Document:

Exhibit 10.2

 

OMNIBUS
AGREEMENT

 

This OMNIBUS
AGREEMENT (this “Agreement”),
dated as of this 2nd day of September, 2004 (the “Effective
Date”), is made by and between TOTAL LNG USA, INC.,
a company incorporated under the laws of the state of Delaware, with a place of
business at One Memorial City Plaza, 800 Gessner, Suite 700, Houston, Texas
U.S.A. 77024 (“Customer”) and SABINE PASS LNG, L.P., a Delaware limited partnership with a
place of business at 717 Texas Avenue, Suite 3100, Houston, Texas, U.S.A. 77002
(“SABINE”).  Customer and SABINE are each sometimes
referred to herein as a “Party” and are
together sometimes referred to herein as the “Parties”.

 

RECITALS

 

WHEREAS, SABINE
intends to construct, own and operate an LNG terminal facility in Cameron Parish,
Louisiana capable of performing certain LNG terminalling services, including:
the ability to berth LNG Vessels; the receiving and storing of LNG which has
been unloaded from LNG Vessels; the regasification of LNG; and the
delivery of natural gas to a pipeline interconnection point at the terminal
facility;

 

WHEREAS, the Parties are executing simultaneously herewith an LNG
Terminal Use Agreement (“TUA”) under
which SABINE will, subject to Customer exercising its option hereunder, provide
LNG terminalling services to Customer at the Sabine Pass Facility, and the
Parties agree to condition the effectiveness of the TUA on the fulfillment of
certain conditions precedent;

 

WHEREAS, the Parties desire to address the possibility of certain
changes to their contractual relationship under certain circumstances; and

 

WHEREAS, the Parties wish to memorialize other understandings
supplementing the TUA, including Customer’s obligation to pay certain capacity
reservation fees and additional Customer rights with respect to the expansion
of the Sabine Pass Facility.

 

NOW,
THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, SABINE
and Customer agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Capitalized
terms used in this Agreement and not otherwise defined herein have the meanings
given to them in the TUA; provided that
the terms defined below shall have the following meanings:

 

1.1                                 “Condition Fulfillment Date” means
June 30, 2005.

 

1.2                                 “FERC Application” means that
certain application (as amended immaterially from time to time) filed by SABINE
with the FERC on December 22, 2003, in Docket No. CP04-47-000  in relation to the Sabine Pass Facility
pursuant to Section 3(a) of the Natural Gas Act (“NGA”)
and the corresponding regulations of the FERC.

 

 

1.3                                 “FERC Approval” means the order of
the FERC granting to SABINE the approvals requested in the FERC Application
(for the avoidance of doubt, FERC Approval does not mean an order of the FERC
granting the approvals requested in the applications filed by Cheniere Sabine
Pass Pipeline Company in FERC Docket Nos. CP04-38-000, CP04-39-000 and
CP04-40-000 pursuant to Section 7(c) of the NGA in relation to the pipeline to
interconnect with the Sabine Pass Facility).

 

ARTICLE 2

CAPACITY RESERVATION FEES

 

2.1                                 Capacity
Reservation Fee First Installment. 
Within thirty (30) days of the Effective Date, Customer shall confirm in
writing to SABINE whether or not Customer has obtained the approval of the
Customer’s Board of Directors for this Agreement and the TUA.  Thereafter (and notwithstanding receipt of
such approval), at Customer’s option, to be exercised by Customer in its sole
and absolute discretion no later than Monday, the 15th day of
November 2004, Customer shall: (i) pay to SABINE the amount of U.S.$10,000,000
(the “Capacity Reservation Fee First Installment”)
by wire transfer in immediately available funds to an account specified in
writing by SABINE (which account SABINE shall so specify the earlier of
November 8, 2004 or upon request by Customer) and (ii) cause TOTAL S.A. to
execute and deliver to SABINE the Guarantee. 
Except as provided in Clause 2.3, SABINE shall have no obligation to
refund to Customer the Capacity Reservation Fee First
Installment for any reason.  In the event
that: (i) confirmation of Customer’s Board of Directors approval has not
been given to SABINE (for any or no reason whatsoever) within the above thirty
(30) day period; or (ii) Customer elects (for any or no reason whatsoever) to
not make the payment; or (iii) Customer elects (for any or no reason
whatsoever) to not cause TOTAL S.A. to execute and deliver the Guarantee under
this Clause 2.1 by November 15, 2004, then, for all purposes,
(a) Customer shall be deemed to have not exercised the foregoing option
and (b) this Agreement and the TUA shall terminate automatically (and,
without in any way limiting the generality of the foregoing, SABINE and
Customer shall each be discharged from all obligations and liabilities under
this Agreement and the TUA).

 

2.2                                 Capacity
Reservation Fee Second Installment. 
No later than three (3) Business Days following satisfaction of the
Conditions Precedent and the exercise of the option by Customer pursuant to
Clause 2.1, Customer shall pay to SABINE an additional amount of
U.S.$10,000,000 (the “Capacity Reservation Fee
Second Installment”) by wire transfer in immediately available funds
to an account specified in writing by SABINE. 
Except as provided in Clause 2.3, SABINE shall have no obligation to
refund to Customer the Capacity Reservation Fee Second
Installment for any reason.

 

2.3                                 Fee
Adjustment for the Capacity Reservation Fee.  The Capacity Reservation Fee First
Installment and the Capacity Reservation Fee Second Installment shall be
recouped by Customer through a monthly reduction in the Fee equal to $166,667
for each month during the first one hundred and twenty (120) months following
the Commercial Start Date of the Sabine Pass Facility.  For the relevant one hundred and twenty (120)
month period, the reduction will be reflected in the monthly statement SABINE
provides Customer pursuant to Section 11.1 of the TUA.

