off of the manifold ESD valves, with transfer pumps off and allowing sufficient time for the liquid level to stabilize.  Measurements prior to loading and after loading will be carried out based on the condition of the LNG Tanker's lines upon arrival at berth.  Since significant volumes of LNG may remain in the LNG Tanker's manifold and crossover, gauging will be performed with these lines in the same condition prior to loading and after loading.  If the LNG Tanker's manifold and crossover lines are empty (warm) when measurement is taken before loading commences, they will be emptied prior to measurement following the completion of loading.  If the crossover lines are liquid filled (cold) when measurement is taken before loading commences, they will remain full (cold) until measurement is taken following the completion of loading.  The volume of LNG remaining in the tanks immediately before loading of the LNG Tanker shall be subtracted from the volume  immediately after loading and the resulting volume shall be taken as the volume of the LNG delivered from the terminal to the LNG Tanker.
The volume of LNG stated in cubic meters to the nearest zero point zero zero one (0.001) cubic meter, shall be determined by using the tank gauge tables and by applying the volume corrections set forth therein.

A-8

(ii)    Gas returned to the terminal and gas consumed by the LNG Tanker during loading shall be taken into account to determine the volume loaded for Buyer's account in accordance with the formula in Paragraph 12.4 of this Exhibit A - MMBtu Calculation of the Quantity of LNG Loaded.
(iii)    If failure of the primary gauging and measuring devices of an LNG Tanker should make it impossible to determine the LNG volume, the volume of LNG loaded shall be determined by gauging the liquid level using the secondary gauging and measurement devices. If an LNG Tanker is not so equipped, the volume of LNG loaded shall be determined by gauging the liquid level in Seller's onshore LNG storage tanks immediately before and after loading the LNG Tanker, in line with the terminal procedures, and such volume shall have subtracted from it an estimated LNG volume, agreed upon by the Parties, for boil-off from such tanks during the loading of such LNG Tanker.  Seller shall provide Buyer, or cause Buyer to be provided with, a certified copy of tank gauge tables for each onshore LNG tank which is to be used for this purpose, such tables to be verified by a competent impartial authority.
12.    Calculations
The calculation procedures contained in this Paragraph 12 are generally in accordance with the Institute of Petroleum Measurement Manual, Part XII, the Static Measurement of Refrigerated Hydrocarbon Liquids, Section 1, IP 251/76.
d     =    density of LNG loaded at the prevailing composition and temperature Tl in kg/m3, rounded to two (2) decimal places, calculated according to the method specified in Paragraph 12.1 of this Exhibit A.
Hi    =    gross heating value (mass based) of component “i” in MJ/kg, in accordance with Paragraph 12.6(a) of this Exhibit A.
Hm    =    gross heating value (mass based) of the LNG loaded in MJ/kg, calculated in accordance with the method specified in Paragraph 12.3 of this Exhibit A, rounded to four (4) decimal places.
Hv    =    gross heating value (volume based) of the LNG loaded in Btu/SCF, calculated in accordance with  the method specified in Paragraph 12.5 of this Exhibit A.
K1    =     volume correction in m3/kmol, at temperature Tl, obtained by linear interpolation from Paragraph 12.6(c) of this Exhibit A, rounded to six (6) decimal places.
K2    =    volume correction in m3/kmol, at temperature Tl obtained by linear interpolation from Paragraph 12.6(d) of this Exhibit A, rounded to six (6) decimal places.
Mi    =    molecular mass of component “i” in kg/kmol, in accordance with Paragraph 12.6(a) of this Exhibit A.
P     =    average absolute pressure of vapor in an LNG Tanker immediately before loading, in millibars, rounded to a whole millibar.

A-9

Q    =    number of MMBtu contained in the LNG delivered, rounded to the nearest ten (10) MMBtu.
Tl     =    average temperature of the liquid cargo in the LNG Tanker immediately after loading, in degrees Celsius, rounded to one (1) decimal place.
Tv     =     average temperature of the vapor in an LNG Tanker immediately before loading, in degrees Celsius, rounded to one (1) decimal place.
V    =    the volume of the liquid cargo loaded, in cubic meters, rounded to three (3) decimal places.
Vh    =    the volume of the liquid cargo in an LNG Tanker immediately before loading, in cubic meters, rounded to three (3) decimal places.
Vb    =    the volume of the liquid cargo in an LNG Tanker immediately after loading, in cubic meters, rounded to three (3) decimal places.
Vi    =    molar volume of component “i” at temperature Tl, in m3/kmol, obtained by linear interpolation from Paragraph 12.6(b) of this Exhibit A, rounded to six (6) decimal places.
Xi    =    molar fraction of component “i” of the LNG samples taken from the loading line, rounded to four (4) decimal places, determined by gas chromatographic analysis.
Xm    =    the value of Xi for methane.
Xn    =    the value of Xi for nitrogen.
12.1     Density Calculation Formula
The density of the LNG loaded which is used in the MMBtu calculation in 12.4 of this Exhibit A shall be calculated from the following formula derived from the revised Klosek-McKinley method:

In the application of the above formula, no intermediate rounding shall be made if the accuracy of “d” is thereby affected.
12.2    Calculation of Volume Delivered
The volume, in cubic meters, of each LNG cargo loaded shall be calculated by using the following formula:

A-10

12.3     Calculation of Gross Heating Value (Mass Based)
The gross heating value (mass based), in MJ/kg, of each LNG cargo loaded shall be calculated by using the following formula:

12.4    MMBtu Calculation of the Quantity of LNG Loaded
The number of MMBtu contained in the LNG loaded shall be calculated using the following formula:

The derivation of the conversion factor 1/1055.12 in the formula in this Paragraph for the conversion of MJ into MMBtu is obtained from GPA-2145:1994 and IP-251:1976 as follows:
(a)    q(T,P) means the gross heating value (measured at temperature T and pressure P), contained in a given quantity of gas;
(b)    q(60°F, 14.696 psia) in MJ = 1/1.00006 x q(15°C, 1013.25 millibar) in MJ;
(c)    1 MMBtu corresponds to 1055.06 MJ;
(d)    q(60°F, 14.696 psia) in MMBtu = 1/1055.06 x q(60°F, 14.696 psia) in MJ; and
(e)    Combining (b) and (d) above yields:
q(60°F, 14.696 psia) in MMBtu = 1/1055.12 x q(15°C, 1013.25 millibar) in MJ.
Hence the number of MJ derived shall be divided by 1055.12 to obtain the number of MMBtu for invoicing purposes.
		
	QBOG
	=    the quantity of boil off gas in MJ consumed by the LNG tanker during loading, calculated as follows:

QBOG = (V2 x 55.575)
where:
		
	V2
	=    the quantity of natural gas consumed by the LNG tanker during loading (as calculated pursuant to the below formula), stated in kg and rounded to the nearest kg; and

A-11

		
	55.575 =
	the heating value of the vapor (assumed to be 100% of methane) stated in MJ/kg at standard reference conditions (15 ̊C, 1.01325 bar) for both combustion & metering references (tables below).

Quantity of Natural Gas Consumed by LNG Tanker (V2)
The quantity of natural gas consumed by the LNG tanker during loading shall be computed by taking the initial and the final reading of Natural Gas Consumption Meter on board the tanker (i.e. final reading of Natural Gas Consumption Meter after completion of loading minus initial reading of Natural Gas Consumption Meter before the start of loading) and is calculated by using the following formula:
V2    =    Vf - Vi
where:
		
	V2
	=    the quantity of natural gas consumed by the LNG tanker during loading, stated in kg;

		
	Vf
	=    the reading of Natural Gas Consumption Meter on board the tanker after the completion of loading, stated in kg; and

		
	Vi
	=    the reading of Natural Gas Consumption Meter on board the tanker before the start of loading, stated in kg.

12.5    Calculation of Gross Heating Value (Volume Based)
The calculation of the Gross Heating Value (volume based) in Btu/SCF shall be derived from the same compositional analysis as is used for the purposes of calculating the Gross Heating Value (mass based) Hm and the following formula shall apply:

The derivation of the conversion factor 1.13285 for the conversion of MJ/kmol into Btu/SCF is obtained as follows:
(a)    molar gross heating value = 
(b)    1 kmol = 2.20462 lbmol;
(c)    1 lbmol = 379.482 SCF;
(d)    hence 1 kmol = 836.614 SCF; and
(e)    Hv = 

A-12

12.6    Data
(a)    Values    of Hi and Mi
	
			
	Component
	Hi (in MJ/kg)
	Mi (in kg/kmol)

	Methane
	55.575
	16.0425

	Ethane
	51.951
	30.0690

	Propane
	50.369
	44.0956

	Iso-Butane
	49.388
	58.1222

	N-Butane
	49.546
	58.1222

	Iso-Pentane
	48.95
	72.1488

	N-Pentane
	49.045
	72.1488

	N-Hexane
	48.715
	86.1754

	Nitrogen
	0
	28.0134

	Carbon Dioxide
	0
	44.0095

	Oxygen
	0
	31.9988

Source:  GPA Publication 2145 Sl-2009: “Table of Physical Properties for Hydrocarbons and Other Compounds of Interest to the Natural Gas Industry”.

(b)    Values of Vi (cubic meter/kmol)
	
								
	Temperature
	-150°C
	-154°C
	-158°C
	-160°C
	-162°C
	-166°C
	-170°C

	Methane
	0.039579
	0.038983
	0.038419
	0.038148
	0.037884
	0.037375
	0.036890

	Ethane
	0.048805
	0.048455
	0.048111
	0.047942
	0.047774
	0.047442
	0.047116

	Propane
	0.063417
	0.063045
	0.062678
	0.062497
	0.062316
	0.061957
	0.061602

	Iso-Butane
	0.079374
	0.078962
	0.078554
	0.078352
	0.078151
	0.077751
	0.077356

	N-Butane
	0.077847
	0.077456
	0.077068
	0.076876
	0.076684
	0.076303
	0.075926

	Iso-Pentane
	0.092817
	0.092377
	0.091939
	0.091721
	0.091504
	0.091071
	0.090641

	N-Pentane
	0.092643
	0.092217
	0.091794
	0.091583
	0.091373
	0.090953
	0.090535

	N-Hexane
	0.106020
	0.105570
	0.105122
	0.104899
	0.104677
	0.104236
	0.103800

	Nitrogen
	0.055877
	0.051921
	0.048488
	0.046995
	0.045702
	0.043543
	0.041779

	Carbon Diox
	0.027950
	0.027650
	0.027300
	0.027200
	0.027000
	0.026700
	0.026400

	Oxygen
	0.03367
	0.03275
	0.03191
	0.03151
	0.03115
	0.03045
	0.02980

Source:   National Bureau of Standards Interagency Report 77-867, Institute of Petroleum IP251/76 for Oxygen.
Note:    For intermediate values of temperature and molecular mass a linear interpolation shall be applied

A-13

(c)    Values of Volume Correction Factor, K1 (cubic meter/kmol)
	
								
	Molecular Mass of Mixture
	-150°C
	-154°C
	-158°C
	-160°C
	-162°C
	-166°C
	-170°C

	16.0
	-0.000012
	-0.000010
	-0.000009
	-0.000009
	-0.000008
	-0.000007
	-0.000007

	16.5
	0.000135
	0.000118
	0.000106
	0.000100
	0.000094
	0.000086
	0.000078

	17.0
	0.000282
	0.000245
	0.000221
	0.000209
	0.000197
	0.000179
	0.000163

	17.2
	0.000337
	0.000293
	0.000261
	0.000248
	0.000235
	0.000214
	0.000195

	17.4
	0.000392
	0.000342
	0.000301
	0.000287
	0.000274
	0.000250
	0.000228

	17.6
	0.000447
	0.000390
	0.000342
	0.000327
	0.000312
	0.000286
	0.000260

	17.8
	0.000502
	0.000438
	0.000382
	0.000366
	0.000351
	0.000321
	0.000293

	18.0
	0.000557
	0.000486
	0.000422
	0.000405
	0.000389
	0.000357
	0.000325

	18.2
	0.000597
	0.000526
	0.000460
	0.000441
	0.000423
	0.000385
	0.000349

	18.4
	0.000637
	0.000566
	0.000499
	0.000477
	0.000456
	0.000412
	0.000373

	18.6
	0.000677
	0.000605
	0.000537
	0.000513
	0.000489
	0.000440
	0.000397

	18.8
	0.000717
	0.000645
	0.000575
	0.000548
	0.000523
	0.000467
	0.000421

	19.0
	0.000757
	0.000685
	0.000613
	0.000584
	0.000556
	0.000494
	0.000445

	19.2
	0.000800
	0.000724
	0.000649
	0.000619
	0.000589
	0.000526
	0.000474

	19.4
	0.000844
	0.000763
	0.000685
	0.000653
	0.000622
	0.000558
	0.000503

	19.6
	0.000888
	0.000803
	0.000721
	0.000688
	0.000655
	0.000590
	0.000532

	19.8
	0.000932
	0.000842
	0.000757
	0.000722
	0.000688
	0.000622
	0.000561

	20.0
	0.000976
	0.000881
	0.000793
	0.000757
	0.000721
	0.000654
	0.000590

	25.0
	0.001782
	0.001619
	0.001475
	0.001407
	0.001339
	0.001220
	0.001116

	30.0
	0.002238
	0.002043
	0.001867
	0.001790
	0.001714
	0.001567
	0.001435

Source:  National Bureau of Standards Interagency Report 77-867.
Note 1:    Molecular mass of mixture equals  
Note 2:    For intermediate values of temperature and molecular mass a linear interpolation shall be applied.

A-14

(d)    Values of Volume Correction Factor, K2 (cubic meter/kmol)
	
								
	Molecular Mass of Mixture
	-150°C
	-154°C
	-158°C
	-160°C
	-162°C
	-166°C
	-170°C

	16.0
	-0.000039
	-0.000031
	-0.000024
	-0.000021
	-0.000017
	-0.000012
	-0.000009

	16.5
	0.000315
	0.000269
	0.000196
	0.000178
	0.000162
	0.000131
	0.000101

	17.0
	0.000669
	0.000568
	0.000416
	0.000377
	0.000341
	0.000274
	0.000210

	17.2
	0.000745
	0.000630
	0.000478
	0.000436
	0.000397
	0.000318
	0.000246

	17.4
	0.000821
	0.000692
	0.000540
	0.000495
	0.000452
	0.000362
	0.000282

	17.6
	0.000897
	0.000754
	0.000602
	0.000554
	0.000508
	0.000406
	0.000318

	17.8
	0.000973
	0.000816
	0.000664
	0.000613
	0.000564
	0.000449
	0.000354

	18.0
	0.001049
	0.000878
	0.000726
	0.000672
	0.000620
	0.000493
	0.000390

	18.2
	0.001116
	0.000939
	0.000772
	0.000714
	0.000658
	0.000530
	0.000425

	18.4
	0.001184
	0.001000
	0.000819
	0.000756
	0.000696
	0.000567
	0.000460

	18.6
	0.001252
	0.001061
	0.000865
	0.000799
	0.000735
	0.000605
	0.000496

	18.8
	0.001320
	0.001121
	0.000912
	0.000841
	0.000773
	0.000642
	0.000531

	19.0
	0.001388
	0.001182
	0.000958
	0.000883
	0.000811
	0.000679
	0.000566

	19.2
	0.001434
	0.001222
	0.000998
	0.000920
	0.000844
	0.000708
	0.000594

	19.4
	0.001480
	0.001262
	0.001038
	0.000956
	0.000876
	0.000737
	0.000623

	19.6
	0.001526
	0.001302
	0.001078
	0.000992
	0.000908
	0.000765
	0.000652

	19.8
	0.001573
	0.001342
	0.001118
	0.001029
	0.000941
	0.000794
	0.000681

	20.0
	0.001619
	0.001382
	0.001158
	0.001065
	0.000973
	0.000823
	0.000709

	25.0
	0.002734
	0.002374
	0.002014
	0.001893
	0.001777
	0.001562
	0.001383

	30.0
	0.003723
	0.003230
	0.002806
	0.002631
	0.002459
	0.002172
	0.001934

Source: National Bureau of Standards Interagency Report 77-867.
Note 1:    Molecular mass of mixture equals  
Note 2:    For intermediate values of temperature and molecular mass a linear interpolation shall be applied.

A-15

EXHIBIT B 
FORM OF PORT LIABILITY AGREEMENT

EXHIBIT C
FORM OF GUARANTY

EXHIBIT D
FORM OF DIRECT AGREEMENT

EXHIBIT E
FORM OF TUG SERVICES AGREEMENT

EXHIBIT F
TUG CHARACTERISTICSEX10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 INTERNATIONAL FRANCHISE AGREEMENT
 

 of
 

 HERTZ EQUIPMENT RENTAL SYSTEM
 

 by and between
 

 HERTZ EQUIPMENT RENTAL CORPORATION
 

 and
 

 MONGOLIA EQUIPMENT RENTAL CORPORATION 
 

 (the “Parties)
 

 

 

 

 

 

 

 

 

 

 
 

 

 HERTZ EQUIPMENT RENTAL SYSTEM
 INTERNATIONAL FRANCHISE AGREEMENT
 

 TABLE OF CONTENTS 
 
 	 	 	
	 ITEM
	  
	 PAGE

	  
	  
	  

 	  
	 RECITALS
	 1

 	I.
	 GRANT OF NON-EXCLUSIVE LICENSE
	2

 	 II.
	 TERM AND RENEWAL
	 4

 	III.
	 SERVICES OF FRANCHISOR
	5

 	 IV.
	 FEES
	 6

 	V.
	 DUTIES OF FRANCHISEE
	8

 	 VI.
	 PROPRIETARY MARKS

 	 14

 	VII.

