Exhibit 10.2

 


*** indicates material has been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission.  A complete copy of this agreement has been filed with the Securities and Exchange Commission.

 

 

CREDIT AGREEMENT

 

among

 

FREEPORT LNG DEVELOPMENT, L.P.,
as Borrower,

 

FREEPORT LNG-GP, INC.,
as General Partner

 

CONOCOPHILLIPS COMPANY,
as Lender,

 

VARIOUS FINANCIAL INSTITUTIONS,
from time to time a party hereto as Lenders,

 

CONOCOPHILLIPS COMPANY,
as Administrative Agent,

 

and

 

CONOCOPHILLIPS COMPANY,
as Collateral Agent

 


 

Dated as of July 2, 2004

 


 

FREEPORT LNG RECEIVING, STORAGE AND REGASIFICATION TERMINAL

 

 


 

Table of Contents

 

ARTICLE 1.

DEFINITIONS AND RULES OF INTERPRETATION

 

 

 

 

1.1

Defined Terms

 

1.2

Rules of Interpretation

 

1.3

Accounting Principles

 

 

 

 

ARTICLE 2.

AMOUNTS AND TERMS OF CREDIT FACILITY

 

 

 

 

2.1

The Construction Loan Facility

 

2.2

The Term Loan Facility

 

2.3

Notice of Borrowing

 

2.4

Pro Rata Borrowings; Availability

 

2.5

Minimum Amount and Maximum Number of Borrowings, etc.

 

2.6

Disbursement of Funds

 

2.7

Evidence of Obligations and Notes

 

2.8

Interest on Loans

 

2.9

Ranking

 

2.10

Taxes

 

2.11

Tax Reporting

 

2.12

Increased Costs and Reduction of Return

 

2.13

Funding Losses

 

2.14

Survival

 

2.15

Supplemental Costs and TPS Loans

 

2.16

Expansion Loans

 

2.17

TPS Secured Parties and Expansion Secured Parties

 

2.18

Certain Costs Recoverable by Borrower; Obligations of the Borrower

 

 

 

 

ARTICLE 3.

CONDITIONS PRECEDENT

 

 

 

 

3.1

Conditions to Closing and Construction Loans During Initial Period

 

3.2

Construction Loans After Initial Period

 

3.3

The Conversion Date

 

3.4

No Failure to Satisfy Condition

 

3.5

Administrative Agent Rights

 

3.6

Conditions to Initial Tranche B Construction Loan

 

 

 

 

ARTICLE 4.

REPRESENTATIONS, WARRANTIES AND AGREEMENTS

 

 

 

 

4.1

Organization

 

4.2

Authority and Consents.

 

4.3

Capitalization; Debt; Investments.

 

4.4

Financial Condition.

 

4.5

Legal Matters; Labor Disputes

 

4.6

Necessary Approvals.

 

4.7

Use of Proceeds; Margin Stock.

 

4.8

ERISA

 

4.9

Taxes; Tax Status.

 

4.10

Investment Company Act

 

 

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4.11

Regulation

 

4.12

Title; Security Documents.

 

4.13

Environmental Matters

 

4.14

Subsidiaries; Capital Stock Ownership

 

4.15

Intellectual Property

 

4.16

Project Documents.

 

4.17

No Default; Force Majeure

 

4.18

Compliance with Applicable Laws and Necessary Approvals

 

4.19

Disclosure.

 

4.20

Utilities, etc

 

4.21

Transactions with Affiliates

 

4.22

Single-Purpose Entity; Phase 1 Additions; Location of Business

 

 

 

 

ARTICLE 5.

COVENANTS.

 

 

 

 

5.1

Financial Statements and Other Information

 

5.2

Other Notices

 

5.3

Conduct of Business; Title to Assets

 

5.4

Compliance with Applicable Laws; Legal Matters

 

5.5

Payment of Taxes, Tax Status etc.

 

5.6

Books and Records; Financial Management; Auditors.

 

5.7

Inspection.

 

5.8

Governmental Approvals; Maintenance of Certain Rights

 

5.9

Insurance.

 

5.10

Events of Loss; Project Document Claims and Performance Liquidated Damages.

 

5.11

Application of Loss Proceeds; Expropriation Event.

 

5.12

Limitation on Liens

 

5.13

Guarantees; Debt

 

5.14

Leases

 

5.15

Single Purpose Entity of the Borrower and General Partner; Subsidiaries and Investments; Phase 1 Additions

 

5.16

Restricted Payments

 

5.17

Hedging Agreements

 

5.18

Certain Security Interest Matters

 

5.19

Transactions with Affiliates; Expansion

 

5.20

Use of Proceeds; Accounts; Construction Budget.

 

5.21

Project Construction; Maintenance.

 

5.22

Performance of Project Documents

 

5.23

Operating Budget; Account Agreement; Phase 1 Addition Expenses.

 

5.24

Fundamental Changes.

 

5.25

Amendment of Transaction Documents; Material Additional Project Documents; Change Orders; etc.

 

5.26

Environmental Compliance

 

5.27

Completion; Construction Contracts; Performance Tests.

 

5.28

ERISA

 

5.29

Certain Restrictive Agreements

 

5.30

Security Documents.

 

 

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5.31

Prepayment of Debt

 

5.32

Transfers of Capital Stock in the Borrower and its Subsidiaries

 

5.33

Payment of Project Costs with Project Revenues

 

5.34

Investment Company Act; PUHCA

 

5.35

Further Assurances

 

 

 

 

ARTICLE 6.

PAYMENT PROVISIONS; FEES.

 

 

 

 

6.1

Repayment of Principal; Interest; Reduction of Commitment.

 

6.2

Voluntary Prepayments

 

6.3

Mandatory Prepayments

 

6.4

Term Loan Maturity Date

 

6.5

Method and Place of Payment.

 

6.6

Application of Payments; Sharing.

 

 

 

 

ARTICLE 7.

EVENTS OF DEFAULT AND REMEDIES.

 

 

 

 

7.1

Events of Default

 

7.2

Acceleration.

 

7.3

Other Remedies

 

7.4

No Default or Event of Default

 

7.5

Administrative Agent Rights

 

 

 

 

ARTICLE 8.

THE AGENTS.

 

 

 

 

8.1

Appointment and Authorization.

 

8.2

Delegation of Duties

 

8.3

Liability of the Agents

 

8.4

Reliance by the Agents

 

8.5

Notice of Default.

 

8.6

Credit Decision

 

8.7

Indemnification of Agents.

 

8.8

Agents in Individual Capacities; Other Business with the Borrower

 

8.9

Successor Agents.

 

8.10

Withholding Tax.

 

 

 

 

ARTICLE 9.

MISCELLANEOUS.

 

 

 

 

9.1

COSTS AND EXPENSES

 

9.2

INDEMNITY

 

9.3

Notices.

 

9.4

Benefit of Agreement; Assignment by Borrower

 

9.5

No Waiver; Remedies Cumulative

 

9.6

No Third Party Beneficiaries

 

9.7

Confidentiality

 

9.8

No Immunity

 

9.9

Counterparts

 

9.10

Amendment or Waiver.

 

9.11

Assignments by Lenders, Participations, etc.

 

9.12

Survival

 

 

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9.13

WAIVER OF JURY TRIAL

 

9.14

Right of Set-off

 

9.15

Severability

 

9.16

Domicile of Loans

 

9.17

Limitation of Recourse.

 

9.18

Governing Law; Submission to Jurisdiction.

 

9.19

Reinstatement

 

9.20

Complete Agreement

 

9.21

Maximum Interest Rate

 

 

Appendices

 

 

 

Appendix A:

Defined Terms and Rules of Interpretation

 

 

Appendix B:

Intercreditor Arrangement Between Secured Parties and TPS Secured Parties: Summary of Terms and Conditions

 

 

Appendix C:

Insurance Provisions

 

 

 

 

 

 

Schedules

 

 

 

Schedule 4.2:

Financing-Related Filings, Etc.

 

 

Schedule 4.9:

Taxes

 

 

Schedule 5.3(b):

Outstanding Parcels

 

 

Schedule 5.12:

Certain Transaction Documents with Liens

 

 

Schedule 5.19:

Certain Transaction Documents with Affiliates

 

 

Schedule 5.20:

Approved Development and Construction Cost Reimbursements

 

 

 

 

 

 

Exhibits

 

 

 

Exhibit A-1:

Form of Notice of Borrowing

 

 

Exhibit B-1:

Form of Tranche A Construction Note

 

 

Exhibit B-2:

Form of Tranche B Construction Note

 

 

Exhibit B-3:

Form of Tranche A Term Note

 

 

Exhibit B-4:

Form of Tranche B Term Note

 

 

Exhibit C:

Form of Process Agent Letter

 

 

Exhibit D-1:

Form of Construction Requisition

 

 

Exhibit D-2:

Form of Independent Engineer’s Certificate (Drawdowns)

 

 

Exhibit E-1:

Form of Borrower Completion Certificate

 

 

Exhibit E-2:

Form of Independent Engineer Completion Certificate

 

 

Exhibit F:

Form of Consent Agreement

 

 

Exhibit G:

Form of Assignment and Acceptance

 

 

Exhibit H-1:

Form of Officer’s Certificate of the Borrower

 

 

Exhibit H-2:

Form of Officer’s Certificate of Other Entity

 

 

Exhibit I-1:

Form of Quarterly Financial Statements Officer’s Certificate

 

 

Exhibit I-2:

Form of Annual Financial Statements Officer’s Certificate

 

 

Exhibit I-3:

Form of Quarterly Operating Report Officer’s Certificate

 

 

 

 

 

 

Annex

 

 

 

Annex I:

Construction Loan Commitment

 

 

 

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This CREDIT AGREEMENT (this “Agreement”), dated as of July 2, 2004, is among (i) FREEPORT LNG DEVELOPMENT, L.P., a limited partnership organized and existing under the laws of the State of Delaware, as the Borrower, (ii) FREEPORT LNG-GP, INC., a corporation organized under the laws of the State of Delaware, as General Partner, (iii) CONOCOPHILLIPS COMPANY, a corporation organized under the laws of the State of Delaware, as Lender, (iv) the financial institutions from time to time party hereto as Lenders, (v) CONOCOPHILLIPS COMPANY, as Administrative Agent, and (vi) CONOCOPHILLIPS COMPANY, as Collateral Agent.

 

R E C I T A L S:

 

WHEREAS the Borrower has been formed as a limited partnership under the laws of the State of Delaware solely to undertake the development, construction, financing, completion, ownership and operation of a LNG terminal facility located on Quintana Island, Texas, that is designed to and capable of performing certain LNG terminalling services, all as more fully described in the Project Documents;

 

WHEREAS, in order to finance the acquisition, construction and initial operation of Phase 1 of the Project and certain other costs and expenditures associated with the development of Phase 1 of the Project and the financing contemplated herein, the Borrower has requested the Lenders to provide the credit facilities described herein; and

 

WHEREAS, the Lenders are willing to provide the credit facilities described herein upon the terms and conditions herein set forth;

 

NOW, THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

 

ARTICLE 1.           DEFINITIONS AND RULES OF INTERPRETATION.