 

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ARTICLE 3

CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE TUA

 

3.1                                 Conditions Precedent

 

The Parties acknowledge and agree that the provisions of this Agreement
are effective and binding as of the Effective Date.  Any provision of the TUA notwithstanding, the
Parties acknowledge and agree that only the provisions of Article 1, Article 17, Article 18, Article
19, Article 20, Article 21, Article 23, and Article 24 of the TUA are
effective and binding as of the Effective Date; provided, however, that
Customer’s obligations under Section 17.2(c) of the TUA shall not be effective
or binding on Customer unless and until the date on which Customer exercises
its option under Clause 2.1.  Any
provision of the TUA notwithstanding, the Parties also acknowledge and agree
that all other provisions contained in the TUA shall not become effective and
binding unless and until both of the following conditions (“Conditions Precedent”) have been satisfied by no later than
the Condition Fulfillment Date:

 

(a)                                  FERC
Approval.  SABINE shall have obtained
and provided to Customer evidence of the FERC Approval (the “Approval Condition Precedent”); and

 

(b)                                 Financing
Approval.  SABINE shall have provided
to Customer evidence that it can finance the expected cost of development and
construction of the Sabine Pass Facility (the “Financing
Condition Precedent”).  The
Financing Condition Precedent shall be deemed to have been satisfied if, but
only if, the following conditions are satisfied or waived in writing by
Customer:

 

(i)                                     SABINE
has entered into (and provided Customer with a copy of) a definitive loan
agreement with creditworthy lenders experienced in making energy project loans
under the terms of which the lenders agree to lend to SABINE an amount which
when aggregated with the equity contributed to SABINE is sufficient to fund the
engineering, procurement and construction of the Sabine Pass Facility, such
loan agreement being subject to no conditions precedent other than customary
and routine conditions (including FERC Approval) that are reasonably expected
to be satisfied; and

 

(ii)                                  SABINE has entered
into (and provided Customer with a copy of) an EPC contract, acceptable to the
lenders, with a contractor that is an internationally recognized, reputable,
creditworthy and experienced engineering, procurement and construction company,
such EPC contract remains in full force and effect, there is no default
thereunder, SABINE has issued a written notice to proceed to the EPC contractor
under such EPC Contract, and the EPC contractor has accepted in writing SABINE’s
notice to proceed.

 

3.2                                 Satisfaction of Conditions Precedent; Notification; Waiver and
Termination

 

(a)                                  General.
SABINE shall endeavor to procure the satisfaction of the Conditions Precedent
by the Condition Fulfillment Date, and shall keep Customer reasonably

 

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informed as to the progress
being made towards satisfaction of the Conditions Precedent.

 

(b)                                 Notification.  SABINE shall promptly notify Customer in
writing of satisfaction of any of the Conditions Precedent.  Moreover, SABINE shall promptly notify
Customer in writing upon SABINE’s determination that a Condition Precedent
cannot be met or is not likely to be met by the Condition Fulfillment Date and
the basis for such non-satisfaction.

 

(c)                                  Termination
for Non-Satisfaction of Approval Condition Precedent.  If the Approval Condition Precedent has not
been satisfied by the Condition Fulfillment Date, then Customer may terminate
this Agreement and the TUA with immediate effect by giving written notice of
such termination to SABINE within thirty (30) days after the Condition
Fulfillment Date.  In the event of a termination of this Agreement under this Clause 3.2(c),
SABINE and Customer shall each be discharged from any further obligations or
liabilities under this Agreement and the TUA.

 

(d)                                 Termination
for Unacceptable FERC Approval.  If
the FERC Approval contains a condition that limits or would have the effect of
limiting the cargo capacity of LNG vessels that may use the Sabine Pass
Facility to less than 250,000 cubic meters, then Customer may terminate this
Agreement and the TUA with immediate effect by giving written notice of such
termination to SABINE within thirty (30) days after the sixty (60) day cure
period provided below.  SABINE shall have
a period of sixty (60) days following receipt of FERC Approval in which to
cause FERC to eliminate the above cargo capacity condition imposed by the
FERC.  In the event of a termination of this Agreement under this Clause 3.2(d),
SABINE and Customer shall each be discharged from any further obligations or
liabilities under this Agreement and the TUA.

 

(e)                                  Failure
to Satisfy Financing Condition Precedent. 
If the Financing Condition Precedent has not been satisfied by the
Condition Fulfillment Date, then Customer may terminate this Agreement and the
TUA with immediate effect by giving written notice of such termination to
SABINE within thirty (30) days after the Condition Fulfillment Date.  In the event of a termination
of this Agreement under this Clause 3.2(e), SABINE and Customer shall each be
discharged from any further obligations or liabilities under this Agreement and
the TUA.

 

(f)                                    Failure
to Satisfy Conditions Precedent.  If
either or both of the Conditions Precedent have not been satisfied by the
Condition Fulfillment Date and Customer has not exercised its termination
rights as provided for in this Clause 3.2, then SABINE shall use its
commercially reasonable efforts to obtain the approvals necessary for the
fulfillment of the Conditions Precedent. 
Subsequent to the Condition Fulfillment Date, Customer may, in its sole
discretion, propose financing adequate to satisfy the Financing Condition
Precedent, which SABINE may accept or reject in its sole discretion.  In the event that by January 1, 2006 the
Conditions Precedent are not met then either Party hereto may terminate this
Agreement and the TUA.  In the event of a termination of this Agreement under this Clause 3.2(f),
SABINE and Customer

 

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shall each be discharged from
any further obligations or liabilities under this Agreement and the TUA other
than liabilities accruing prior to termination..

