EXHIBIT 2
CONTRIBUTION AGREEMENT
by and among
FREEPORT LNG INVESTMENTS, LLC,
FREEPORT LNG-GP, INC.,
CHENIERE ENERGY, INC.,
CHENIERE LNG, INC.,
and
FREEPORT LNG TERMINAL, LLC
AUGUST 26, 2002
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS............................................................. 1
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ARTICLE II CONTRIBUTIONS.......................................................... 6
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2.1 Initial Contributions by Cheniere Entities............................... 6
2.2 Initial Contributions by Investments..................................... 9
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2.3 Additional Contributions by Investments.................................. 9
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2.4 General Partner of Partnership........................................... 10
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ARTICLE III DISTRIBUTIONS TO CHENIERE............................................. 10
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3.1 Distributions of Investments Fixed Contributions......................... 10
3.2 Accelerated Distributions................................................ 10
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ARTICLE IV REPRESENTATIONS AND WARRANTIES......................................... 11
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4.1 Representations and Warranties of the Cheniere Entities.................. 11
4.2 Representations and Warranties of Investments............................ 15
4.3 Representations and Warranties of General Partner........................ 17
ARTICLE V COVENANTS............................................................... 18
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5.1 Covenants of the Cheniere Entities....................................... 18
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5.2 Covenants of Investments and General Partner............................. 21
5.3 Joint Covenants.......................................................... 22
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ARTICLE VI CLOSING and CONDITIONS TO CLOSING...................................... 23
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6.1 The Closing.............................................................. 23
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6.2 Conditions to Cheniere Entities' Closing................................. 24
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6.3 Conditions to Investments's and General Partner's Closing................ 25
ARTICLE VII INDEMNIFICATION....................................................... 27
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7.1 Indemnification by the Cheniere Entities................................. 27
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7.2 Indemnification by Investments and General Partner....................... 27
7.3 Nature and Survival; Time Limits; Exclusive Remedy....................... 27
7.4 Matters Involving Third Parties.......................................... 28
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7.5 Limitation of Indemnification............................................ 29
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7.6 Exclusive Remedy......................................................... 29
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ARTICLE VIII TERMINATION.......................................................... 29
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8.1 Termination of Agreement................................................. 29
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8.2 Effect of Termination.................................................... 30
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8.3 Procedure for Termination................................................ 30
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ARTICLE IX MISCELLANEOUS.......................................................... 30
9.1 No Third Party Beneficiaries............................................. 30
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9.2 Entire Agreement......................................................... 30
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9.3 Succession and Assignment................................................ 30
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9.4 Counterparts; Facsimile Signatures....................................... 30
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9.5 Headings................................................................. 30
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9.6 Notices.................................................................. 30
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9.7 Governing Law............................................................ 32
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9.8 Amendments and Waivers.................................................. 32
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9.9 Severability............................................................ 32
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9.10 Expenses................................................................ 32
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9.11 Construction............................................................ 32
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9.12 Incorporation of Exhibits and Schedules................................. 33
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9.13 Specific Performance.................................................... 33
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9.14 Attorneys Fees.......................................................... 33
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ARTICLE X CONSENT TO JURISDICTION................................................. 33
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ARTICLE XI WAIVER OF JURY TRIAL................................................... 34
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CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement"), dated August 26, 2002
(the "Effective Date"), is entered into between (1) Freeport LNG Investments,
LLC, a Delaware limited liability company ("Investments"), (2) Freeport LNG-GP,
Inc., a Delaware corporation (the "General Partner"), (3) Cheniere Energy, Inc.,
a Delaware corporation ("Cheniere"), (4) Cheniere LNG, Inc., a Delaware
corporation ("Cheniere LNG") and (5) Freeport LNG Terminal, LLC, a Delaware
limited liability company ("Terminal LLC" together with Cheniere and Cheniere
LNG, the "Cheniere Entities"). Each of Investments, General Partner, and the
Cheniere Entities is sometimes referred to herein as a "Party," and all of them
together, are sometimes referred to herein as the "Parties."
RECITALS
WHEREAS, Investments, General Partner and Cheniere LNG desire to form
Freeport LNG Development, L.P. (the "Partnership") to develop, build, own and
operate a liquefied natural gas ("LNG") receiving and regasification facility (a
"LNG Facility") on the ▇▇▇▇▇▇▇▇ Site in or about Freeport, Texas (the
"Project");
WHEREAS, subject to the terms and conditions of this Agreement, the
Cheniere Entities have agreed to contribute certain assets to the Partnership
and to assign certain liabilities to the Partnership;
WHEREAS, in exchange for such contribution, Cheniere LNG (directly or
indirectly through its permitted Affiliates or transferees) will own a 40%
beneficial interest in the Partnership;
WHEREAS, subject to the terms and conditions of this Agreement,
Investments has agreed to contribute certain funds to the Partnership;
WHEREAS, in exchange for such contribution, Investments (directly or
indirectly through its permitted Affiliates or transferees) will own a 60%
beneficial interest in the Partnership;
WHEREAS, subject to the terms and conditions of this Agreement, General
Partner has agreed to be the general partner of the Partnership; and
WHEREAS, the Parties desire to enter into this Agreement for the
purpose of providing the terms and conditions upon which each Party will cause
the Partnership to be formed.
NOW, THEREFORE, in consideration of the respective agreements
hereinafter set forth, the Parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings:
"Action" means any judicial or administrative action, claim, suit,
hearing, demand or proceeding by or before any Governmental Entity.
"Affiliate" means, with respect to any specified Person, a Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such specified Person, it being
understood that for purposes of this definition the term "control" (including
the terms "controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Assumed Accounts Payable" has the meaning set forth in Section
2.1(c)(i).
"Assumed Contract Payables" has the meaning set forth in Section
2.1(c)(ii).
"Assumed Liabilities" has the meaning set forth in Section 2.1(c).
"Business Day" means any day excluding Saturday, Sunday and any day on
which commercial banks in Texas are authorized or required to close.
"Capacity Distribution" has the meaning set forth in Section 3.2.
"Capacity Reservation" means a third party's commitment, option or
other agreement under which the Partnership receives consideration in exchange
for reservation of future regasification capacity of the Project.
"Cheniere" has the meaning set forth in the preamble.
"Cheniere Contribution" means the Cheniere Entities' contributions to
the Partnership pursuant to Section 2.1.
"Cheniere Entities" has the meaning set forth in the preamble.
"Cheniere Party Indemnitees" has the meaning set forth in Section 7.2.
"Cheniere Payable" has the meaning set forth in Section 2.1(c)(vi).
"Closing" has the meaning set forth in Section 6.1.
"Closing Date" has the meaning set forth in Section 6.1.
"Confidential Information" has the meaning set forth in Section 5.2(g).
"Company R&D" has the meaning set forth in Section 2.1(a)(vi).
"Contracts" has the meaning set forth in Section 2.1(a)(ii).
"Contributed Assets" has the meaning set forth in Section 2.1(a).
"Contributions" mean both the Cheniere Contribution and the Cash
Contribution.
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"Contango Option" has the meaning set forth in Section 5.1(h).
"Contango Release" has the meaning set forth in Section 5.1(h).
"Crest" has the meaning set forth in the definition of Lease Option.
"Crest Settlement" has the meaning set forth in Section 5.1(i).
"Crest Waiver" has the meaning set forth in Section 5.1(i).
"Effective Date" has the meaning set forth in the preamble.
"Employee Plan" has the meaning set forth in Section 4.1(p)(ii).
"ENE" means Ecology and Environment, Inc.
"ENE Agreement" means the Consulting Agreement between Cheniere and ENE
regarding an environmental assessment of the Project.
"ERISA" has the meaning set forth in Section 4.1(p)(i).
"Excluded Liabilities" has the meaning set forth in Section 2.1(d).
"FERC" means the Federal Energy Regulatory Commission.
"Final Payment" has the meaning set forth in Section 2.2(a)(iv).
"Final Payment Date" has the meaning set forth in Section 2.2(a)(iv).
"Fixed Distributions" has the meaning set forth in Section 3.1(a).
"Freeport LNG Facility" means any LNG Facility to be developed, built,
owned or operated in, or within a 25 mile radius of, Freeport, Texas.
"General Partner" has the meaning set forth in the preamble.
"Governmental Entity" means any United States federal, state or local,
or any foreign government, governmental authority, regulatory or administrative
agency, governmental commission, court or tribunal (or any department, bureau or
division thereof).
"Governmental Permits" means all franchises, approvals, authorizations,
permits, licenses, easements, registrations, qualifications, leases, variances
and similar rights required by the Cheniere Entities or the Partnership, as the
case may be, from any Governmental Entity for the Project.
"Guaranty Agreement" has the meaning set forth in Section 5.2(g).
"Indemnified Party" has the meaning set forth in Section 7.4(a).
"Indemnifying Party" has the meaning set forth in Section 7.4(a).
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"Initial Payment" has the meaning set forth in Section 2.2(a)(i).
"Investments" has the meaning set forth in the preamble.
"Investments Fixed Contribution" has the meaning set forth in Section
2.2(a).
"Investments Party Indemnitees" has the meaning set forth in Section
7.1(a).
"IRC" means the Internal Revenue Code of 1986, as amended, and
regulations issued by the IRS pursuant to the Internal Revenue Code.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of Treasury.
"Knowledge" means, with respect to any Person, (a) if such Person is an
individual, the actual knowledge of such Person, or (b) if such Person is other
than an individual, the actual knowledge of the officers, directors and other
senior management of such Person.
"Law(s)" means all laws, statutes, rules, regulations, codes,
injunctions, judgments, orders, decrees, rulings, constitutions, ordinances, or
common law of any federal, state, local or municipal Governmental Entity.
"Liability(ies)" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, whether incurred
directly or consequentially and whether due or to become due), including any Tax
or other liability arising out of applicable statutory, regulatory or common
law, any contractual obligation and any obligation arising out of tort.