 

1.1           Defined Terms.  Except as otherwise expressly provided herein, capitalized terms used in this Agreement and its Schedules, Exhibits, Appendices and Annex shall have the respective meanings assigned to such terms in Appendix A hereto.

 

1.2           Rules of Interpretation.  Except as otherwise expressly provided herein, the rules of interpretation set forth in Appendix A hereto shall apply to this Agreement.

 

1.3           Accounting Principles.  Except as otherwise provided in this Agreement, all computations and determinations as to financial matters, and all financial statements to be delivered under this Agreement shall be made or prepared in accordance with GAAP (including principles of consolidation where appropriate) applied on a consistent basis (except to the extent approved or required by the independent public accountants certifying such statements and disclosed therein).

 



 

ARTICLE 2.           AMOUNTS AND TERMS OF CREDIT FACILITY.

 

2.1           The Construction Loan Facility

 

(a)           Subject to and upon the terms and conditions set forth herein, each Lender severally agrees to make, from time to time during the Construction Loan Availability Period, senior secured loans (each, a “Tranche A Construction Loan” and, collectively, the “Tranche A Construction Loans”) to the Borrower, which Tranche A Construction Loans (i) shall be made and maintained in Dollars, (ii) shall not exceed for any Lender, in aggregate principal amount, that amount which equals the Tranche A Construction Loan Commitment of such Lender, and (iii) except to the extent that such Tranche A Construction Loans are converted into Tranche A Term Loans in accordance with Section 2.2 hereof, shall mature on the Tranche A Construction Loan Maturity Date.

 

(b)           Subject to and upon the terms and conditions set forth herein, each Lender severally agrees to make, from time to time during the Construction Loan Availability Period, senior secured loans (each, a “Tranche B Construction Loan” and, collectively, the “Tranche B Construction Loans”) to the Borrower, which Construction Loans (i) shall be made and maintained in Dollars, (ii) except to the extent that such Tranche B Construction Loans are converted into Tranche B Term Loans in accordance with Section 2.2 hereof, shall mature on the Tranche B Construction Loan Maturity Date.

 

(c)           The Construction Loans are available only on the terms and conditions specified hereunder, and once repaid, in whole or in part, at maturity or by prepayment, may not be reborrowed in whole or in part.

 

2.2           The Term Loan Facility

 

(a)           Subject to and upon the terms and conditions set forth herein, each of the Lenders agrees that on the Conversion Date all Tranche A Construction Loans of such Lender outstanding on such date (after giving effect to any Borrowing of Tranche A Construction Loans on such date and any prepayment of Tranche A Construction Loans on such date in accordance herewith) shall automatically convert into term loans (each, a “Tranche A Term Loan” and, collectively, the “Tranche A Term Loans”) in an aggregate principal amount not exceeding such Lender’s Tranche A Term Loan Commitment in effect as of such date.

 

(b)           Subject to and upon the terms and conditions set forth herein, each of the Lenders agrees that on the Conversion Date all Tranche B Construction Loans of such Lender outstanding on such date (after giving effect to any Borrowing of Tranche B Construction Loans on such date and any prepayment of Tranche B Construction Loans on such date in accordance herewith) shall automatically convert into term loans (each, a “Tranche B Term Loan” and, collectively, the “Tranche B Term Loans”).

 

(c)           Construction Loans that are converted into Term Loans shall not be deemed to be prepaid, repaid or discharged but shall be deemed to be continued as Term Loans as provided hereby.  Construction Loans that are not converted into Term Loans in accordance herewith shall be repaid in accordance with Section 6.1.

 

2.3           Notice of Borrowing.  Whenever the Borrower desires to make a Borrowing pursuant to Section 2.1, it shall give written notice to the Administrative Agent at its Notice Office at least three Business Days prior to the date of the Borrowing; provided, that any

 

2



 

such notice shall be deemed to have been given on a certain day only if given before 5:00 p.m. (New York City time).  Each such notice (a “Notice of Borrowing”) shall be irrevocable and shall be given by the Borrower substantially in the form of Exhibit A-1 hereto, appropriately completed to specify (i) the aggregate principal amount of the Tranche A Construction Loans to be made pursuant to such Borrowing, (ii) the aggregate principal amount of the Tranche B Construction Loans to be made pursuant to such Borrowing, and (iii) the date of such Borrowing (which shall be a Business Day not later than the Conversion Date).  The Administrative Agent shall promptly give each Lender notice of the proposed Borrowing (which, in the case of at least the Initial Lender, shall include the aggregate principal amount of the Construction Loans to be made), the amount of such Lender’s proportionate share thereof, and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing.

 

2.4           Pro Rata Borrowings; Availability.  Each Borrowing of Tranche A Construction Loans shall be incurred contemporaneously and ratably among the Lenders based upon the amount of their respective Tranche A Construction Loan Commitments.  Each Borrowing of Tranche B Construction Loans shall be incurred contemporaneously and ratably among the Lenders based upon the amount of their respective Tranche B Construction Loan Commitments.  Except for the obligations of the Initial Lender set forth in Section 2.6, it is agreed that no Lender shall be responsible for any default by any other Lender of its obligation to make a Loan hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder regardless of the failure of any other Lender to make a Loan hereunder.

 

2.5           Minimum Amount and Maximum Number of Borrowings, etc.

 

(a)           The aggregate principal amount of each Borrowing of Tranche A Construction Loans and Tranche B Construction Loans, collectively, on a given Disbursement Date under Section 2.1 shall not be less than the lesser of (i) $1,000,000 and (ii) the aggregate unused amount of the applicable Construction Loan Commitments.

 

(b)           Except in the case of Borrowings incurred solely to pay any of the Obligations set forth in clause (a) or (b) of the definition of Obligations, the Borrower shall be limited to a maximum of one Borrowing per calendar month.

 

2.6           Disbursement of Funds.  Subject to the terms and conditions hereof, no later than 5:00 p.m. (New York City time) on the Borrowing date specified in each Notice of Borrowing, each Lender will make available, through such Lender’s Applicable Lending Office, its pro rata portion of the aggregate amount of the Loans requested to be made on such date, in Dollars and in immediately available funds at the Payment Office of the Administrative Agent, and the Administrative Agent will deposit the aggregate of the amounts so made available by the Lenders into the Construction Account.  Unless the Administrative Agent shall have been notified by any Lender prior to the applicable date of the Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender’s portion of the Borrowing on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent may (but shall have no obligation to), in reliance upon such assumption, make available to the Borrower a corresponding amount.  If such corresponding amount is not in fact made available to the Administrative Agent by such Defaulting Lender, the Administrative Agent shall be entitled to

 

3



 

recover such corresponding amount from such Defaulting Lender on demand.  If such Defaulting Lender does not immediately pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Initial Lender, and the Initial Lender shall immediately pay such corresponding amount to the Administrative Agent.  The Administrative Agent shall also be entitled to recover on demand from such Defaulting Lender interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent.  If (a) the Administrative Agent does not intend to make available to the Borrower such corresponding amount, (b) the Administrative Agent shall have been notified by any Lender prior to the applicable date of the Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender’s portion of the Borrowing on such date, or (c) any Lender does not make available to the Administrative Agent such Lender’s portion of the Borrowing, the Administrative Agent shall immediately notify the Initial Lender, and the Initial Lender shall make available to the Administrative Agent such corresponding amount.  The Initial Lender shall be entitled to recover such corresponding amount made available by it under this Section 2.6 from such Defaulting Lender on demand.  The Initial Lender shall also be entitled to recover on demand from such Defaulting Lender, interest on such corresponding amount made available by the Initial Lender under this Section 2.6 in respect of each day from the date such corresponding amount was made available by the Initial Lender to the Administrative Agent until the date such corresponding amount is recovered by the Initial Lender.  Until full recovery by the Initial Lender of such corresponding amount made available by it under this Section 2.6, the Initial Lender shall be entitled to all of the rights and remedies of such Defaulting Lender under the Credit Agreement to the extent such advance has not been recovered by the Initial Lender.  Any amount the Administrative Agent receives from the Initial Lender in excess of the amount required to make available to the Administrative Agent the aggregate principal amount of the Construction Loans to be made on such date shall immediately be returned to the Initial Lender.  Nothing in this Section 2.6 shall be deemed to relieve any Lender from its obligation to make a Loan hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any failure by such Lender to make Loans hereunder.

 

2.7           Evidence of Obligations and Notes

 

(a)           Each Lender will maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender as a result of the Loans of such Lender, including the Class, Type, amounts of principal, interest and other amounts payable and paid to such Lender from time to time under this Agreement and the Notes.  The entries made by each Lender shall constitute conclusive evidence of the existence and amounts of the Loans and other Obligations therein recorded, in the absence of manifest error; provided, however, that the failure of any Lender to maintain account or accounts, or any error therein, shall not in any manner affect the obligations of the Borrower to repay or pay the Loan made by such Lender, accrued interest thereon and the other Obligations owed to such Lender hereunder in accordance with the terms of this Agreement and the Notes.  Each Lender shall advise the Borrower promptly of the outstanding principal hereunder owed to such Lender upon written request therefor.  If any amounts paid by the Borrower pursuant to the Notes issued pursuant hereto are insufficient to repay or pay the principal amount of all outstanding Loans, all accrued

 

4



 

and unpaid interest thereon and all other Obligations, the Borrower shall be responsible for the deficiency.

 

(b)           The Borrower’s obligation to pay the principal of, and interest on, the Loans made by each Lender shall be evidenced by

 

(1)         in the case of Tranche A Construction Loans, a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1 hereto with blanks appropriately completed in conformity herewith (each, a “Tranche A Construction Note” and, collectively, the “Tranche A Construction Notes”),

 

(2)         in the case of Tranche B Construction Loans, a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-2 hereto with blanks appropriately completed in conformity herewith (each, a “Tranche B Construction Note” and, collectively, the “Tranche B Construction Notes”),

 

(3)         in the case of Tranche A Term Loans, a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-3 hereto with blanks appropriately completed in conformity herewith (each, a “Tranche A Term Note” and, collectively, the “Tranche A Term Notes”), and

 

(4)         in the case of Tranche B Term Loans, a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-4 hereto with blanks appropriately completed in conformity herewith (each, a “Tranche B Term Note” and, collectively, the “Tranche B Term Notes”).

 

Each of the promissory notes referred to in this Section 2.7(b) are herein referred to individually as a “Note” and, collectively, as the “Notes”.