 	 THE MANUAL
	16

 	 VIII.
	 CONFIDENTIAL INFORMATION

 	 17

 	IX.
	 ACCOUNTING AND RECORDS

 	18

 	 X.
	 ADVERTISING AND SALES PROMOTION

 	 19

 	XI.
	 INSURANCE

 	20

 	 XII.
	 TRANSFERABILITY OF INTEREST

 	 22

 	XIII.
	 DEFAULT AND TERMINATION

 	25

 	 XIV.
	 OBLIGATIONS UPON TERMINATION OR EXPIRATION

 	 28

 	XV.
	 COVENANTS

 	31

 	 XVI.
	 TAXES, LAWS, PERMITS, AND INDEBTEDNESS

 	 33

 	XVII.
	 INDEPENDENT CONTRACTOR AND INDEMNIFICATION

 	35

 	 XVIII.
	 APPROVALS AND WAIVERS

 	 36

 	XIX.
	 NOTICES

 	37

	 XX.
	 ENTIRE AGREEMENT

 	 37

 	XXI.
	 SEVERABILITY AND CONSTRUCTION

 	38

 	 XXII.
	 DISPUTE RESOLUTION

 	 38

 	XXIII.
	 ACKNOWLEDGMENTS

 	42

 	 XXIV.

 	 MISCELLANEOUS
	 42

 
 
 
 EXHIBIT A - Product Line
 EXHIBIT B - Additional Locations
 EXHIBIT C - Performance Requirements
 EXHIBIT D - Guaranty and Undertaking
 EXHIBIT E - OpCo Joinder Letter
 

 

 

 - i -
 

 
 

 

 HERTZ EQUIPMENT RENTAL SYSTEM
 FRANCHISE AGREEMENT
 

 THIS AGREEMENT is made and entered into this 20th day of February, 2013, by and between, on the one hand, HERTZ EQUIPMENT RENTAL CORPORATION, a  corporation organized and existing under the laws of the State of Delaware, United States of America, having its principal place of business at 225 Brae Boulevard, Park Ridge, New Jersey 07656, U.S.A. (the “Franchisor”), and on the other hand, Mongolia Equipment Rental Corporation, a corporation organized and existing under the laws of Delaware, having its registered address at 2300 W. Sahara Ave., Suite 800, Las Vegas, NV 89102 , the “Franchisee”).  
 

 WITNESSETH:
 

 WHEREAS, Franchisor and its affiliates conduct, and license others to conduct, the business of renting, leasing, selling and maintaining the classes of personal property (the “Product Line”) described below, principally for use in construction, materials handling, and commercial and industrial activities, under a unique plan or system (the “System”), which is identified by the Proprietary Marks (defined below) (each an “Equipment Rental Business”);
 

 WHEREAS, the System is characterized and distinguished by Franchisor’s standards and specifications for the Product Line and other equipment; special marketing techniques; methods and techniques for record keeping, reporting, advertising, and sales promotion; and such other features as are conceived or developed by Franchisor for authorized use as part of the System;
 

 WHEREAS, Franchisor has the exclusive right to grant licenses to use the System;
 

 WHEREAS, the System is identified by means of certain trademarks, trade names, service marks, logos, emblems and other indicia of origin, including but not limited to the mark HERTZ EQUIPMENT RENTAL, which are and will be set forth in Franchisor’s Confidential Operating Manual (the “Manual”) or otherwise by Franchisor in writing as being designated for use by Franchisee and by other franchisees of the System in order to identify for the public the System, under which the services are rendered and the high standards of quality attendant thereto (the “Proprietary Marks”);
 

 WHEREAS,  HERTZ SYSTEM, INC. (“Hertz”), a corporation organized and existing under the laws of the State of Delaware, United States of America, with its principal office in Park Ridge, New Jersey 07656, U.S.A., is the owner of the Proprietary Marks and has the right to grant licenses to use those Proprietary Marks; and
 

 WHEREAS, Franchisee, having been advised of the nature of the System, and understanding and acknowledging the necessity of operating in strict accordance with the standards and specifications established by Franchisor and Hertz, desires to receive the benefits to be derived from operating under the System and from using the Proprietary Marks, and desires to be licensed hereunder to operate an Equipment Rental Business identified by the mark HERTZ EQUIPMENT RENTAL and the other Proprietary Marks licensed hereunder.
 

 

 D-3
 

 
 

 

 NOW, THEREFORE, the parties, in consideration of the undertakings and commitments of each party to the other party set forth herein, the sufficiency of which is hereby acknowledged, mutually agree as follows:
 

 I.
 GRANT OF NON-EXCLUSIVE LICENSE
 

 A.
 Franchisor hereby grants to Franchisee, upon the terms and conditions herein contained, the right and license, and Franchisee hereby undertakes the obligation, to use the System in the conduct and operation of an Equipment Rental Business under the mark HERTZ EQUIPMENT RENTAL and such other Proprietary Marks as may be prescribed by Hertz (the “Franchised Business”); to use the Proprietary Marks only in accordance with the terms of this Agreement and the conditions set out in the  Consent by HERTZ at the end of this Agreement; to operate and conduct the Franchised Business solely in accordance with the System, as it is now constituted and may be changed, improved, and further developed from time to time; and to operate and conduct the Franchised Business and provide services in connection therewith only within the following area  (the “Area of Responsibility”): The country of Mongolia as its boundaries exist as of the date of this Agreement.  During the term of this Agreement, so long as Franchisee remains, Franchisor shall not establish or license another to establish an Equipment Rental Business within Franchisee’s Area of Responsibility.
 

 B.
 Franchisee shall, in connection with the operation of the Franchised Business, rent, lease and maintain only the Product Line set out in Exhibit A to this Agreement, as it may be modified by Franchisor from time to time; provided, however, Exhibit A may be amended from time to time as mutually agreed by Franchisor and Franchisee.
 

 C.
 Franchisee expressly acknowledges and agrees that Franchisor retains and reserves all rights not expressly granted to Franchisee in this Agreement.  Franchisor shall retain, for itself, and its, parents, subsidiaries, and affiliates (together, its “Affiliates”) the right, among others, to use, and to license others to use, the System and the Proprietary Marks within and outside the Franchisee’s Area of Responsibility; and to develop, use and license the use of other proprietary marks within and outside the Franchisee’s Area of Responsibility in connection with the sale, rental, lease, or other use of the same, similar or different products and services, in each case except with respect to the Equipment Rental Business for which Franchisee is being granted an exclusive right and license as described in Paragraph I.A above, on any terms and conditions Franchisor may deem advisable, and without granting Franchisee any right therein.  Franchisee expressly acknowledges and agrees that Franchisor and its Affiliates may develop, use and license methods, plans, programs or procedures for the operation of equipment renting businesses which are not part of the System and that Franchisee has no rights therein unless such methods, plans, programs or procedures are expressly made part of the System by Franchisor.
 

 D.
 Without limiting generality of the foregoing reservation of rights by Franchisor, Franchisee agrees that it has no rights under this Agreement:
 

 

 D-3
 

 
 

 

 (1)
 To rent, lease or sell any vehicles that are determined by Franchisor to be primarily designed, used or maintained for the transportation of property or goods (a “Truck Rental Business”), subject to Franchisee’s right of first refusal pursuant to Paragraph I.F.3. below, except for the rental or leasing of trucks that are in the Product Line and used in connection with the operation of the Franchised Business;
 

 (2)
 Except for new Product Lines sales approved by Franchisor (subject to any restrictions designated by Franchisor, including manufacturer’s sale restriction), to sell the Product Line, or any cars or trucks under the Proprietary Marks or otherwise from or in connection with the Franchised Business (a “Vehicle or Equipment Sales Business”);
 

 (3)
 To lease any cars under any lease agreements, or to rent any cars, including for transient rental purposes, for insurance and mechanical related vehicle replacement purposes, or in connection with or through any self-service program or car-sharing service (a “Car Rental Business”); and
 

 (4)
 Except as expressly granted to Franchisee in this Agreement pursuant to Paragraph I.A. above, to use any trademark (including other trademarks that contain “HERTZ”) or any system (including other systems that are similar to or contain elements or features of the System) owned, developed, or acquired by Franchisor or its Affiliates.
 

 E.
 Franchisee further acknowledges and agrees that nothing in this Agreement shall prohibit Franchisor or its Affiliates from:
 

 (1)
 Operating (or licensing others to operate) businesses and systems within (except for another Equipment Rental Business) or without the Area of Responsibility;
 

 (2)
 Operating (or licensing others to operate) an Equipment Rental Business under the Proprietary Marks or other trademarks outside the Area of Responsibility;
 

 (3)
 Operating (or licensing others to operate) a Truck Rental Business, Vehicle or Equipment Sales Business, or Car Rental Business under the Proprietary Marks or other trademarks within or without the Area of Responsibility, subject to Franchisee’s right of first refusal pursuant to Paragraph I.F.3. below with respect to the Truck Rental Business; or
 

 (4)
 Selling any of their assets, engaging in a public offering or private placement of ownership interests, merging with or acquiring other corporations or entities, or being acquired by another corporation or entity (including a corporation or entity which may own or operate systems or chains which may be competitive with or similar to the System).
 

 Franchisee shall, at Franchisee’s expense, acquire or lease the following location or locations for the Franchised Business:
 

 (1)
 Within one hundred eighty (180) days of the Commencement Date (as defined below), and as approved by Franchisor, the initial location(s) for the Franchised Business (the “Initial Franchised Premises”).
 

 

 D-3
 

 
 

 

 (2)
 The additional location(s) for the Franchised Business described in Exhibit B hereto (which, together with the Initial Franchised Premises, shall each constitute the “Franchised Premises” hereunder), which must be opened and in operation by the date(s) specified in Exhibit B.  Franchisee’s failure to meet the schedule for opening the additional locations constitutes grounds for termination of this Agreement; provided, however, that Franchisor may, at its option and in lieu of termination, reduce, modify, revise, or reclaim the Area of Responsibility upon notice to Franchisee.
 

 (3)
 Franchisor hereby agrees that, so long as Franchisee shall be in full compliance with this Agreement and with all other agreements (if any) between Franchisee and Franchisor,  during the term of this Agreement, and subject to the provisions of this Paragraph I.F.(3), Franchisor will not establish or license another to establish a Truck Rental Business under the System at a location within the Area of Responsibility without first having afforded Franchisee, for a period of one hundred and eighty (180) days, a non-transferrable right of first refusal to establish a Truck Rental Business under the System within the Area of Responsibility.  Franchisee agrees that Franchisor shall have no obligation to establish or to license another to establish a business under the System within the Area of Responsibility if Franchisee elects not to exercise its right of first refusal.  Franchisee shall exercise its right of first refusal by execution of the then-current form of Hertz franchise agreement for the Truck Rental Business, and such other ancillary agreements as Franchisor may then require; provided, however, that the amount of the initial fee, license fee, advertising fee, sales promotion fee, and any other fees to be provided for in the franchise agreement, as well as the length of the term of such franchise agreement, the scope of any territorial provisions, and the grant of any right to establish additional franchised businesses, shall be the subject of negotiation between the Franchisor and the Franchisee.
 

 F.
 (1)
 To accommodate certain legal and structuring considerations, Franchisor hereby agrees to allow Franchisee to appoint, and the Franchisee agrees that it shall as soon as possible following the date of this Agreement but in any event within 3 calendar months of the Commencement Date, incorporate a company organized and existing under the laws of Mongolia (“OpCo”) to operate the Franchised Business on the express conditions (which conditions shall apply throughout the term of this Agreement) that:  (i) Franchisee shall at all times control and oversee the effective management and operations of OpCo, including all aspects of OpCo’s operations related to the Franchised Business; (ii) Franchisee shall cause OpCo to fully comply with all of the obligations of OpCo set forth in this Agreement and any other agreement with Franchisor; (iii) Franchisee must provide to Franchisor all ownership and operation information and documents that Franchisor may reasonably require with regard to OpCo, including but not limited to information, representations, warranties and agreements about OpCo, and true and complete copies of any available organizational documents of OpCo; and (iv) save for where Franchisor has given its express permission, OpCo shall be an operating company whose primary purpose shall be the issuing, receiving and settling of trade and other payments through a bank account.
 

 (2)
 OpCo will operate the Franchised Business, and perform such activities with respect to the operation of the Franchised Business, which as a matter of applicable law must be carried out by OpCo rather than Franchisee, including but not limited to:  employing
 

 D-3
 

 
 

 

 staff and processing visas, applying for local licenses and permits, subscriptions to utilities, obtaining commercial leases, payment of employees’ wages, payment of local taxes, maintaining local books of account and making necessary filings with government bodies.  Franchisee or one or more of its owners must own one hundred percent of ownership interest in OpCo.  OpCo shall limit, and its organizational documents shall limit, its activities to the operation of the Franchised Business.
 

 (3)
 OpCo shall be authorized to use the Proprietary Marks and other elements of the System, but only to the extent necessary to perform the obligations delegated to OpCo under this Agreement, and only in compliance with all of the terms and conditions of this Agreement.
 

 (4)
 The references to “Franchisee” in this Agreement shall be deemed to include both “Franchisee” and “OpCo,” and Franchisee shall provide, upon incorporation of OpCo, that OpCo shall jointly and severally, directly, unconditionally and irrevocably join in and agree to be bound (as if a party hereto) by, and liable for the breach of, all of Franchisee’s liabilities and obligations under this Agreement by issue of a letter in the form set out in Exhibit E.  Without limiting the generality of the foregoing, OpCo shall be bound by the governing law and arbitration provisions in Article XXII.
 

 II.
 TERM AND RENEWAL
 

 A.
 The license granted to Franchisee under this Agreement shall commence on July 1st, 2013 (the “Commencement Date”) and continue for ten (10) years (the “Initial Term”), unless renewed or sooner terminated in accordance with the terms hereof. 
 

 B.
 The license granted to Franchisee under this Agreement may be renewed for two (2) successive five (5) year terms, provided that at the end of the Initial Term (and, as applicable, the end of the first renewal period):
 

 (1)
 Franchisee has given Franchisor written notice of its election to renew not more than twelve (12) months nor less than nine (9) months prior to the end of the Initial Term (and, as applicable, the end of the first renewal period);
 

 (2)
 Franchisee is not in default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Franchisee and Franchisor or its Affiliates (whether or not related to this Agreement), and has substantially complied with all the terms and conditions of this Agreement and such other agreements during the terms thereof;
 

 (3)
 Franchisee has paid all amounts owed to Franchisor on or before the dates on which they were due;
 

 (4)
 Franchisee shall execute the then-current form of Hertz Equipment Rental System International Franchise Agreement being offered by Franchisor, which agreement, it is
 

 

 D-3
 

 
 

 

 understood, shall supersede this Agreement in all respects and the terms of which may differ from the terms of this Agreement, and which agreement shall include the then applicable license fee, minimum fee and any other fees or assessments being charged by Franchisor; provided, however, that no initial fee shall be payable by Franchisee upon such renewal and, provided further, that the right to renew for two (2) successive five (5) year periods provided for above shall be preserved;
 

 (5)
 Franchisee shall execute a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its Affiliates and their officers, directors and employees, in their corporate and individual capacities, arising out of or in connection with this Agreement, including, without limitation, claims arising under all local laws, rules, and ordinances;
 

 (6)
 Franchisee shall have complied with Franchisor’s then-current qualification and training requirements;
 

 (7)
 Franchisee shall refurbish, repair, replace or obtain, at Franchisee’s expense, such equipment, computer systems, signs, interior and exterior decor items, fixtures, furnishings, supplies and other products and materials required for the operation of the Franchised Business as Franchisor may reasonably require and shall otherwise modernize the Franchised Business to reflect the then-current standards and image of the System as specified in the Manual;
 

 (8)
 Franchisor shall have a continuing program for the conduct and operation of the Equipment Rental Business and be offering new franchises to conduct the Equipment Rental Business at the time of such election by Franchisee and upon each renewal; 
 

 (9)
 Franchisee shall have achieved during the Initial Term of this Agreement (or, as applicable, the first renewal period) the performance requirements set forth and described in Exhibit C hereto; and
 

            (10)
 Franchisor has not notified Franchisee of its determination of any applicable law which is enacted, promulgated or amended after the date of this Agreement that may have a material adverse effect on Franchisor’s or its Affiliates’ rights, remedies or discretion in franchising Equipment Rental Businesses in the Area of Responsibility.
 

 III.
 SERVICES OF FRANCHISOR
 

 A.
 Franchisor shall, upon request of Franchisee, consult with Franchisee concerning advertising, sales and publicity, and promotion of the Franchised Business.
 

 B.
 Franchisor may, at its option and upon such terms as it deems advisable, provide Franchisee with continuing advisory assistance in the operation of the Franchised Business.  Franchisor may from time to time offer to Franchisee, at Franchisee’s expense, materials and bulletins on sales, marketing developments, and operating techniques.
 