"Lease Option" means the Agreement for Lease Option, dated March 23,
2001, between the Brazos River Harbor Navigation District and Crest Investment
Company ("Crest"), which Crest later assigned to Freeport LNG Terminal, LLC, an
indirect wholly owned subsidiary of Cheniere, pursuant to an Assignment of Lease
Option. The Lease Option means both the Agreement for Lease Option and
Assignment of Lease Option.
"Lien(s)" means any mortgage, pledge, lien, security interest, charge,
claim, equitable interest, restriction on transfer, conditional sale or other
title retention device or arrangement (including a capital lease), whether
relating to any property or right or the income or profits therefrom or other
encumbrance of any kind whatsoever.
"LNG" has the meaning set forth in the first Whereas clause.
"LNG Facility" has the meaning set forth in the first Whereas clause.
"Losses" has the meaning set forth in Section 7.1(a).
"Management Team" has the meaning set forth in Section 2.1(b).
"Material Adverse Effect" means, individually or in the aggregate, a
material adverse effect on either (i) the Contributed Assets, condition
(financial or otherwise) or prospects of the
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Project taken as a whole or (ii) the ability of the Cheniere Entities or an
Affiliate thereof to perform their obligations under this Agreement or the other
Related Documents to which they are a party
"Option Agreement" has the meaning set forth in Section 5.2(b).
"Partners" means Investments and Cheniere LNG.
"Partnership" has the meaning set forth in the first Whereas clause.
"Partnership Agreement" means the Limited Partnership Agreement for
Freeport LNG Development, L.P., which shall be substantially in the form
attached hereto as Exhibit A .
"Party" or "Parties" has the meaning set forth in the preamble.
"Payment Date(s)" has the meaning set forth in Section 2.2(b).
"Permits" has the meaning set forth in Section 2.1(a)(iv).
"Person" means any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization or Governmental Entity.
"Project" has the meaning in the first Whereas clause.
"Project Approval" means the Partnership's receipt of all final and
non-appealable Governmental Permits, including all FERC approvals, necessary to
commence construction of the Project.
"▇▇▇▇▇▇▇▇ Site" means the parcel(s) of land on ▇▇▇▇▇▇▇▇ Island in
Freeport, Texas, more particularly described on Exhibit B attached hereto.
"R&D" means both the Third Party R&D and the Company R&D.
"Real Property" means all realty, including appurtenances, improvements
and fixtures located on such realty, and any other interests in real property,
including fee interests, leasehold interests, rights of way, easements and other
similar types of interests.
"Related Documents" means this Agreement and the other documents and
instruments to be executed and delivered in connection with the transactions
contemplated by this Agreement.
"Required Consents" has the meaning set forth in Section 4.1(c).
"Second Payment" has the meaning set forth in Section 2.2(a)(ii).
"Second Payment Date" has the meaning set forth in Section 2.2(a)(ii).
"Securities Act" means the Securities Act of 1933, as amended.
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"Tax(es)" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the IRC), customs duties, capital stock, franchise, profits, withholding, social
security (or similar, including FICA), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.
"Technip" means Technip USA.
"Technip Agreement" means the Consulting Agreement between Cheniere and
Technip regarding engineering assessment and site design for the Project.
"Third Party R&D" has the meaning set forth in Section 2.1(a)(v).
"Third Payment" has the meaning set forth in Section 2.2(a)(iii).
"Third Payment Date" has the meaning set forth in Section 2.2(a)(iii).
"Third Party Claim" has the meaning set forth in Section 7.4(a).
"Warrant" has the meaning set forth in Section 5.1(g).
ARTICLE II
CONTRIBUTIONS
2.1 Initial Contributions by Cheniere Entities.
(a) Contributed Assets. The Cheniere Entities shall contribute and
assign (as applicable) to the Partnership, free and clear of all Liens, all
right, title and interest of the Cheniere Entities in and to all assets set
forth on a schedule as required below or exclusively used or held exclusively
for use in connection with completing the Project, including without limitation,
the following (collectively, the "Contributed Assets"):
(i) The Lease Option, including all amendments, assignments,
extensions and renewals thereto;
(ii) All contracts, agreements, commitments, warranties,
guaranties, and other instruments, oral or written, in effect as of the Closing
Date directly related to the Project, including, but not limited to, any
Capacity Reservation or capacity option agreements or memorandums of
understanding regarding the use of the Project, all of which are described on
Schedule 2.1(a)(ii) (the "Contracts");
(iii) All furniture, fixtures, equipment and other personal
property described on Schedule 2.1(a)(iii);
(iv) All Governmental Permits, consents, authorizations,
waivers, licenses, permits and approvals from any Person directly related to the
Project obtained by the
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Cheniere Entities prior to the Closing, all of which are described on Schedule
2.1(a)(iv) (the "Permits");
(v) Subject to Sections 5.2(g) and 5.3(a), all studies,
analyses and reports relating to the Project and/or LNG Facilities created,
conducted or produced by independent third parties, including, but not limited
to, any market studies, terminal studies, feasibility studies, environmental
assessments, safety and permitting assessments, legal and FERC permitting
developments or filings, pipeline and permitting assessments, engineering
reports and marine and site designs, all of which are described on Schedule
2.1(a)(v) (collectively the "Third Party R&D" );
(vi) Subject to Sections 5.2(g) and 5.3(a), all research,
development and know-how created or produced by the Cheniere Entities directly
relating to the Project including, but not limited to, any market studies,
terminal studies, feasibility studies, legal and FERC permitting developments or
filings, (collectively the "Company R&D" );
(vii) all prepaid expenses, advances and deposits, if any,
directly related to the Project; and
(viii) copies of all books and records directly and exclusively
related to the Project.
(b) Management Team. Subject to Section 5.1(e)(ii), the Cheniere
Entities agree that the following employees of the Cheniere Entities shall cease
to be employees of the Cheniere Entities and shall on the Closing Date become
employees of the Partnership: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(the "Management Team").
(c) Assumption of Liabilities. At the Closing, Cheniere, Investments,
and General Partner agree that the Partnership will assume or reimburse the
following (collectively, the "Assumed Liabilities"):
(i) The Partnership shall reimburse or directly pay on behalf of
the Cheniere Entities at the Closing: (A) all non-Affiliate third party accounts
payable (including legal fees related to the FERC permitting) incurred by the
Cheniere Entities and directly related to the Project, which accrued between
June 30, 2002 through the Closing Date; and (B) all payment obligations the
Cheniere Entities have incurred, regardless if incurred prior to June 30, 2002,
under the ENE Agreement and Technip Agreement; provided, however, that the
Partnership shall only be obligated to reimburse or directly pay on behalf of
the Cheniere Entities (as the case may be) those accounts payable (X) listed and
described on Schedule 2.1(c)(i), which as of the Effective Date, shall include
all accounts payable from June 30, 2002 through July 31, 2002 and shall be
updated on or before September 10, 2002 to include those accounts payable from
August 1, 2002 through August 31, 2002 and (Y) those non-Affiliate third party
accounts that are incurred in the ordinary course of business between September
1, 2002 through the Closing Date; further provided, however, that in no event
shall the Partnership be responsible for or assume more than $300,000 of
non-Affiliate third party accounts payable incurred prior to the Closing Date,
excluding the payment obligations under the ENE Agreement and the Technip
Agreement (collectively, the "Assumed Accounts Payable");
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(ii) The Partnership shall reimburse or directly pay on behalf
of the Cheniere Entities at the Closing, all payables incurred by the Cheniere
Entities in the ordinary course under the Contracts (but excluding the
Employment Agreement between Cheniere and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇) between June 30, 2002
through the Closing Date (the "Assumed Contract Payables");
(iii) The Partnership shall assume the Royalty (as defined in the
Crest Settlement) payment obligation contained in and pursuant to Section
1.03(a) of the Crest Settlement for gas processed and produced solely at the
Project after Closing;
(iv) The Partnership shall assume all obligations directly
related to the Contributed Assets accruing from and after the Closing Date;
(v) The Partnership shall assume any salary or bonus payable to
the Management Team accruing from and after the Closing Date; and
(vi) The Partnership shall reimburse Cheniere at Closing $75,000
for salary and other overhead expenses (the "Cheniere Payable");
(d) Exclusion of Liabilities. Notwithstanding any other provision of
this Agreement, the Partnership shall not assume or have any liability hereunder
with respect to any other liabilities or obligations of the Cheniere Entities
not specifically included in the Assumed Liabilities, whether known or unknown,
liquidated or unliquidated, contingent or fixed (the "Excluded Liabilities"),
including without limitation:
(i) Liabilities, other than the Assumed Liabilities, arising
out of the Cheniere Entities performance or failure to perform under the
Contracts, including any breach of or damages caused in whole or in part by the
Cheniere Entities or any Affiliate thereof prior to the Closing.
(ii) Liabilities, other than the Assumed Liabilities, arising
out of the Cheniere Entities' ownership of the Contributed Assets prior to the
Closing Date;
(iii) Liabilities arising out of any businesses operated and
assets owned by the Cheniere Entities other than the Contributed Assets, whether
incurred before or after the Closing Date;
(iv) Liabilities incurred by Investments or the General Partner
through the Closing;
(v) Liabilities arising out of the employment of the members of
the Management Team prior to the Closing Date, including under any Employee
Plans;
(vi) Liabilities or obligations for the Cheniere Entities to pay
any Taxes of any kind or nature, including any interest or penalties imposed
with respect thereto, and including any Taxes incurred by the Cheniere Entities
arising out of their business operation, their ownership of the Contributed
Assets prior to the Closing Date and their contribution of the Contributed
Assets at the Closing to the Partnership; or
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(vii) Liabilities or obligations under and arising from or
relating to the Crest Settlement, except that certain Royalty payment obligation
described in Section 2.1(c)(iii) above.