 

(c)           The Tranche A Construction Note issued to each Lender shall (i) be payable to the order of such Lender, (ii) be dated the Closing Date, (iii) evidence the principal amount of Tranche A Construction Loans outstanding from time to time, (iv) mature on the Tranche A Construction Loan Maturity Date, (v) bear interest as provided in this Agreement, and (vi) be entitled to the benefits of this Agreement.  The Tranche B Construction Note issued to each Lender shall (i) be payable to the order of such Lender, (ii) be dated the Closing Date, (iii) evidence the principal amount of Tranche B Construction Loans outstanding from time to time, (iv) mature on the Tranche B Construction Loan Maturity Date, (v) bear interest as provided in this Agreement, and (vi) be entitled to the benefits of this Agreement.  The Tranche A Term Note issued to each Lender shall (i) be payable to the order of such Lender, (ii) be dated the Conversion Date, (iii) be in a stated principal amount equal to the Tranche A Term Loans of such Lender, (iv) mature on the Tranche A Term Loan Maturity Date, (v) bear interest as provided in this Agreement and (vi) be entitled to the benefits of this Agreement.  The Tranche B Term Note issued to each Lender shall (i) be payable to the order of such Lender, (ii) be dated the Conversion Date, (iii) be in a stated principal amount equal to the Tranche B Term Loans of such Lender, (iv) mature on the Tranche B Term Loan Maturity Date, (v) bear interest as provided in this Agreement and (vi) be entitled to the benefits of this Agreement.

 

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(d)           Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the schedule attached thereto (or any continuation thereof) the outstanding principal amount of Loans evidenced thereby.  Failure to make such notation shall not affect the Borrower’s obligations in respect of such Loans.

 

2.8           Interest on Loans

 

(a)           The Borrower agrees to pay interest in respect of the aggregate outstanding principal amount of each Tranche A Construction Loan from the date the proceeds thereof are made available to the Borrower until the maturity of such Tranche A Construction Loan (whether by acceleration or otherwise) at a rate per annum that is equal to the Tranche A Rate.  The Borrower agrees to pay interest in respect of the aggregate outstanding principal amount of each Tranche B Construction Loan from the date the proceeds thereof are made available to the Borrower until the maturity of such Tranche B Construction Loan (whether by acceleration or otherwise) at a rate per annum that is equal to the Tranche B Rate.  Interest after the Term Date shall be paid in accordance with Section 6.1.

 

(b)           Upon the occurrence and during the continuance of an Event of Default, the aggregate outstanding amount of the Loans will bear interest at a rate (the “Default Rate”) that is equal to the sum of (i) *** per annum and (ii) in the case of Tranche A Loans, the greater of (A) the Tranche A Rate and (B) the Prime Rate and in the case of Tranche B Loans, the Tranche B Rate.

 

(c)           Accrued (and theretofore unpaid) interest shall be payable in respect of each Construction Loan, monthly in arrears on the last Business Day of each month and on any repayment or prepayment (on the amount repaid or prepaid) at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.  Notwithstanding the foregoing, interest payable in accordance with Section 2.8(b) shall be payable as provided therein.

 

2.9           Ranking.  The Loans will be senior secured Debt of the Borrower ranking pari passu in right of payment with all other existing and future senior Debt of the Borrower, and senior in right of payment to all existing and future Debt of the Borrower that is designated as subordinate or junior in right of payment to the Loans.

 

2.10         Taxes

 

(a)           Any and all payments by the Borrower to any Lender or Agent under this Agreement and any other Financing Document shall be made free and clear of, and without deduction or withholding for, any Taxes.

 

(b)           The Borrower agrees to indemnify and hold harmless each Lender and each Agent for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this section) paid by any such Lender or Agent and any liability (including penalties, interest, additions to Tax and expenses) arising from or with respect to the Loans, whether or not such Taxes were correctly or legally asserted.  Payment under this indemnification shall be made within 30 days after the date the affected Lender or Agent makes written demand on Borrower therefor; provided, however, that if such Taxes are paid by any

 

6



 

Lender or Agent prior to Conversion, then payment under this indemnification shall not be due until COP Shipper makes its first Debt Service Installment payment.

 

(c)           On or after Conversion, if the Borrower shall be required by Applicable Law to deduct or withhold for any Taxes from or in respect of any sum payable hereunder or under any other Financing Document to any Lender or Agent, then:

 

(1)         the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this section) such Lender or Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made;

 

(2)         the Borrower shall make such deductions and withholdings;

 

(3)         the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other Government Authority in accordance with Applicable Law; and

 

(4)         the Borrower shall also pay to each Lender and Agent for the account of such Lender or Agent, as the case may be, at the time interest is paid, all additional amounts specified by the respective Lender or Agent as necessary to preserve the after-tax yield it would have received if such Taxes had not been imposed.

 

(d)           Within 30 days after the date of any payment by the Borrower of Taxes, the Borrower shall furnish the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent.

 

(e)           If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to Section 2.10(c), then such Lender, may (or at the request of the Borrower and at the reasonable expense of the Borrower shall) use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office so as to eliminate any such additional payment by the Borrower that may thereafter accrue, if in the judgment of such Lender such change is not otherwise disadvantageous to such Lender.  Payment of expenses incurred under this Section 2.10(e) shall be made within 30 days after the date the affected Lender or Agent makes written demand on the Borrower therefor; provided, however, that if such expenses are paid or incurred by any Lender or Agent prior to Conversion then payment under this Section 2.10(e) shall not be due until COP Shipper makes its first Debt Service Installment payment.

 

(f)            Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by Applicable Law, such properly completed and executed documentation prescribed by Applicable Law or reasonably requested by the Borrower at the Borrower’s expense as will permit such

 

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payments to be made without withholding Tax or withholding or at a reduced rate (unless doing so in the judgment of such Lender is not otherwise disadvantageous to such Lender).

 

(g)           Neither the Administrative Agent nor any Lender shall be required to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Borrower or any other Person.

 

2.11         Tax Reporting.  The Borrower and each of the Lenders shall report the Loans as loan transactions for federal income tax purposes.

 

2.12         Increased Costs and Reduction of Return

 

(a)           If any Lender determines that, due to either (i) the introduction of or any change in Applicable Law occurring or becoming effective after the date hereof, or (ii) the compliance by such Lender with any guideline or request from any central bank or other Governmental Authority promulgated, issued or becoming effective after the date hereof (whether or not having the force of Applicable Law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Loans, then the Borrower shall be liable for, and shall from time to time, upon written demand (with a copy of such demand to be sent to the Administrative Agent), pay to the Administrative Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs.  Payment under this Section 2.12(a) shall be made within 30 days after the date the affected Lender or Agent makes written demand on Borrower therefor; provided, however, that if such increased costs are paid by any Lender or Agent prior to Conversion, then payment under this Section 2.12(a) shall not be due until COP Shipper makes its first Debt Service Installment.

 

(b)           If any Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation after the date hereof, (ii) any change in any Capital Adequacy Regulation occurring or becoming effective after the date hereof, (iii) any change in the interpretation, construction or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation, construction or administration thereof occurring or becoming effective after the date hereof, or (iv) compliance after the date hereof by such Lender (or its Applicable Lending Office) or any corporation controlling such Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by such Lender or any entity controlling such Lender and (taking into consideration such Lender’s or such entity’s policies with respect to capital adequacy and the return on capital that such Lender determines it would have achieved but for the occurrence of any event described in the foregoing clauses (i) through (iv)) determines that the amount of such capital required or expected to be maintained is increased as a consequence of its Commitment, Loans, credits or obligations under this Agreement, then, upon demand of such Lender to the Borrower through the Administrative Agent, the Borrower shall pay to such Lender, from time to time as specified in writing by such Lender, additional amounts sufficient to compensate such Lender for the effect of such increase.  Payment under this Section 2.12(b) shall be made within 30 days after the date the affected Lender or Agent makes written demand on Borrower therefor; provided, however, that if such additional amounts are paid by any Lender or Agent prior to

 

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Conversion, then payment under this Section 2.12(b) shall not be due until COP Shipper makes its first Debt Service Installment payment.

 

(c)           Before making demand upon the Borrower under Section 2.12(a), the affected Lender shall designate a different Applicable Lending Office with respect to its Loans if such designation will avoid the need for making such demand and will not, in the judgment of such Lender, be illegal or otherwise disadvantageous to such Lender.

 

(d)           Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.12 shall not constitute a waiver of such Lender’s right to demand such compensation.

 

2.13         Funding Losses.  The Borrower shall reimburse each Lender and hold each Lender harmless from any loss or expense that the Lender may sustain or incur as a consequence of:

 

(a)           the failure of the Borrower to make on a timely basis any scheduled payment of principal of any Loan except if such failure is not an Event of Default;

 

(b)           the failure of the Borrower to borrow a Construction Loan after the Borrower has given (or is deemed to have given) a Notice of Borrowing or to effect the Conversion in accordance herewith;

 

(c)           the prepayment or repayment (including pursuant to ARTICLE 6) or other payment (including after acceleration thereof) of a Loan on a day other than the scheduled payment date for such amount; and

 

(d)           the failure of the Borrower to make any prepayment in accordance with Section 6.2.

 

2.14         Survival.  The agreements and obligations of the Borrower in Sections 2.10 through 2.13 shall survive the payment of the Loans, the Notes and all other Obligations.

 

2.15         Supplemental Costs and TPS Loans

 

(a)           If Supplemental Costs are required to be paid or reimbursed, the Borrower shall provide or cause to be provided financing for *** of such Supplemental Costs (in each case upon terms and conditions, and pursuant to documentation, not inconsistent with the Financing Documents) by either:

 

(1)         causing capital calls to be made on the Limited Partners and the proceeds of such capital calls to be deposited into the Supplemental Reserve Account, provided that such capital call obligations shall be supported by Acceptable Credit Support to the extent not funded timely by deposits of the proceeds of such capital calls into the Supplemental Reserve Account; or

 

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(2)         entering into a credit facility with an Eligible Institution containing a commitment to fund the TPS Loans with the proceeds thereof to be used for Supplemental Costs.  The TPS Loans, if any, will be arranged by the General Partner; or

 

(3)         availing itself of the Tranche B Construction Loan Commitment, subject to the terms of this Agreement.

 

(b)           The TPS Loans shall be made under a separate facility or separate facilities.  The Borrower may have more than one facility for TPS Loans subject to intercreditor arrangements acceptable to the Administrative Agent in its sole discretion.  In accordance with the commitments of the Lenders and the financing obtained under Section 2.15(a), Borrower undertakes that each request for payment or reimbursement of Supplemental Costs shall be simultaneously funded one half from the Tranche A Commitments (subject to satisfaction of the requirements under the Financing Documents) and one half from either the Tranche B Commitments or the other financing contemplated under Section 2.15(a).

 

(c)           On the Project Completion Date, the obligations of the General Partner, the Limited Partners, the Borrower, and the TPS Lenders to enter into or provide such Supplemental Cost financing contemplated by this Section 2.15 shall terminate.