 C.
 Franchisor shall provide Franchisee with access to the Manual as more fully
 

 D-3
 

 
 

 

 described in Paragraph VII. hereof, the contents of which Manual may be amended or supplemented by Franchisor from time to time.
 

 D.
 Franchisor shall include such information as Franchisor deems appropriate about Franchisee and other System franchisees on Franchisor’s Website (as defined below) and in such other electronic and other sales promotion material as may from time to time be determined by Franchisor.
 

 E.
 Franchisor may, from time to time and at its sole discretion, offer certain products and services to Franchisee, for purchase at Franchisee’s option, including Hertz Equipment Rental System Standard Rental Agreements, other forms, stationery, standard Hertz Equipment Rental signs, sales promotional materials, and decalcomania, upon such price, terms, and conditions as Franchisor may determine.
 

 F.
 Franchisor shall, as may be deemed appropriate by Franchisor, include on Franchisor’s Website such information with respect to rates, equipment and conditions under which the Product Line may be rented from System franchisees.
 

 G.
 Franchisor shall, at its sole discretion, make available to Franchisee, such programs as Franchisor may from time to time develop or designate to facilitate the purchase of various equipment and materials required in the Franchised Business (at Franchisor’s sole discretion, from Franchisor, its Affiliates, or third party suppliers), upon such price, terms and conditions as Franchisor may determine, and to the extent permitted by law.
 

 H.
 Franchisor shall make available to Franchisee, at Franchisor’s sole discretion and upon such terms as Franchisor deems advisable, access to a program for the disposal of used equipment. 
 

 I.
 Notwithstanding anything to the contrary contained in this Agreement, any obligation Franchisor may have to provide training or assistance that involves personnel traveling to the Area of Responsibility is subject to Franchisor’s determination, in its sole discretion and based on such information as Franchisor deems appropriate, including U.S. State Department travel advisories, that it is safe to travel to the proposed destination. 
 

 J.
 Franchisee acknowledges and agrees that any designee, employee, regional/branch offices, contractor or agent of Franchisor may perform any duty or obligation imposed on Franchisor by this Agreement, as Franchisor may designate.
 

 IV.
 FEES
 

 A.
 In consideration of the license granted herein, Franchisee shall pay to Franchisor the following fees:
 

 (1)
 An initial fee of Forty Five Thousand Dollars ($45,000.00) upon execution of this Agreement, of which thirty Thousand Dollars($30,000.00) shall be for costs heretofore incurred by Franchisor in connection with this Agreement and Fifteen Thousand Dollars ($15,000.00) shall be for costs incurred by Franchisor in furnishing assistance and services to Franchisee during the initial phase of the Franchised Business, which are to defray Franchisor’s
 

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 costs of any kind or nature by way of reimbursement or otherwise.  Franchisee acknowledges and agrees that the initial fee shall be deemed fully earned upon execution of this Agreement as consideration for Franchisor’s lost or deferred opportunity to license others and to defray Franchisor’s costs. If Franchisor permits Franchisee to defer payment of a portion of the initial fee and this Agreement is terminated at any time before the initial fee has been paid in full, the balance of the initial fee shall immediately become due to Franchisor.
 

 (2)
 A continuing monthly license fee in an amount equal to six percent (6%) of the Gross Revenue, as hereinafter defined, derived from the Franchised Business, but not less than $135,000 per annum.  The minimum annual amount shall be applied beginning 12 months from the Commencement Date and shall be adjusted pro rata in the case of a partial year, and all payments of the minimum annual amounts shall commence and be due to Franchisor upon the submission of the annual statements required under Paragraph IX.C.(1) hereof.
 

 (3)
 An amount equal to one percent (1%) of all sums or other consideration received by Franchisee during the prior month related to (i) the sale, trade-in or other disposal of used equipment previously employed in the conduct of the Franchised Business, and (ii) new Product Lines sales approved by Franchisor, which such sums or other consideration shall not also be subject to the continuing monthly license fee otherwise due under Paragraph IV.A. (2) above, provided the one percent (1%) fee is timely paid.
 

 B.
 If required by Franchisor, Franchisee shall pay any assessments related to Franchisor’s Programs (as defined in Paragraph V.J.(2) below) on the same pro rata basis as other System franchisees within the same geographical or market area as the Area of Responsibility (as determined by Franchisor from time to time).  Such assessments may be used by Franchisor to defray any of Franchisor’s operating expenses and overhead reasonably related to the administration, direction or operation of such Programs.  Franchisor shall from time to time determine and inform Franchisee of the amount of such assessments, and the time and manner of payment thereof by Franchisee.
 

 C.
 All payments required by this Paragraph IV. to be paid to Franchisor shall be due in such manner and at such times (which may be on a monthly or other periodic basis) as may be prescribed by Franchisor from time to time, in its sole discretion.  Any payment, or any report or statement required under any other paragraph of this Agreement, not actually received by Franchisor on or before the date on which it is due shall be deemed overdue.  Franchisee shall pay Franchisor a late fee of not less than 10% of the total amount overdue.  Such late fee shall not be deemed a waiver or an election of remedies by Franchisor, nor shall it be deemed a penalty.  Such late fee shall be deemed to reimburse Franchisor for its reasonable added administrative cost and expenses associated with such late payment.  Franchisee acknowledges and agrees that these added costs and expenses are difficult to calculate and that such late fee is a reasonable estimate of such added costs and expenses.
 

 D.
 “Gross Revenue,” for the purposes of this Agreement, shall mean and include the gross amount of all sums, whether such sums are cash or credit, billed or charged by Franchisee (whether or not the same shall have been paid or collected) as time, mileage, or use charges, loss and collision damage waiver charges, personal accident or other insurance charges (net of the portion of such charges which is payable by Franchisee to the insurance carrier issuing the
 

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 applicable policy), and all other charges and all other income of every kind and nature derived from the Franchised Business; but shall not include the amount of any sales or other similar taxes imposed by government authorities separately stated and collected from customers, any refueling service charges separately stated, equipment transportation and delivery charges provided by third parties and separately stated and supported by original invoice, nor any sums received as insurance or otherwise to reimburse Franchisee for damage to the personal property of Franchisee, or to reimburse Franchisee for the loss, conversion, or abandonment of such property (but inclusive of all proceeds of any business interruption insurance policies maintained by Franchisee).
 

 E.
 All amounts mentioned in this Agreement are in the currency of the United States of America and all references to “Dollars” or “$” in this Agreement are to the currency of the United Statement of America.  All payments to Franchisor pursuant to this Agreement shall be made in the currency of the United States of America at the prevailing rate of exchange at the principal commercial banks where Franchisee's principal place of business is located on the first business day of the month during which payment is due.  Without limiting the generality of Paragraph IV.C above, Franchisor shall have the right to require that all payments due under this Agreement shall be made by international bank wire transfer in immediately available funds to a bank account designated by Franchisor, unless the transmission of said monies would violate applicable governmental regulations for the control of currency or banking, in which case said monies shall, at the option of Franchisor, be deposited by Franchisee for the account of Franchisor in an interest-bearing, United States dollar-linked account with an appropriate depository agent designated by Franchisor and subject to the sole control of Franchisor.  All fees assessed in connection with conversion of currencies or transmittal of payment shall be borne by Franchisee.  Franchisor shall be entitled to all interest earned on such deposits.  In the event such restrictions are in place for ninety (90) days or longer, Franchisor shall have the right, but not the obligation, to terminate this Agreement upon notice to Franchisee.
 

 F.
 Franchisee shall provide Franchisor within one hundred eighty days (180) days of the Commencement Date a standby letter of credit, in form and substance satisfactory to Franchisor in the amount of _________________, from a leading commercial bank approved by Franchisor.  
 

 V.
 DUTIES OF FRANCHISEE
 

 A.
 Franchisee understands and acknowledges the importance of maintaining the excellent reputation of Franchisor and its System, and recognizes the need to comply with the System as now constituted and as the same may from time to time be changed by Franchisor, and that such compliance is important to Franchisee, Franchisor and other franchisees in order to develop and maintain high quality and uniform operating standards, and to protect Franchisor’s reputation and goodwill.
 

 B.
 Franchisee shall continuously offer, energetically advertise, and otherwise actively promote the Product Line so as to develop the largest possible market for the Product Line within the Area of Responsibility; and shall otherwise devote Franchisee’s best efforts to the conduct and operation of the Franchised Business.
 

 

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 C.
 Franchisee shall designate one individual as the representative of Franchisee (the “Representative”) at the end of this Agreement, who is authorized to act on behalf of, and bind,  Franchisee with respect to this Agreement. The Representative shall have the right to manage the Franchised Business.  Franchisee and the Representative shall devote their best efforts to the development, conduct, maintenance and operation of the Franchised Business, within the Area of Responsibility; and use every reasonable means to encourage the use of Hertz world-wide equipment rental services.
 

 D.
 Prior to opening the Franchised Business, Franchisee’s Representative, manager and key employees shall, at Franchisee’s sole expense (including all travel and living expense), attend and complete such initial training programs and courses at reasonable frequency as Franchisor may require.  In addition, Franchisor may require Franchisee’s Representative, at Franchisee’s sole expense (including all travel and living expense) to attend such remedial training programs and courses as Franchisor deems necessary to improve Franchisee’s operation of the Franchised Business.  Franchisee’s Representative, manager and key employees may, at Franchisee’s option and sole expense (including all travel and living expense, and the payment of associated training fees, if any), attend and complete such other additional training programs and courses as Franchisor may, in its sole discretion, offer from time to time.  Franchisee shall implement a training program for all employees of the Franchised Business in accordance with Franchisor’s then-current standards and procedures.
 

 E.
 Franchisor may, at its sole option, hold periodic conventions or seminars for System franchisees, which may include programs on sales and marketing techniques, performance specifications, advertising programs and training suggestions, among other things.  Franchisee’s attendance at each such convention or seminar is mandatory and Franchisee shall pay all expenses of attending, including travel, lodging, meals and entertainment.
 

 F.
 All sales and marketing activities of Franchisee shall conform to the standards, methods and procedures which may be prescribed from time to time by Franchisor in writing.  Franchisee shall maintain a sufficient supply of, and use at all times in its operation hereunder, only such promotional, sales, and marketing supplies and materials as conform with Franchisor’s image, standards and such specifications as Franchisor may prescribe from time to time.  In addition, Franchisee agrees to list the Franchised Business, as directed by Franchisor, in paper and electronic directories applicable to the Area of Responsibility.  Franchisee authorizes Franchisor, at Franchisor’s discretion, to appoint any qualified agent or agency to place telephone directory and electronic listings, at Franchisee’s expense, in the uniform manner prescribed by Franchisor.  Franchisee agrees to pay for such listings in the manner prescribed by Franchisor from time to time.
 

 G.
 Franchisee shall operate the Franchised Business only from the Franchised Premises.  Franchisee agrees to use the Franchised Premises solely for the purpose of operating the Franchised Business, except as otherwise agreed to by Franchisor in writing; and to keep the Franchised Premises open and in normal operation for such minimum hours and days as Franchisor may reasonably prescribe from time to time.  Franchisee shall actively and continuously operate the Franchised Business at each of the Franchised Premises in accordance with Paragraph I.F. above throughout the term of this Agreement.
 

 

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 H.
 Franchisee agrees to maintain the Franchised Premises in a clean, attractive condition and in good repair, and in connection therewith, shall make such reasonable additions, repairs and replacements thereto as may be required for that purpose, including, without limitation, such periodic repainting, repairs to impaired equipment, and such other repairs and renovation as Franchisor may reasonably direct from time to time.
 

 I.
 Franchisee agrees to rent, lease and maintain only the equipment included in the Product Line set out in Exhibit A to this Agreement and specified in the Manual; to repair and maintain the Product Line as prescribed by Franchisor; to replace individual components of such Product Line at such reasonable intervals as Franchisor may require; to incorporate in or delete from the Product Line such categories of equipment as Franchisor may specify; and to maintain such quantities of equipment in each equipment category as Franchisor may require; to keep and maintain all equipment in excellent mechanical and running order, and in a safe, efficient, clean and presentable condition, and to promptly respond to manufacturer’s recalls and to comply with the manufacturer’s instructions related thereto.
 

 J.
 Franchisee shall maintain and operate the Franchised Business in conformity with such standards, specifications and procedures as Franchisor may from time to time prescribe in the Manual or otherwise in writing, including but not limited to the following obligations:
 

 (1)
 To participate in any and all programs, campaigns or activities, regular or special, relating to advertising, sales promotion, marketing, reservations, centralized billing, or any other program, campaign or activity which Franchisor may from time to time engage in, conduct or prescribe, in its sole discretion, for its benefit and the benefit of System franchisees.
 

 (2)
 To subscribe to, participate in, and comply with any and all operating programs, customer satisfaction programs, account programs, coupon programs, experimental or test programs, and such other programs that Franchisor may from time to time prescribe in the Manual or otherwise in writing, including, but not limited to, the Franchisor’s: (i) frequent renter or loyalty programs; and (ii) Franchisor Account Programs (as defined in and in accordance with and subject to Paragraph V.J. (13) below); as all such programs may be modified, replaced or instituted by Franchisor from time to time (together with all programs, campaigns, and activities described in Paragraph V.J.(1) above, the “Programs”).  Franchisee agrees to support and service the Programs in accordance with the relevant provisions thereof, as required by Franchisor, and to contribute to the expense thereof, if any, on the same basis as other System franchisees in accordance with Paragraph IV.B. above.  Franchisee understands and agrees that it may be required to enter into participation or other agreements, which shall contain such terms and conditions as Franchisor shall determine to be appropriate, to evidence Franchisee’s participation in such Programs.
 

 (3)
 To purchase and install such signs, fixtures, furnishings, appliances and equipment as Franchisor may direct from time to time to comply with standards and specifications required by the System; and to refrain from installing or permitting to be installed any signs, fixtures, furnishings, appliances or equipment not meeting Franchisor’s standards and specifications.  Franchisee agrees to refurbish and upgrade the Franchised Premises as may be reasonably required by Franchisor to maintain or improve the appearance of the Franchised Premises, to accommodate new or additional equipment or equipment related requirements, and
 

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 to conform to Franchisor’s current standards and specifications as Franchisor may from time to time prescribe in the Manual or otherwise in writing.  Franchisee agrees to display, at Franchisee’s expense, the mark HERTZ EQUIPMENT RENTAL and such other Proprietary Marks as Franchisor designates on all signage, forms, uniforms, stationery and any other items that Franchisor designates for display of such Proprietary Marks.  In the event that Franchisor changes its Proprietary Marks, or trade dress, Franchisee shall have a reasonable period of time (as Franchisor may from time to time prescribe in the Manual or otherwise in writing) to make such modifications pursuant to this Paragraph.
 

 (4)
 To carry out and report to Franchisor such customer satisfaction tracking techniques as Franchisor requires and to achieve throughout the term of this Agreement the performance requirements set forth and described in Exhibit C hereto.
 

 (5)
 To require that employees of Franchisee, while working at the Franchised Business, wear uniforms, provided by Franchisee at Franchisee’s expense, of such color, design and other specifications as Franchisor may require.  Franchisee’s employees shall present a neat and clean appearance at all times and render competent and courteous service to all customers of the Franchised Business.  Franchisee shall employ (or the Representative serve as) a manager who shall devote his full time to the management and operation of the Franchised Business.
 

 (6)
 To decorate, in a manner satisfactory to Franchisor, the interior and exterior of the Franchised Premises with the colors and other trade dress prescribed by Franchisor from time to time; and to paint and letter the Product Line and other personal property utilized in the Franchised Business in the uniform manner prescribed by Franchisor from time to time.
 

 (7)
 To cooperate with all other franchisees and Equipment Rental Businesses operated by Franchisor’s parent and to comply with all policies and procedures set forth in the Manual.
 

 (8)
 To use, in connection with the renting of the Product Line, at Franchisee’s expense, only the Hertz Equipment Rental System Standard Rental Agreement forms from time to time specified by Franchisor and no modifications, alterations or additions shall be made to such forms without Franchisor’s prior written consent (save that the forms may be translated into any relevant language if the Franchisee so requires).  Franchisee shall purchase from Franchisor’s approved suppliers the Hertz Equipment Rental System Standard Rental Agreement forms that meet Franchisor’s then-current specifications.
 

 (9)
 To afford each renter of the Product Line, in accordance with the Hertz Equipment Rental System Standard Rental Agreement, the option, by payment of an additional charge specified by Franchisee, to effect the waiver of certain claims by Franchisee against such renter for loss of or damage to the rented personal property, subject, however, to all the terms, conditions, and limitations contained in the Hertz Equipment Rental System Standard Rental Agreement and applicable laws.
 

 (10)
 To promptly and courteously honor, to the same extent and pursuant to the same terms and conditions Franchisor honors, centralized billing arrangements and any charge
 

 

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 cards which may from time to time be approved by Franchisor, whether or not such cards are guaranteed cards, and to honor such cards in accordance with the terms and conditions thereof, or in the manner from time to time prescribed by Franchisor.  Nothing herein shall be construed to prevent Franchisee from honoring any other charge cards in its discretion.
 

 (11)
 To diligently solicit and endeavor to secure suitable applicants for centralized billing which Franchisor, or its Affiliates, in their sole discretion, may decide to approve from time to time, and to forward applications to Franchisor, or such Affiliate, for investigation and approval.
 