2.2 Initial Contributions by Investments.
(a) Investments Fixed Contribution. Investments agrees to contribute
and, to the extent not paid by Investments, to cause its transferees and assigns
to contribute to the Partnership, on the dates set forth below, the following
(collectively the "Investments Fixed Contributions "):
(i) On the Closing Date, $1 million in cash (the "Initial
Payment");
(ii) On April 15, 2003 (the "Second Payment Date"), $750,000 in
cash less any amounts previously paid to Cheniere by the Partnership prior to
the Second Payment Date pursuant to Section 3.2(a) (the "Second Payment");
(iii) On October 15, 2003 (the "Third Payment Date"), $750,000 in
cash less any amounts previously paid to Cheniere by the Partnership after the
Second Payment Date and prior to the Third Payment Date pursuant to Section
3.2(a) (the "Third Payment"); and
(iv) Within 30 days of Project Approval (the "Final Payment
Date"), $2.5 million in cash less any amounts previously paid to Cheniere by the
Partnership after the Third Payment Date and prior to the Final Payment Date
pursuant to Section 3.2(a) (the "Final Payment").
(b) If Investments and its transferees and assigns withdraw from the
Partnership, pursuant to and in accordance with the terms of the Partnership
Agreement, prior to the Second Payment Date, Third Payment Date or the Final
Payment Date (collectively the "Payment Date(s)"), then Investments and its
transferees and assigns shall have no obligation to make such Second Payment,
Third Payment or Final Payment, as the case may be, accruing after the date of
such withdrawal.
2.3 Additional Contributions by Investments.
(a) At Closing, such amounts necessary to pay the Assumed Accounts
Payable, the Assumed Contract Payables and the Cheniere Payable under Section
2.1(c) at Closing and such additional amounts of working capital as the General
Partner determines.
(b) After Closing, in the event that the Partnership shall require
funds in excess of those available to the Partnership from operations, as
provided in the Partnership Agreement, the Partners shall make such additional
capital contributions as are needed based on the Partners' percentage interest
in the Partnership; provided, however, that the first $9 million of additional
capital contributions under Sections 2.3(a) and (b) shall be contributed solely
by Investments (or its transferees or assigns, as applicable) which
contributions will not affect or in any way alter the percentage interest of the
Partners and provided further, that (i) no amount contributed in accordance with
Section 2.2(a) shall be counted towards such $9 million, (ii) no amount used to
pay an Affiliate Payment (as defined in the Partnership Agreement) shall
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be counted towards such $9 million and (iii) such $9 million shall be increased
by the amount of any distributions made to Investments pursuant to Sections
3.2(b)(iii) and (iv).
(c) If Investments and its transferees and assigns withdraw from the
Partnership pursuant to and in accordance with the terms of the Partnership
Agreement, prior to such withdrawal, Investments and its transferees and assigns
will contribute to the Partnership an aggregate amount equal to $4.0 million,
which such $4.0 million shall be increased by the amount of any distributions
made to Investments pursuant to Sections 3.2(b)(iii) and (iv) and shall be
decreased by any amount previously contributed to the Partnership pursuant to
Sections 2.3(a) and 2.3(b) above.
2.4 General Partner of Partnership. General Partner agrees that
following the Closing it will serve as the general partner of the Partnership.
General Partner shall not be obligated to contribute any property, assets or
cash to the Partnership and therefore shall not receive or own any beneficial
interest in the Partnership.
ARTICLE III
DISTRIBUTIONS TO CHENIERE
3.1 Distributions of Investments Fixed Contributions.
(a) Investments, General Partner and Cheniere LNG shall cause the
Partnership Agreement to provide that any Investments Fixed Contributions
pursuant to Section 2.2(a) shall be immediately distributed to Cheniere LNG
(each, a "Fixed Distribution").
(b) If Investments and its transferees and assigns withdraws from
the Partnership in accordance with Section 2.2(b) hereof prior to a Payment Date
and accordingly Investments and its transferees and assigns are not obligated to
contribute to the Partnership such Investments Fixed Contributions, then the
Partnership shall have no obligation to make the Fixed Distribution to Cheniere
LNG on such Payment Date.
3.2 Accelerated Distributions.
(a) If, prior to the Final Payment Date, the Partnership sells any
Capacity Reservations and receives cash consideration therefor, the Partnership
shall distribute to Cheniere LNG as a prepayment of the Fixed Distributions 25%
of the cash received for such Capacity Reservation (each, a "Capacity
Distribution"); provided, however, that if, and when, Investments and its
transferees and assigns makes the Second Payment or Third Payment, no subsequent
Capacity Distributions shall be made by the Partnership until such time as the
aggregate amount of such Capacity Distribution obligations that would otherwise
be payable to Cheniere LNG exceeds the Second Payment, and/or Third Payment, as
the case may be. Any Capacity Distributions made by the Partnership prior to the
applicable Payment Date shall reduce the obligation of Investments to make the
ensuing Second Payment, Third Payment or Final Payment, as the case may be, and
the ensuing obligation of the Partnership to make the corresponding Fixed
Distribution. The Partnership's Capacity Distribution obligation to Cheniere LNG
shall terminate upon the Final Payment Date after Cheniere LNG has received
aggregate Fixed Distributions and Capacity Distributions equal to $5.0 million.
In no event (whether
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pursuant to Section 3.1 or Section 3.2) shall Cheniere LNG be entitled to
receive an aggregate amount pursuant to Section 3.1 or Section 3.2 in excess of
$5.0 million.
(b) Any cash received by the Partnership from sales of any Capacity
Reservations prior to Project Approval, after payment of all Capacity
Distributions to Cheniere LNG under Section 3.2(a), shall be paid, held or
distributed in the following order of priority:
(i) first, to Investments with respect to each Fiscal Year (as
defined in the Partnership Agreement) of the Partnership an amount equal to 44%
of the taxable income allocated to Investments pursuant to Section 4.3(i) of the
Partnership Agreement for such Fiscal Year;
(ii) second, an amount shall be set aside equal to all current
Project expenses plus future Project expenses reasonably anticipated through
approval of the Project by FERC;
(iii) third, an amount shall be distributed to Investments (and
Cheniere LNG, if applicable) equal to the sum of all additional capital
contributions made by Investments (and Cheniere LNG, if applicable) to the
Partnership pursuant to Section 2.3 above;
(iv) fourth, an amount shall be distributed to Investments
equal to the sum of any Second Payment, Third Payment or Final Payment made by
Investments to the Partnership pursuant to Section 2.2(a); and
(v) the excess to be retained as capital reserves or to be
distributed pro rata to the partners of the Partnership in accordance with their
respective percentage interests.
Schedule 3.2 sets forth by way of example, distributions to be made
pursuant to this Section 3.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Cheniere Entities. In order to
induce Investments and General Partner to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, the Cheniere Entities,
joint and severally, represent and warrant to Investments and General Partner as
of the date hereof and Closing Date as follows:
(a) Organization and Qualification. Each of the Cheniere Entities is
a corporation or limited liability company duly organized, validly existing and
in good standing under the laws of its state of incorporation or formation with
all requisite power and authority to own, lease and use the Contributed Assets
as they are currently owned, leased and used. Each of the Cheniere Entities is
qualified or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction in which the character of the Contributed
Assets makes such qualification necessary, except any such jurisdiction where
the failure to be so qualified or licensed and in good standing would not have a
Material Adverse Effect.
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(b) Authority and Validity. Each of the Cheniere Entities has all
requisite power and authority to execute and deliver, to perform its obligations
under, and to consummate the transactions contemplated by, this Agreement and
all other Related Documents to which it is a party. No approval of Cheniere's
stockholders is required for consummation of the transactions contemplated by
this Agreement or the Related Documents. The execution and delivery by the
Cheniere Entities of, the performance by the Cheniere Entities of their
obligations under, and the consummation by the Cheniere Entities of the
transactions contemplated by, this Agreement and the other Related Documents to
which they are a party have been duly authorized by all requisite corporate or
company action on their part. This Agreement is and, when executed and delivered
by the Cheniere Entities, the other Related Documents to which they are a party
will be, the valid and binding obligation of the Cheniere Entities, enforceable
against the Cheniere Entities in accordance with its and their respective terms,
except insofar as enforceability may be affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
(c) Noncontravention. Subject to obtaining all consents and
approvals set forth on Schedule 4.1(c) hereto (the "Required Consents"), the
execution, delivery and performance by the Cheniere Entities of this Agreement
and the other Related Documents to which they are a party will not (i) conflict
with or violate any provision of the articles of incorporation or formation, or
by-laws or operating agreements of any Cheniere Entity, (ii) require any
consent, approval or authorization of, or any filing with or notice to, any
Person, (iii) violate any Law to which any Cheniere Entity is subject, or (iv)
(1) violate, conflict with or constitute a breach of or default under, (2)
permit or result in the termination, suspension or modification of, (3) result
in the acceleration of (or give any Person the right to accelerate) the
performance of the Cheniere Entities, or (4) result in the creation or
imposition of any Lien under, any permit or license included in the Contributed
Assets or any other instrument evidencing any of the Contributed Assets or any
instrument or other agreement directly related to the Project to which the
Cheniere Entities are a party or by which they or any of the Contributed Assets
are bound or affected.
(d) Contributed Assets. The Cheniere Entities have good and
marketable title to (or in the case of Contributed Assets that are leased or
licensed, valid leasehold or license interests in or valid contractual right to
use) the Contributed Assets owned, leased or licensed by it. The Contributed
Assets are free and clear of all Liens of any kind or nature. Except as set
forth on Schedule 4.1(d), none of the Contributed Assets are leased or licensed
from any other Person.
(e) Permits and Licenses. The Contributed Assets do not include any
Governmental Permits, consents, authorizations, waivers, licenses, permits and
approvals from any Person relating to the Project owned or granted to the
Cheniere Entities.
(f) Contracts. The Contracts (except for the Lease Option, ENE
Agreement and Technip Agreement) listed on Schedule 2.1(a)(ii) are, as of the
Closing Date, all of the contracts, agreements, commitments, warranties,
guaranties, and other instruments, oral or written, including, but not limited
to, any Capacity Reservations or capacity option agreements or memorandums of
understanding, regarding the Project. True and correct copies of all Contracts
(and with respect to any oral Contracts, a summary of the principal terms
thereof) have been provided to Investments or its representatives or Affiliates.