 

ARTICLE 4

EXPANSION AND EXPANSION RECEPTION QUANTITY

 

If at any time within the period ending two (2) years after the
Effective Date, SABINE determines that it desires to expand the regasification
capacity of the Sabine Pass Facility, it shall provide written notice to
Customer.  No later than a period of two
(2) years after the Effective Date, Customer may provide written notice to SABINE
of its desire for the LNG storage and regasification capacity at the Sabine
Pass Facility to be expanded.  In this
respect, the Parties shall exclusively negotiate the proposed terms and
conditions of such expansion in good faith for a period of ninety (90) days
from the date such written notice is received by the other Party; provided that SABINE shall be obliged to enter into such
negotiations only if Customer desires to increase its Maximum LNG Reception
Quantity (as determined by Customer in its sole discretion) by an amount equal
to between 195,457,500 MMBTUs per Contract Year and 390,915,000 MMBTUs per
Contract Year upon the date commercial operations commence with respect to the
expansion. The reservation fee for the expansion quantity shall equal $0.24 per
MMBTU multiplied by the expansion quantity, assuming the storage to
regasification ratio to be 3 to 1.

 

Additionally, notwithstanding the foregoing obligation of the Parties
to negotiate the proposed terms and conditions of the expansion in good faith,
Customer acknowledges and agrees that the timing of the development and
construction of the expansion shall be at SABINE’s sole and absolute
discretion.

 

ARTICLE 5

OPERATING MATTERS

 

5.1                                 Tug
and Line Handling Boats

 

The Parties acknowledge that three (3) 5,000-horsepower, 70 ton bollard
pull tug boats with fire-fighting capability and two (2) line handling boats to
assist with the safe berthing of LNG Vessels will be dedicated to the Sabine
Pass Facility.  Such tug and line
handling boats will be available to Customer and all Other Customers of the
Sabine Pass Facility on a non-discriminatory basis.  The Parties agree to cooperate in seeking
competitive bids to fulfill the requirements for these tugs.  Customer shall have the right to nominate
potential vendors to bid on these services. 
The Parties, along with Other Customers, shall exercise commercially
reasonable efforts in the selection of a third-party supplier which has the
most competitive bid taking into account multiple factors including price,
contractual terms and conditions, specifications of the bid, the reputation,
financial condition and technical capability of the bidders and responsiveness
of service.

 

5.2                                 Secondments

 

From and after the date on which the Capacity Reservation Fee Second
Installment is paid, or earlier if the Parties so agree, and throughout the
effectiveness of the TUA, Customer shall have the right, in its sole
discretion, to second employees to SABINE, not exceeding four (4) in number at
any one time, to occupy technical positions within SABINE with

 

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responsibilities relating to such matters as engineering, design,
construction supervision, and operations, but not commercial matters.  The employees so seconded shall report to
SABINE, shall comply with all personnel policies of SABINE, shall be competent
to safely perform the duties of the position which they fill, shall be paid in
accordance with the SABINE pay scale, and shall be terminable at the discretion
of SABINE.  For the purpose of this
Clause 5.2, SABINE shall mean SABINE, an operating company created by Cheniere
Energy, Inc. or its Affiliate to operate the Sabine Pass Facility or a third
party contractor selected to operate the Sabine Pass Facility.

 

ARTICLE 6

LNG AND GAS QUALITY SPECIFICATIONS

 

6.1                                 Notwithstanding compliance by
Customer and SABINE with their respective obligations under Sections 9.4 and
10.3 of the TUA, the Parties acknowledge that the Gas redelivered or to be
redelivered by SABINE to Customer pursuant to the TUA may not conform to the
quality specifications of one or more of Customer’s Downstream Pipelines. The
Parties also acknowledge that Gas redelivered or to be redelivered by SABINE to
Other Customers also may not conform to the quality specifications of one or
more of their Downstream Pipelines. 
Either or both of these potential occurrences are defined as “Downstream Pipelines Nonconformance.”

 

6.2                                 The
Parties further acknowledge that the U.S. natural gas industry is addressing
and attempting to resolve, on an industry-wide basis, existing and potential
quality nonconformance problems such as Downstream Pipelines Nonconformance.

 

6.3                                 “Customer
Nonconformance” means any Downstream Pipelines Nonconformance with
respect to any of Customer’s Downstream Pipelines that exists or is reasonably
likely to exist because the Gas to be redelivered to Customer under the TUA (“Redelivered Gas”) will not meet the specifications of any of
Customer’s applicable Downstream Pipelines solely as a result of the Customer’s
LNG to be delivered under the TUA (“Delivered LNG”)
not meeting such Downstream Pipelines’ specifications.

 

6.4                                 “SABINE
Nonconformance” means any Downstream Pipelines Nonconformance with
respect to any of Customer’s Downstream Pipelines that exists or is reasonably
likely to exist on any of Customer’s Downstream Pipelines for any reason other
than a Customer Nonconformance.

 

6.5                                 On or before June 30, 2006,
either Party may provide written notice to the other Party that any Downstream
Pipelines Nonconformance may reasonably be expected to exist on or after the
Commercial Start Date (the “Nonconformance Notice”).

 

6.6                                 Upon delivery and receipt of the
Nonconformance Notice, the Parties shall expeditiously negotiate in good faith
a commercially reasonable and mutually satisfactory resolution of such
Downstream Pipelines Nonconformance such that Customer’s Redelivered Gas
satisfies the specifications of Customer’s Downstream Pipelines.  Such agreement shall be referred to as the “Compliance Agreement”.