 

(d)           If any existing Acceptable Credit Support ceases to constitute Acceptable Credit Support or is not renewed at least 30 days before it is scheduled to expire, substitute Acceptable Credit Support meeting the requirements thereof shall be provided within three Business Days of such event or the Collateral Agent shall immediately be entitled to draw on such Acceptable Credit Support and deposit the proceeds thereof into the Supplemental Reserve Account for the benefit of the Secured Parties.  Any letter of credit or guarantee constituting Acceptable Credit Support shall expressly provide for such right of the Collateral Agent.

 

(e)           The TPS Financing Documents shall contain terms not inconsistent with the Financing Documents, including that the terms of such Debt provide to the Lenders (i) notice of any default under such Debt at the same time such notice is delivered to the Borrower or any TPS Secured Party and the right to cure such default on the same terms and conditions as those available to the Borrower, and (ii) the right to purchase such Debt at any time at a cash price equal to the aggregate principal and accrued and unpaid interest outstanding plus a make whole amount, if any, whereupon the TPS Lenders (and their representatives) shall assign to the Lenders or their representatives all of their claims, liens and other Property in connection with such Debt (A) without recourse or warranty (other than that the assignor is the legal and beneficial owner of the interest being assigned and that such interest is free and clear of any adverse claim) and (B) as may be contemplated in the intercreditor agreement between the Secured Parties and the TPS Secured Parties.

 

(f)            The Borrower and each of the TPS Lenders shall report the TPS Loans as loan transactions for federal income tax purposes.

 

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(g)           The TPS Obligations may, at the sole option of the General Partner, be secured by the following (subject to any applicable Permitted Liens and without recourse to or warranty by the Lenders or any of their Affiliates):

 

(1)         a first priority Lien on the COP Royalty,

 

(2)         a first priority Lien on all or any portion of the Non-COP TUAs, including amounts payable (and other obligations performable) by each of the Non-COP Shippers thereunder,

 

(3)         a first priority Lien on the TPS Accounts;

 

(4)         a Lien of equal and ratable priority with that of the Collateral Agent:

 

(A)          in the Loss Proceeds Account and the Loss Proceeds from insurance and an Expropriation Event and the Delay Liquidated Damages and Performance Liquidated Damages but subject as to percentage interests to an intercreditor agreement between the TPS Lenders and the Lenders; and

 

(B)           in any Shared Accounts to the extent proceeds of the TPS Loans are transferred into such Accounts and used therein in a manner similar to the proceeds of the Loans;

 

(C)           the Supplemental Reserve Account; and/or

 

(5)         a second priority Lien granted by the Collateral Agent in the Borrower’s interest in the Accounts other than those set forth in Section 2.15(g)(3) and (4).

 

(h)           The Secured Parties shall have, and shall subordinate, their Liens in the Property set forth in Section 2.15(g)(1), (2) and (3) in favor of the Lien securing the TPS Obligations provided for in such clauses.  As a condition to the initial closing of the TPS Financing Documents, the Secured Parties and the TPS Secured Parties shall have entered into intercreditor arrangements contemplated by this Section 2.15(h) and consistent with the terms as attached in Appendix B that are acceptable to the Secured Parties in their sole discretion.  Such intercreditor arrangements, may include an intercreditor agreement or a non-disturbance and recognition agreement, but shall provide among other matters:

 

(1)         the grant by the Secured Parties to the Non-COP Shippers, and their successors and assigns, of a non-disturbance and recognition agreement as to their TUAs;

 

(2)         the recognition by the Secured Parties of the Liens provided for in this Section 2.15 (and the relative priority thereof) in favor of the TPS Secured Parties, and their successors and assigns; and

 

(3)         the recognition by the TPS Lenders of the Lien (and the relative priority thereof) in favor of the Secured Parties, and their successors and assigns.

 

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2.16         Expansion Loans

 

(a)           The Expansion Obligations may, at Borrower’s option, be secured by the following  (subject to any applicable Permitted Liens and without recourse to or warranty by the Lenders or any of their Affiliates): a Lien on (1) the COP Royalty, and (2) all or some portion of the Non-COP TUAs, including amounts payable (and other obligations performable) by each Non-COP Shipper thereunder.

 

(b)           As a condition to each initial closing of the Expansion Financing Documents:

 

(1)         the Secured Parties and the Expansion Secured Parties shall have entered into intercreditor arrangements acceptable to the Secured Parties in their sole discretion addressing, among other things, the relative rights, interests and obligations of such secured parties, including such rights, interests and obligations with respect of the Borrower and its Affiliates, Expansion and its Affiliates, the Project and the Phase 2 Projects;

 

(2)         the Expansion Secured Parties shall have entered into non-disturbance and recognition agreement(s) with the COP Shipper as to the COP TUA acceptable to the Administrative Agent; and

 

(3)         if requested by the Secured Parties, then the Secured Parties, the Expansion Secured Parties, the Borrower and Expansion shall have entered into the Shared Facilities Agreement, if any.

 

Notwithstanding anything to the contrary in any Transaction Document, (A) no Secured Party shall enter into the Shared Facilities Agreement, if any, without the prior written consent of the Administrative Agent given or withheld in its sole discretion and (B) no Borrower Entity shall enter into the Shared Facilities Agreement, if any, without the prior written consent of the Administrative Agent given or withheld in its sole discretion.

 

(c)           As a condition to the beginning of each Phase 2 Project, the risks associated with completion of any Phase 2 Project shall be mitigated through engineering, procurement and construction arrangements that (A) utilize one or more internationally reputable construction contractors having significant experience in the type of work contemplated, who will serve as the primary contractors responsible for all of the work, (B) are contracted for on terms and conditions that are substantially similar to those governing the engineering, procurement and construction of Phase 1 of the Project, including substantially similar rights and remedies in respect of liabilities and damages for performance failures and third-party losses and injuries, and appropriate security for any non-performance damages to be provided by a Person or Persons (1) having a long term unsecured debt rating of at least “BBB–” by S&P and “Baa3” by Moody’s and (2) who shall not hold or be the beneficiary of any Liens on any or all of the Project, any Phase 2 Project or Property of any Borrower Entity, Expansion or any of Expansion’s Subsidiaries, (C) require such contractors to provide and maintain construction–related insurances of substantially similar types, coverages, amounts and provisions as required in connection with the Project as set out in Section 5.9 and Appendix C, and (D) are designed so

 

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that there could not reasonably be expected to occur a material adverse interference to the Project’s design, construction, installation, operation, maintenance in conformity with the Construction Contracts, Good LNG Practices, Necessary Approvals and Applicable Law or the continuing availability of the Services Quantity (as used in each of the TUAs (or similar term if such term is not used therein)) as contemplated by the Financing Documents and the TUAs.

 

(d)           As a condition to each initial closing of the Expansion Financing Documents:

 

(1)         the Project Completion Date has occurred or the Independent Engineer has certified that it reasonably expects such date will occur no later than the Date Certain notwithstanding any and all current or proposed Phase 2 Projects and Phase 2 Expenditures and Phase 1 Additions;

 

(2)         an Authorized Officer of the Borrower certifies, and the Independent Engineer, if any, confirms in writing as reasonable (or, if there is no Independent Engineer, the Administrative Agent shall be reasonably satisfied), that the engineering, design, procurement, contracting and construction arrangements in respect of the related Phase 2 Project will (A) utilize one or more internationally reputable construction contractors having significant experience in the type of work contemplated, who will serve as the primary contractors responsible for all of the work, (B) be contracted for on terms and conditions that are substantially similar to those governing the engineering, procurement and construction of Phase 1 of the Project, including substantially similar rights and remedies in respect of liabilities and damages for performance failures and third-party losses and injuries, and appropriate security for any non-performance damages to be provided by a Person or Persons (1) having a long term unsecured debt rating of at least “BBB–” by S&P and “Baa3” by Moody’s and (2) who shall not hold or be the beneficiary of any Liens on any or all of the Project, any Phase 2 Project or Property of any Borrower Entity, Expansion or any of its Subsidiaries, (C) require such contractors to provide and maintain construction–related insurances of substantially similar types, coverages, amounts and provisions as required in connection with the Project as set out in Section 5.9 and Appendix C, and (D) be designed so that there could not reasonably be expected to occur a material adverse interference to the Project’s design, construction, installation, operation, maintenance in conformity with the Construction Contracts, Good LNG Practices, Necessary Approvals and Applicable Law or the continuing availability of the Services Quantity (as used in each of the TUAs (or similar term if such term is not used therein)) as contemplated by the Financing Documents and the TUAs.

 

(3)         The Administrative Agent shall be reasonably satisfied that the Shared Facilities Agreement, if any, any related intercreditor agreement between any Secured Parties and any Expansion Secured Parties, and the other operating agreements and arrangements in respect of the financing and operation of the Phase 2 Project, including any required insurances and operating standards and requirements, are designed so that there could not reasonably be expected to occur a material adverse interference to the Project’s design, construction, installation, operation, maintenance in conformity with the Construction Contracts, Good LNG Practices, Necessary Approvals and Applicable

 

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Law or the continuing availability of the Services Quantity (as used in each of the TUAs (or similar term if such term is not used therein)) as contemplated by the Financing Documents and the TUAs.

 

(4)         The Expansion Financing Documents shall contain terms not inconsistent with the Financing Documents, including that the terms of such Debt provide to the Lenders (i) notice of any default under such Debt at the same time such notice is delivered to the Borrower or any Expansion Secured Party, and (ii) the right to purchase such Debt at any time at a cash price equal to the aggregate principal and accrued and unpaid interest outstanding plus a make whole amount, if any, whereupon the Expansion Lenders (and their representatives) shall assign to the Lenders or their representatives all of their claims, liens and other Property in connection with such Debt (A) without recourse or warranty (other than that the assignor is the legal and beneficial owner of the interest being assigned and that such interest is free and clear of any adverse claim) and (B) as may be contemplated in the intercreditor agreement between the Secured Parties and the Expansion Secured Parties.

 

2.17         TPS Secured Parties and Expansion Secured Parties.  Each of the TPS Secured Parties and Expansion Secured Parties and each participant of a TPS Loan or Expansion Loan shall be an Eligible Institution.

 

2.18         Certain Costs Recoverable by Borrower; Obligations of the Borrower.  Subject to Section 9.1 and 9.2, the parties hereto acknowledge and agree that the costs, expenses, fees or scheduled interest on the Loans and incidental costs relating to the administration (but not enforcement) of the Loans shall be recoverable by the Borrower under the COP TUA as set forth therein provided that they are not the result of Defaults or Events of Default under the Credit Agreement.

 

ARTICLE 3.           CONDITIONS PRECEDENT.