Except as set forth on
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Schedule 4.1(f), each Contract is in full force and effect and constitutes the
valid, legal, binding and enforceable obligation of the parties thereto, except
to the extent enforceability may be affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting creditors' rights generally or by principles governing the
availability of equitable remedies. None of the Cheniere Entities or, to the
Knowledge of the Cheniere Entities, any other party thereto is in breach or
default of any material terms or conditions of a Contract.
(g) Lease Option. True and correct copies of the Lease Option have
been provided to Investments or its representatives or Affiliates. The Lease
Option is in full force and effect and the Cheniere Entities have all right,
title and interest therein, free and clear of all Liens. All rents and other
sums and charges payable by the Cheniere Entities, under the Lease Option, are
current. Subject to obtaining the consent of the Brazos River Harbor Navigation
District, the transaction contemplated by this Agreement and the Related
Documents will not result in a breach of or a default under such Lease Option,
and will not otherwise cause such Lease Option to be terminated or subject to
termination on terms different than those in effect prior to the Closing. None
of the Cheniere Entities or, to the Knowledge of the Cheniere Entities, any
other party thereto is in breach or default of any material terms or conditions
under the Lease Option.
(h) Consulting Agreements. True and correct copies of the ENE
Agreement and Technip Agreement has been provided to Investments or its
representatives or Affiliates. Both the ENE Agreement and Technip Agreement are
in full force and effect and constitute the valid, legal, binding and
enforceable obligations of the parties thereto, except to the extent
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies. Subject to the consents set forth on Schedule 4.1(c), the
transaction contemplated by this Agreement and the Related Documents will not
result in a breach of or a default under such ENE Agreement or Technip
Agreement, and will not otherwise cause such ENE Agreement or Technip Agreement
to cease to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Closing. None of the Cheniere Entities or, to
the Knowledge of any Cheniere Entity, any other party thereto is in breach or
default of any material terms or conditions under the ENE Agreement or Technip
Agreement, as the case may be.
(i) FF&E. The Contributed Assets do not include any owned or leased
FF&E. The Assumed Liabilities do not include any Liabilities with respect to,
incurred in connection with or relating (directly or indirectly) to any FF&E.
(j) No other R&D. The Third Party R&D listed on Schedule 2.1(a)(v),
are, as of the Closing Date, all of the studies, analyses and reports relating
to the Project created, conducted or developed by an independent third party,
including, but not limited to, any market studies, terminal studies, feasibility
studies, environmental assessments, safety and permitting assessments, legal and
FERC permitting developments and filings, pipeline and permitting assessments,
engineering reports and marine and site designs. True and correct copies of all
Third Party R&D and, to the Knowledge of the Cheniere Entities all Company R&D,
have been provided to Investments or its representatives or Affiliates.
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(k) Real Property. The Contributed Assets do not include any owned
or leased Real Property. Other than the obligations under the Lease Option, the
Assumed Liabilities do not include any Liabilities with respect to, incurred in
connection with or relating (directly or indirectly) to any Real Property.
(l) Finders and Brokers. The Cheniere Entities have not employed any
financial advisor, broker or finder or incurred any Liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement or the Related Documents for
which Investments, the Partnership or General Partner could be liable, except
for the fees of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., which will be satisfied by Cheniere.
(m) Assumed Liabilities. The Cheniere Entities have delivered to
Investments and General Partner true, correct and complete listing of the
Assumed Accounts Payable and Assumed Contracts Payable. None of the Cheniere
Entities have any material Liabilities or obligations directly relating to the
Contributed Assets or the Project, except as set forth and scheduled in Sections
2.1(c)(i), (ii) and (iii).
(n) Legal and Other Compliance.
(i) To the extent related to the Project or the Contributed
Assets, the Cheniere Entities (1) have complied in all material respects with,
and are in compliance in all material respects with all applicable Laws, (2)
have not received any written notice from any Governmental Entity, which have
not been dismissed or otherwise disposed of, that they have not so complied, (3)
have not been charged or, to the Knowledge of the Cheniere Entities, formally
threatened with or, to the Knowledge of the Cheniere Entities under
investigation with respect to any violation of any applicable Law, and (4)
except as set forth on Schedule 4.1(o), are not a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator, board, panel of Governmental Entity.
(ii) Neither the ownership or use of the Contributed Assets (1)
to the Knowledge of the Cheniere Entities, conflicts with the rights of any
other Person or (2) violates, conflicts with or results in a default, right to
accelerate or loss of rights under, (A) any terms or provisions of the Cheniere
Entities' articles of incorporation or formation, or by-laws or operating
agreement, as the case may be, or (B) any order, judgment or decree to which any
Cheniere Entity is a party or by which it is bound or affected pertaining
directly and primarily to the Contributed Assets or the Project, or (C) to the
Knowledge of the Cheniere Entities, any Lien, lease, license, agreement,
understanding, or Law pertaining directly and primarily to the Contributed
Assets or Project to which the Cheniere Entities are a party or by which they
are bound or affected.
(o) Litigation. There are no Actions pending or, to the Knowledge of
the Cheniere Entities, threatened against any of the Cheniere Entities that have
resulted or could reasonably be expected to result in a Material Adverse Effect,
or that question the validity of this Agreement or of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement or any
Related Documents. Except as disclosed on Schedule 4.1(o), there are no
judgments, orders, decrees, citations, fines or penalties assessed against the
Cheniere Entities, affecting the Project or the Contributed Assets.
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(p) Employment Matters.
(i) The Cheniere Entities have complied in all material
respects with all applicable Laws relating to the employment of the Management
Team members, including the Worker Adjustment and Retraining Notification Act,
as amended, and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), continuation coverage requirements with respect to group health
plans, and those relating to wages, hours, collective bargaining, unemployment
compensation, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of taxes as applicable to the Management Team. To the Knowledge of the Cheniere
Entities, no member of the Management Team has any plans to terminate employment
with a Cheniere Entity, other than in connection with the transaction
contemplated by this Agreement. There are no controversies or disputes pending
between a Cheniere Entity on the one hand, and any of the members of the
Management Team on the other hand, before any court, commission, board, agency,
arbitrator, grievance procedure or any other forum.
(ii) Schedule 4.1(p)(ii) sets forth all Employee Plans (as
defined herein) to which a Cheniere Entity contributes or is obligated to
contribute, under which a Cheniere Entity has or may have any Liability for
premiums or benefits, and which benefits any Management Team member. For
purposes of this Agreement, the term "Employee Plan" means any plan, program,
agreement, policy or arrangement, whether or not reduced to writing, covering
Management Team members, that is (i) a welfare benefit plan within the meaning
of Section 3(1) of ERISA; (ii) a pension benefit plan within the meaning of
Section 3(2) of ERISA; (iii) any "multi-employer" plan (as defined in Section
3(37) of ERISA); (iv) a stock bonus, stock purchase, stock option, restricted
stock, stock appreciation right or similar equity-based plan; or (v) any other
deferred compensation, retirement, welfare benefit, bonus, incentive or fringe
benefit plan whether for the benefit of a single individual or a group of
individuals. No reportable event, within the meaning of Title IV of ERISA, has
occurred and is continuing with respect to any Employee Plan. No prohibited
transaction, within the meaning of Title I of ERISA, has occurred with respect
to any Employee Plan, and no accumulated funding deficiency (as defined in Title
I of ERISA) or withdrawal liability (as defined in Title IV of ERISA) exists
with respect to any Employee Plan.
(q) Investment Matters. Cheniere (i) is acquiring its interest in
the Partnership solely for investment purposes and not with a view to the
distribution or resale thereof and (ii) is an "accredited investor" as defined
in Rule 501(a) of the Securities Act.
(r) Disclosure. To the knowledge of the Cheniere Entities, the
representations and warranties contained in this Agreement or in any Schedule or
Exhibit to this Agreement, or in any certificate furnished by the Cheniere
Entities pursuant to this Agreement do not contain any untrue statement of a
material fact or omit to state any material fact regarding the Contributed
Assets or the Project necessary in order to make the statements and information
contained herein or therein not materially misleading.
4.2 Representations and Warranties of Investments. In order to induce
the Cheniere Entities and General Partner to enter into and perform this
Agreement and to consummate the transactions contemplated hereby, Investments
does hereby represent and warrant to the Cheniere Entities and General Partner
as of the date hereof and the Closing Date as follows:
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(a) Organization and Qualification. Investments is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware with all requisite power and authority to
carry on its business as currently conducted and to own, lease, use and operate
its assets. Investments is duly qualified or licensed to do business and is in
good standing under the laws of each jurisdiction in which the character of the
properties owned, leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except any such jurisdiction
where the failure to be so qualified or licensed and in good standing would not
have a material adverse effect on Investments or the Partnership, its ability to
perform its obligations under this Agreement or the other Related Documents to
which it is a party, or on the validity, binding effect or enforceability of
this Agreement or the other Related Documents.
(b) Authority and Validity. Investments has all requisite power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
Related Documents to which it is a party. The execution and delivery by
Investments of, the performance by Investments of its obligations under, and the
consummation by Investments of the transactions contemplated by, this Agreement
and the Related Documents to which it is a party have been duly authorized by
all requisite action of Investments, and this Agreement is and, when executed
and delivered by Investments, the other Related Documents to which it is a party
will be, the valid and binding obligation of Investments, enforceable against
Investments in accordance with its and their respective terms, except insofar as
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies.
(c) Noncontravention. Subject obtaining the Required Consents, the
execution, delivery and performance by Investments of this Agreement and the
other Related Documents to which it is a party will not (i) conflict with or
violate any provision of the Certificate of Formation or limited liability
company agreement of Investments, (ii) require any consent, approval or
authorization of, or any filing with or notice to, any Person, except for such
consents, approvals, authorizations, filings and notices as have been obtained,
made or given, or (iii) violate any Law to which Investments is subject.