 

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6.7                                 If (i) any Downstream
Pipelines Nonconformance identified in the Nonconformance Notice is a SABINE
Nonconformance or (ii) on or prior to June 30, 2006, Customer
notifies SABINE in writing of the specifications with respect to any of Customer’s
Downstream Pipelines and or thereafter there is a SABINE Nonconformance
involving any such Downstream Pipelines due to such specifications and the
Parties have been unable within ninety (90) days of the Nonconformance Notice
to agree upon a Compliance Agreement, SABINE shall either cure the SABINE
Nonconformance or reimburse, through a reduction in the Fee payable under the
TUA, Customer’s reasonably incurred cost of treating to the extent necessary to
eliminate the SABINE Nonconformance.

 

6.8                                 If the Nonconformance Notice
identifies any Customer Nonconformance, and the Parties have been unable to
reach a Compliance Agreement, then Customer shall bear the costs of its own
treating.

 

6.9                                 If at any time after June 30,
2005, SABINE notifies Customer that it has received a bona fide offer to
purchase terminalling services at the Sabine Pass Facility having an annual
reception quantity of at least one hundred eighty three billion Standard Cubic
Feet (183 bcf) and a term of at least fifteen (15) years from an Other Customer
whose LNG is reasonably expected to cause a Sabine Nonconformance, Customer
shall have thirty (30) days within which to elect either (a) to reduce the LNG
specification under the TUA to the greater of 1065 BTU per Standard Cubic Foot
or the level that would be necessary, in the absence of any other LNG, to
prevent a Downstream Pipelines Nonconformance or (b) terminate Customer’s right
to reimbursement under Clause 6.7 above.

 

ARTICLE 7

APPLICABLE LAW

 

The substantive laws of the State of New York, United States of
America, exclusive of any conflicts of laws principles that could require the
application of any other law, shall govern this Agreement for all purposes.

 

ARTICLE 8

DISPUTE RESOLUTION

 

Any Dispute
arising under this Agreement shall be exclusively and definitively resolved
through final and binding arbitration pursuant to the provisions of Section
20.1 of the TUA.  For the purposes of
this Agreement, “Dispute” means any dispute,
controversy, or claim (of any and every kind or type, whether based on
contract, tort, statute, regulation, or otherwise) arising out of, relating to,
or connected with this Agreement, including any dispute as to the construction,
validity, interpretation, termination, enforceability, or breach of this
Agreement, as well as any dispute over arbitrability or jurisdiction.

 

ARTICLE 9

CONFIDENTIALITY

 

Each Party acknowledges and agrees that it shall be bound by the
rights, duties and obligations set forth in Article 21 of the TUA with respect
to the disclosure of information or documents that come

 

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into such Party’s possession and the issuance of public announcements
in connection with this Agreement.  Each
Party reserves its rights under Section 21.2 of the TUA to issue and make
public announcements, press releases and statements regarding this Agreement.

 

ARTICLE 10

NOTICES

 

All notices authorized or required between the Parties shall be
provided in the manner set forth in Article 23 of the TUA.

 

ARTICLE 11

REPRESENTATIONS AND WARRANTIES

 

11.1                           SABINE
hereby represents and warrants to Customer as follows:

 

(a)                                  SABINE
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.  SABINE is duly qualified to
do business and is in good standing as a foreign limited partnership in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those jurisdictions
in which failure to do so would not have a material adverse effect on SABINE or
its business.

 

(b)                                 SABINE
has the requisite power, authority and legal right to execute and deliver, and
to perform its obligations, under this Agreement.  All partnership action on the part of SABINE
and its officers, directors and partners necessary for the authorization of
this Agreement and the performance of all obligations of SABINE hereunder and
thereunder has been taken.

 

(c)                                  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 SABINE’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 (including permits and licenses)
to which SABINE is a party.

 

(d)                                 SABINE
is not in violation of any applicable statute, rule, regulation, order,
permits, licenses or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties, which violation would materially and adversely
affect the business, financial condition, or operations of SABINE or the Sabine
Pass Facility.

 

11.2                           Customer
hereby represents and warrants to SABINE as follows:

 

(a)                                  Customer
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.  Customer is duly qualified to
do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its 

 

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properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on Customer or
its business.

 

(b)                                 Subject
to the next sentence, Customer has the requisite power, authority and legal
right to execute and deliver, and to perform its obligations, under this
Agreement.  In the event Customer’s Board
of Directors hereafter approves this Agreement, then all corporate action on
the part of Customer and its officers, directors and shareholders necessary for
the authorization of this Agreement and the performance of all obligations of
Customer hereunder and thereunder shall have been taken.

 

(c)                                  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 Customer’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 (including permits and licenses
to which Customer is a party).

 

(d)                                 Customer
is not in violation of any applicable statute, rule, regulation, order, permit
or license or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties, which violation would materially and adversely
affect the business, financial condition, or operations of Customer or the
Sabine Pass Facility.

 

ARTICLE 12

MISCELLANEOUS

 

12.1                           Amendments.  This Agreement may not be amended, modified,
varied or supplemented except by an instrument in writing signed by SABINE and
Customer.

 

12.2                           Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the Parties.

 

12.3                           Waiver.  No failure to exercise or delay in exercising
any right or remedy arising from this Agreement shall operate or be construed
as a waiver of such right or remedy. 
Performance of any condition or obligation to be performed hereunder
shall not be deemed to have been waived or postponed except by an instrument in
writing signed by the Party who is claimed to have granted such waiver or
postponement.  No waiver by either Party
shall operate or be construed as a waiver in respect of any failure or default
not expressly identified by such written waiver, whether of a similar or
different character, and whether occurring before or after that waiver.