 

3.1           Conditions to Closing and Construction Loans During Initial Period.  Prior to the earlier to occur of (i) the initial satisfaction of all conditions set forth in Section 3.2 and (ii) *** (the “Initial Period”), the obligation of any Lender to make any Construction Loan on any Disbursement Date shall be subject to the conditions precedent that, both immediately prior to the making of each such Construction Loan and also after giving effect thereto on and as of such Disbursement Date and to the application of proceeds therefrom, as though made on and as of such Disbursement Date, unless such condition is waived by the Administrative Agent in writing:

 

(a)           Transaction Documents.  (1) Each of the Transaction Documents to which either ConocoPhillips or COP Shipper is a party or which is to be in effect on the Closing Date (or Disbursement Date as the case may be), except the Non-COP TUA between Borrower and The Dow Chemical Company dated March 1, 2004, shall have been duly authorized, executed and delivered to the Administrative Agent by each party thereto.  Each Lender shall have received an original of each such Transaction Document to which it is a party executed by all parties thereto, its Note, and a copy of all other Transaction Documents.

 

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(2)         (A) The Borrower is not in default in the performance, observance or fulfilment of any of its obligations, covenants or conditions contained in any of the Project Documents in full force and effect and, to the best of the Borrower’s knowledge, no Project Participant (other than the Borrower, any Shipper and any Non Smith LP, and solely as a party to the Shared Facilities Agreement, if any, Expansion) is in default in the performance, observance or fulfilment of any of its material obligations, covenants or conditions contained therein unless such default could not reasonably be expected to have a Material Adverse Effect, (B) each Project Document (other than the TUAs, the Construction Contracts and EPC Guaranty as disclosed to the Administrative Agent) to be in full force and effect on the Closing Date or such Disbursement Date, as applicable, is in full force and effect unless such failure could not reasonably be expected to have a Material Adverse Effect, (C) the copy of each such Project Document contemplated by Section 3.1(a)(2)(B) has been delivered to the Administrative Agent and is true, correct and complete on such date, and (D) except as delivered to the Administrative Agent pursuant to Section 3.1(a)(2)(C), there are no agreements, side letters or other documents to which the Borrower is a party that have the effect of modifying or supplementing in any respect any of the respective rights or obligations of the Borrower or any Project Participant under any of the Project Documents, all of the foregoing (A) - (D) being certified by an Authorized Officer of the Borrower as set forth in a certificate dated the Closing Date and delivered to the Administrative Agent in the form attached hereto as Exhibit H-1.

 

(b)           Notes.  The Borrower shall have duly authorized and executed a Construction Note for the account of each Lender.  Each such Construction Note shall be appropriately completed with the name of the payee and date thereof inserted therein.  Each Construction Note shall be delivered by the Borrower to the Administrative Agent.

 

(c)           Charter Documents.  The Administrative Agent shall have received the following documents, each certified as indicated below:

 

(1)         (A) a certificate as to the good standing of each Borrower Entity from the Secretary of State of its jurisdiction of organization, and (B) a certificate of authority for each such entity to transact business in Texas from the Secretary of State of the State of Texas, in each case dated as of a date no earlier than 30 days prior to the Closing Date; and

 

(2)         a certificate of an Authorized Officer of the Borrower, dated the Closing Date, in the form attached hereto as Exhibit H-1, with appropriate insertions, together with a copy of the Partnership Agreement referred to in such certificate.

 

(d)           Insurance.  The Administrative Agent shall have received evidence of insurance, certified by a broker licensed to do business in Texas, with respect to each policy of insurance required to be in effect pursuant to Section 5.9 hereof and the designation of the Collateral Agent as loss payee thereunder to the extent required by Section 5.9 hereof but solely to the extent reasonably required by the Administrative Agent.  In addition, the Administrative Agent shall have received a report from the Insurance Advisor stating that, in its opinion, all insurance policies required to be maintained (or caused to be maintained) by the Borrower

 

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pursuant to Section 5.9 hereof have been obtained and are in full force and effect on the Closing Date, such insurance policies comply in all material respects with the requirements of Section 5.9 hereof, and the insurance coverage required by Section 5.9 hereof is comparable in all material respects, including policy limits and deductibles, to insurance carried by responsible owners and operators of Property similar to the Project, in each case only to the extent reasonably required by the Administrative Agent as contemplated by the proviso to Section 5.9.

 

(e)           Satisfaction of Certain Section 3.2 Conditions for Disbursement Dates.  For each Disbursement Date during the Initial Period (but not on the Closing Date unless also a Disbursement Date), the conditions set forth in Sections 3.2(a) (other than Section 3.2(a)(1)(B)) and 3.2(f) are satisfied.

 

(f)            FERC Approval.

 

(1)         The FERC Approval has been duly obtained or made, was validly issued or executed and delivered, is in full force and effect, and is held in the name of the Borrower;

 

(2)         The Administrative Agent shall have received an original (or copy certified by an Authorized Officer of the Borrower to be a true and complete copy) of the FERC Approval.

 

(3)         There shall have been no change in any Applicable Law or the FERC Approval previously delivered under Section 3.1(f)(2) and no issuance of any order, writ, injunction or decree of any Governmental Authority or arbitral tribunal or change in any third party consent or waiver, which, in either such case, could reasonably be expected to have a Material Adverse Effect;

 

(g)           Construction Budget and Drawdown Schedule.  Such Construction Loan shall be in accordance with the Construction Budget and the Drawdown Schedule.

 

(h)           Preceding Closings.

 

(1)         The Site Leases shall be in full force and effect and all other documents necessary to establish control of the Land in the Borrower and the Site Lessee, together with all easements and rights-of-way (other than the easements for the pipeline to Stratton Ridge, Texas) necessary for the construction and operation of the Project and title (other than title to the Outstanding Parcels to the extent Section 5.3(b) permits such matters to remain outstanding after the Closing Date and Permitted Title Defects) to the Land, shall be in full force and effect and reasonably satisfactory in all respects to the Administrative Agent, and the Borrower shall have caused the Deed of Trust and Memoranda of Site Lease to be duly recorded in accordance with Applicable Law;

 

(2)         The other transactions contemplated by Section 2.2 of the Omnibus Agreement shall have become effective;

 

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(3)         The COP TUA, the Stockholders Agreement and the Stock Purchase Agreement shall have been executed and delivered by all parties thereto and shall be in full force and effect; and

 

(4)         The closing under the Stock Purchase Agreement shall have occurred.

 

(i)            Filings, Registrations and Recordings.  Any document required to be filed, registered, notarized or recorded in order to create and perfect the Lien on the Collateral as first priority Liens (subject to Permitted Liens) shall have been properly filed, registered, notarized or recorded in each office in each jurisdiction in which such filings, registrations, notarizations and recordations are required, and any other action required in the judgment of the Administrative Agent to perfect such Liens as such first priority Liens (subject to Permitted Liens) shall have been effected, and the Collateral Agent shall have received acknowledgment copies or other evidence satisfactory to it that all necessary filing, registration, notarization, recording and other fees and all taxes and expenses related to such filings, registrations, notarizations and recordings have been paid in full.

 

(j)            Security Documents.  The Collateral Agent shall have received such documents as are necessary to perfect the interests of the Secured Parties in and to the Collateral covered by the Security Agreement with the priority contemplated thereby.  Consent Agreements for the TUA with The DOW Chemical Corporation and any other Project Document to be in full force and effect on the Closing Date or such Disbursement Date, as applicable, requested by the Administrative Agent shall have been duly authorized, executed and delivered to the Administrative Agent.

 

(k)           Searches.  On the Closing Date, Administrative Agent shall have received satisfactory reports of UCC, tax lien, judgment and/or litigation searches (collectively, the “UCC Searches”) conducted by a search firm reasonably acceptable to Administrative Agent with respect to the Collateral and each Borrower Entity in Harris County, Brazoria County, the State of Texas, the state jurisdiction of organization of such entity and any locations specified by the Administrative Agent and copies of any financing statements or other publicly filed record listed on such reports.

 

(l)            Borrower’s Certificate.  (A) The representations and warranties of the Borrower contained in Article IV hereof and the representations and warranties of the Borrower contained in each of the other Financing Documents to which the Borrower is a party are true and correct in all material respects on and as of the Closing Date (or, if made solely as of an earlier date, were true and correct as of such earlier date), (B) all Financing Documents are in full force and effect under the terms and conditions set forth in such Financing Documents, and (C) no Default or Event of Default has occurred and is continuing and (D) all conditions set forth in Section 3.1 have been satisfied except as expressly set forth in such certificate, all of the foregoing (A) - (D) being certified by an Authorized Officer of the Borrower as set forth in a certificate dated the Closing Date, in the form attached hereto as Exhibit H-1, and delivered to the Administrative Agent on the Closing Date.

 

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(m)          Financial Information, etc.

 

(1)         On the Closing Date, the Administrative Agent shall have received copies of the most recent unaudited or, if available, audited consolidated statements from the Borrower together with a certificate from the chief financial officer or other Authorized Officer of such Person, dated the Closing Date, to the effect that, to the best of such officer’s knowledge, (A) such financial statements are true, complete and correct in all material respects and (B) there has been no material adverse change in the financial condition, operations, Property, or business of such Person since the date of such financial statements.

 

(2)         The Administrative Agent shall have received such other financial, business and other information regarding the Project Participants as the Administrative Agent shall have reasonably requested.

 

(n)           Base Case Projections; Drawdown Schedule; Budgets.  The Administrative Agent shall have received from the Borrower (A) the Base Case Projections, (B) the Construction Budget, and (C) the Drawdown Schedule, all of the foregoing in clauses (A) - (C) as reasonably satisfactory to the Administrative Agent.

 

(o)           Process Agent.  The Administrative Agent shall have received a copy of a letter from Corporation Service Company accepting its appointment as process agent in New York for each Borrower Entity in substantially the form of Exhibit C hereto.

 

(p)           Legal Opinions.  On the Closing Date, the Administrative Agent shall have received original counterparts of legal opinions dated the Closing Date and addressed to each Secured Party in form, scope and substance satisfactory to the Administrative Agent of (1) Brownstein Hyatt & Farber, P.C. and Dewey Ballantine LLP, each as counsel to the Borrower and General Partner, and (2) counsel to the Brazos River Authority that is satisfactory to the Administrative Agent.

 

(q)           Investment Company; Public Utility.  Neither the Lenders nor any Borrower Entity shall be subject to regulation by reason of the transactions contemplated by the Transaction Documents as:

 

(1)         an “investment company,” or company “controlled” by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended, or

 

(2)         a “holding company,” or an “affiliate” of a “holding company,” or a “subsidiary company” of a “holding company,” or a “public utility company” or an “associate company” of any of the foregoing, within the meaning of the Public Utility Holding Company Act of 1935, as amended or

 

(3)         subject to regulation under any Applicable Law relating to public utilities, gas utilities, public service corporations or similar entities.