 (12)
 To maintain the type of time, use, mileage or other rates promoted or prescribed by Franchisor from time to time; to furnish Franchisor with a complete schedule of Franchisee’s charges and rates; and to maintain the types and levels (maximum or minimum) of rates promoted or prescribed from time to time by Franchisor to the extent allowed by applicable law which, in Franchisor’s sole discretion, and business judgment, Franchisor determines best serve the competitive and other business interests of the System.  In Franchisor’s sole discretion, such rates may include or exclude a separate charge or charges for mileage, the insurance referred to in Paragraph V.J.(9) hereof, gasoline, oil, maintenance or any other item.
 

 (13)
 Franchisor and its Affiliates may enter into contracts throughout the term of this Agreement with commercial entities, membership associations, governmental or inter-governmental agencies and departments, and other groups and organizations under which the contracting party receives contracted rates, discounts, rebates or other benefits (“Franchisor Account Programs”); Franchisee agrees to comply with, and adhere to, all such contracted rates, discounts, rebates or other benefits as Franchisor may from time to time prescribe in the Manual or otherwise in writing, except as may otherwise be required by applicable law.  Further, Franchisee agrees to comply with all of the terms and conditions of all Franchisor Account Programs as Franchisor may establish and modify them from time to time, including liability insurance coverages.
  
 (14)
 To cooperate in the preparation, development and maintenance of an interior page on Franchisor’s Website, which shall contain such information about Franchisee’s Franchised Business as Franchisor deems necessary or appropriate.  All such information (and any proposed revisions thereto) shall be subject to Franchisor’s approval prior to posting or use.  Except for hertzmongolia.com and mongoliahertz.com, Franchisor’s Website is the only Website authorized for advertising the Franchised Business, and, except as provided in this Paragraph V.J. (14), absent Franchisor’s prior written approval, Franchisee is strictly prohibited from advertising the Franchised Business on any website other than Franchisor’s designated Website.  Franchisor shall have sole discretion and control over Franchisor’s Website design and content.  Franchisor shall have no obligation to maintain its Website or Websites indefinitely, and shall have the right to dismantle any Website or alter any Website’s form or content at any time without liability to Franchisee.  Franchisor may also engage third parties to develop, administer or otherwise service such Websites.  Franchisor shall be the owner of hertzmongolia.com, mongoliahertz.com or any other URL for any website that includes the Proprietary Marks, or any other proprietary mark, words, or other name associated with the Franchisor or the System.  Except for hertzmongolia.com and mongoliahertz.com, Franchisee further agrees that it shall not use any existing or future Proprietary Marks or any variation thereof as part of a domain name or
 

 

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 electronic address of any website and agrees to immediately transfer, without charge, the ownership of any domain names containing the Proprietary Marks including hertzmongolia.com and mongoliahertz.com to Franchisor upon demand.  As used herein, “Website” means any interactive electronic document, contained in a network of electronic devices linked by communications software, that Franchisor operates or authorizes others to operate and that refers to the Franchised Business, the Proprietary Marks, or the System.
 

 (15)
 To comply with all of the terms and conditions of all customer complaint programs that Franchisor may from time to time prescribe in the Manual or otherwise in writing.  Pursuant to such programs, Franchisor shall have the right to resolve customer complaints on Franchisee’s behalf and to receive reimbursement from Franchisee for the costs of resolving such complaints, and Franchisee agrees to abide by all customer complaint decisions rendered by Franchisor.
 

 (16)
 To refrain from engaging in any practices which tend to mislead the public in any way.
 

 K.
 Franchisee shall permit Franchisor and its agents to enter the Franchised Premises at any reasonable time and on reasonable prior notice and as often as Franchisor may elect for the purpose of conducting inspections and audits to determine Franchisee’s compliance with this Agreement; shall cooperate fully with Franchisor’s representatives in such inspections and audits by rendering such assistance as they may reasonably request; and, upon notice from Franchisor or its agents, and without limiting Franchisor’s other rights under this Agreement, shall take such steps as may be necessary immediately to correct and/or pay promptly any deficiencies detected during such inspections and audits.
 

 L.
 If Franchisee is unable to rent or lease under the System any product or service desired by an actual or prospective customer, Franchisee shall use all reasonable efforts to refer that customer to another business operated under the mark HERTZ which rents or leases the desired product or service, such as another Hertz Equipment Rental Business, a Truck Rental Business, or a Car Rental Business.
 

 M.
 Franchisee, at its expense, shall purchase or lease, and thereafter use and maintain, such computer system hardware, software, subscriptions, databases, required dedicated telephone and power lines, modems, printer(s), and other computer-related accessories or peripheral equipment as Franchisor specifies in the Manual or otherwise in writing (the “Computer System”).  Franchisee’s Computer System shall have the capacity to electronically exchange information, messages, and other data with other computers, by such means (including but not limited to the Internet), and using such protocols (e.g., TCP/IP), as Franchisor may reasonably prescribe in the Manual or otherwise in writing.  Franchisor shall have the right from time to time, and at any time, to retrieve data and information from Franchisee’s Computer System, by modem or other requested means, and use it for any reasonable business purpose both during and after the term of this Agreement.  Franchisor may, from time to time, specify in the Manual or otherwise in writing the information that Franchisee shall collect and maintain on the Computer System installed at the Franchised Business, and Franchisee shall provide to Franchisor such reports as Franchisor may reasonably request from the data so collected and maintained, subject only to any restrictions imposed by applicable law (such as any privacy or
 

 

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 data security laws).  The information so obtained by Franchisor shall be in addition to and not in lieu of the reporting requirements set forth in Paragraph IX hereof.  Franchisee shall acquire software for the Computer System from an approved supplier as Franchisor may from time to time prescribe in the Manual or otherwise in writing.  Franchisee shall keep its Computer System in good maintenance and repair and, at its expense, shall promptly install such additions, changes, modifications, substitutions, and/or replacements to the Computer System, as Franchisor directs.
 

 N.
 Franchisee shall comply with the standards and procedures developed by Franchisor for the System, in the manner directed by Franchisor in the Manual or otherwise, with regard to Franchisee’s authorization to use, and use of, blogs, common social networks (such as Facebook®), professional networks (such as Linked-In®), live blogging tools (such as Twitter®), virtual worlds, file, audio and video sharing sites and other similar social networking media or tools (together, “Social Media”) that in any way references the Proprietary Marks or involves the System or the Franchised Business.
 

 O.
 Franchisor may (but is not required to) develop an Intranet network through which Franchisor and its franchisees can communicate by e-mail or similar electronic means.  Franchisee agrees to use the facilities of the Franchisor’s Intranet network in strict compliance with the standards, protocols and restrictions that Franchisor may from time to time prescribe in the Manual or otherwise in writing (including, without limitation, standards, protocols and restrictions relating to the encryption of confidential information and prohibitions against the transmission of libelous, derogatory or defamatory statements).
 

 P.
 Franchisee shall comply with all other requirements set forth in this Agreement.  In addition, Franchisee agrees that its compliance with the terms of all third-party supplier agreements, voluntary participation agreements, lease agreements, finance agreements, and all other agreements signed by Franchisee or its affiliates with Franchisor (including but not limited to other franchise agreements) and with Franchisor’s Affiliates are essential to this Agreement and a termination of any of these other agreements by Franchisor or its Affiliates shall give Franchisor the right to immediately terminate this Agreement in accordance with Paragraph XIII.B.
 

 VI.
 PROPRIETARY MARKS
 

 A.
 With respect to Franchisee’s licensed use of the Proprietary Marks pursuant to this Agreement, Franchisee agrees that:
 

 (1)
 Franchisee shall use only the Proprietary Marks authorized by Franchisor and/or Hertz  in the Manual or otherwise in writing, and shall use them only in the manner authorized and permitted by Franchisor and/or Hertz.
 

 (2)
 Franchisee shall use the Proprietary Marks only for the operation or conduct of the Franchised Business, only within the Area of Responsibility, and only at the Franchised Premises.
 

 (3)
 During the term of this Agreement, Franchisee shall identify itself as the
 

 

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 owner of the Franchised Business in conjunction with any use of the Proprietary Marks, including, but not limited to, advertisements, Websites, Social Media, invoices, order forms, receipts and contracts, as well as at such conspicuous locations on the Franchised Premises as Franchisor may designate in writing.  The identification shall be in the form which specifies Franchisee’s name, followed by the term “Franchisee” or such other identification as shall be approved by Franchisor and/or Hertz.
 

 (4)
 Franchisee’s right to use the Proprietary Marks is limited to such uses as are authorized under this Agreement, and any unauthorized use thereof shall constitute an infringement of Franchisor’s and Hertz’ respective rights.
 

 (5)
 Franchisee shall not use the Proprietary Marks as part of its corporate or other legal name, nor shall Franchisee purchase, sell, license or register equipment or the Product Line under a name that includes the Proprietary Marks in any manner whatsoever.
 

 (6)
 Franchisee shall comply with Franchisor’s and Hertz’ instructions in filing and maintaining the requisite trade name or fictitious name registrations, and shall execute any documents deemed necessary by Franchisor, Hertz or their counsel to obtain protection for the Proprietary Marks or to maintain their continued validity and enforceability.
 

 (7)
 Franchisor and/or Hertz may take such action as they deem appropriate to preserve their rights to and interest in the Proprietary Marks as they are from time to time in use, and their right to license the Proprietary Marks to others, and may take such action as they deem appropriate to protect and defend their right to and interest in the Proprietary Marks against infringement, confusion, tarnishment, dilution or other diminution or loss.  Franchisor and Hertz shall have full discretion to elect the specific measures, if any, to be taken pursuant to their rights under this Paragraph VI.A.(7) and shall be obligated to take only such action as Franchisor and Hertz reasonably may determine to be necessary and appropriate.
 

 (8)
 In the event that litigation involving the Proprietary Marks is instituted or threatened against Franchisee, Franchisee shall promptly notify Franchisor and shall cooperate fully with Franchisor and Hertz in defending or settling such litigation. 
 

 (9)
 Franchisee shall, upon request by Franchisor and/or Hertz, execute a specific trademark license agreement, registered user agreement or any other document necessary to meet the requirements of the laws of any country, province, district, or other political subdivision in which Franchisee operates, for purposes of recordal or otherwise, and to pay the actual costs thereof. Upon the termination or expiration of this Agreement, Franchisee agrees to do everything necessary to ensure that Franchisee ceases to be a registered user of the Proprietary Marks, and Franchisee hereby appoints Franchisor and Hertz  as Franchisee’s attorney to execute any documents and to do such things as may be necessary for this purpose and agrees to pay the actual costs associated with the cancellation of the registered user agreement.
 

 B.
 Franchisee expressly understands and acknowledges that:
 

 (1)
 Hertz is the owner of all right, title and interest in and to the Proprietary
 

 

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 Marks and the goodwill associated with and symbolized by them.
 

 (2)
 The Proprietary Marks are valid and serve to identify the System and those who are licensed under the System.
 

 (3)
 Franchisee shall not directly or indirectly contest the validity or the ownership of the Proprietary Marks.
 

 (4)
 Franchisee’s use of the Proprietary Marks pursuant to this Agreement does not give Franchisee any ownership interest or other interest in or to the Proprietary Marks, except the license granted herein.
 

 (5)
 Any and all goodwill arising from Franchisee’s use of the Proprietary Marks in the Franchised Business shall inure solely and exclusively to Hertz’ benefit, and upon expiration or termination of this Agreement and the license herein granted, no monetary amount shall be assigned as attributable to any such goodwill associated with Franchisee’s use of the System or the Proprietary Marks.
 

 (6)
 The right and license to use the Proprietary Marks granted hereunder to Franchisee is non-exclusive.
 

 C.
 Franchisee agrees to operate in the name of HERTZ EQUIPMENT RENTAL (and such other Proprietary Marks as Franchisor and Hertz prescribe) together with logos, emblems and color schemes prescribed by Franchisor and Hertz and other characteristics of the System in substantially the same combination, arrangement and manner as displayed and used in other businesses under the System in and around the United States and elsewhere, and to emphasize the same in the operation of the Franchised Business and in all advertising matter (subject to Franchisor’s approval under the terms of Paragraph X.A. hereof), so that Franchisee’s business will be readily recognized by the public as a part of the System.
 

 VII.
 THE MANUAL
 

 A.
 In order to protect the reputation and goodwill of Franchisor and to maintain uniform standards of operation under the Proprietary Marks, Franchisee shall conduct the Franchised Business in accordance with the Manual, access to which Franchisor will provide to Franchisee for the term of this Agreement.  The Manual shall at all times remain the sole property of Franchisor, notwithstanding that Franchisee may have materially assisted Franchisor in adapting the Manual or translating the Manual into another language, as provided in Paragraph VII.D below.  Franchisee shall sign whatever assignment or other documents Franchisor requests to evidence Franchisor’s ownership or to provide such other assistance to secure Franchisor’s intellectual property rights in such ideas, concepts, translation, methods and techniques.
 

 B.
 Franchisee shall at all times treat the Manual, any other operational directives created or approved by Franchisor for use in the operation of the Franchised Business, and the information contained therein, as confidential; and shall use all reasonable efforts to maintain such information as secret and confidential.  Franchisee shall not at any time, without Franchisor’s prior written consent, copy, duplicate, record or otherwise reproduce the foregoing
 

 

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 materials, in whole or in part, nor otherwise make the same available to any unauthorized person.  Franchisor reserves the right to provide the Manual in hard copy, electronic or such other form as it may select, including through an intranet portal.  Franchisee shall at its expense ensure that it has the necessary equipment to receive and use the Manual in its various forms.
 

 C.
 Franchisor may from time to time revise the contents of such Manual and other operational directives referred to herein, and Franchisee expressly agrees to comply promptly with each new or changed standard provided it was given notice of such change.  Franchisee shall at all times insure that its copies of such Manual and other operational directives are kept current and up-to-date.  In the event of any dispute as to the contents thereof, the terms of the master copy maintained by Franchisor at Franchisor’s home office shall be controlling. 
 

 D.
 If Franchisee desires to translate the Manual into local language or the Manual is required under applicable law to be in the local language, Franchisee shall, at its own expense, translate the Manual into the local language, in accordance with the following terms:
 

 (1)
 Franchisee shall submit any proposed translation of the Manual (and any revisions or modifications thereto) to Franchisor for Franchisor's prior approval, and such translation, any copies thereof (whether or not made in violation of this Agreement), and any copyright owned by Franchisee to such translation shall be the sole property of Franchisor and shall be governed by this Agreement. Franchisee shall pay for all costs and expenses for such translations.
 

 (2)
 Franchisee shall ensure that, before any employee or independent contractor begins work on translating the Manual or any revisions or modifications thereto, each such employee or contractor (and, in turn, said contractors' employees and contractors) shall obtain the agreement (in the form specified by Franchisor) of such persons and entities to maintain the confidentiality of the contents of the Manual (and/or any revisions or modifications thereto), and that such individual irrevocably assigns to Franchisor, with no monetary consideration paid by Franchisor, any and all intellectual property right such individual may have in the translated version of the Manual (and/or any revisions or modifications thereto). Franchisee shall immediately provide the original copy of each such document to Franchisor.
 

 VIII.
 CONFIDENTIAL INFORMATION
 

 A.
 The parties expressly understand and agree that the relationship established between Franchisee and Franchisor by this Agreement is one of confidence and trust, and that as a result thereof Franchisor will be disclosing and transmitting to Franchisee certain confidential and proprietary information concerning the System and procedures, operations and data used in the System.  Franchisee agrees to treat and maintain such confidential and proprietary information as Franchisor’s private property, to use the same only for purposes of operation of the Franchised Business and to refrain from disclosing the same to others, except Franchisee’s employees or agents, during the term of this Agreement or thereafter.  Information or techniques prepared, compiled or developed by Franchisee, its employees or agents, during the term of this Agreement and relating to performance or operation of the System or the Franchised Business shall be considered as part of Franchisor’s confidential and proprietary information.  Franchisee shall sign whatever assignment or other documents Franchisor requests to evidence Franchisor’s
 

 

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 or Hertz’ ownership or to provide such other assistance to secure Franchisor’s intellectual property rights in such information and techniques.
 

 B.
 Franchisee agrees to restrict the knowledge of Franchisor’s confidential and proprietary information to Franchisee’s employees and agents who are directly connected with the performance of work which requires knowledge thereof, and Franchisee shall advise such employees and agents of the confidential nature thereof and the requirements for non-disclosure thereof. Franchisee agrees to submit the form of confidentiality agreement for approval by Franchisor.
 

 IX.
 ACCOUNTING AND RECORDS
 

 A.
 During the term of this Agreement, Franchisee shall maintain and preserve, for at least six (6) years from the dates of their preparation, full, complete and accurate books, records and accounts, in connection with the Franchised Business, in accordance with generally accepted accounting principles or international financial reporting standards applicable in the Area of Responsibility and in the form and manner prescribed by Franchisor from time to time in writing.
 