 

12.4                           No
Third Party Beneficiaries.  The
interpretation of this Agreement shall exclude any rights under legislative
provisions conferring rights under a contract to persons not a party to that
contract.  Nothing in this Agreement
shall otherwise be construed to create any duty to, or standard of care with
reference to, or any liability to, any person other than a Party.

 

9

 

12.5                           Interpretation.

 

(a)                                  Headings.  The headings used in this Agreement are for
convenience only.

 

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

 

(c)                                  References.  Unless otherwise provided, reference to any
Clause means a Clause of this Agreement and reference to a Section means a
Section of the TUA.

 

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

 

(e)                                  Time
Periods.  References to “day,” “month,”
“quarter” and “year” shall mean a day, month, quarter and year of the Gregorian
calendar, respectively.

 

(f)                                    Statutory
References.  Unless the context
otherwise requires, any reference to a statutory provision is a reference to
such provision as amended or re-enacted or as modified by other statutory
provisions from time to time and includes subsequent legislation and
regulations made under the relevant statute.

 

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

 

12.6                           Severance
of Invalid Provisions.  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.

 

12.7                           Expenses.  Each Party shall be responsible for and bear
all of its own costs and expenses incurred in connection with the preparation
and negotiation of this Agreement.

 

12.8                           Entire
Agreement; Conflicts.  This Agreement
together with the TUA constitutes the entire agreement between the Parties
relating to the subject matter hereof and supersedes and replaces any
provisions on the same subject contained in any other agreement between the
Parties, whether written or oral, prior to the date of the original execution
hereof.  In the event any conflict arises
between this Agreement and the TUA, this Agreement shall prevail.

 

12.9                           Counterpart
Execution.  This Agreement may be
executed in any number of counterparts and each such counterpart shall be
deemed an original Agreement for all purposes.

 

ARTICLE 13

PRICING TERMS

 

13.1                           If, on
or before the Commercial Start Date, SABINE enters into any terminal use
agreement (“New TUA”) with any
Other Customer for at term of five (5) years or longer, covering a reception
quantity of 19,500,000 MMBtu or more per annum, SABINE shall as soon as
practicable provide written notice to Customer, which notice shall include the
pricing terms of the New TUA.  For a
period of thirty (30) days following receipt of such notice by Customer,
Customer shall have the option to elect, by providing written notice to SABINE
within such thirty (30) day period, to adopt the pricing terms of the New TUA
in lieu of the

 

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existing pricing terms of the TUA, for the
remaining term of the TUA.  Pricing terms
shall mean the pricing terms including fuel or Retainage.

 

13.2                           The
right of Customer to Adopt new pricing terms under Clause 13.1 shall not apply
to any New TUA with either J & S Cheniere S.A or an Affiliate of
SABINE, unless a third party receives an assignment of Services under the New
TUA for a term exceeding five (5) years. 
Subsequent assignments prior to the Commercial Start Date by
J & S Cheniere S.A. or an Affiliate of SABINE will be deemed a
New TUA and subject to the provisions of Clause 13.1.

 

IN WITNESS WHEREOF, each Party has caused this Agreement to be duly
executed and signed by its duly authorized officer as of the Effective Date.

 

 

	
  SABINE PASS LNG, L.P.

  	
  TOTAL LNG USA, INC.

  
	
   

  	
   

  
	
  By: Sabine Pass LNG-GP, Inc.,

  	
   

  
	
  its General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Charif Souki

  	
   

  	
  By: 

  	
  /s/ Sveinung J. Stohle

  	
   

  
	
   

  	
   

  
	
  Name:  Charif Souki

  	
  Name:  Sveinung J. Stohle

  
	
  Title:  Chairman

  	
  Title:  President and General
  Manager

  
						

 

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Additional Signatories of the Omnibus Agreement for Limited Purposes

 

Cheniere Energy, Inc. (“Cheniere”),
which directly or indirectly owns all of the voting rights of SABINE, hereby
joins in the execution of this Agreement solely to evidence the following:

 

(1)                                  Cheniere expressly
agrees that this (a) Agreement and the TUA supersede and cause the expiration
of the term of that certain Confidentiality Agreement dated January 5, 2004,
between Cheniere and TOTAL GAS & POWER NORTH AMERICA, INC. and (b) it will
comply with the last sentence of Article 9 of this Agreement.

 

(2)                                  Cheniere shall use
all reasonable efforts to cause SABINE to satisfy the Conditions Precedent by
the Condition fulfillment Date and, if the Conditions Precedent are not
satisfied by such date, then Cheniere shall continue to use all reasonable efforts
to cause SABINE to satisfy the Conditions Precedent as soon as thereafter as is
reasonably possible.

 

Cheniere Energy, Inc.

 

 

	
  By: 

  	
  /s/ Charif Souki

  	
   

  
	
  Name: Charif Souki

  
	
  Title: Chairman

  

 

 

TOTAL GAS & POWER NORTH AMERICA, INC., an
Affiliate of Customer, hereby joins in the execution of this Agreement solely
to expressly agree that this Agreement and the TUA supersede and cause the
expiration of the term of that certain Confidentiality Agreement dated January
5, 2004, between Cheniere and TOTAL GAS & POWER NORTH AMERICA, INC.

 

TOTAL GAS & POWER NORTH AMERICA, INC.

 

 

	
  By: 

  	
  /s/ J. Mark Ingram

  	
   

  
	
  Name: J. Mark Ingram

  
	
  Title: President and General Manager

  

 

12Exhibit
10.3

 

PARENT
GUARANTEE

 

Guarantee, dated as of 5
November, 2004, by TOTAL S.A., a corporation organized under the laws of France
(the “Guarantor”), in favor of SABINE PASS LNG, L.P., a limited
partnership organized under the laws of the state of Delaware, U.S.A. (“Guaranteed
Party”).