 

(r)            Material Adverse Effect.  (i) No event shall have occurred and no condition shall exist that has had or could reasonably be expected to have a Material Adverse

 

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Effect and (ii) no material adverse change shall have occurred in the business, operations or condition (financial or otherwise) of any Borrower Entity or any provider of financing (whether debt or equity, contingent or otherwise) for Supplemental Costs, other than the Initial Lender, (and any Acceptable Credit Support Issuer) which could reasonably be expected to have a Material Adverse Effect);

 

(s)           Title Insurance; Survey etc.  On the Closing Date, the Borrower shall have obtained

 

(1)         a leasehold mortgagee policy of title insurance (the “Title Insurance”) covering the Land, in favor of the Collateral Agent, for the benefit of the Secured Parties, that (A) insures the validity and priority of the Lien created under the Deed of Trust in an amount not less than $2,000,000, and (B) is otherwise in form as contemplated by Commitment for Title Insurance issued by the Title Insurance Company issued June 28, 2004 (with an effective date of June 13, 2004) (the “Commitment”), but which contains no reference to any matters in Schedule C of the Commitment except that Schedule B may contain exceptions for the Outstanding Parcels to the extent Section 5.3(b) hereof permits such matters to remain outstanding after the Closing Date, and with the standard printed exceptions in Schedule B amended or deleted as indicated in the Commitment and additionally as follows:  (i) exception 2. shall be deleted except for “shortages in area”; (ii) exception 3. shall omit the reference to subsequent taxes or assessments for prior years, and shall be supplemented to include the following additional sentence:  “Company insures that standby fees, taxes and assessments by any taxing authority for the year 2004 are not yet due and payable.”; (iii) the following shall be added to Schedule B:  “Section 13 of the Conditions and Stipulations of this Policy is hereby deleted.”; and (iv) exception 8 shall be deleted; and

 

(2)         an ALTA survey of recent date of the Land certified to the Collateral Agent, the Title Insurance Company and the Borrower, which survey shall be in form and substance satisfactory to the Administrative Agent and the Title Insurance Company.

 

(t)            Title Continuation Report; Survey.  (1) After the EPC Contract has been entered into, for any Disbursement Date occurring in any January, April, July or October the Borrower shall have delivered to the Administrative Agent a title continuation report from the Title Insurance Company to such Disbursement Date, in form and substance satisfactory to the Administrative Agent, setting forth no additional exceptions other than Permitted Title Defects, and (2) in the case of the first Disbursement Date that is at least 60 days after the foundations of the Facility have been completed, the Borrower shall have delivered to the Administrative Agent an updated survey of the Mortgaged Property, certified to the Collateral Agent, for the benefit of the Secured Parties, the Title Insurance Company and the Borrower, showing the Project.  In the case any Phase 2 Project has commenced or been completed on the Land, such survey shall include such parts of a Phase 2 Project(s) on the Land and, to the extent reasonably possible, indicated as part of a Phase 2 Project.  Such survey shall be in form and substance satisfactory to the Administrative Agent and the Title Insurance Company, and shall disclose no easements, rights of way or encumbrances, other than Permitted Liens.

 

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(u)           EPC Contract Closing Documents  On or prior to the first Disbursement Date after the EPC Contract has been entered into, the Administrative Agent shall have received the agreements and other documents as contemplated in Section 5.27(f); provided however, if the EPC Contract is entered into on a Disbursement Date, then the Administrative Agent shall have received such agreements and documents on such Disbursement Date.

 

(v)           Additional Matters.  All partnership and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Transaction Documents shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents, certificates, and instruments relating to this Agreement or any other Transaction Document or the transactions contemplated hereby or thereby as the Administrative Agent shall have reasonably requested, in each case in form and substance satisfactory to the Administrative Agent.

 

Unless waived by the Administrative Agent in writing, the acceptance of the proceeds of each Construction Loan shall constitute a certification by the Borrower to the Lenders confirming the satisfaction of the conditions set forth in clauses (a) through (v) of this Section 3.1 upon the making of such Construction Loan.

 

3.2           Construction Loans After Initial Period.  After the Initial Period, the obligation of any Lender to make any Construction Loan on any Disbursement Date shall be subject to the conditions precedent that, both immediately prior to the making of each such Construction Loan and also after giving effect thereto on and as of such Disbursement Date and to the application of proceeds therefrom, as though made on and as of such Disbursement Date, unless such condition is waived by the Administrative Agent:

 

(a)           Construction Requisitions; Notices of Borrowing.

 

(1)         Not less than ten Business Days prior to such Disbursement Date, the Administrative Agent shall have received (A) a Construction Requisition dated no more than 10 Business Days prior to such Disbursement Date executed and delivered by an Authorized Officer of the Borrower in respect of the Disbursement of Construction Loans to be made on such Disbursement Date, and (B) a certificate of the Independent Engineer in respect of such proposed Requisition in the form attached hereto as Exhibit D-2 whereby the Independent Engineer shall evidence its approval of the expenditures to be paid with the Disbursement from each of the Lenders, in each case satisfactory to the Administrative Agent.

 

(2)         The Administrative Agent shall have received a Notice of Borrowing pursuant to Section 2.3 in respect of the Disbursement of Construction Loans on such Disbursement Date.

 

(3)         If Tranche A Loans are to be made for Supplemental Costs on the Disbursement Date, then simultaneously with (or, if not possible, on the same day as) the funding of such Tranche A Loans, the financing (whether debt or equity, contingent

 

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or otherwise) contemplated by Section 2.15(a) shall be utilized to fund the other *** of the Supplemental Costs contemplated by Section 2.15(a).

 

(b)           Representations and Warranties.  The representations and warranties of each Borrower Entity or any Equity Pledgor contained in any Financing Document to which such entity is a party shall be true and correct in all material respects on and as of such Disbursement Date as if made on and as of such date (or, if stated to have been made solely as of an earlier date, were true and correct in all material respects as of such date).

 

(c)           No Default.  No Default or Event of Default shall have occurred and be continuing.

 

(d)           Necessary Approvals, etc.

 

(1)         All Necessary Approvals have been duly obtained or made, were validly issued or executed and delivered, are in full force and effect, are final and not subject to modification, or pending or threatened dispute or appeal, and are held in the name of the Borrower (unless otherwise disclosed by the Borrower to the Administrative Agent in a writing referencing Section 4.6(a)) except those Necessary Approvals that have not been obtained but will be obtained by the time such approvals are required for the performance by any Project Participant of any of its obligations respecting the Project and for which none of the Borrower or the Independent Engineer has any reason to believe that any such Necessary Approvals will not be obtained in due course prior to the time required;

 

(2)         All Necessary Approvals obtained or to be obtained in Section 3.2(d)(1), are (or in the case of those not obtained as set forth therein will be) free from conditions or requirements at all relevant times, the compliance with which could reasonably be expected to have a material adverse effect on the Construction Budget, each Phase 1 Addition Budget for construction (to the extent not in conflict with the Construction Budget), any construction schedule, including the Project Schedule, operation, maintenance or ownership of the Project or which any of the Borrower or the Independent Engineer does not reasonably expect to be able to satisfy as certified by an Authorized Officer of the Borrower in a certificate dated the Disbursement Date and delivered to the Administrative Agent;

 

(3)         The Administrative Agent shall have received (A) originals (or copies certified by an Authorized Officer of the Borrower to be true and complete copies) of all of the Necessary Approvals set forth in Section 3.2(d)(1) other than those not obtained as set forth therein, (B) in the case of the Necessary Approvals not obtained as set forth therein, satisfactory assurances that such Necessary Approvals will be obtained by the time when needed in connection with the construction or operation of the Project, and (C) if requested, copies (certified by an Authorized Officer of the Borrower to be true and complete copies) of all applications made for any Governmental Approvals and all material correspondence received or sent in respect of such applications; and

 

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(4)         There shall have been no change in any Applicable Law or any Necessary Approval previously delivered under Section 3.2(d)(3), and no issuance of any order, writ, injunction or decree of any Governmental Authority or arbitral tribunal or change in any third party consent or waiver, which, in either such case, could reasonably be expected to have a Material Adverse Effect.

 

(e)           Material Adverse Effect.  There shall exist no circumstance, event or condition which has had or could reasonably be expected to have a Material Adverse Effect.

 

(f)            Legal Matters.  No Legal Matters nor any Governmental Approval, pending or threatened, against or affecting (i) any Borrower Entity or Equity Pledgor or its respective Property or rights in the Project, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (ii) the Collateral.

 

(g)           Construction Budget and Drawdown Schedule.

 

(1)         Such Construction Loan shall be in accordance with the Construction Budget and the Drawdown Schedule.

 

(2)         The Administrative Agent shall have received from the Borrower (A) the Construction Budget and (B) the Drawdown Schedule, each of the foregoing in clauses (A) and (B) as reasonably satisfactory to the Independent Engineer.

 

(3)         Notwithstanding anything to the contrary in Sections 3.2(g)(1) and (2), the last Construction Loan shall be in an amount determined by the Borrower and confirmed by the Independent Engineer as necessary to pay all Project Costs, including punchlist amounts under the Construction Contracts and other milestones to be incurred, through the final completion of the Construction Contracts (including Final Completion under the EPC Contract).

 

(h)           EPC Matters.  The EPC Contract and EPC Guaranty shall each be in full force and effect as approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor thereof in all respects including provisions with respect to scope of work, insurance, warranties, liquidated damages, completion deadlines, performance standards, performance testing and subcontractor approvals.

 

(i)            Title Continuation Report; Survey.  (1) For any Disbursement Date occurring in any January, April, July or October the Borrower shall have delivered to the Administrative Agent a title continuation report from the Title Insurance Company to such Disbursement Date, in form and substance satisfactory to the Administrative Agent, setting forth no additional exceptions other than Permitted Title Defects, and (2) in the case of the first Disbursement Date that is at least 60 days after the foundations of the Facility have been completed, the Borrower shall have delivered to the Administrative Agent an updated survey of the Mortgaged Property, certified to the Collateral Agent, for the benefit of the Secured Parties, the Title Insurance Company and the Borrower, showing the Project.  In the case any Phase 2 Project has commenced or been completed on the Land, such survey shall include such parts of a Phase 2 Project(s) on the Land and, to the extent reasonably possible, indicated as part of a Phase 2 Project.  Such survey shall be in form and substance satisfactory to the Administrative Agent

 

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and the Title Insurance Company, and shall disclose no easements, rights of way or encumbrances, other than Permitted Liens.

 

(j)            Construction Progress.  The Borrower shall certify in the Construction Requisition delivered to the Administrative Agent that (1) based on current progress and the reasonable evaluation of what can be reasonably foreseen, Completion will occur on or before the Date Certain and (2) the date when the Project Completion Date is reasonably expected to occur.

 

(k)           Commencement of Work.  The Administrative Agent shall have received evidence that the EPC Contractor shall have received and accepted the Notice to Proceed.