(d) Finders and Brokers. Investments has not employed any financial
advisor, broker or finder or incurred any Liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which a Cheniere Entity, the
Partnership or General Partner could be liable.
(e) Litigation. There are no Actions pending or, to the Knowledge of
Investments, threatened against Investments that have resulted or could
reasonably be excepted to result in a material adverse effect on the Partnership
or its assets, or that question the validity of this Agreement or of any action
taken or to be taken by Investments pursuant to or in connection with the
provisions of this Agreement or any Related Documents.
(f) Investment Matters. Investments (i) is acquiring its interest in
the Partnership solely for investment purposes and not with a view to the
distribution or resale thereof and (ii) is an "accredited investor" as defined
in Rule 501(a) of the Securities Act.
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4.3 Representations and Warranties of General Partner. In order to
induce the Cheniere Entities and Investments to enter into and perform this
Agreement and to consummate the transactions contemplated hereby, General
Partner does hereby represent and warrant to the Cheniere Entities and
Investments as of the date hereof and on the Closing Dates follows:
(a) Organization and Qualification. General Partner is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with all requisite power and authority to carry on its
business as currently conducted and to own, lease, use and operate its assets.
General Partner is duly qualified or licensed to do business and is in good
standing under the laws of each jurisdiction in which the character of the
properties owned, leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except any such jurisdiction
where the failure to be so qualified or licensed and in good standing would not
have a material adverse effect on General Partner, its ability to perform its
obligations under this Agreement or the other Related Documents to which it is a
party, or on the validity, binding effect or enforceability of this Agreement or
the other Related Documents.
(b) Authority and Validity. General Partner has all requisite power
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
Related Documents to which it is a party. The execution and delivery by General
Partner of, the performance by General Partner of its obligations under, and the
consummation by General Partner of the transactions contemplated by, this
Agreement and the Related Documents to which it is a party have been duly
authorized by all requisite corporate action of Investments, and this Agreement
is and, when executed and delivered by General Partner, the other Related
Documents to which it is a party will be, the valid and binding obligation of
General Partner, enforceable against General Partner in accordance with its and
their respective terms, except insofar as enforceability may be affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
(c) Noncontravention. Subject to obtaining the Required Consents,
the execution, delivery and performance by General Partner of this Agreement and
the other Related Documents to which it is a party will not (i) conflict with or
violate any provision of the certificate of incorporation or the by-laws of
General Partner, (ii) require any consent, approval or authorization of, or any
filing with or notice to, any Person, except for such consents, approvals,
authorizations, filings and notices as have been obtained, made or given, or
(iii) violate any Law to which General Partner is subject.
(d) Finders and Brokers. General Partner has not employed any
financial advisor, broker or finder or incurred any Liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which a Cheniere Entity, the
Partnership or General Partner could be liable.
(e) Litigation. There are no Actions pending or, to the Knowledge of
General Partner, threatened against General Partner that have resulted or could
reasonably be excepted to result in a material adverse effect on the Partnership
or its assets, or that question the validity of this Agreement or of any action
taken or to be taken by General Partner pursuant to or in connection with the
provisions of this Agreement or any Related Documents.
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ARTICLE V
COVENANTS
5.1 Covenants of the Cheniere Entities.
(a) Access to Information. From the date hereof to the Closing Date,
the Cheniere Entities shall, and shall cause their officers, directors,
employees and agents to, afford the members, officers, employees, agents,
representatives and advisors of Investments and General Partner reasonable
access at all reasonable times during normal business hours to the Cheniere
Entities' officers, employees, agents, properties, books, records and contracts
directly related to the Project, and shall furnish Investments and General
Partner all financial, operating and other data and information as Investments
and General Partner may reasonably request with respect to the Project.
Investments, General Partner and their representatives shall have the right to
enter the offices and properties of the Cheniere Entities at any reasonable time
and from time to time for the purpose of conducting its due diligence
investigations with respect to the Project.
(b) Required Approvals. The Cheniere Entities will use their
reasonable efforts to obtain, as soon as possible and at their sole expense, all
Required Consents in accordance with applicable Law and in form and substance
reasonably satisfactory to Investments and General Partner. In addition, the
Cheniere Entities shall use their reasonable efforts to assist the Partnership
in obtaining, and shall not take any action that could reasonably be expected to
delay, hinder or restrict, Project Approval. Investments and General Partner
will cooperate with the Cheniere Entities, but neither the Cheniere Entities,
Investments nor General Partner will be required to agree to any unreasonable
changes in, or the imposition of any unreasonable condition (including the
payment of any unreasonable fee) to the transfer to the Partnership of any
Contract, agreement, Permit as a condition to obtaining the Required Consents.
(c) Freeport LNG Facility. From and after the Effective Date, except
in accordance with this Agreement, the Partnership Agreement or the Option
Agreement, no Cheniere Entity or any Affiliates thereof shall, without
Investments' prior written consent, pursue the construction, development or
operation of any Freeport LNG Facility until such time that Investments or any
of its Affiliates has no contractual, equity or partnership interest in, or
related to the development of, a Freeport LNG Facility.
(d) LNG Facility.
(i) No Cheniere Entity or any Affiliates thereof shall, without
Investments' prior written consent, make any filing with FERC for the
development of any LNG Facility until the earlier to occur of: (1) termination
of this Agreement pursuant to Article XIII; (2) December 19, 2003; (3) the date
the Partnership has received approval of the Project by FERC; or (4) such time
as Investments withdraws from the Partnership.
(ii) No Cheniere Entity or any Affiliates thereof shall, without
Investments' prior written consent, continue, engage in, solicit, initiate or
encourage the sale of capacity at any other LNG Facility, other than the
Project, prior to the earlier of: (1) termination of this Agreement pursuant to
Article XIII; (2) December 19, 2003; (3) such time as the
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Partnership has entered into binding terminal capacity and use agreements (not
options for the same) of at least 800 MMCF/day of the Project's capacity; (4)
such time as the General Partner provides Cheniere a written response, which
affirmatively agrees with Cheniere's written notice to the Partnership stating
that Cheniere believes that the Partnership has ceased marketing and selling
additional Project capacity and that Cheniere would like to begin selling
capacity for LNG Facilities other than the Project; or (5) such time as
Investments withdraws from the Partnership.
(e) Management Team.
(i) The Cheniere Entities shall pay all Management Team
employees all compensation, including salaries, commissions, bonuses, deferred
compensation, severance, insurance, pensions, profit sharing, vacation, sick pay
and other compensation or benefits to which they are entitled for time periods
ending on or before the Closing.
(ii) The Cheniere Entities will be responsible for maintenance
and distribution of benefits accrued under any Employee Plan maintained by the
Cheniere Entities pursuant to and if required by the provisions of such plans to
the Management Team for the time period ending on or before the Closing.
Investments, General Partner or the Partnership will not assume any Liability
for any such benefits or any fiduciary or administrative responsibility to
account for or dispose of any such accrued benefits under any Employee Plans
maintained by the Cheniere Entities. Following the Closing Date and during a
transition period, the Management Team shall remain employed by the Cheniere
Entities and the Management Team's offices shall remain located at the offices
of the Cheniere Entities. The Partnership shall reimburse the Cheniere Entities
for its expenses incurred for such transition services in accordance with
Schedule 5.1(e).
(iii) All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other Employee
Plans of the Cheniere Entities, or arising under any Law affecting the
Management Team incurred on or before the Closing Date or resulting or arising
from events or occurrences occurring on or before the Closing Date (including,
without limitation, any liability for (1) a Management Team member who have
incurred a disability on or before the Closing Date, (2) a Management Team
member on or eligible for COBRA continuation, (3) a Management Team member or
his/her dependents hospitalized on or before the Closing Date, and (4) any
retroactive assessment resulting from underfunding of any Employee Plan by any
employer sponsors thereof prior to the Closing) will remain the responsibility
of the Cheniere Entities, whether or not such employees are hired by the
Partnership after the Closing. None of Investments, General Partner or the
Partnership will have, nor will assume, any obligation or liability under or in
connection with any such Employee Benefit Plan or, for any period prior the
Closing, arising under any such Law. Notwithstanding anything contained in this
Agreement to the contrary, none of Investments, General Partner or the
Partnership will have, nor will assume, any obligations or liability arising
from or related to the failure of any of the Employee Plans of the Cheniere
Entities to comply with the applicable provisions of ERISA or any other Law
governing or applicable to such Employee Plans.
(iv) All claims and obligations under, pursuant to or in
connection with any compensation or bonus plan of the Cheniere Entities
(including, without limitation, any phantom stock plan, stock plan, option plan,
or other similar plan or arrangement) pursuant to which any employee, director
or officer of the Cheniere Entities receives or is entitled to receive
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compensation, in any form, solely as a result of the consummation of the
transactions contemplated by this Agreement or the Related Documents will remain
the responsibility of the Cheniere Entities, whether or not the employees
participating in such plans are hired by the Partnership after the Closing.
Investments, General Partner and the Partnership will not have, and will not
assume, any obligation or liability under or in connection with any such plan.
(v) Notwithstanding the termination of the employment of the
Management Team members, the Cheniere Entities shall either (1) provide for the
continued vesting of any stock options in Cheniere common stock granted to a
Management Team member prior to the Closing or (2) issue replacement warrants to
such Management Team member in lieu of such stock options.
(f) Non-Solicitation. No Cheniere Entity or any Affiliates thereof
shall, without General Partner's prior written consent, directly or indirectly,
induce or attempt to induce any employee of the Partnership to leave the employ
of the Partnership or in any way interfere with the relationship between the
Partnership and any employee thereof; provided, however that this restriction
shall not apply to a member of the Management Team once such member is providing
less than 50% of his time to the Project.
(g) Warrant. At the Closing, Cheniere shall issue to Investments a
warrant to purchase 700,000 shares of common stock of Cheniere in the form
attached hereto as Exhibit C (the "Warrant").