 

1.             Guarantee.  To induce the Guaranteed Party to enter into
the LNG Terminal Use Agreement dated as of September 2, 2004 (the “Agreement”)
with TOTAL LNG USA, INC. (the “Company”), the Guarantor absolutely,
unconditionally and irrevocably guarantees to the Guaranteed Party and its
successors and permitted assigns the prompt payment of all amounts that become
due and payable (subject to any applicable grace period) by the Company to the
Guaranteed Party under the Agreement from and after the “Commercial Start Date”
as such term is defined in the Agreement, including payment obligations in
respect of any breach of the Agreement by the Company after the Commercial
Start Date (collectively, the “Obligations”); provided, however,
the Guarantor’s total liability in respect of the Obligations shall be a
cumulative maximum amount of Two Billion Five Hundred Million U.S dollars
($2,500,000,000) (the “Maximum Guaranteed Amount”).  All amounts paid by or on behalf of the
Company pursuant to the Agreement in respect of the Obligations shall be
included in determining whether the Maximum Guaranteed Amount has been reached
and shall count towards the satisfaction thereof for all purposes of this
Guarantee.  Notwithstanding anything to the
contrary, the following are excluded from the definition of Obligations and the
Guarantor shall have no liability in respect thereof:  obligations to pay the Guaranteed Party or
third parties for claims or by way of indemnity or contribution for claims arising
in tort or strict liability, or claims for damages to property of the
Guaranteed Party or any third party or personal injury to the Guaranteed Party’s
or any third party’s employees, agents or contractors under the laws of any
jurisdiction.  For the avoidance of
doubt, in no event shall Guarantor have any obligation under the Guarantee
unless and until the Commercial Start Date occurs.

 

2.             Nature of Guarantee.  This Guarantee is a primary and original
obligation of Guarantor and is an absolute, unconditional, irrevocable guaranty
and, to the extent permitted by applicable law, shall remain in full force and
effect without regard to any invalidity with respect to the execution and
delivery of the Agreement by the Company or the execution and delivery by the
Company of any other agreement between the Company and the Guaranteed
Party.  The Guarantor’s obligations
hereunder shall not be affected by the existence, validity, enforceability,
perfection or extent of any collateral therefor or by any other circumstance
relating to the Obligations that might otherwise constitute a legal or
equitable discharge of or defense to the Guarantor not available to the
Company.  The Guarantor agrees that the
Guaranteed Party may resort to the Guarantor for payment of any of the
Obligations whether or not the Guaranteed Party shall have resorted to any
collateral therefor or shall have proceeded against the Company or any other
obligor principally or secondarily obligated with respect to any of the
Obligations.  The Guaranteed Party shall
not be obligated to file any claim relating to the Obligations in the event
that the Company becomes subject to a bankruptcy, reorganization or similar
proceeding, and the failure of the Guaranteed Party to so file shall not affect
the Guarantor’s obligations hereunder. 
In the event that any payment to the Guaranteed Party in respect of any
Obligations is rescinded or must otherwise be returned for any reason
whatsoever, the Guarantor shall remain liable hereunder with respect to such
Obligations as if such payment had not been made.  The Guarantor reserves the right to (a)
set-off against any payment that has become due and payable

 

1

 

hereunder any amount that
has become due and payable by the Guaranteed Party to the Company under the Agreement
and (b) assert defenses which the Company may have under or with respect
to the Agreement to payment of any Obligations other than defenses arising from
the bankruptcy or insolvency of the Company or the Company’s failure to have
the authority to (x) execute or deliver the Agreement or (y) perform its
obligations under the Agreement.  Any
arbitral decision (whether in a contested arbitration, by default or otherwise)
under the Agreement shall conclusively determine the liability of the parties
hereto with respect to the subject matter of such arbitral decision.

 

3.             Changes in Obligations,
Collateral therefor and Agreements Relating thereto; Waiver of Certain Notices.  The Guarantor agrees that the Guaranteed
Party may at any time and from time to time, either before or after the
maturity thereof, without notice to or further consent of the Guarantor, extend
the time of payment of, or exchange or surrender any collateral for, any of the
Obligations, and may also make any agreement with the Company or with any other
party to or person liable on any of the Obligations or interested therein, for
the extension, payment, compromise, discharge or release thereof, in whole or
in part, or for any modification or any amendment of the terms of the Agreement
(other than any Restricted Amendment) or of any agreement between the
Guaranteed Party and the Company or any such other party or person without in
any way impairing or affecting this Guarantee. 
“Restricted Amendment” means any modification or amendment of the
Agreement which (i) extends the term of the Agreement or (ii) increases the
amount to be paid by the Company under the Agreement. Notwithstanding the
foregoing, Guarantor agrees that (x) if a Restricted Amendment is executed
without its written consent that extends the term of the Agreement, this
Guarantee shall remain in full force and effect for the term specified in the
Agreement prior to such Restricted Amendment and (y) if a Restricted Amendment
is executed without its written consent that increases the amount to be paid by
the Company under the Agreement, the Guarantor shall remain liable for such of
the Obligations as would have been owed had such Restricted Amendment not been
executed.  The Guarantor waives:

 

(a)           notice of
the acceptance of this Guarantee;

 

(b)           notice of
the creation, existence or acquisition of all or any part of the Obligations;

 

(c)           notice or
consent respecting any modification of the Obligations or the Agreement (other
than any Restricted Amendment);

 

(d)           notice of
adverse change in the Company’s financial condition or of any other fact which
might increase the Guaranteed Party’s risk;

 

(e)           notice of
presentment, demand for payment, notice of dishonor and protest with respect to
any instrument; and

 

(f)            notice of
Company’s default.