 B.
 Franchisee shall submit to Franchisor, on a monthly or other periodic basis prescribed by Franchisor, a statement or statements in the form prescribed by Franchisor, showing such descriptive information as Franchisor may require of each item of equipment and other personal property in the Product Line owned, used, under repair or kept by Franchisee for use in the Franchised Business in the preceding month and the Gross Revenue generated by the Franchised Business, during such period.  Such statements shall be signed by Franchisee.  At the request of Franchisor and at Franchisee’s sole cost and expense, Franchisee agrees to swear to the truth of such statements by means of an affidavit executed before  a Consul of the United States of America, or before a Notary Public and/or by providing Franchisor with a statement of a Certified Public or Chartered Accountant as deemed appropriate by Franchisor.
 

 C.
 Franchisee shall submit the following statements to Franchisor:
 

 (1)
 As soon as available, but in any event within ninety (90) days after the end of each calendar year of the Franchised Business, a statement certified by a Certified Public or Chartered Accountant in a generally recognized international accounting firm, showing: (i) the total Product Line and the total amount of Gross Revenue generated by the Franchised Business during such calendar year or portion thereof; and (ii) a computation of the amount that Franchisee was required to spend under Paragraph X.C. below for advertising and promotion and the amount actually expended by Franchisee; and
 

 (2)
 At Franchisor’s request, audited financial statements certified by a Certified Public or Chartered Accountant in a generally recognized international accounting firm for the Franchised Business within ninety (90) days after the end of each calendar year.
 

 Upon submission of such statements, Franchisee shall remit therewith all sums not theretofore paid which shall be due to Franchisor in accordance with the provisions of this Agreement (including the payment of the minimum annual license fee required under Paragraph IV.A.(2)
 

 

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 hereof).  If any amounts are then overdue, such overdue sums shall be subject to late fees pursuant to Paragraph IV.C. hereof.
 

 D.
 Franchisee shall also submit to Franchisor, for review or auditing, to determine Franchisee’s compliance with this Agreement, such other forms, reports, records, information and data as Franchisor may reasonably designate, in the manner and at the times and places reasonably required by Franchisor, upon request and as specified from time to time by Franchisor in writing.
 

 E.
 Franchisor, Hertz and their designated agents shall have the right at all reasonable times on reasonable prior written notice in order to determine Franchisee’s compliance with this Agreement, to examine, audit, and copy at its expense, on the premises of the Franchised Business, the books and records of Franchisee and/or the Franchised Business.  Franchisor shall also have the right, at any time, to have an independent audit made of such books and records.  If these examinations or audits are conducted due to Franchisee’s failure to comply with this Agreement or any other agreement with Franchisor or its Affiliates, or if Franchisee denies Franchisor access to the books and records of Franchisee and/or the Franchised Business or otherwise takes action that results in the examination or audit not proceeding satisfactorily, Franchisor shall have the right to charge Franchisee for the costs and expenses incurred in connection with the examinations and audits, including, without limitation, charges for Franchisor’s employees’ or agents’ travel expenses, room, board and compensation, and costs of enforcement of these provisions, and reasonable accounting and legal fees.  The foregoing remedies shall be in addition to any other remedies Franchisor may have.
 

 X.
 ADVERTISING AND SALES PROMOTION
 

 Recognizing the value of advertising and sales promotion, the importance of the standardization of advertising programs to the furtherance of the goodwill and public image of the System, and the significance of sales promotion activities, the parties agree as follows:
 

 A.
 All advertising relating to the Franchised Business by Franchisee in any medium shall be conducted in a dignified manner and shall conform to such standards and requirements as Franchisor may from time to time designate in writing.  Upon written request by Franchisor, Franchisee shall submit to Franchisor for its prior approval (including with respect to prices to be charged, to the extent allowed by applicable law) samples of all advertising and promotional plans and materials (including Websites) that Franchisee desires to use and that have not been prepared or previously approved by Franchisor.  If written disapproval thereof is not received by Franchisee within thirty (30) days of mailing, Franchisor shall be deemed to have given the required approval.  Franchisee shall not advertise the Franchised Business outside the Area of Responsibility without the prior written consent of Franchisor.
 

 B.
 Franchisee agrees that Franchisor shall have the right, in its sole discretion, to establish, for such periods of time as Franchisor shall deem appropriate, System-wide, regional, national and/or local advertising and sales promotion funds for the System.  Franchisee also agrees that Franchisor may at its sole discretion discontinue any such funds which it may have established.  As of the date of this Agreement, Franchisor has not established any such funds that are applicable to the Franchised Business. In the event such funds are established and applicable
 

 

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 to the Franchised Business, Franchisee may elect to contribute to such funds.  If Franchisee does not elect to contribute to such funds, then Franchisor shall have no obligation to Franchisee whatsoever with respect to the way in whiich such funds are used and Franchisor shall in its sole discretion determine whether or not to include the Area of Responsibility in its advertising and sales promotion or similar programs in the use of such funds.  If Franchisee elects to contribute to such funds, such funds shall be maintained and administered by Franchisor or its designee as follows: 
 

 (1)
 Franchisor shall direct all such advertising and sales promotion programs, with sole discretion over the planning of such programs; the creative and strategic concepts, materials and media used in such programs; and the placement and allocation thereof.  Franchisee agrees and acknowledges that the funds are intended to maximize recognition and acceptance of the Proprietary Marks and the System, and the promotion and exploitation thereof, and that Franchisor undertakes no obligation in administering the funds to make expenditures for Franchisee which are equivalent or proportionate to Franchisee’s contribution, or to ensure that any particular franchisee benefits directly or pro rata from the placement of advertising or the promotion of sales.
 

 (2)
 Franchisee agrees that the funds may be used to meet any and all costs of maintaining, administering, directing and preparing advertising and sales promotion activities, including, without limitation, the cost of preparing and conducting television, radio, magazine, internet, Social Media, and newspaper advertising campaigns and other public relations activities; the Website; employing advertising agencies to assist therein; sales programs and activities; and providing certain promotional brochures and other marketing materials to System franchisees.  Sums paid by Franchisee to the advertising and sales promotion funds may be used by Franchisor to defray any of Franchisor’s operating expenses and overhead reasonably related to the administration, direction or operation of the advertising and sales promotion funds, programs, and activities.
 

 C.
 In addition to any other expenditures required under this Paragraph X, Franchisee shall spend annually an amount equal to not less than one percent (1%) of the Gross Revenue of the Franchised Business for the year for local advertising and promotion of the Franchised Business within the Area of Responsibility.  Subject to such changes or other requirements of Franchisor as it reasonably determines to be appropriate, as used herein “local advertising and promotion” shall consist only of the direct costs of purchasing and producing advertising materials (including, but not limited to, camera ready advertising and point of sale materials), media (space or time), and those direct out of pocket expenses related to costs of advertising and sales promotion spent by Franchisee in the Area of Responsibility, including advertising agency fees and expenses.  “Local advertising and promotion” shall not include any of the following: (1) salaries and expenses of any employees of Franchisee, including salaries or expenses for attendance at advertising meetings or activities, or incentives provided or offered to such employees, including discount coupons; (2) charitable, political, or other contributions or donations; and (3) the value of discounts provided to consumers.
 

 XI.
 INSURANCE
 

 A.
 Franchisee shall, if available, procure, prior to the commencement of business,
 

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 and maintain in full force and effect during the term of this Agreement, at Franchisee’s expense, an insurance policy or policies protecting Franchisee and Franchisor and their shareholders, Affiliates, officers, directors, partners and employees, against any loss, liability, personal injury, death, property damage, loss of business income, or expense whatsoever arising or occurring upon or in connection with the Franchised Business.  Franchisor shall be named an additional insured in such policy or policies with respect to liability arising out of the operation of the Franchised Business.  The policy or policies shall contain a waiver of subrogation by Franchisee’s insurance carriers.  In addition, Franchisee agrees to seek compensation solely from Franchisee’s insurance carriers to the extent that any loss may be covered by Franchisee’s insurance policy or policies.
 

 B.
 Such policy or policies shall be written by an insurance company satisfactory to Franchisor and shall be in a form satisfactory to Franchisor in accordance with standards and specifications set forth herein as well as others which Franchisor may reasonably specify from time to time; and shall include at a minimum (except as additional coverages and higher policy limits may be reasonably specified from time to time by Franchisor in writing) the following:
 

 (1)
 Commercial General Liability (“CGL”) Insurance, including Products and Completed Operations and Contractual Liability Coverage, with a combined single limit of liability of not less than two million dollars ($2,000,000) per occurrence for bodily injury, including death, personal injury, and property damage.  Such insurance shall be written on a primary and noncontributory basis.
 

 (2)
 Workers’ Compensation and Employer’s Liability Insurance as well as such other insurance as may be required by statute or rule of the jurisdiction in which the Franchised Business is located or operated.  Employer’s Liability insurance shall have limits of not less than five hundred thousand dollars ($500,000).
 

 (3)
 Automobile Liability Insurance for all owned, non-owned, leased, rented, borrowed, and/or hired vehicles (Symbol 1) insuring against liability for bodily injury and death and property damage in an amount not less than one million dollars ($1,000,000) per occurrence.  
 

 (4)
 Excess Liability Insurance with a combined single limit of not less than four million dollars ($4,000,000) per occurrence in excess of the underlying CGL, Employer’s Liability, and Automobile Liability Insurance requirements set forth in Paragraph XI.B.(1), (2), and (3) above.
 

 C.
 Franchisee shall, prior to the commencement of business hereunder, provide to Franchisor a certificate of insurance which verifies the coverages described herein, identifies the additional insureds provided for herein, and confirms that such insurance shall not be terminated or the amount or type of coverage altered without the insurance carrier giving Franchisor thirty (30) days’ prior written notice, which shall be sent to the attention of the Insurance Manager at the address stated at Paragraph XIX. hereof, or to such other address as Franchisor may specify from time to time in writing.
 

 D.
 Franchisee’s obligation to obtain and maintain the foregoing policy or policies in
 

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 the amounts specified shall not be limited in any way by reason of any insurance which may be maintained by Franchisor, nor shall Franchisee’s performance of that obligation relieve it of liability under the indemnity provisions set forth in Paragraph XVII.C. hereof.
 

 E.
 Should Franchisee, for any reason, fail to procure or maintain the insurance required by this Agreement, as revised from time to time for all franchisees in writing, Franchisor shall have the right and authority (without, however, any obligation to do so) to (1) procure such insurance and to charge the cost of same to Franchisee, which charges, together with a reasonable fee for Franchisor’s expenses in so acting, shall be payable by Franchisee immediately upon notice, or (2) terminate this Agreement as provided in Paragraph XIII.C. hereof.
 

 XII.
 TRANSFERABILITY OF INTEREST
 

 A.
 Transfer by Franchisor:
 

 Franchisor shall have the right to delegate, transfer, or assign all or any part of its rights or obligations herein to any person or legal entity.
 

 B.
 Transfer by Franchisee:
 

 (1)
 Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Franchisor has granted this license in reliance on Franchisee’s business skill, financial background and capacity, reputation in the community, and other factors deemed appropriate by Franchisor.  Accordingly, Franchisee shall not, whether by operation of law or otherwise, sell, assign, convey, transfer, give away, pledge, mortgage or otherwise encumber this Agreement, or any interest herein or rights hereunder, except as provided in this Paragraph XII.  Any purported sale, assignment, conveyance, gift, pledge, mortgage or other transfer or encumbrance, by Franchisee, or by operation of law or otherwise, of this Agreement, or any of Franchisee’s interest herein or rights hereunder, not in compliance with this Paragraph XII., shall be null and void, and shall constitute a material breach of this Agreement for which this Agreement shall automatically terminate without notice or opportunity to cure, pursuant to Paragraph XIII.A. hereof.  
 

 (2)
 Franchisee shall be, at all times, a wholly owned subsidiary of [             ], a Delaware corporation (“Owner”). A complete list of the Officers and Directors of Owner, as well as persons and entities having an Ownership Interest of more than 5% in Owner (each, a “Control Person”), is set forth in the form set out at the end of this Agreement (the “Control Person Schedule”).  Franchisee represents and warrants that such ownership information form is current, complete and accurate.  Franchisor understands that Owner is involved in, owns and operates other unrelated businesses in and out of Mongolia and that its wide shareholder base changes, to some degree, from time to time. Franchisee shall update the Control Person Schedule on a quarterly basis after the date of this Agreement, and at any time as reasonably requested in writing from Franchisor. Any purported sale, assignment, conveyance, gift, pledge, mortgage or other transfer or encumbrance of, or change in,  the Owner’s Ownership Interest in Franchisee without the prior consent of Franchisor, shall be deemed to be an unauthorized assignment of the license granted under this Agreement and shall constitute a material breach of this
 

 

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 Agreement for which this Agreement shall automatically terminate without notice or opportunity to cure, pursuant to Paragraph XIII.A. hereof.  For the purpose of this Agreement, the term “Ownership Interests” shall mean all forms of ownership, whether legal or beneficial, voting or non-voting, including stock, partnership interests, limited liability company membership or ownership interests, joint tenancy interests, proprietorship interests, trust beneficiary interests, proxy interests, power-of-attorney interests, and all options, warrants and instruments convertible into such other interests.  
 

 (3)
 If Franchisee at any time during the term hereof desires to transfer the Franchised Business, and provided Franchisee is not in default hereunder, Franchisor hereby agrees to issue to the transferee of the Franchised Business designated by Franchisee a then-current standard form Hertz Equipment Rental System International Franchise Agreement, granting such transferee the right to use the System in the conduct of the Franchised Business in the Area of Responsibility specified in Paragraph I.A. hereof, upon the same terms and conditions then being offered by Franchisor under such Hertz Equipment Rental System International Franchise Agreement, except as to any initial fee, license fee, minimum fee and any other fees and assessments to be paid by such transferee to Franchisor under such Hertz Equipment Rental System International Franchise Agreement, as well as the length of the term thereof, all of which shall remain within the sole discretion of Franchisor; provided, however, that such transferee shall have first applied to and been approved by Franchisor as a franchisee (which approval shall not be unreasonably withheld) and shall have agreed to and accepted all the terms and conditions of such franchise offered to him by Franchisor, as described above, including the payment of any initial fee, license fee and any other fees and assessments as therein provided.  
 

 (4)
 Prior to any transfer to a transferee approved by Franchisor, Franchisor may, in its sole discretion, as conditions precedent to such transfer, require that:
 

 (a)
 Franchisee (transferor) execute a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor, its Affiliates and their officers, directors and employees, in their corporate and individual capacities, arising out of or connected with the performance of this Agreement, including, without limitation, claims arising under any applicable laws, rules, and ordinances; and
 

 (b)
 Transferee execute (and/or, upon Franchisor’s request, cause all interested parties to execute) such ancillary agreements as Franchisor may require for the Franchised Business, including, but not limited to, an agreement to guarantee payment of amounts owed by Franchisee to Franchisor, its Affiliates, third party suppliers, and to other franchisees.
 

 (c)
 Neither transferee nor any of its affiliates (including owners) is a Restricted Person (as defined in Paragraph XVI.C.(3) below.
 

 C.
 Sale of Assets to Franchisor:
 

 Franchisor shall have the right of first refusal, upon application to Franchisor for approval of a transferee pursuant to Paragraphs XII.B(2) or XII.C hereof, to purchase from
 

 

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 Franchisee all of the assets employed in the Franchised Business for the same purchase price and conditions of payment as proposed by the prospective transferee pursuant to a bona fide written offer to purchase, a true copy of which shall be delivered to Franchisor, who shall have sixty (60) days from receipt of such copy within which to accept the same offer, with Franchisor having the right of access at reasonable times to the books, records, equipment, leases and other assets utilized in the operation of the Franchised Business to enable Franchisor to evaluate, as Franchisor deems appropriate, whether or not to exercise such right of first refusal; and an additional sixty (60) days thereafter to consummate this transaction in accordance with the provisions of Paragraphs XIV.J(1) to XIV.J(4) hereof. Franchisor shall have the unrestricted right to assign this right of first refusal to its designee (an Affiliate or unaffiliated third party) separate and apart from the remainder of this Agreement.
 

 D.
 Non-Waiver of Claims:
 

 Franchisor’s consent to a transfer of any interest in this Agreement shall not constitute a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of Franchisor’s right to demand exact compliance with any of the terms of this Agreement by the transferee.
 