 

(l)            Independent Engineer Certification.  The Independent Engineer shall have confirmed to the Administrative Agent and the Borrower its agreement with the certifications and other statements set forth in Sections 3.2(d)(1), 3.2(d)(2), 3.2(g)(2) and 3.2(j) by executing and delivering a certificate in the form of Exhibit D-2 dated the Disbursement Date.

 

(m)          Utilities.  The Administrative Agent shall have received a certificate of an Authorized Officer of the Borrower, dated the first Disbursement Date after the Initial Period, to the effect that, to the knowledge of the Borrower, all utility services necessary for the construction and operation of the Project (including gas, potable and raw water supply, storm, electric, radio, cellular, telephone and sewage services and facilities) have been committed to the Project (with a true copy of binding agreements (if any) that evidence the same) by appropriate utilities, authorities or other Persons, or will be otherwise available to the Borrower in the ordinary course of business at the appropriate stage of construction or operation of the Project, in each case on terms consistent with those reflected in the Construction Budget and the Base Case Projections.

 

(n)           EPC Contract Closing Documents.  On or prior to the first Disbursement Date after the EPC Contract has been entered into, the Administrative Agent shall have received the agreements and other documents as contemplated in Section 5.27(f); provided however, if the EPC Contract is entered into on a Disbursement Date, then the Administrative Agent shall have received such agreements and documents on such Disbursement Date.

 

(o)           Other Documents.  The Administrative Agent shall have received such other statements, certificates, documents, writings, approvals, consents, legal opinions pertaining to events occurring or circumstances arising after the Closing Date as the Administrative Agent may reasonably request.

 

Unless waived by the Administrative Agent in writing, the acceptance of the proceeds of each Construction Loan shall constitute a certification by the Borrower to the Lenders confirming the satisfaction of the conditions set forth in clauses (a) through (o) of this Section 3.2 upon the making of such Construction Loan.

 

3.3           The Conversion Date.  The occurrence of the Conversion Date shall be subject to the conditions precedent that the Administrative Agent shall have received, or the Administrative Agent shall have waived receipt of, the following, each of which (unless otherwise specified below) shall be in form and substance satisfactory to the Administrative

 

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Agent, and that the other conditions set forth below shall have been satisfied or waived by the Administrative Agent in writing:

 

(a)           Term Notes.  Each Lender shall have received its original Term Note in respect of the Term Loans made or maintained by it, duly completed, executed and delivered by the Borrower and in accordance with Section 2.7.

 

(b)           Insurance.  The Administrative Agent shall have received a certified copy of the insurance policies required by Section 5.9 hereof or certificates of insurance with respect thereto, together with evidence of the payment of all premiums due and payable therefor, and a certificate of the Insurance Advisor, certifying that insurance complying with Section 5.9 hereof, covering the risks referred to therein, has been obtained and is in full force and effect.  The Borrower shall have delivered the final Title Insurance or certificates of insurance with respect thereto, in favor of the Collateral Agent, for the benefit of the Secured Parties set forth in Section 3.1(s) together with evidence of the payment of all premiums due and payable therefor.

 

(c)           Necessary Approvals.

 

(1)         All Necessary Approvals shall have been duly obtained and shall be final, non-appealable and in full force and effect and free from material conditions or requirements at all relevant times; provided that, with respect to such Necessary Approvals that cannot be obtained on or prior to the Conversion Date in the exercise of reasonable diligence (but which are routinely obtainable, can be obtained only after completion of certain operations testing or can be obtained only after a period of operations), the Administrative Agent shall have received assurances satisfactory to the Administrative Agent that such Necessary Approvals will be obtained by the time when needed in connection with the operation of the Project.

 

(2)         The Administrative Agent shall have received (A) originals (or copies certified by an Authorized Officer of the Borrower to be true and complete copies) of all of the Necessary Approvals received by the Borrower and (B) if requested, copies (certified by an Authorized Officer of the Borrower to be true and complete copies) of all applications made for any Necessary Approvals and all material correspondence received or sent in respect of such applications.

 

(d)           Completion Certificates.  The Administrative Agent shall have received (i) an original executed counterpart of the Borrower Completion Certificate and (ii) an original executed counterpart of the Independent Engineer Completion Certificate, and, in each case, the statements contained therein shall be true and correct in all material respects.

 

(e)           Officer’s Certificates.  The Administrative Agent shall have received an original counterpart of an Officer’s Certificate, dated as of the Conversion Date, to the effect that (i) the representations and warranties made by the Borrower in ARTICLE 4 hereof and the representations and warranties made by the Borrower in each of the other Financing Documents to which it is a party are true and correct in all material respects on and as of the Conversion Date with the same force and effect as if made on and as of such date (or, if stated to have been made solely as of an earlier date, were true and correct in all material respects as of such date);

 

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(ii) no Default or Event of Default has occurred and is continuing on the Conversion Date; (iii) no Material Adverse Effect, and no event or condition that could reasonably be expected to have a Material Adverse Effect, has occurred and is continuing; and (iv) no default by the Borrower or, to the knowledge of the Borrower, by any Project Participant (other than any Non Smith LP and any Shipper) under any of the Transaction Documents (which default could reasonably be expected to have a Material Adverse Effect) has occurred and is continuing on the Conversion Date.

 

(f)            Opinions.  The Administrative Agent shall have received original counterparts of such supplemental opinions of counsel to the Borrower as the Administrative Agent may reasonably request.

 

(g)           Budget.  The Administrative Agent shall have received the Borrower’s proposed Operating Budget for the first Operating Year.

 

(h)           Final Survey.  The Borrower shall have delivered to the Administrative Agent a final “as-built” survey of the Land, certified to the Collateral Agent, for the benefit of the Secured Parties, the Title Insurance Company and the Borrower, updated to within 30 days before the Conversion Date, showing the Project (completed as to Phase 1), which, in the case any Phase 2 Project has commenced or been completed on the Land, shall include such parts of a Phase 2 Project(s) on the Land and indicated as part of a Phase 2 Project.  Such survey shall be in a form satisfactory to the Administrative Agent and the Title Insurance Company, and shall disclose no easements, rights-of-way, encumbrances or other Liens on real property, other than Permitted Liens.  The Borrower shall have prepared and caused to be executed and recorded such amendments to the Deed of Trust or other confirmatory documents as may have been reasonably requested by the Administrative Agent in order to protect or confirm the lien of the Deed of Trust on the Mortgaged Property, as reflected in the final survey delivered pursuant to this Section 3.3(h).

 

(i)            Lien Waivers.  Lien waivers shall have been delivered by Construction Contractors in accordance with the Construction Contracts.

 

(j)            Project Documents.  Each Project Document shall be in full force and effect unless (1) expired in accordance with its terms, (2) in the case of any Non-COP TUA or Shared Facilities Agreement, if any, the failure thereof to be in full force and effect could not reasonably be expected to have a Material Adverse Effect or (3) otherwise consented to by the Administrative Agent.

 

(k)           Searches.  Administrative Agent shall have received satisfactory reports of UCC Searches conducted by a search firm reasonably acceptable to Administrative Agent with respect to the Collateral and each Borrower Entity in Harris County, Brazoria County, the State of Texas, the state jurisdiction of organization of such entity and any locations specified by the Administrative Agent and copies of any financing statements or other publicly filed record listed on such reports.

 

(l)            Other Documents.  The Administrative Agent shall have received original counterparts of such other statements, certificates and documents pertaining to events occurring

 

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or circumstances arising after the Closing Date as the Administrative Agent may reasonably request.

 

3.4           No Failure to Satisfy Condition.  Notwithstanding anything in Section 3.1, 3.2 or 3.3 to the contrary, the failure of any Borrower Entity in performance or compliance with any term, covenant or provision under any Financing Document shall not constitute the failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3 if such failure of any Borrower Entity in performance or compliance thereof is the reasonably foreseeable result of:

 

(a)           the COP Directors’ failure to approve or consent to any Board Action where:

 

(1)         such failure to approve or consent to such Board Action could reasonably be foreseen to result in a specific, identified risk of a failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3 , and

 

(2)         such risk is expressly noted in the Board minutes (such minutes to be provided to the Board and certified by the secretary of the General Partner within 45 days of such meeting), with specific reference to the certain failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3 and with a description of the connection between the Board Action and the foreseen risk of Default or Event of Default, and

 

(3)         the COP Directors have the right to vote on the matter under the Stockholders Agreement, and

 

(4)         the MS Directors voted to approve or consent to the Board Action, or

 

(b)           any Board Action approved or consented to by a majority of the COP Directors where:

 

(1)         the good faith implementation of such Board Action could reasonably be foreseen to result in a specific, identified risk of a failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3, and

 

(2)         such risk is expressly noted in the Board resolution with specific reference to the certain failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3, or

 

(c)           any action or inaction under the exclusive control of the COP Directors under the Stockholders Agreement, but expressly excluding ConocoPhillips’ rights under Section 3(d) of the Stockholders Agreement and actions and inactions by any COP Designated Employees, or

 

(d)           any uncured and material breach by ConocoPhillips or its Affiliates under a Project Document, where the Borrower Entities and their Affiliates, agents and other representatives (other than ConocoPhillips and its Affiliates and representatives) shall have performed all of their obligations to date in respect of such Project Document; provided however that (i) any dispute as to whether a “material breach” has occurred will be as finally determined under the applicable Project Document dispute resolution provision and (ii) no Secured Party

 

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shall be entitled to claim a condition set forth in Section 3.1, 3.2 or 3.3 is not satisfied due to the circumstances set out in this Section 3.4(d) until such time as a determination that no “material breach” has occurred has become final and non-appealable.

 

3.5           Administrative Agent Rights.  Notwithstanding Sections 3.4, the failure of any Borrower Entity in performance or compliance with any term, covenant or provision under any Financing Document shall still constitute a failure to satisfy a condition set forth in Section 3.1, 3.2 or 3.3 if the Administrative Agent determines in its reasonable discretion that such failure of any Borrower Entity in performance or compliance thereof could have a material adverse effect on the validity of the Lien of the Security Documents or the priority contemplated thereby.

 

3.6           Conditions to Initial Tranche B Construction Loan.  The obligation of any Lender to make the initial Tranche B Construction Loan shall be subject to the conditions precedent that, both immediately prior to the making of such initial Tranche B Construction Loan and also after giving effect thereto on and as of the Disbursement Date of such initial Tranche B Construction Loan and to the application of proceeds therefrom, as though made on and as of such Disbursement Date, unless such condition is waived by the Administrative Agent in writing:

 

(a)           Transaction Documents.  (1) Each of the Transaction Documents to which an Equity Pledgor is a party and which is to be in effect on the Disbursement Date of such initial Tranche B Construction Loan shall have been duly authorized, executed and delivered to the Administrative Agent by each party thereto.  Each Lender shall have received an original of each such Transaction Document to which it is a party executed by all parties thereto, its Tranche B Construction Note, and a copy of all other Transaction Documents.