 

4.             Expenses.  The Guarantor agrees to pay on demand all
fees and out of pocket expenses (including the reasonable fees and expenses of
the Guaranteed Party’s counsel) in any way relating to the enforcement or
protection of the rights of the Guaranteed Party hereunder;

 

2

 

provided, that the Guarantor shall not be liable
for any expenses of the Guaranteed Party if no payment under this Guarantee is
otherwise due.

 

5.             Subrogation.  Upon payment of the Obligations, the
Guarantor shall be subrogated to the rights of the Guaranteed Party against the
Company with respect to such Obligations, provided that such right of
subrogation shall not be exercised until the earlier of (a) the satisfaction in
full of all indebtedness of the Guaranteed Party secured by the “Sabine Pass
Facility” (as defined in the Agreement) or (b)  the satisfaction in full of all
Obligations.

 

6.             No Waiver; Cumulative
Rights.  No failure on the
part of the Guaranteed Party to exercise, and no delay in exercising, any
right, remedy or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by the Guaranteed Party of any right, remedy or
power hereunder preclude any other or future exercise of any right, remedy or
power.  Each and every right, remedy and power
hereby granted to the Guaranteed Party or allowed it by law or other agreement
shall be cumulative and not exclusive of any other, and may be exercised by the
Guaranteed Party at any time or from time to time.

 

7.             Representations and
Warranties.  The Guarantor
hereby represents and warrants that:

 

(a)           the
Guarantor is duly organized, validly existing and in good standing under the
laws of France and has full corporate power to execute, deliver and perform
this Guarantee;

 

(b)           the execution, delivery and
performance of this Guarantee have been duly authorized by all necessary
corporate action and do not contravene any provision of the Guarantor’s
certificate of incorporation or by-laws or any law, regulation, rule, decree,
order, judgment or contractual restriction binding on the Guarantor or its
assets;

 

(c)           all consents, licenses, clearances,
authorizations and approvals of, and registrations and declarations with, any
governmental authority or regulatory body necessary for the due execution,
delivery and performance of this Guarantee have been obtained and all
conditions thereof have been duly complied with, and no other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required in connection with the execution, delivery or performance of this
Guarantee; and

 

(d)           this
Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles.

 

8.             Assignment.  Except as otherwise
expressly provided in this Guarantee, neither the Guarantor nor the Guaranteed
Party may assign its rights, interests or obligations hereunder to any other
person or entity without the prior written consent of the Guarantor or the
Guaranteed Party, as the case may be. 
The Guaranteed Party shall be entitled to assign, mortgage or pledge all
or any of its rights, interests, and benefits hereunder to secure payment of
any indebtedness incurred or to be incurred in connection with the financing of
the development of the “Sabine Pass Facility” (as such term is defined in the
Agreement).  Guarantor shall execute and
deliver to

 

3

 

the lenders to whom such indebtedness is
owed a consent to such assignment in reasonable form and substance acceptable
to the Guarantor and such lenders.

 

9.             Notices.  All notices or demands on the Guarantor shall
be deemed effective when received, shall be in writing and shall be delivered
by hand or by registered mail, or by facsimile transmission promptly confirmed
by registered mail, addressed to the Guarantor at:

 

TOTAL S.A.

2 place de la Coupole

92078 Paris La Défense
Cedex

France

Attention:  Legal Director, Gas & Power

Facsimile:  331.4744.3807

 

or to such other address or facsimile
number as the Guarantor shall have notified the Guaranteed Party in a written
notice delivered to the Guaranteed Party.

 

10.           Termination.

 

(a)           This Guarantee shall remain in full
force and effect and shall be binding on the Guarantor, its successors and
assigns until the first to occur of any of the following events (a “Termination
Event”): (i) all obligations of the Guarantor hereunder having been
satisfied (including, without limitation, as a result of the Guaranteed Party
(and/or its designee) having received an amount, in the aggregate, equal to the
Maximum Guaranteed Amount pursuant to the Agreement and/or this Guarantee),
(ii) such time that the Company or its assignee or successor in interest
under the Agreement would have satisfied the Credit Test if the Company or such
assignee or successor in interest had been a replacement guarantor as referred
to in Section 10(b) below, (iii) termination as provided in Section 10(b)
below, (iv) termination as provided in Section 10(c) below, or (v) the 20th
anniversary of the Commercial Start Date. 
For the avoidance of doubt and without limiting the terms of this
Section 10(a), this Guarantee shall terminate in its entirety upon the
termination of the Agreement and the satisfaction of all Obligations.

 

(b)           Guarantor shall have the right to
cause to be provided a replacement guaranty that is in full substitution for
and in lieu of this Guarantee where the proposed replacement guarantor
satisfies the Credit Test and the proposed form of replacement guaranty is, in
all material respects, no less favorable to the Guaranteed Company than this
Guarantee.  Upon the execution and
delivery of such a replacement guarantee by a replacement guarantor who
satisfies the Credit Test, this Guarantee automatically shall terminate and be
null and void for all purposes.  “Credit
Test” means that after giving effect to the execution and delivery of such
a replacement guaranty by the proposed replacement guarantor, it shall be
established to the Guaranteed Party’s reasonable satisfaction that the proposed
replacement guarantor has a credit rating with respect to its senior long-term
unsecured debt of “A3” (or higher) by Moody’s Investor Service (“Moody’s”) or “A-”
(or higher) by Standard and Poor’s (“S&P”) (provided that in the event
either such rating agency ceases to publish such ratings, an equivalent rating
by a comparable rating agency shall be used).