(h) Release of Contango Option. The Cheniere Entities (i)
acknowledge and agree that they shall be solely responsible for all obligations
of the Cheniere Entities under the Option Purchase Agreement, dated June 4,
2002, between Cheniere and Contango Sundance, Inc. (the "Contango Option") and
(b) shall use all commercially reasonable efforts to obtain at or prior to
Closing from Contango Sundance, Inc., on terms reasonable satisfactory to
Investments, a release and waiver of the Cheniere Entities' obligations under
Section 7.5 of the Contango Option (the "Contango Release").
(i) Release of Crest Right of First Refusal. The Cheniere Entities
shall use all commercially reasonable efforts to obtain at or prior to Closing a
binding modification to the Settlement and Purchase Agreement, dated June 14,
2001, between Cheniere, CXY Corporation, Crest Energy, L.L.C., Crest and
Freeport LNG Terminal, LLC (the "Crest Settlement"), whereby Crest, Crest
Energy, LLC and any Affiliate thereof waive and release, on terms reasonable
satisfactory to Investments, any rights contained in Section 1.05 of the Crest
Settlement (the "Crest Waiver").
(j) Assignment of Lease Option. The Cheniere Entities shall use all
commercially reasonable efforts to obtain at or prior to Closing from the Brazos
River Harbor Navigation District an assignment of the Lease Option to the
Partnership from Terminal LLC in a form reasonably acceptable to Cheniere and
Investments.
(k) Exclusivity; No Shop. Until the earlier of the Closing Date or
termination of this Agreement pursuant to Article XIII hereof, the Cheniere
Entities will not (nor will the Cheniere Entities cause or permit any of their
officers, directors, agents or Affiliates to), directly or indirectly, (1)
continue, solicit, initiate or encourage the submission of any proposal or offer
from any Person relating to, or enter into or consummate any transaction
relating to, the Project
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or the acquisition of any portion of the Contributed Assets or any acquisition
structured as a merger, consolidation or share exchange to effect a transfer of
the Contributed Assets or (2) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. If any Person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing, Cheniere will notify Investments
immediately of the identity of such Person and the nature and terms of such
communications and, if in written form, provide Investments and General Partner
with copies thereof.
(l) Taxes. The Cheniere Entities will be responsible for the payment
of any state or local sales, use, transfer, excise, documentary or license taxes
or fees or any other charge (including filing fees) imposed by any Governmental
Entity with respect to the transfer of any of the Contributed Assets or Assumed
Liabilities pursuant to this Agreement.
5.2 Covenants of Investments and General Partner.
(a) Unless this Agreement is terminated pursuant to Article VIII,
neither Investments, General Partner nor any Affiliates thereof shall, without
Cheniere's prior written consent, pursue developing an LNG Facility in Sabine
Pass, Texas, Corpus Christi, Texas, or Brownsville, Texas, until the later to
occur of: (i) 24 months after the Closing Date or (ii) such time that Cheniere
has no contractual, equity or partnership interest in, or related to the
development of, an LNG Facility in such location.
(b) At Closing Investments shall execute and deliver an option
agreement, on terms mutually acceptable to Investments and Cheniere (the "Option
Agreement"), whereby Investments shall agree that if it or any of its Affiliates
pursue or form a partnership, joint venture, corporation or entity to pursue the
development of a second Freeport LNG Facility, Cheniere shall be granted an
option to acquire 40% of any payments, interest or value therein to be held or
received by Investments or any of its Affiliates, on the same terms and
conditions as Investments. Cheniere acknowledges that any interest it may
acquire shall be subject to the same proportionate dilution as any interest held
by Investments or its Affiliates.
(c) Required Approvals. Investments will use commercially reasonable
efforts to assist the Cheniere Entities in obtaining all Required Consents in
accordance with applicable Law; provided that Investments shall not be required
to expend its own funds in connection therewith.
(d) Non-Solicitation. Except for the Management Team, neither
Investments, any Affiliate of Investments, the General Partner nor the
Partnership will, without Cheniere's written consent, directly or indirectly,
induce or attempt to induce any employee of Cheniere or any of its Affiliates to
leave the employ of Cheniere or its Affiliates or in any way interfere with the
relationship between Cheniere and such employee.
(e) Intent to Complete Project. Investments and its Affiliates
intends to proceed with the development and completion of the Project in a
timely and expeditious manner. Investments will use commercially reasonable
efforts, including contributing up to $9 million as described in Section 2.3, to
obtain Project Approval. Investments and its Affiliates agree that as along as
such member of the Management Team remains an employee of the
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Partnership, such member will initially work exclusively on the development and
completion of the Project, except as set forth on Schedule 5.1(e).
(f) Investor Presentations. As long as Investments owns at least
200,000 shares of common stock of Cheniere or a warrant exercisable for at least
200,000 shares of common stock of Cheniere, then upon reasonable advance notice
and subject to his availability, Investments shall cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (i) to
attend one energy investor conference per year, (ii) meet with existing or
potential shareholders of Cheniere in New York, New York and Boston,
Massachusetts once per year, and (iii) make himself reasonably available to
existing or potential shareholders of Cheniere at the Partnership's office in
Houston, Texas once per fiscal quarter.
(g) Use of R&D. Investments and the General Partner hereby
acknowledge and agree that the Cheniere Entities and their Affiliates shall be
entitled to retain copies of any R&D and shall, subject to the terms of Sections
5.1(c) and (d), have the right to use such R&D as it determines in its
discretion in order to develop or operate any other business or venture of any
description including the development and operation of another LNG Facility.
After the Closing Date, Cheniere shall have access to and shall receive copies
of third-party research, reports, documents, agreements and other work product
produced for the Partnership as well as know how and other confidential
information of the Partnership ("Confidential Information") in connection with
the Project. Cheniere or its Affiliates may use, subject to the terms of
Sections 5.1(c) and (d), such Confidential Information in the development or
operation of other businesses or ventures, including the development and
operation of other LNG Facilities. Cheniere or its Affiliates may hire or engage
any third-party consultant, advisor, counsel or other third-party to provide
services, including any such party that had or was providing services to the
Partnership, and such Person may use Confidential Information (including
information developed for the Partnership) in connection with providing services
to Cheniere or its Affiliates.
(h) Guaranty Agreement. Investments shall cause its principal equity
holder to execute a guaranty agreement in the formattached hereto as Exhibit F
(the "Guaranty Agreement").
5.3 Joint Covenants.
(a) General. Each of the Parties will use commercially reasonable
efforts to take such actions and to do all other things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction of the closing conditions
set forth in Article VI hereof); provided, however, that Investments and General
Partner will not be required to agree to any material increase in the amount
payable with respect to, or any modification that makes more burdensome in any
material respect, any of the Assumed Liabilities.
(b) Confidentially.
(i) Subject to Section 5.3(b)(ii) below, neither of the Parties
will issue any press release or make any other public announcement regarding
this Agreement or the transaction contemplated hereby without the consent of the
other Party. Each Party will hold, and will cause its employees, consultants,
advisors and agents to hold, in confidence the terms of this Agreement and any
non-public information concerning the other Party obtained pursuant to this
Agreement or in connection with the negotiation hereof. Notwithstanding the
preceding
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provisions, a Party may disclose such information to the extent required by any
applicable Law (including disclosure requirements under federal and state
security laws and disclosure required in connection with any judicial or
administrative proceeding of any Governmental Entity), but, except as permitted
below, the Party proposing to disclose such information will first notify and
consult with the other Party concerning the proposed disclosure, to the extent
reasonably feasible. The Parties acknowledge that Cheniere is a "public company"
subject to the disclosure requirements contained in the Securities Act of 1933
and the Securities and Exchange Act of 1934 as well as the requirements of the
American Stock Exchange. Notwithstanding any other provision of this Agreement,
Cheniere may disclose to its shareholders and the public such information as it
reasonably determines is necessary or appropriate to comply with its legal
obligations or requirements, including its disclosure obligations. Each Party
also may disclose such information to employees, consultants, advisors, agents
and lenders or potential lenders whose knowledge is necessary to facilitate the
consummation of the transactions contemplated by this Agreement and the Related
Agreements. Each Party's obligation to hold information in confidence will be
satisfied if it exercises the same care with respect to such information as it
would exercise to preserve the confidentiality of its own similar information.
(ii) Subject to Sections 5.1(c) and (d), (1) each Party shall
have access to confidential information, know-how and work product (including
third-party reports, documents and agreements) produced in connection with the
Partnership., (2) each of the Parties and each of their respective Affiliates is
entitled to use any Confidential Information, including any know-how and
third-party reports, documents, agreements or other work products, in connection
with the development or operation of any other business or venture, including
the funding thereof, and (3) each Party and their respective Affiliates may hire
any third-party consultant, advisor, counsel or other service provider employed
by the Partnership and such party may use any Confidential Information, work
product or know-how developed on behalf of the Partnership in providing services
to such Party or its Affiliates.
(c) Notification of Certain Matters. Between the date of this
Agreement and the Closing Date, each Party will promptly notify the other Party
of any fact, event, circumstance or action known to the first Party (i) which,
if known on the Effective Date, would have been required to be disclosed to the
other Party pursuant to this Agreement or (ii) the existence or occurrence of
which would cause any of such Party's representations or warranties under this
Agreement not to be correct and complete.
(d) Related Documents. Subject to the satisfaction or waiver of
their respective conditions to Closing (as set forth in Article VI hereof), the
Parties will execute and deliver at Closing each of the Related Documents to
which they are a party as contemplated by Article VI.
ARTICLE VI
CLOSING and CONDITIONS TO CLOSING
6.1 The Closing. The execution of the Partnership Agreement, the
contribution by the Parties of the Cheniere Contribution and Initial Payment to
the Partnership, as applicable, and the execution of the Related Documents (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇, Hyatt and ▇▇▇▇▇▇,
P.C., at 10:00 a.m., Mountain Time, on September 19, 2002, or
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at such other time and place as the Parties may agree (the applicable date on
which the Closing shall occur is referred to herein as the "Closing Date").