 F.
 Franchisor’s Review of Securities Offering and Financing Documents:
 

                        Franchisee and its affiliates shall not represent in any proposed financing arrangement to any proposed lender, or participant in a private or public investment offering, that Franchisor or any of its Affiliates is or shall be in any way responsible for Franchisee’s obligations or financial projections, if any, set forth in such financing arrangement or investment offering, or that Franchisor or any of its Affiliates is or shall be participating in such private or public investment offering.  In furtherance of the foregoing:
 

 (1)
 Any proposed financing arrangement where any of the Proprietary Marks appears, or a reference to this Agreement appears, shall contain a disclaimer in bold face type substantially as follows:  “THE BORROWER IS A PARTY TO CERTAIN FRANCHISE AGREEMENT WITH HERTZ EQUIPMENT RENTAL CORPORATION (“FRANCHISOR”) TO OPERATE AN EQUIPMENT RENTAL BUSINESS.  NEITHER FRANCHISOR NOR ITS AFFILIATES OWN SUCH BUSINESS OR ARE A PARTY TO THIS FINANCING AND HAVE NOT PROVIDED OR REVIEWED, AND ARE NOT RESPONSIBLE FOR, ANY DISCLOSURES OR OTHER INFORMATION SET FORTH HEREIN.”  Also, at least fifteen (15) days prior to closing such financing, Franchisee shall submit to Franchisor a written statement certifying that it has not misrepresented or overstated its relationship with Franchisor or its rights to use any of the Proprietary Marks;
 

 (2)
 Any such private or public investment offering circular or prospectus issued by Franchisee or any of its affiliates where any of the Proprietary Marks appears, or a reference to this Agreement appears, shall contain a disclaimer in bold face type substantially as follows:  “THE BORROWER IS A PARTY TO CERTAIN FRANCHISE AGREEMENT WITH HERTZ EQUIPMENT RENTAL CORPORATION (“FRANCHISOR”) TO OPERATE AN EQUIPMENT RENTAL BUSINESS.  NEITHER FRANCHISOR NOR ITS AFFILIATES OWN SUCH BUSINESS OR ARE A PARTICIPANT IN THIS OFFERING AND HAVE NOT
 

 

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 PROVIDED OR REVIEWED, AND ARE NOT RESPONSIBLE FOR, ANY DISCLOSURES OR OTHER INFORMATION SET FORTH HEREIN.”  Also, at least fifteen (15) days prior to issuance, such prospectus or offering circular shall be submitted to Franchisor with a statement, signed by Franchisee, certifying that it has not misrepresented or overstated its relationship with Franchisor or its rights to use any of the Proprietary Marks and specifically designating the provisions in the prospectus or offering circular referring to its rights under this Agreement and demonstrating compliance with this Section; and
 

 (3)
 At any time requested by Franchisor, Franchisee shall make any changes and shall incorporate any disclaimers required by Franchisor with respect to Franchisee’s relationship with Franchisor or any of its Affiliates or its use of any of the Proprietary Marks. Nothing contained in this Paragraph XII. F. shall constitute approval by Franchisor of a change in an Owner’s Ownership Interest in Franchisee by a public equity offering or otherwise.
 

 G.
 No Responsibility:
 

 Franchisor assumes no responsibility, liability or obligation whatsoever to review or comment on any offering circular, prospectus or financing documents of Franchisee or any of its affiliates, and Franchisor may rely solely and exclusively upon Franchisee’s disclaimers and certificates required in the preceding sections.  Franchisee acknowledges that Franchisor’s review, if any, of any offering circular, prospectus or financing documents shall (a) be limited solely to the subject of the factual accuracy of the representations as to the relationship between Franchisee and Franchisor, including the use of the Proprietary Marks in the documents and the disclaimer required therein, (b) not constitute a review for compliance with applicable law, and (c) not constitute any kind of authorization, acceptance, agreement, endorsement or ratification of the offering, prospectus or the financing, either express or implied. Franchisor shall be entitled to indemnification pursuant to Paragraph XVII.C regardless of whether Franchisor has made any review or comment with respect to any offering circular, prospectus or financing documents of Franchisee or its affiliates.
 

 XIII.
 DEFAULT AND TERMINATION
 

 A.
 Franchisee shall be deemed to be in default under this Agreement, and this Agreement and all rights granted Franchisee hereunder shall automatically terminate without notice to Franchisee, if any of the following events occur:
 

 (1)
 If Franchisee becomes insolvent or is dissolved; if a receiver or trustee for the business of Franchisee is appointed; or if Franchisee files a voluntary petition in bankruptcy or an involuntary petition is filed by any other person, and such involuntary petition is not dismissed within sixty (60) days of filing;
 

 (2)
 If Franchisee attempts to engage in, permits or suffers any transfer of any rights or obligations under this Agreement, any Ownership Interest or the Franchised Business without Franchisor’s prior written consent, contrary to the terms of Paragraph XII.B hereof.
 

 B.
 Franchisee shall be deemed to be in default and Franchisor may, at its option, upon written notice to Franchisee, terminate this Agreement and all rights granted hereunder,
 

 

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 without affording Franchisee any opportunity to cure the default, if any of the following events occur:
 

 (1)
 If Franchisee fails to commence active operation of the Franchised Business within twelve (12) months from the Commencement Date of this Agreement;
 

 (2)
 If Franchisee without the Franchisor’s prior written consent fails or ceases to actively and continuously operate the Franchised Business at all of the Franchised Premises pursuant to Paragraph I.F. above throughout the term of this Agreement;
 

 (3)
 If Franchisee is convicted of a felony, a crime involving moral turpitude, or any other crime or offense that is reasonably likely, in the sole opinion of Franchisor, to adversely affect the System, the Proprietary Marks, the goodwill associated therewith, or Franchisor’s interest therein;
 

 (4)
 If Franchisee discloses or divulges the contents of the Manual or other trade secrets or confidential or proprietary information provided to Franchisee by Franchisor, contrary to Paragraphs VII. or VIII. hereof;
 

 (5)
 If Franchisee fails to comply with the covenants in Paragraph XV. hereof;
 

 (6)
 If Franchisee knowingly maintains falsified books or records, or submits false reports to Franchisor;
 

 (7)
 If Franchisee fails on three (3) or more separate occasions, during any twelve (12) month period, to comply with provisions of this Agreement, including Franchisee’s obligation promptly to pay any monies owing to Franchisor or its Affiliates or other franchisees when due, even though the defaults were cured after notice to Franchisee;
 

 (8)
 If Franchisee makes any material misrepresentation or omission of a material fact in the information furnished by Franchisee to Franchisor in connection with Franchisor’s decision to enter into the Franchise Agreement with Franchisee, on the franchise application for the Franchise Agreement or in any agreement with Franchisor or its Affiliates;
 

 (9)
 If Franchisee fails to successfully complete Franchisor’s initial training program to Franchisor’s satisfaction;  
 

 (10)
 If Franchisee is in default under any agreement of the type identified in Paragraph V.P.; or
 

 (11)
 If Franchisor or its Affiliates terminate any other agreement between Franchisee and Franchisor or its Affiliates. 
 

 C.
 Except as provided in Paragraphs XIII.A. and XIII.B. hereof, Franchisee shall have thirty (30) days after Franchisor’s written notice of termination within which to remedy any other default as described in this Paragraph XIII.C., and to provide evidence thereof to Franchisor.  If any such default is not so cured within that period, or such longer period as
 

 

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 applicable law may require, this Agreement and all rights granted hereunder shall terminate without further notice at the end of such period.  Franchisee shall be in default under this Paragraph XIII.C. for any failure to strictly comply with any of the requirements imposed by this Agreement, the Manual (as they may from time to time be supplemented by Franchisor), or to carry out the terms of this Agreement in good faith.  Such defaults shall include, without limitation, the occurrence of any of the following events:
 

 (1)
 Franchisee’s failure, refusal or neglect promptly to pay any monies owing to Franchisor or its Affiliates when due, to pay when due any monies otherwise incurred or owing in connection with the operation of the Franchised Business, or to submit the financial or other information required by Franchisor under this Agreement;
 

 (2)
 Franchisee’s failure to maintain the standards specified by Franchisor in the Manual or otherwise in writing;
 

 (3)
 Franchisee’s failure to maintain the rates promoted or described by Franchisor as required by this Agreement;
 

 (4)
 Franchisee’s failure, refusal or neglect to obtain Franchisor’s prior written approval or consent as required by this Agreement;
 

 (5)
 Franchisee’s misuse or unauthorized use of the Proprietary Marks or other material impairment of the goodwill associated therewith or Franchisor’s rights therein;
 

 (6)
 Franchisee’s default under any agreement of the type identified in Paragraph V.P.; or
 

 (7)
 Franchisee’s failure to procure or maintain the insurance required by Paragraph XI. hereof. 
 

 D.
 Franchisor may terminate Franchisee’s right to operate the Franchised Business from any and all Franchised Premises, without penalty or payment of compensation or damages by or to either party, if a Political Event has occurred affecting such Franchised Premises.  Franchisor will notify Franchisee at least thirty (30) days in advance of the effective date of termination, unless emergent circumstances make a shorter notice period necessary.  For the purpose of this Paragraph, “Political Event” shall mean one or more of the following conditions occurring in the geographical area where the Franchised Premises are located:  (i) war, whether or not declared, (ii) civil insurrection, (iii) loss of effective control over public safety by institutions of a government recognized by the United States, (iv) declaration of martial law, (v) applicable laws of any nation render performance of this Agreement or any ancillary agreement between the parties (including circumstances where either party is prevented from providing services under this Agreement or to any Franchised Premises as a result of sanctions by the United States or any other government), or (vi) interruption of safe transportation to the area where the Franchised Premises are located for more than sixty (60) days.
 

 E.
 The parties acknowledge and agree that a court order shall not be required to give effect to any termination of this Agreement.
 

 

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 XIV.
 OBLIGATIONS UPON TERMINATION OR EXPIRATION
 

 Upon termination or expiration, this Agreement and all rights granted hereunder to Franchisee shall forthwith terminate; provided, however, that Franchisee shall remain liable for any damage to Franchisor arising from Franchisee’s breach of or failure to perform any of the covenants, obligations or undertakings herein contained.  In addition, upon termination or expiration:
 

 A.
 Franchisee shall immediately cease operating under the System and the Proprietary Marks.
 

 B.
 Franchisee’s name shall be withdrawn as soon as possible from all published lists of persons operating businesses under the System.  Franchisee shall not hold itself out to the public as a present or former System franchisee.
 

 C.
 Franchisee shall immediately cease and terminate all use in any manner whatsoever of the mark HERTZ EQUIPMENT RENTAL and any other Proprietary Marks licensed hereunder, or colorable imitations thereof, and shall take any steps necessary to disassociate itself from such marks, including the withdrawal of all advertising matter (including from Websites and Social Media), the destruction of all letterheads, and the removal of all signs and any other articles which display the Proprietary Marks or trade dress associated with the System.  If Franchisee is using any e-mail address or Internet domain name registration which contains the mark HERTZ or any other Proprietary Mark of Hertz, Franchisee shall immediately take such action as may be necessary to cease use of any such e-mail address and to transfer any such Internet domain name registration to Hertz.
 

 D.
 In the event Franchisee continues to operate any business, Franchisee agrees not to use any reproduction, counterfeit, copy, or colorable imitation of the Proprietary Marks, either in connection with such other business or in the promotion thereof, which is likely to cause confusion, mistake or deception, or which is likely to dilute Hertz’ exclusive rights in and to the Proprietary Marks; and Franchisee further agrees not to utilize any designation of origin or description or representation which falsely suggests or represents an association or connection with Franchisor or Hertz so as to constitute unfair competition.  Franchisee shall make such modifications or alterations to the Franchised Premises immediately upon termination or expiration of this Agreement as may be necessary to prevent the operation of any business thereon by himself or others in derogation of this Paragraph XIV., including changing all telephone numbers, discontinuing all classified, website, and other advertising, and making such specific additional changes as Franchisor or Hertz may reasonably request for that purpose.  In the event Franchisee fails or refuses to comply with the requirements of this Paragraph XIV., Franchisor or its agents shall have the right to enter upon the premises where the Franchised Business was conducted, without being guilty of trespass or any other tort, for the purpose of making or causing to be made such changes as may be required, and shall otherwise be deemed to be authorized by Franchisee to take such action on Franchisee’s behalf as may be appropriate hereunder, at the expense of Franchisee, which expense Franchisee agrees to pay upon demand.  
 

 E.
 Franchisee shall promptly pay all sums owing to Franchisor and Franchisor’s Affiliates and other franchisees.  In the event of termination for any default of Franchisee, such
 

 

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 sums shall include all damages, costs and expenses, including reasonable attorneys’ fees, incurred by Franchisor, Hertz and their respective Affiliates as a result of the default, which obligation shall give rise to and remain, until paid in full, a lien in favor of Franchisor, Hertz and their respective Affiliates against any and all of the personal property, machinery, fixtures and equipment owned by Franchisee and used in the Franchised Business at the time of default.
 

 F.
 Franchisee shall pay to Franchisor all damages, costs and expenses, including reasonable attorneys’ fees, incurred by Franchisor if Hertz subsequent to the termination or expiration of this Agreement is successful in obtaining injunctive or other relief for the enforcement of any provisions of this Paragraph XIV.
 

 G.
 Franchisee shall immediately turn over to Franchisor the Manual and all other manuals, records, files, instructions, software, correspondence, promotional material, forms, Hertz Equipment Rental System Standard Rental Agreements, and any and all other materials, in any medium, in the Franchisee’s possession or control that use any of the Proprietary Marks or relate to the operation of the System, and all copies thereof (all of which are acknowledged to be Franchisor’s and Hertz’ property).  Franchisee shall retain no copy or record of any of the foregoing, except Franchisee’s copy of this Agreement and of any correspondence between the parties, and any other documents which Franchisee reasonably needs for compliance with any provision of law.
 

 H.
 Franchisee shall take such action as shall be necessary to cancel any assumed name or equivalent registration which contains the mark HERTZ EQUIPMENT RENTAL or any other Proprietary Mark of Franchisor, and Franchisee shall furnish Franchisor with evidence satisfactory to Franchisor of compliance with this obligation within thirty (30) days after termination or expiration of this Agreement.  If Franchisee fails to take such action within the prescribed time, Franchisee shall be deemed to have appointed Franchisor and Hertz as its agents with authorization to take such action on Franchisee’s behalf.
 

 I.
 Franchisee shall immediately advise Franchisor of all inventory or other items (excluding those items described in Paragraph XIV.G hereof and excluding the Product Line) bearing Franchisor’s Proprietary Marks.  Franchisor shall have the right (but not the duty), to be exercised by written notice of intent provided to Franchisee within thirty (30) days after termination, to purchase any of such items at Franchisee’s cost or fair market value, whichever is less.  If the parties cannot agree on fair market value within a reasonable time, an independent appraiser shall be designated by Franchisor, and his determination shall be binding.  If Franchisor elects to exercise any option to purchase herein provided, it shall have the right to set off all amounts due from Franchisee under this Agreement, and the cost of the appraisal, if any, against any payment therefor.
 

 J.
 Franchisor shall have the option (but not the duty) upon written notice to Franchisee (i) within thirty (30) days after Franchisor learns of the automatic termination of this Agreement under Paragraph XIII.A hereof, or (ii) within thirty (30) days after termination of this Agreement under Paragraph XIII.B or XIII.C hereof, to elect to purchase from Franchisee, and to require Franchisee to sell to Franchisor or to Franchisor’s nominee, some or all (at Franchisor’s option) of the assets (including the Product Line) employed in the Franchised Business, on the terms and conditions hereinafter contained. Franchisor shall have the unrestricted right to assign
 

 

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 this option to purchase to its designee (an Affiliate or unaffiliated third party) separate and apart from the remainder of this Agreement.
 

 (1)
 The purchase and sale shall be implemented by a formal contract containing warranties and representations by the seller at the time of sale with respect to full ownership and transferability of the assets to be sold, the absence of liens and encumbrances thereon, the seller’s full authority to effect such sales and transfers, the working condition and repair of physical assets, and such other warranties, representations and agreements as shall be appropriate in a transaction of such nature.
 

 (2)
 The closing date for the purchase and sale shall be no later than the ninetieth (90th) day after Franchisor’s written notice of intention to purchase.
 

 (3)
 The assets to be sold or transferred shall include all personal property owned and employed by Franchisee in such Franchised Business (including leased property and excluding such personal property that Franchisor specifically declines to purchase) together with other assets used by Franchisee in connection with the conduct of such Franchised Business, including, without limitation, all real property, leases, and tenancies, equipment lease, rental agreements in which seller is the lessor, other contracts and agreements (except employment agreements) to which the seller is a party, all leasehold improvements, furniture, fixtures, machinery, equipment and signs, inventories of tires, fuel, supplies and parts on hand, all of which shall be determined by Franchisor or its nominee on and after the closing date.
 

 (4)
 The seller’s transfer and conveyance shall be free and clear of all liens, claims, and encumbrances and seller shall obtain and deliver to Franchisor or its nominee on or before the closing date any and all consents of third parties to the assignment or transfer of leases and contracts where such consent is required to effectuate a valid transfer or assignment as aforesaid.
 

 (5)
 The total purchase price to be paid by Franchisor to Franchisee and accepted by Franchisee pursuant to this Paragraph XIV.J shall be the lesser of (x) five (5) times the average annual net income (after provision for income tax) of the Franchised Business for the three (3) most recently completed fiscal years of such Franchised Business, determined in accordance with generally accepted accounting principles in effect in the Area of Responsibility or the United States as determined by Franchisor, or one hundred percent (100%) of net tangible asset value of the Franchised Business as of the date of sale, whichever is greater; or (y) one hundred twenty five percent (125%) of the net tangible asset value of the Franchised Business, as of the date of sale, determined in accordance with generally accepted accounting principles in effect in the Area of Responsibility or the United States as determined by Franchisor .  In determining such purchase price pursuant to this Paragraph XIV.J(5), the physical assets shall be depreciated at rates and in accordance with standard accounting methods employed by Franchisor or its successor at the time Franchisor or its nominee shall purchase the same, provided that such methods are in accordance with generally accepted accounting principles in effect in the Area of Responsibility or the United States as determined by Franchisor.  In making calculations of net tangible asset value as of the date of sale, vehicles and other physical assets which shall have been fully depreciated shall be valued at the fair market value thereof as of the date of sale.  The value, before depreciation, assigned to the Product Line to be sold and
 

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 transferred hereunder, shall not exceed prices which were paid or which would have been paid by Franchisor or its nominee in accordance with its customary business practices for the same or comparable assets at the time and place when purchased by Franchisee.  All other physical assets to be sold and transferred, except real estate, shall be valued for the purposes hereof at seller’s cost less depreciation calculated at rates as above set forth.  Real estate, if any, shall be valued at the fair market value thereof, as of the date of sale.  No value or payment shall be attributed to intangible assets, such as leases, tenancies, equipment rental and lease agreements, and other contracts and agreements.  Notwithstanding anything herein contained, if any asset to be sold and transferred to Franchisor or its nominee pursuant hereto shall then be subject to a right of purchase by Franchisee’s customer thereof, the price to be paid by Franchisor or its nominee therefor shall in no event exceed the price at which such customer is entitled to purchase the same.
 