 

4

 

(c)           Guarantor shall have the right to
cause to be provided to the Guaranteed Party an Acceptable Letter of Credit in
an aggregate amount equal to the then current LC Amount that is in full
substitution for and in lieu of this Guarantee. 
Upon the execution and delivery of such Acceptable Letter of Credit by
an Acceptable LC Issuer and the execution and delivery of the Escrow Agreement
by the Guarantor and the Guaranteed Party, this Guarantee automatically shall
terminate and be null and void for all purposes.  “Acceptable Letter of Credit” shall
mean an irrevocable standby letter of credit in form and substance reasonably
satisfactory to the Guaranteed Party issued to and for the benefit of the
Guaranteed Party on which the Guaranteed Party may: (i) draw upon demand for any
amounts that have become due and payable by the Company under the Agreement or
(ii) draw the entire remaining amount under the Acceptable Letter of Credit if
the Acceptable Letter of Credit is not renewed or replaced to the full value of
the LC Amount not later than thirty (30) days prior to the scheduled date of
its expiry.  In order to be an “Acceptable
Letter of Credit”, a letter of credit must be issued by an Acceptable LC Issuer
and must by its terms have an initial expiration date at least twelve months
beyond its date of issuance and require the issuer to provide a written notice
of non-renewal at least thirty days prior to its current expiration date.  Any amount drawn by the Guaranteed Party
because the Acceptable Letter of Credit is not renewed or replaced (the “Escrow
Amount”) that has not yet been applied to amounts then due and payable by
the Company under the Agreement shall be held in a special account (established
pursuant to an escrow agreement mutually acceptable to the Guarantor and the Guaranteed
Party (the “Escrow Agreement”), which Escrow Agreement shall provide
that (x) all interest earned on the Escrow Amount shall be released monthly to
the Guarantor or its designee and (y) for every dollar of Obligations paid by
the Company pursuant to the Agreement, one dollar of the Escrow Amount shall be
released to the Guarantor or its designee) for the Guaranteed Party’s benefit
to secure the performance of the Company of the Obligations (which account will
be pledged to the Guaranteed Party’s lenders). 
The remaining balance of the Escrow Amount shall be returned promptly to
the Company should the Acceptable Letter of Credit be replaced or renewed or
the Agreement be terminated (subject to withholding for any claim that the
Guaranteed Party may have against the Company), with any interest accrued on
the Escrow Amount to be added to, and treated similarly to, the principal
amount.  “Acceptable LC Issuer”
shall mean a United States bank or trust company (or other bank or trust
company that is reputable) that has both a short-term and long-term Dollar
deposit rating of at least Prime-1
and A2 by Moody’s or of at least
A-1 and A by S&P, provided in either case, in the event Moody’s or
S&P ceases to publish deposit ratings, an equivalent deposit rating by a
comparable rating agency shall be used. 
The Acceptable Letter of Credit shall be governed by the laws of the
State of New York. “LC Amount” shall mean the Maximum Guaranteed Amount
reduced in accordance with Section 1 to reflect all amounts paid by or on
behalf of the Company pursuant to the Agreement in respect of the Obligations.

 

(d)           This Guarantee shall be returned by
Guaranteed Party to Guarantor immediately after the occurrence of a Termination
Event.

 

11.           Governing Law.  This Guarantee shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws.

 

5

 

12.           Dispute
Resolution.

 

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

 

(b)           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).

 

(c)           Number of Arbitrators.  The arbitral tribunal (“Tribunal”)
shall consist of three (3) arbitrators, who shall endeavor to complete the
final hearing in the arbitration within six months after the appointment of the
last arbitrator.

 

(d)           Method of Appointment of the
Arbitrators.  Guaranteed Party and
Guarantor (the “Parties”) shall each appoint one (1) arbitrator within
thirty (30) days of the commencement of the arbitration, and the two
arbitrators so appointed shall select the presiding arbitrator within thirty
(30) days after the latter of the two arbitrators has been appointed by the
Parties.  If a Party fails to appoint its
Party-appointed arbitrator or if the two Party-appointed arbitrators cannot reach
an agreement on the presiding arbitrator within the applicable time period,
then the AAA shall serve as the appointing authority and shall appoint the
remainder of the three arbitrators not yet appointed.  If the party-appointed arbitrators cannot
reach an agreement on the presiding arbitrator within the applicable time
period, then the AAA as the appointing authority shall make the prescribed
appointment.

 

(e)           Consolidation.  If the Parties (and/or the Company) initiate
multiple arbitration proceedings under this Guarantee and/or under the 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.

 

(f)            Place of Arbitration.  Unless otherwise agreed by all Parties to the
Dispute, the place of arbitration shall be Houston, Texas.

 

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

 

6

 

(h)           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.

 

(i)            Qualifications 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 concerning the
arbitration or the underlying Dispute other than communications directly
concerning the selection of the presiding arbitrator, where applicable.

 

(j)            Costs and Attorneys’ Fees.  The arbitral tribunal is authorized to award
costs of the arbitration in its award, including (i) the fees and expenses of
the arbitrators; (ii) the costs of assistance required by the tribunal,
including its experts; (iii) the fees and expenses of the administrator; (iv)
the reasonable costs for legal representation of a successful party; and (v) 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.

 

(k)           Waiver 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.

 

IN WITNESS WHEREOF, this
Guarantee has been duly executed and delivered by the Guarantor to the
Guaranteed Party as of the date first above written.

 

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  TOTAL S.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Castaigne

  	
   

  
	
   

  	
   

  	
  Name: Robert Castaigne

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  

 

7

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