6.2 Conditions to Cheniere Entities' Closing. The obligation of the
Cheniere Entities to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Sections 4.2, 4.3 and 4.4 hereof shall be true and
correct when made and shall be true and correct in all material respects as of
the Closing Date (except for representations and warranties as are hereunder
expressly made only as of another specified date, which shall be true and
correct as of such other date).
(b) Absence of Litigation. No injunction, judgment, order, decree,
ruling or charge shall be in effect that would (i) prevent or make illegal the
consummation by the Cheniere Entities of any of the transactions contemplated by
this Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation.
(c) Performance by Investments and General Partner. Investments and
General Partner shall have each performed and complied with all their covenants,
agreements and obligations hereunder through the Closing.
(d) Certificates and Other Closing Deliveries. Investments or
General Partner, as the case may be, shall have executed (or caused to be
executed) and delivered to Cheniere each of the following items:
(i) a certificate, in the form attached as Exhibit D, executed
by an authorized Person of Investments and the chief executive officer of
General Partner, to the effect that each of the conditions specified above in
Sections 6.2(a) - (c) are satisfied in all material respects;
(ii) an Assignment and Assumption of Contracts to the
Partnership in a form mutually acceptable to Cheniere and Investments;
(iii) a certificate of the applicable authorized Person of
Investments and General Partner, dated the Closing Date, in the Form attached
hereto as Exhibit G certifying that (A) all requisite action has been taken by
the applicable entity and (B) the incumbency and signatures of the officers or
authorized Person of the applicable entity executing this Agreement and the
Related Documents.
(iv) the Partnership Agreement;
(v) the Option Agreement;
(vi) the Guaranty Agreement;
(vii) an opinion of counsel for Investments and the General
Partner dated the Closing Date and dealing with formation, authority, execution
and delivery, in a form reasonably acceptable to Cheniere; and
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(viii) such other instruments and documents as Cheniere may
reasonably request at least 5 Business Days prior to the Closing in connection
with the transactions contemplated by this Agreement.
(e) The Cheniere Entities may waive any condition specified in this
Section 6.2 if it executes a writing so stating at or prior to the Closing and
such waiver shall not be considered a waiver of any other provision in this
Agreement unless the writing specifically so states.
6.3 Conditions to Investments's and General Partner's Closing. The
obligation of Investments or General Partner to consummate the transactions to
be performed by it in connection with the Closing is subject to satisfaction of
the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 4.1 hereof shall be true and correct when made
and shall be true and correct in all material respects as of the Closing Date
(except for representations and warranties as are hereunder expressly made only
as of another specified date, which shall be true and correct as of such other
date).
(b) Absence of Litigation. No injunction, judgment, order, decree,
ruling or charge shall be in effect that would (i) prevent or make illegal the
consummation by the Investments or General Partner of any of the transactions
contemplated by this Agreement or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation.
(c) Performance by Investments and the General Partner. The Cheniere
Entities and their Affiliates shall have performed and complied with all their
covenants, agreements and obligations hereunder through the Closing.
(d) Certificates and Other Closing Deliveries. The Cheniere Entities
shall have executed (or caused to be executed) and delivered to Investments and
General Partner each of the following items:
(i) a certificate, in the form attached as Exhibit E,
executed by the chief executive officer, president or chief financial officer of
Cheniere and Cheniere LNG and an authorized Person of Freeport LNG, to the
effect that each of the conditions specified above in Sections 6.3(a) - (c) is
satisfied in all material respects;
(ii) an Assignment of Lease Option to the Partnership in a
form mutually acceptable to Cheniere and Investments;
(iii) an Assignment and Assumption of Contracts to the
Partnership in a form mutually acceptable to Cheniere and Investments;
(iv) an opinion of counsel for Cheniere, dated the Closing
Date and dealing with formation, authority, execution and delivery, in a form
reasonably acceptable to Investments;
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(v) evidence, in form and substance satisfactory to
Investments and General Partner, that all of the Required Consents have been
obtained or given in accordance with applicable Law and are in full force and
effect;
(vi) a certificate of the secretary of Cheniere and Cheniere
LNG and an authorized Person of Freeport LNG, dated the Closing Date, in the
form attached as Exhibit H as to (A) the corporate actions (including copies of
relevant resolutions) taken by the Cheniere Entities and their board of
directors or managers, as the case may be, to authorize the transactions
contemplated hereby, and (B) the incumbency and signatures of the officers or
manager of the applicable Cheniere Entities executing this Agreement and the
other Related Documents;
(vii) the Warrant;
(viii) the Option Agreement
(ix) the Partnership Agreement; and
(x) such other instruments and documents as Investments or
General Partner may reasonably request within 5 Business Days prior to the
Closing in connection with the transactions contemplated by this Agreement.
(e) Contango Release. Cheniere shall have received the Contango
Release.
(f) Crest Waiver. The Cheniere Entities shall have modified the
Crest Settlement and received the Crest Waiver.
(g) Excluded Liabilities; Lien Releases; Taxes. The Cheniere
Entities shall have delivered releases, satisfactions and terminations,
including, without limitation, UCC-3 termination statements, in a form
reasonably satisfactory to Investments and General Partner, of all Liens
affecting any of the Contributed Assets.
(h) Employment Agreements. The Partnership shall have entered into
employment agreements with each of the Management Team members on terms
reasonably satisfactory to Investments.
(i) Management Team. The Cheniere Entities shall provide
documentation that the Cheniere Entities either (1) provided for the continued
vesting of any stock options in Cheniere common stock granted to a Management
Team member prior to the Closing or (2) issued replacement warrants to such
Management Team member in lieu of such stock options.
(j) Due Diligence. Investments and General Partner and their
representatives shall be satisfied in their sole discretion with the results of
their legal, accounting and business due diligence investigations.
(k) Investments or General Partner, as applicable, may waive any
condition specified in this Section 6.3 if it executes a writing so stating at
or prior to the Closing and such waiver shall not be considered a waiver of any
other provision in this Agreement unless the writing specifically so states.
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ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by the Cheniere Entities. Subject to the limitations
set forth in this Article VII, following the Closing Date, the Cheniere Entities
shall, jointly and severally, indemnify and hold harmless Investments and
General Partner and their officers, directors, employees, agents, managers,
representatives and Affiliates (collectively, the "Investments Party
Indemnitees"), from, against and in respect of any and all Liabilities,
obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings,
damages, dues, assessments, losses, fines, penalties, injuries, deficiencies,
demands, expenses, fees, costs, amounts paid in settlement (including reasonable
attorneys' and expert witness fees and disbursements in connection with
investigating, defending or settling any action or threatened action), arising
out of any claim, complaint, demand, cause of action, audit, investigation,
hearing, Action, suit or other proceeding asserted or initiated or otherwise
existing in respect of any matter (collectively "Losses") arising from or
related to any of the following:
(a) Subject to Section 7.5 below, any breach or default in
performance by the Cheniere Entities of any of their representations or
warranties, covenants or agreements contained in this Agreement;
(b) ownership of the Contributed Assets and development of the
Project through the Closing Date (except for the Assumed Liabilities); or
(c) the Excluded Liabilities.
7.2 Indemnification by Investments and General Partner. Subject to the
limitations set forth in this Article VII, Investments and General Partner,
jointly and severally, shall indemnify and hold harmless the Cheniere Entities
and their officers, directors, employees, agents, managers, representatives and
Affiliates (collectively, the "Cheniere Party Indemnitees") from, against and in
respect of any and all Losses arising from or related to any of the following:
(a) any breach or default in performance by Investments or General
Partner, as the case may be, of any of their representations or warranties,
covenants or agreements contained in this Agreement; and
(b) the Partnership's failure to pay the Assumed Liabilities;
provided, however, that the liability of Investments and General Partner under
this Section 7.2(b) shall not increase the amount payable by Investments if
Investments elects to withdraw pursuant to Section 2.3(c), and upon such
withdrawal neither Investments nor General Partner shall have any further
liability under this Section 7.2(b).
7.3 Nature and Survival; Time Limits; Exclusive Remedy.
(a) Regardless of any investigation made at any time by or on behalf
of any Party hereto or of any information any Party may have in respect thereof,
all representations and warranties made herein or in any other agreement entered
into in connection with the transactions contemplated hereby shall survive the
Closing and continue in effect for a period of 2 years after the Closing;
provided, however, that the representations and warranties contained
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in Sections 4.1(b), 4.1(d), 4.1(m), 4.1(o) (with respect to ERISA only) 4.2(b)
and 4.3(b) hereof and any claim based on fraud or intentional misrepresentation
shall survive the Closing and continue in effect through the applicable statute
of limitations. Any claim for indemnification pursuant to this Article VII as a
result of any breach of representation or warranty must be made within the
period of time during which such representation or warranty survives the Closing
pursuant to this Section 7.3(a). Any claim described in the preceding sentence
asserted within the applicable time period (and, to the extent of such claim,
any representation or warranty upon which such claim is based) shall survive
thereafter until such claim is finally resolved.
(b) The covenants and agreements of the Parties set forth in this
Agreement shall survive for the period of time set forth in such covenant or
agreement or, where no such period of time is set forth, for the applicable
statute of limitations with respect to claims arising out of or related to the
performance (or failure to perform) by the applicable Party of its obligations
with respect to such covenant or agreement.
7.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Article VII, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that failure on
the part of the Indemnified Party to notify any Indemnifying Party shall not
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party is thereby materially prejudiced by
such failure.