 K.
 Franchisee shall take all steps necessary to transfer to Franchisor or its designee all telephone numbers, facsimile and electronic communication lines, used by it in the conduct of its Franchised Business, and, upon Franchisor’s request, advise the telephone company and any third party service providers who provide telephone number, facsimile and electronic communication lines used in the Franchised Business that Franchisee has no further interest in such telephone numbers, facsimile and electronic communication lines, and to approve their transfer to Franchisor or its designee.
 

 L.
 Franchisee shall comply with the covenants contained in Paragraph XV. hereof.
 

 XV.
 COVENANTS
 

 A.
 Unless otherwise specified, the term “Franchisee” as used in this Paragraph XV. shall include, collectively and individually, all Owners, officers and directors of Franchisee and Franchisee shall cause such persons to execute such further documents as Franchisor requires in its discretion in furtherance of this requirement.
 

 B.
 Franchisee covenants that during the term of this Agreement, except as otherwise expressly approved in writing by Franchisor, Franchisee’s Representative shall devote a significant amount of his personal time, energy, and direction, and Franchisee’s best efforts, to the management and operation of the Franchised Business.  At Franchisor’s request, Franchisee shall furnish Franchisor with information with respect to any other business activity of Franchisee.
 

 C.
 Franchisee acknowledges that the methods of doing business and other elements comprising the System are unique and distinctive and have been developed by Franchisor at great effort, time and expense; that Franchisee has regular and continuing access to valuable confidential information, proprietary material, and training regarding the System; and that Franchisee recognizes his obligation to encourage the use of Hertz world-wide equipment rental services, to fully develop the largest possible market for the Product Line within the Area of Responsibility.  Franchisee accordingly agrees that, during the term of this Agreement, Franchisee shall not, without the prior written consent of Franchisor, either directly or indirectly, for himself, or through, on behalf of, or in conjunction with any person, partnership, corporation, limited liability company or other entity:
 

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 (1)
 Divert or attempt to divert any actual or prospective business or customer of the business franchised hereunder, or of any other Equipment Rental Business conducted under the System, to any competitor, by direct or indirect inducement or otherwise (provided, however, that Franchisee’s obtainment of equipment from competitive businesses that are approved by Franchisor or in the Manual or otherwise in writing for the purposes of re-rental from the Franchised Business will not be deemed a diversion of business under this Paragraph X.V.(C)(1));
 

 (2)
 Employ or seek to employ any person who is at that time employed by Franchisor, or by any other franchisee of Franchisor, or otherwise directly or indirectly seek to induce such person to leave his or her employment; or
 

 (3)
 Own, maintain, engage in, operate, conduct, solicit, have any interest in, or provide any advisory or operational assistance to any other equipment renting business similar to the Equipment Rental Business.
 

 D.
 Franchisee covenants that, without written consent of Franchisor, for a period of one (1) year after the expiration or termination of this Agreement, regardless of the cause of termination, Franchisee shall not, either directly or indirectly, for himself or through, on behalf of, or in conjunction with any other person, partnership, corporation, limited liability company or other entity:
 

 (1)
 Employ or seek to employ any person who is at that time employed by Franchisor, or by any other franchisee of Franchisor, or otherwise directly or indirectly seek to induce such person to leave his or her employment; or
 

 (2)
 Own, maintain, engage in, operate, conduct, solicit, have any interest in, or provide any advisory or operational assistance to any other equipment rental business similar to the Equipment Rental Business:
 

 (a)
 Within the Area of Responsibility;
 

 (b)
 Within seventy-five (75) miles of the border of the Area of Responsibility;
 

 (c)
 Within the area of responsibility of any other System franchisee;
 

 (d)
 Within a ten (10) mile radius of the border of the area of responsibility of any other System franchisee; or
 

 (e)
 Within a ten (10) mile radius of any Equipment Rental Business operated by Franchisor or its Affiliates under the System.  
 

 If Franchisee fails or refuses to abide by any of the foregoing covenants, and Franchisor obtains enforcement in a judicial or arbitration proceeding, the obligations under the breached covenant will be tolled during the period(s) of time that the covenant is breached and/or Franchisor seeks to enforce it, and will continue in effect for a period of one (1) year after the date of the order enforcing the covenant.
 

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 E.
 Franchisee acknowledges that Franchisee’s violation of the terms of this Paragraph XV. would result in irreparable injury to Franchisor for which no adequate remedy at law may be available, and Franchisee, accordingly, consents to the issuance of an injunction prohibiting any conduct by Franchisee in violation of the terms of this Paragraph XV.  Franchisor may further avail itself of any other legal or equitable rights and remedies which it may have under this Agreement or otherwise.
 

 F.
 Franchisee expressly agrees that the existence of any claim it may have against Franchisor, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Franchisor of the covenants in this Paragraph XV.
 

 G.
 It is agreed that each of the foregoing covenants and the subjects thereof shall be construed as being independent of any other covenant, subpart or provision of this Agreement.  If all or any portion of a covenant in this Paragraph XV. is held unreasonable or unenforceable by a court or agency having valid jurisdiction in a final decision to which Franchisor is a party, Franchisee expressly agrees to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Paragraph XV.
 

 H.
 Franchisee understands and acknowledges that Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant or subpart thereof set forth in this Paragraph XV. without Franchisee’s consent, effective immediately upon notice by Franchisor, and Franchisee agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding any other provision of this Agreement.
 

 I.
 This Paragraph XV. shall not apply to any ownership by Franchisee of less than a one percent (1%) beneficial interest of the outstanding equity securities of any publicly held corporation.
 

 XVI.
 TAXES, LAWS, PERMITS, AND INDEBTEDNESS
 

 A.
 Liability for payment of taxes shall be as follows:
 

 (1)
 Franchisee acknowledges that this Agreement contemplates that Franchisor will not be responsible for any taxes with respect to any transactions or payments contemplated by or pursuant to this Agreement except as provided in this Paragraph XVI.A.
 

 (2)
 Any and all franchise, real and personal property, sales and use, retailers, occupational, gross receipts, value added, turnover, net income, and any other taxes, charges, or assessments of any nature whatsoever relating directly or indirectly to the operation of the Franchised Business, the equipment contained therein or services provided thereby, or the revenues derived therefrom, shall be the liability and responsibility of Franchisee without diminution of the payments otherwise payable to Franchisor under this Agreement and Franchisee shall pay all such taxes, charges, or assessments directly to the appropriate taxing authority when due (excluding payments which are disputed in good faith, provided that, at Franchisor’s request, Franchisee shall, at its sole cost and expense, place a reasonable bond for such payments). 
 

 

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 (3)
 Income taxes imposed on income paid to a non-resident shall be Franchisor's liability. At the option of Franchisor, or if Franchisee is legally required to withhold such taxes, payments to Franchisor shall be net of such taxes, provided an official receipt for payment thereof by Franchisee is furnished to Franchisor at the time payment hereunder is made to Franchisor.  Franchisee shall pay any penalties, interest and expenses incurred or assessed as a result of Franchisee's failure to withhold such taxes or to timely remit them to the appropriate authority. Franchisee will fully and promptly cooperate with Franchisor to provide such information and records as Franchisor may request in connection with any application by Franchisor to any taxing authority with respect to the tax credits, exemptions or refunds available for any withholding of taxes paid or payable by Franchisee.  
 

 (4)
 Each payment to be made by Franchisee under this Agreement shall be made free and clear of, and without reduction for, any consumption, value added, sales or similar taxes; and in the event any such taxes on payments to Franchisor are imposed or withheld, Franchisee shall increase each payment to ensure that Franchisor shall receive each payment as if no such taxes were paid or withheld.
 

 B.
 Franchisee acknowledges that it is responsible for and shall pay to the appropriate authority any and all payroll tax, unemployment tax, unemployment compensation contribution, disability benefit payments, insurance costs, and any other assessments or charges which relate directly or indirectly to the employment by Franchisee of employees to operate the Franchised Business.
 

 C.
 In the conduct and operation of the Franchised Business, Franchisee shall fully comply with all applicable laws, including:
 

 (1)
 All applicable laws, rules and regulations, and shall timely obtain and maintain any and all permits, certificates, or licenses necessary for the full and proper conduct of the Franchised Business, including, without limitation, licenses to do business and fictitious name registrations, sales tax permits, zoning permits, fire clearances.
 

 (2)
 All applicable laws related to the access by people with disabilities regarding the construction, design and operation of the Franchised Premises.
 

 (3)
 All applicable anti-terrorism laws.  Further, Franchisee certifies, represents and warrants that neither Franchisee nor any of its affiliates or Owners is a Restricted Person.  For the purpose of this Agreement, “Restricted Persons” shall mean any of the following:  (1) the government of any country that is subject to an embargo imposed by the United States government; (2) entities located in, or organized under, the laws of any country that is subject to an embargo imposed by the United States government; (3) individuals that ordinarily reside in any country that is subject to an embargo imposed by the United States government; or (4) persons identified from time to time by any government or legal authority under applicable laws as a person with whom dealings and transactions by Franchisor and/or its Affiliates are prohibited or restricted, including persons designated on the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) List of Specially Designated Nationals and Other Blocked Persons (including terrorists and narcotics traffickers), and similar restricted party listings, including those maintained by other governments pursuant to applicable United
 

 

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 Nations, regional or national trade or financial sanctions.
 

 (4)
 All applicable laws pertaining to the privacy of consumer, employee, and transactional information (“Privacy Laws”).  Franchisee shall comply with Franchisor’s standards and policies pertaining to privacy information as set forth in the Manual or otherwise in writing by Franchisor.  If there is a conflict between Franchisor’s standards and policies and the Privacy Laws, Franchisee shall:  (i) comply with the requirements of the Privacy Laws; (ii) immediately give Franchisor written notice of such conflict; and (iii) promptly and fully cooperate with Franchisor’s and its counsel in determining the most effective way, if any, to meet Franchisor’s standards and policies pertaining to privacy information.  
 

 (5)
 The United States Foreign Corrupt Practices Act, 15 U.S.C. §78dd-2 (“FCPA”) and all applicable laws of similar effect or nature.  In particular, Franchisee understands the FCPA’s prohibition of the payment or the gift of any item of value, either directly or indirectly, by a company organized under the laws of the United States of America or any of its states to an official, employee, or officer of, or person acting in an official capacity for, a government or international organization for the purpose of influencing any action or decision, or inducing him to use his influence with the government or organization in a manner contrary to his position or creating an improper advantage to assist Franchisor (or any agent, Affiliate or representative) in obtaining or retaining business for, with, or in that country or organization or directing business to any person.  Further, Franchisee represents and warrants that Franchisee and its affiliates do and shall comply with all applicable legal requirements and Franchisor’s policies against corrupt business practices, against money laundering and against facilitating or supporting persons who conspire to commit crimes or acts of terror against any person or government.
 

 D.
 In the event of any bona fide dispute as to liability for taxes assessed or other indebtedness, Franchisee may contest the validity or the amount of the tax or indebtedness in accordance with procedures of the taxing authority or applicable law; however, in no event shall Franchisee permit a tax sale or seizure by levy of execution or similar writ or warrant, or attachment by a creditor, to occur against the premises of the Franchised Business, or any improvements thereon.
 

 XVII.
 INDEPENDENT CONTRACTOR AND INDEMNIFICATION
 

 A.
 It is understood and agreed by the parties hereto that this Agreement does not create a fiduciary relationship between them; that Franchisee shall be an independent contractor; and that nothing in this Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of the other for any purpose whatsoever.  Franchisor and Franchisee acknowledge and agree that Franchisee is not a commercial agent of Franchisor or otherwise in relation to the System under any commercial agency/distributor law (or any similar law) in effect in the Area of Responsibility (if any) and Franchisee agrees not to present this Agreement for registration or recording with any governmental agency in connection with any such law.
 

 B.
 It is understood and agreed that nothing in this Agreement authorizes Franchisee to make any contract, agreement, warranty, or representation on Franchisor’s behalf, or to incur
 

 

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 any debt or other obligation in Franchisor’s name; and that Franchisor shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action, or by reason of any act or omission of Franchisee in its conduct of the Franchised Business, or any claim or judgment arising therefrom against Franchisee.
 

 C.
 Franchisee shall indemnify and hold Franchisor (and its Affiliates, and employees, officers and directors thereof) harmless from and against any and all liabilities, claims, actions, fines, damages, losses, costs, and expenses (including reasonable attorneys’ fees) arising out of, caused by or connected directly or indirectly with the operation of the Franchised Business, or the performance or nonperformance of Franchisee’s obligations hereunder, irrespective of whether such claims or suits shall be against Franchisor solely or as a defendant with Franchisee and/or other parties, and irrespective of whether any such claims or suits allege negligence on the part of Franchisor, and regardless of the jurisdictions in which any such claims or suits may be brought.
 

 XVIII.
 APPROVALS AND WAIVERS
 

 A.
 Whenever this Agreement requires the prior approval or consent of Franchisor, Franchisee shall make a timely written request to Franchisor therefor, and such approval or consent shall be obtained in writing.  Franchisor will also consider, in its sole discretion, other reasonable requests individually submitted in writing by Franchisee for Franchisor’s consent to a waiver of any obligation imposed by this Agreement.
 

 B.
 Franchisor makes no warranties or guarantees upon which Franchisee may rely, and assumes no liability or obligation to Franchisee, by providing any waiver, approval, consent or suggestion to Franchisee in connection with this Agreement, or by reason of any neglect, delay or denial of any request therefor.
 

 C.
 No failure of Franchisor to execute any power reserved to it by this Agreement, or to insist upon strict compliance by Franchisee with any obligation or condition hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Franchisor’s right to demand exact compliance with any of the terms herein.  Waiver by Franchisor of any particular default by Franchisee shall not affect or impair Franchisor’s rights with respect to any subsequent default of the same, similar or different nature, nor shall any delay, forbearance or omission of Franchisor to exercise any power or right arising out of any breach or default by Franchisee of any of the terms, provisions or covenants hereof, affect or impair Franchisor’s right to exercise the same, nor shall such constitute a waiver by Franchisor of any right hereunder, or the right to declare any subsequent breach or default and to terminate this license prior to the expiration of its term.  Subsequent acceptance by Franchisor of any payments due to it hereunder shall not be deemed to be a waiver by Franchisor of any preceding breach by Franchisee of any terms, covenants or conditions of this Agreement.
 

 XIX.
 NOTICES
 

 Any notice required or permitted to be given pursuant to this Agreement shall be in writing and shall be effective on the earlier of: (a) one business day after it is sent by a commercially recognized (e.g., FedEx or UPS) or postal service next business day delivery
 

 

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 service; or (b) the fifth (5th) business day after it is sent by registered air mail (return receipt requested) to the appropriate party at the following notice address, or such other notice address as may be designated by the party to be notified.
 

 The Franchisor’s notice address is:
 

 Franchise Development Manager
 Hertz Equipment Rental Corporation
 225 Brae Boulevard
 Park Ridge, New Jersey  07656
 U.S.A
 

 Franchisor’s agent for service of process in the State of New York (USA):
 

 CT Corporation Systems
 111 Eighth Avenue
 New York, New York 10011
 U. S. A.
 

 The Franchisee’s notice address is:
 

 Mongolia Equipment Rental Corporation
 2300 W. Sahara Ave
 Suite 800
 Las Vegas, NV 89102
 USA
 

 With additional notice to be sent to:
 

 Hogan Lovells (Ulaanbaatar) LLC
 Suite 401, New Century Plaza
 Sukhbaatar District, 1st Khoroo
 Chinggis Avenue-15
 Ulaanbaatar 211213
 Mongolia
  
 The notice addresses hereby given may be changed at any time by either party through written notice to the other.  
 

 XX.
 ENTIRE AGREEMENT
 

 This Agreement, when fully executed, shall supersede and cancel any and all prior and existing agreements, understandings, representations, or statements either oral or in writing, between the parties hereto with respect to the subject matter hereof, and contains all of the covenants and agreements between the parties with respect to the subject matter hereof.  Any amendment or modification of this Agreement is invalid unless made in writing, specifies with
 

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 particularity the nature of such modification or amendment, and is signed by the parties hereto.  Franchisee acknowledges that neither Franchisor nor anyone on behalf of Franchisor has made any representations, inducements, promises or agreements, orally or otherwise, respecting the subject matter of this Agreement which are not embodied herein, and that no other representations induced Franchisee to execute this Agreement.
 