(b) The Indemnifying Party may, (i) at its own expense, participate
in the defense of any claim, suit, action or proceeding and (ii) upon (x)
written notice to the Indemnified Party and (y) delivering to the Indemnified
Party of a written agreement that the Indemnified Party is entitled to
indemnification pursuant to Section 7.1 or 7.2 for all Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Party shall be
liable for the entire amount of any Loss, at any time during the course of any
such claim, suit, action or proceeding, assume the defense thereof, provided
that (1) the Indemnifying Party's counsel is reasonably satisfactory to the
Indemnified Party, and (2) the Indemnifying Party shall thereafter consult with
the Indemnified Party upon the Indemnified Party's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. If the Indemnifying Party assumes such defense, the Indemnified
Party shall have the right (but not the obligation) to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party. If, however, the representation by
the Indemnifying Party's counsel of both the Indemnifying Party and the
Indemnified Party would present such counsel with a conflict of interest, then
such Indemnified Party may employ separate counsel (Indemnifying Party's consent
to the choice of counsel is required, such consent not to be unreasonably
withheld) to represent or defend it in any such claim, action, suit or
proceeding and the Indemnifying Party shall pay the reasonable fees and
disbursements of such separate counsel. Whether or not the Indemnifying Party
chooses to defend or prosecute any such claim, suit, action or proceeding, all
of the Parties hereto shall cooperate in the defense or prosecution thereof.
(c) Any settlement or compromise made or caused to be made by the
Indemnified Party or the Indemnifying Party, as the case may be, of any such
claim, suit, action
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or proceeding of the kind referred to in this Section 7.4 shall also be binding
upon the Indemnifying Party or the Indemnified Party, as the case may be, in the
same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of such settlement or compromise, provided
that no obligation, restriction or Loss shall be imposed on the Indemnified
Party as a result of such settlement without its prior written consent. The
Indemnified Party will give the Indemnifying Party at least 30 days' notice of
any proposed settlement or compromise of any claim, suit, action or proceeding
it is defending, during which time the Indemnifying Party may reject such
proposed settlement or compromise; provided that from and after such rejection,
the Indemnifying Party shall be obligated to assume the defense of and full and
complete liability and responsibility for such claim, suit, action or proceeding
and any and all Losses in connection therewith in excess of the amount of
unindemnifiable Losses which the Indemnified Party would have been obligated to
pay under the proposed settlement or compromise.
7.5 Limitation of Indemnification. Notwithstanding anything to the
contrary herein, any Indemnifying Party shall not be liable for a Loss arising
out of or in connection with any matter described in this Article VII if and to
the extent such Loss is covered by a policy of insurance or benefits from a
right to indemnification from a person not a party to this Agreement and payment
is made under such policy to the Indemnified Party by the insurer or under such
right to indemnification by such Party, as applicable.
7.6 Exclusive Remedy. Following the Closing, the indemnification
provisions set forth in this Agreement shall constitute the sole and exclusive
recourse and remedy for monetary damages (whether through indemnification,
contribution or otherwise) available to the parties hereto with respect to the
breach of any representation or warranty.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to Closing
as provided below:
(a) The Parties may terminate this Agreement by mutual written
consent;
(b) Investments may terminate this Agreement by giving written
notice to Cheniere at any time prior to the Closing (i) in the event any
Cheniere Entity has breached any representation, warranty or covenant contained
in this Agreement in any material respect, Investments or General Partner has
notified Cheniere of the breach and the breach has continued without cure for a
period of 30 days after the notice of breach, (ii) if Investments, General
Partner or any of their representatives are not satisfied with the results of
their legal, accounting or business due diligence investigations, or (iii) if
the Closing shall not have occurred on or before September 19, 2002 or such
later date as the Parties shall mutually agree (unless the failure results
primarily from Investments or General Partner breaching any representation,
warranty or covenant contained in this Agreement); or
(c) The Cheniere Entities may terminate this Agreement by giving
written notice to Investments or General Partner at any time prior to the
Closing (i) in the event Investments or General Partner has breached any
representation, warranty or covenant
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contained in this Agreement in any material respect, Cheniere has notified
Investments or General Partner of the breach and the breach has continued
without cure for a period of 30 days after the notice of breach or (ii) if the
Closing shall not have occurred on or before September 19, 2002 or such later
date as the Parties shall mutually agree (unless the failure results primarily
from the Cheniere Entities breaching any representation, warranty or covenant
contained in this Agreement).
8.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 8.1 hereof, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party,
provided, however, that (i) no termination shall relieve any Party from any
Liability arising from or relating to such Party's breach at or prior to
termination and (ii) the provisions of Sections 5.3(b), 9.6, 9.7, 9.10, 9.11,
9.12, 10 and 11 shall survive the termination of this Agreement.
8.3 Procedure for Termination. In the event of a termination of this
Agreement by either Party pursuant to this Article VIII, written notice of such
termination will be promptly given by the terminating Party to the other Party.
ARTICLE IX
MISCELLANEOUS
9.1 No Third Party Beneficiaries. Except as specifically set forth
herein, this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
9.2 Entire Agreement. This Agreement (including the schedules and
exhibits required to be delivered pursuant to this Agreement) and each other
Related Document constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or between
the Parties (or their respective Affiliates), written or oral, to the extent
they relate in any way to the subject matter hereof or thereof.
9.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
or his rights, interests or obligations hereunder without the prior written
approval of the other Party.
9.4 Counterparts; Facsimile Signatures. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. Each Party hereto
agrees to accept the facsimile signature of the other Party hereto and to be
bound by its own facsimile signature; provided, however, that the Parties shall
exchange original signatures by overnight mail.
9.5 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given (a) upon
confirmation of an electronic mail or facsimile
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message, (b) one Business Day following the date sent when sent by overnight
delivery via a reputable courier or (c) five Business Days following the date
mailed when mailed by registered or certified mail return receipt requested and
postage prepaid, at the following addresses:
If to the Cheniere Entities:
Cheniere Energy, Inc.
▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to Investments:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to General Partner:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇▇▇ Hyatt & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
facsimile, or ordinary mail), but no such notice, request, demand, claim or
other communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change the address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other Party notice in the manner herein set
forth.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) to the extent such provisions or rules would
apply the law of another jurisdiction.
9.8 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent to such occurrence.
9.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10 Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
9.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any Laws shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Definitions are equally applicable to both the singular and plural
forms of the terms defined, and references to the masculine, feminine or neuter
gender include each other gender. Neither the listing nor description of any
item, matter or document on any Schedule nor the furnishing or availability for
review of any document shall be construed to modify, qualify or disclose an
exception to any representation or warranty of any Party made herein or in
connection herewith, except (a) to the extent that such representation or
warranty specifically refers to such Schedule and such modification,
qualification or exception is described on such Schedule, (b) to the extent that
such representation or warranty specifically refers to another Schedule which
specifically cross references such Schedule and such modification, qualification
or exception is described in such cross-referenced Schedule, or (c) it is
evident from the language of the Schedule itself that such exception would be
applicable to another Schedule. All covenants, agreements, representations and
warranties of a Party made herein and in the other Related Documents and any
certificates, exhibits and schedules hereto
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and thereto shall be deemed to have been relied on by the other Party hereto,
notwithstanding any investigation made by or on behalf of any of the Parties or
any opportunity therefor.
9.12 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
9.13 Specific Performance. Each Party acknowledges and agrees that each
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that, in addition to any
other relief which may be available, the other Party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in addition to any other remedy (subject to the provisions set
forth in Articles X and XI hereof) to which it may be entitled, at law or in
equity.
9.14 Attorneys Fees. If either Party brings any suit, action,
counterclaim, or arbitration to enforce the provisions of this Agreement
(including without limitation enforcement of any award or judgment obtained with
respect to this Agreement), the prevailing Party shall be entitled to recover a
reasonable allowance for attorneys' fees, litigation expenses, and the cost of
arbitration in addition to court costs.
ARTICLE X
CONSENT TO JURISDICTION
Each Party agrees that all Actions arising out of or based upon this
Agreement or the subject matter hereof shall be brought and maintained
exclusively in the federal courts located in the City of Houston in the State of
Texas. Each Party by execution hereof (i) hereby irrevocably submits to the
jurisdiction of the federal courts located in the State of Colorado for the
purpose of any Action arising out of or based upon this Agreement or the subject
matter hereof and (ii) hereby waives to the extent not prohibited by applicable
Law, and agrees not to assert, by way of motion, as a defense or otherwise, in
any such Action any claim that it is not subject personally to the jurisdiction
of the above-named court, that it is immune from extraterritorial injunctive
relief, that its property is exempt or immune from attachment or execution, that
any such Action may not be brought or maintained in the above-named court,
should be dismissed on the grounds of forum non conveniens, should be
transferred to any court other than the above-named court, should be stayed by
virtue of the pendency of any other Action in any court other than the
above-named court, or that this Agreement or the subject matter hereof may not
be enforced in or by the above-named court. Each Party hereby consents to
service of process in any such Action in any manner permitted by the laws of the
State of Texas, agrees that service of process by registered or certified mail,
return receipt requested, at the address specified in or pursuant to Section 9.6
hereof is reasonably calculated to give actual notice and waives and agrees not
to assert by way of motion, as a defense or otherwise, in any such Action any
claim that service of process made in accordance with Section 9.6 hereof does
not constitute good and sufficient service of process. The provisions of this
Article X shall not restrict the ability of any Party to enforce in any court
any judgment obtained in the state or federal courts located in the State of
Colorado.
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ARTICLE XI
WAIVER OF JURY TRIAL
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND ACTION OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF,
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR
CONTRACT OR OTHERWISE. ANY OF THE PARTIES HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS ARTICLE XI WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed individually or by their duly authorized officers on the date first
above written.
CHENIERE: CHENIERE ENERGY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
CHENIERE ENTITIES: CHENIERE LNG, INC.
By:________________________________
Name:______________________________
Title:_____________________________
FREEPORT LNG TERMINAL, LLC
By:________________________________
Name:______________________________
Title:_____________________________
INVESTMENTS: FREEPORT LNG INVESTMENTS, LLC
By:________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------
Title: Managing Member
---------------
GENERAL PARTNER: FREEPORT LNG-GP, INC.
By:________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------
Title: Chief Executive Officer
-----------------------
[Signature Page to Contribution Agreement]