 XXI.
 SEVERABILITY AND CONSTRUCTION
 

 A.
 Each paragraph, part, term, and/or provision of this Agreement shall be considered severable; and if, for any reason, any paragraph, part, term, and/or provision herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency having valid jurisdiction, such shall not impair the operation of, or have any other effect upon, such other paragraphs, parts, terms, and/or provisions of this Agreement as may remain otherwise intelligible, and the latter shall continue to be given full force and effect and bind the parties hereto; and such invalid paragraphs, parts, terms, and/or provisions shall be deemed not to be a part of this Agreement.
 

 B.
 Except as specified to the contrary herein, nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal entity other than Franchisor or Franchisee, and such of their respective successors and assigns as may be contemplated by Paragraph XII. hereof, any rights or remedies under or by reason of this Agreement.
 

 C.
 All captions in this Agreement are intended solely for the convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision hereof.
 

 D.
 All references herein in the singular shall be construed to include the plural where applicable, and the masculine to include the neuter gender; and all covenants, agreements, and obligations herein assumed by Franchisee shall be deemed to be joint and several covenants, agreements, and obligations of the several persons named herein as Franchisee.
 

 E.
 This Agreement may be executed in triplicate, and each copy so executed shall be deemed an original.
 

 XXII.
 DISPUTE RESOLUTION
 

 A.
 COSTS AND ATTORNEYS’ FEES
 

 If Franchisor incurs costs and expenses due to Franchisee’s failure to pay when due amounts owed to Franchisor, to submit when due any reports, information, or supporting records, or otherwise comply with this Agreement, Franchisee agrees, whether or not Franchisor initiates any action or proceeding, to reimburse Franchisor for all of the costs and expenses that Franchisor incurs, including, without limitation, reasonable accounting, attorneys’, arbitrators’ and related fees.
 

 

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 B.
 GOOD FAITH EFFORTS TO RESOLVE DISPUTE
 

 Prior to the initiation of any arbitration proceeding set forth in Paragraph XXII.C., below, any dispute shall first be discussed in a face-to-face meeting between Franchisee and a corporate representative of Franchisor, each authorized to make binding commitments on behalf of their respective parties.  This meeting shall be held in person at Franchisor’s then current headquarters (presently in Park Ridge, New Jersey) and within thirty (30) days after the date of written notice given by either Franchisee or Franchisor to the other proposing such a meeting, unless Franchisor and Franchisee agree otherwise.  Franchisor and Franchisee agree that the written notice proposing such a meeting shall be subject to, and shall be dated prior to the expiration of the limitations period set forth in Paragraph XXII.G. below.
 

 C.
 ARBITRATION
 

 Franchisee and Franchisor agree that all controversies, disputes, or claims between Franchisor and/or Franchisor’s Affiliates (and their respective equity holders, officers, directors, agents, and/or employees) and Franchisee and/or Franchisee’s affiliates (and their respective owners, officers, directors, agents, guarantors, and/or employees), if any, arising out of or related to:
 

 (1)
 This Agreement or any other agreement between Franchisor and Franchisee;
 

 (2)
 Franchisor’s relationship with Franchisee; or
 

 (3)
 The scope and validity of this Agreement or any other agreement between Franchisor and Franchisee or any provision of such agreements (including, but not limited to, the validity and scope of the arbitration obligations under this Paragraph, which the parties acknowledge is to be determined by an arbitrator and not a court);
 

 shall be submitted for binding arbitration, on demand of either party, to the International Center for Dispute Resolution (“ICDR”).  The arbitration proceedings shall be conducted by one arbitrator and, except as this Paragraph otherwise provides, according to the then-current international arbitration rules of the ICDR. The arbitration panel shall consist of one (1) arbitrator, unless the claim amount exceeds ten million dollars ($10,000,000) in which case there shall be three (3) arbitrators.  The arbitrators shall have a minimum of ten (10) years international licensing or commercial transaction experience. All proceedings shall be conducted in the City of New York, New York, U.S.A.  The language of the arbitration shall be English.  All matters relating to arbitration shall be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.).  Notwithstanding any other provision of this Paragraph XXII to the contrary, judgment upon the arbitrator’s award may be entered in any court of competent jurisdiction.  Each of the parties hereby waives all objections which it may have at any time to the laying of venue of any proceedings brought in such courts, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object with respect to such proceedings that any such court does not have jurisdiction over such party.
 

 

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 The arbitrator shall have the right to award or include in his or her award any relief which he or she deems proper including, but not limited to, money damages (with interest on unpaid amounts from the date due), specific performance, injunctive relief, and attorneys’ fees and costs, provided that the arbitrator may not declare any Proprietary Marks generic or otherwise invalid or, except as expressly provided in Paragraph XXII.F. below, award any punitive or exemplary damages against either party which such damages the parties hereby expressly waive to the fullest extent permitted by law.
 

 Other than as may be required by law, the entire arbitration proceeding (including, but not limited to, any rulings, decisions or orders of the arbitrator) shall remain confidential and not be disclosed to anyone other than the parties to this Agreement.
 

 Franchisor and Franchisee agree to be bound by the provisions of any limitation on the period of time in which claims must be brought under applicable law or this Agreement, whichever expires earlier.  Franchisor and Franchisee further agree that, in any arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the Federal Rules of Civil Procedure) within the same proceeding as the claim to which it relates.  Any claim which is not submitted or filed as required is forever barred.  The arbitrator may not consider any settlement discussions or settlement offers that might have been made by either Franchisor or Franchisee.  Franchisor reserves the right, but has no obligation, to advance Franchisee’s share of the costs of any arbitration proceeding in order for such arbitration proceeding to take place and by doing so shall not be deemed to have waived or relinquished Franchisor’s right to seek the recovery of those costs in accordance with Paragraph XXII.A.
 

 Franchisor and Franchisee agree that arbitration shall be conducted on an individual, not a class-wide, basis and that an arbitration proceeding between Franchisor and/or Franchisor’s Affiliates (and their respective equity holders, officers, directors, agents, and/or employees) and Franchisee and/or Franchisee’s affiliates (and their respective owners, officers, directors, agents, guarantors, and/or employees), if any, may not be consolidated with any other arbitration proceeding between Franchisor and any other person.  Notwithstanding the foregoing or anything to the contrary in this Paragraph, if any court or arbitrator determines that all or any part of the preceding sentence is unenforceable with respect to a dispute that otherwise would be subject to arbitration under this Paragraph XXII.C., then the parties agree that this arbitration clause shall not apply to that dispute and that such dispute shall be resolved in a judicial proceeding in accordance with this Paragraph XXII (excluding this Paragraph XXII.C.).
 

 Despite Franchisor’s and Franchisee’s agreement to arbitrate, Franchisor and Franchisee shall each have the right to seek (in a proper case only) temporary restraining orders and temporary or preliminary injunctive relief from a court of competent jurisdiction, provided that the underlying claim is contemporaneously submitted for arbitration on the merits pursuant to this Paragraph XXII.C., provided further that for controversies, claims or disputes related to the Proprietary Marks, the covenants at Paragraph XV of this Agreement or any confidentiality obligations under this Agreement neither Franchisor nor Franchisee shall be required to simultaneously submit the underlying claim for arbitration on the merits and shall have the right
 

 

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 to seek relief (including, without limitation, temporary restraining orders, temporary, preliminary or permanent injunctive relief or other equitable remedies) from a court of competent jurisdiction.
 

 The provisions of this Paragraph XXII.C. are intended to benefit and bind Franchisor and/or Franchisor’s Affiliates (and their respective equity holders, officers, directors, agents, and/or employees) and Franchisee and/or Franchisee’s affiliates (and their respective owners, officers, directors, agents, guarantors, and/or employees), if any, and shall continue in full force and effect subsequent to and notwithstanding this Agreement’s expiration or termination. 
 

 D.
 GOVERNING LAW
 

 ALL MATTERS RELATING TO ARBITRATION SHALL BE GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. §§ 1 ET SEQ.).  EXCEPT TO THE EXTENT GOVERNED BY THE FEDERAL ARBITRATION ACT, THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), OR OTHER FEDERAL LAW, THIS AGREEMENT, THE LICENSE, AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN FRANCHISOR  AND FRANCHISEE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES.  NOTHING IN THIS PARAGRAPH XXII.D IS INTENDED BY THE PARTIES TO SUBJECT THIS AGREEMENT TO ANY FRANCHISE OR SIMILAR LAW, RULE, OR REGULATION TO WHICH THIS AGREEMENT WOULD NOT OTHERWISE BE SUBJECT, AND NO SUCH LAW, RULE OR REGULATION SHALL APPLY UNLESS ITS JURISDICTIONAL, DEFINITIONAL AND OTHER REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
 

 E.
 WAIVER OF PUNITIVE DAMAGES 
 

 EXCEPT FOR FRANCHISEE’S OBLIGATION TO INDEMNIFY FRANCHISOR FOR THIRD PARTY CLAIMS UNDER PARAGRAPH XVII.C., FRANCHISOR AND FRANCHISEE WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF A DISPUTE BETWEEN FRANCHISOR AND FRANCHISEE, EACH PARTY SHALL BE LIMITED TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
 

 F.
 LIMITATIONS OF CLAIMS
 

 Except for claims arising from Franchisee’s non-payment or underpayment of amounts Franchisee owes Franchisor, any and all claims and actions arising out of or relating to this Agreement brought by either party against the other, whether in an arbitration or in a legal action, shall be commenced within the time period in which claims shall be brought under applicable law, or one (1) year from the occurrence of the facts giving rise to such claim or
 

 

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 action, whichever expires earlier, or such claim or action shall be barred; provided, however, that the one-year period for commencing an arbitration shall be tolled for a period not to exceed thirty (30) days while the parties seek to resolve the dispute under Paragraph XXII.B. if the notice required under Paragraph XXII.B. is given prior to the expiration of the one (1) year period referred to in this Paragraph XXII.G.
 

 G.
 RIGHTS OF PARTIES ARE CUMULATIVE
 

 Franchisor’s and Franchisee’s rights under this Agreement are cumulative, and Franchisor’s or Franchisee’s exercise or enforcement of any right or remedy under this Agreement shall not preclude Franchisor’s or Franchisee’s enforcement of any other right or remedy that Franchisor or Franchisee are entitled by law to enforce.
 

 XXIII.
 ACKNOWLEDGMENTS
 

 A.
 Franchisee acknowledges that it has conducted an independent investigation of the business franchised hereunder, and recognizes that the business venture contemplated by this Agreement involves business risks and that its success will be largely dependent upon the ability of Franchisee as an independent businessperson.  Franchisor expressly disclaims the making of, and Franchisee acknowledges that it has not received, any warranty or guarantee, express or implied, as to the potential volume, profits or success of the business venture contemplated by this Agreement.
 

 B.
 Franchisee acknowledges that it has received, read and understood this Agreement and the Exhibits hereto; that Franchisor has fully and adequately explained the provisions of each to Franchisee’s satisfaction; and that Franchisor has accorded Franchisee ample time and opportunity to consult with advisors of Franchisee’s own choosing about the potential benefits and risks of entering into this Agreement.  
 

 XXIV.
  MISCELLANEOUS
 

 A.
 This Agreement shall not become binding upon Franchisor until approved, accepted and executed by its President or any Vice President.   To facilitate the execution of this Agreement by geographically separated parties, it may be executed in two or more counterparts, all of which shall constitute one agreement.  The execution by one party of any counterpart shall be sufficient execution by that party whether or not the same counterpart has been executed by any other party.  This Agreement shall become effective when each party has signed at least one counterpart.  All facsimile executions shall be treated as originals for all purposes.  The parties shall do and cause to be done all such acts, matters and things and shall execute and deliver all such documents and instruments as shall be required to enable the parties to perform their respective obligations under, and to give effect to the transactions contemplated by, this Agreement. Without limiting the foregoing, with respect to any power of attorney granted by this Agreement which would be required to be in a specific form, translated into another language or executed in a particular manner for it to be binding and enforceable in any country, Franchisee agrees to execute in the required form and manner a separate power of attorney meeting all such legal requirements to ensure enforceability.
 

 

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 B.
 This Agreement shall be approved by, and/or registered or recorded with, such governmental authorities, as determined by Franchisor in its discretion.  Franchisor and Franchisee agree (a) to cooperate with each other in connection with any dealings with all governmental authorities relating to this Agreement,  (b) that neither shall submit any information to governmental authorities with respect to this Agreement without the other’s prior written approval which approval shall not be unreasonably withheld, and (c) the parties shall share equally the expenses of obtaining approval of,  and/or registering or recording this Agreement,  and any amendment hereto or thereto,  including all legal and other professional expenses (including translation expenses and disbursements),  with the appropriate governmental authorities (except as provided in Paragraph VI.A. (9) above).  If such governmental agency should require the alteration or modification of any term or condition of this Agreement or of the performance of the parties hereunder, and if Franchisor considers the requested alteration or modification to be material and adverse to Franchisor, then Franchisor may terminate this Agreement by giving written notice to this effect to Franchisee within sixty (60) days of notice of such governmental requirement. 
 

 C.
 This Agreement has been executed in English.  If executed in a local language, the English version will control for all purposes, including any controversies, disputes or claims that will be resolved by arbitration or other legal proceeding.  If, in either case, a version translated into local language is required, Franchisee will prepare the translation, provided that Franchisor retains the right to approve such translation.  All communication between Franchisor and Franchisee will be in English.  If translation of any communication into local language is required, Franchisee is responsible for any costs incurred to accomplish this, including any cost Franchisor incurs in order to verify that a translation provided by Franchisee is accurate.  Franchisee acknowledges that any translation, whether commissioned or paid for by Franchisor or Franchisee, shall be the property of Franchisor and constitute a part of Franchisor’s confidential information.  Franchisee shall execute any assignments or other documents necessary to effect Franchisor’s ownership of such translations. 
 

 D.
 Except as otherwise expressly provided herein, neither party shall be liable for loss or damage or deemed to be in breach of this Agreement if its failure to perform its obligations results from:  (a) windstorms, rains, floods, earthquakes, typhoons, mudslides or other similar natural causes; (b) fires, strikes, embargoes, war, terrorist acts, or riots; or (c) acts of  government, or (d) any other event or cause beyond the reasonable control of the party affected (“Force Majeure”).  Any delay resulting from any of such causes, other than a Political Event, shall extend performance accordingly or excuse performance, in whole or in part, as may be reasonable, except that no such cause shall excuse payment of amounts owed at the time of such occurrence or payment of amounts due to Franchisor subsequent to such occurrence.  Notwithstanding the foregoing, if any Force Majeure continues for more than ninety (90) days, Franchisor shall have the right to terminate this Agreement in its entirety.
 

 E.
 The parties shall cooperate with each other on all press releases and other public statements relating to this Agreement and marketing, promotional, and solicitation materials relating to this Agreement.  Neither party shall issue any press release or other public statement relating to this Agreement without the prior written approval of the other party, except for any public statement required under applicable laws (including reporting requirements applicable to public companies).  With respect to any public statement required under applicable laws
 

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 (including reporting requirements applicable to public companies), the issuing party shall provide the other party with a reasonable opportunity to review and comment upon any such statement prior to its issuance.
 

 F.
 Simultaneously with Franchisee’s execution of this Agreement, Franchisee shall cause the Guaranty and Undertaking attached to this Agreement as Exhibit D to be executed by the Owner or other party approved by Franchisor.
 

 G.
 All obligations under this Agreement, which expressly or by their nature survive the expiration or termination of this Agreement, shall continue in full force and effect until they are satisfied in full or by their nature expire.
 

 H. 
 Franchisee shall execute a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its Affiliates and their officers, directors and employees, in their corporate and individual capacities, for claims arising before the signing of this Agreement, including, without limitation, claims arising under all local laws, rules, and ordinances.
 

 IN WITNESS WHEREOF, the parties hereto have duly executed these presents, on the day and year first above written in this Agreement.
 

 

 [signature page follows]
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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	 HERTZ EQUIPMENT RENTAL CORPORATION
	 MONGOLIA EQUIPMENT RENTAL
CORPORATION

	 (FRANCHISOR)
 

 

	 (FRANCHISEE)

	 BY: /s/ Naren Srinivasan
	 BY: /s/ Gary Kucher

	 TITLE: Vice President, 
              Strategy and Corporate Development
	 TITLE: CEO

 

 

 CONSENT BY HERTZ SYSTEM, INC.
 

 Hertz System, Inc., a Delaware, U.S.A., corporation having its principal office in Park Ridge, New Jersey, U.S.A., in consideration of the execution of the foregoing Agreement by the Franchisee named therein and the performance by such Franchisee of its obligations thereunder, hereby agrees to permit Franchisee, during the term of said Agreement, to use in the conduct of the Franchised Business, the Proprietary Marks (as defined therein) in accordance with the terms of said Agreement, PROVIDED THAT Franchisee shall not use, cause to be used, or attempt to use any Proprietary Marks, including the name "Hertz", as a corporate or other business name or as any part of a corporate or business name, or to purchase, sell, license or register vehicles or equipment under a name that includes any Proprietary Marks, including the name "Hertz," in any manner whatsoever.
 

 IN WITNESS WHEREOF, Hertz System, Inc. has duly executed and delivered this Consent this 21 day of March, 2013.
 

 HERTZ SYSTEM, INC.
 

 By: /s/ Naren Srinivasan
        Vice President
 

 

 

 

 

 

 

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