 

(2)         (A) No Equity Pledgor is in default in the performance, observance or fulfillment of any of its obligations, covenants or conditions contained in any of the Project Documents in full force and effect as of Disbursement Date of the initial Tranche B Construction Loan.

 

(b)           Notes.  The Borrower shall have duly authorized and executed a Tranche B Construction Note for the account of each Lender.  Each such Tranche B Construction Note shall be appropriately completed with the name of the payee and date thereof inserted therein.  Each Tranche B Construction Note shall be delivered by the Borrower to the Administrative Agent.

 

(c)           Charter Documents.  The Administrative Agent shall have received the following documents, each certified as indicated below:

 

(1)         (A) a certificate as to the good standing of each Equity Pledgor, and its general partner (if applicable) from the Secretary of State of its jurisdiction of organization, and (B) a certificate of authority for each such entity to transact business in Texas from the Secretary of State of the State of Texas to the extent such Equity Pledgor is required to be or registered to do business in the State of Texas, in each case dated as of a date no earlier than 30 days prior to the Closing Date;

 

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(2)         a certificate of an Authorized Officer of each Equity Pledgor (if applicable), dated the Disbursement Date of such initial Tranche B Construction Loan, in the form attached hereto as Exhibit H-2, with appropriate insertions, together with copies of such Person’s (and it’s manager or general partner, as applicable) Charter Documents and the resolutions of such Person referred to in such certificate.

 

(d)           Satisfaction of Section 3.2 Conditions for Disbursement Date of Initial Tranche B Construction Loan.  For the Disbursement Date of the initial Tranche B Construction Loan, the conditions set forth in Section 3.2 are satisfied.

 

(e)           Filings, Registrations and Recordings.  Any document required to be filed, registered, notarized or recorded in order to create and perfect the Liens created under the Equity Pledges as first priority Liens (subject to the Permitted Liens set forth in Section 5.12(d), (e) and (g)) shall have been properly filed, registered, notarized or recorded in each office in each jurisdiction in which such filings, registrations, notarizations and recordations are required, and any other action required in the judgment of the Administrative Agent to perfect such Liens as such first priority Liens (subject to the Permitted Liens set forth in Section 5.12(d), (e) and (g)) shall have been effected, any certificates evidencing the equity to be pledged under the Equity Pledges, and any stock powers or other assignments relating to such equity, and the Collateral Agent shall have received acknowledgment copies or other evidence satisfactory to it that all necessary filing, registration, notarization, recording and other fees and all taxes and expenses related to such filings, registrations, notarizations and recordings have been paid in full.

 

(f)            Security Documents.  The Collateral Agent shall have received such documents as are necessary to perfect the Liens of the Secured Parties created under the Equity Pledges covering a *** interest in the General Partner and a *** interest in the limited partnership interest in the Borrower and the General Partner’s general partnership interest in the Borrower with a first priority contemplated thereby.

 

(g)           Searches.  On the Disbursement Date of the initial Tranche B Construction Loan, the Administrative Agent shall have received satisfactory reports of UCC Searches conducted by a search firm reasonably acceptable to the Administrative Agent with respect to the Collateral which is the subject of the Equity Pledges and each Equity Pledgor in the state jurisdiction of organization of such entity and any locations specified by the Administrative Agent and copies of any financing statements or other publicly filed record listed on such reports.

 

(h)           Equity Pledgor’s Certificate.  (A) The representations and warranties of each Equity Pledgor contained in the Financing Documents to which such Equity Pledgor is a party are true and correct in all material respects on and as of the Disbursement Date of the initial Tranche B Construction Loan (or, if made solely as of an earlier date, were true and correct as of such earlier date), (B) all Financing Documents to which each Equity Pledgor is a party are in full force and effect under the terms and conditions set forth in such Financing Documents, and (C) (A) - (B) being certified by an Authorized Officer of each Equity Pledgor (as applicable to such Equity Pledgor) as set forth in a certificate dated the Disbursement Date for the initial Tranche B Construction Loan, in a form to be reasonably acceptable to the Administrative Agent

 

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and delivered to the Administrative Agent on the Distribution Date of the initial Tranche B Construction Loan.

 

(i)            Process Agent.  The Administrative Agent shall have received a copy of a letter from Corporation Service Company accepting its appointment as process agent in New York for each Equity Pledgor in substantially the form of Exhibit C hereto.

 

(j)            Legal Opinions.  On the Closing Date, the Administrative Agent shall have received original counterparts of legal opinions dated the Distribution Date of the initial Tranche B Construction Loan and addressed to each Secured Party in form, scope and substance reasonably satisfactory to the Administrative Agent of counsel to each Equity Pledgor that is satisfactory to the Administrative Agent.

 

(k)           Investment Company; Public Utility.  No Borrower Entity or Equity Pledgor shall be subject to regulation by reason of the transactions contemplated by the Transaction Documents as:

 

(1)         an “investment company,” or company “controlled” by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended; or

 

(2)         a “holding company,” or an “affiliate” of a “holding company,” or a “subsidiary company” of a “holding company,” or a “public utility company” or an “associate company” of any of the foregoing, within the meaning of the Public Utility Holding Company Act of 1935, as amended; or

 

(3)         subject to regulation under any Applicable Law relating to public utilities, gas utilities, public service corporations or similar entities.

 

(l)            Material Adverse Effect.  (i) No event shall have occurred and no condition shall exist that has had or could reasonably be expected to have a Material Adverse Effect and (ii) no material adverse change shall have occurred in the business, operations or condition (financial or otherwise) of any Borrower Entity or Equity Pledgor which could reasonably be expected to have a Material Adverse Effect.

 

(m)          Initial Period.  The Initial Period shall have expired.

 

(n)           Tranche B Notice.  The Borrower shall have delivered to the Administrative Agent a written notice of its intent to borrow under the Tranche B Construction Loan Commitment at least 30 days before the initial Disbursement Date of a Tranche B Construction Loan is reasonably expected to occur.

 

(o)           Additional Matters.  All corporate, limited liability company, partnership and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by the Security Documents relating to the Collateral which is the subject of the Equity Pledges shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents, certificates, and

 

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instruments relating to the Security Documents relating to the Collateral which is the subject of the Equity Pledges or the transactions contemplated hereby as the Administrative Agent shall have reasonably requested, in each case in form and substance satisfactory to the Administrative Agent.

 

Unless waived by the Administrative Agent in writing, the acceptance of the proceeds of the initial Tranche B Construction Loan shall constitute a certification by the Borrower to the Lenders confirming the satisfaction of the conditions set forth in clauses (a) through (o) of this Section 3.6 upon the making of such initial Tranche B Construction Loan.

 

ARTICLE 4.           REPRESENTATIONS, WARRANTIES AND AGREEMENTS

 

In order to induce each of the Lenders to enter into this Agreement and to make the Loans, the Borrower (on its own behalf and on behalf of the General Partner and their respective Subsidiaries) makes the following representations, warranties and agreements, all of which are true as of the Closing Date, each Disbursement Date and the Conversion Date (or, if made solely as of an earlier date, were true and correct as of such earlier date) shall survive the execution and delivery of this Agreement and the Notes and the making and continuance of the Loans:

 

4.1           Organization.  The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware.  Each Borrower Entity and Equity Pledgor (other than the Borrower and the General Partner) is an entity duly organized, validly existing and in good standing under the laws of its state of organization.  The General Partner is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Each Borrower Entity and Equity Pledgor: (i) is duly authorized and qualified to do business and is in good standing in each jurisdiction in which it owns or leases Property or in which the conduct of its business requires it to so qualify, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect and (ii) has the requisite power and authority to own or lease and operate its Property, to carry on its business (including with respect to the Project), to borrow money, to create and perfect the Liens in the Collateral as contemplated by the Security Documents and to execute, deliver and perform each Transaction Document (including the Notes) to which it is or will be a party.

 

4.2           Authority and Consents.

 

(a)           The execution, delivery and performance by each Borrower Entity and Equity Pledgor of each Transaction Document to which it is or will be a party, and the transactions contemplated by the Transaction Documents: (i) have been duly authorized by all necessary partnership or corporate action; (ii) will not breach, contravene, violate, conflict with or constitute a default under (A) any of its Charter Documents or any of the other Transaction Documents or (B) any Applicable Law or any contract, loan, agreement, indenture, mortgage, deed of trust, lease, instrument or other writing to which it is a party or by which it or any of its Property may be bound or affected, including all Governmental Approvals, except, in the case of this clause (ii), for any such breach, contravention, violation, conflict or default which could not reasonably be expected to have a Material Adverse Effect; and (iii) except for the Liens created by the Security Documents or any Permitted Lien, will not result in or require the creation or

 

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imposition of any Lien upon or with respect to any of the Property of any Borrower Entity or Equity Pledgor.

 

(b)           Each Transaction Document to which any Borrower Entity or Equity Pledgor is a party (i) has been duly executed and delivered by such Borrower Entity or Equity Pledgor a party thereto and (ii) when executed and delivered by each of the other parties thereto will be the legal, valid and binding obligation of the Borrower Entity or Equity Pledgor in each case if such Borrower Entity or Equity Pledgor is a party thereto, enforceable against such Person in accordance with its terms, except as the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, moratorium or other similar Applicable Laws affecting the enforcement of creditors’ rights generally and (B) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

 

(c)           No authorization, consent or approval of, or notice to or filing with, any Governmental Authority or any other Person has been, is required to be obtained or made (i) for the due execution, delivery, recordation, filing or performance by any Borrower Entity or Equity Pledgor of any of the Financing Documents to which it is a party or any transaction contemplated by the Financing Documents, (ii) for the grant by any Borrower Entity or Equity Pledgor, or the perfection and maintenance, of the Liens contemplated by the Security Documents (including the first priority nature thereof subject only to Permitted Liens) or (iii) for the exercise by the Collateral Agent or any other Secured Party of any of its rights under any Transaction Document or any remedies in respect of the Collateral pursuant to the Security Documents, all of which have been duly obtained, taken, given or made and are in full force and effect, except for the authorizations, consents, approvals, notices and filings listed on Schedule 4.2.

 

4.3           Capitalization; Debt; Investments.

 

(a)           FGP is the only General Partner.  No Change of Control has occurred.  As of the Closing Date, CLNGI, Contango LP and FLNGI are the only Limited Partners.  As of the Closing Date, Contango LP and CLNGI are the only Non Smith LPs.  The Borrower has notified the Administrative Agent of each Person previously considered to be a Non Smith LP that has ceased to be a Non Smith LP.  Immediately prior to the closing of the Omnibus Agreement (as contemplated in Article 5 thereof) and immediately prior to giving effect to the Stock Purchase Agreement, Smith is the sole owner of the General Partner.  As of the Closing Date, (1) there is no Lien on the Partnership Interest of the General Partner or FLNGI and (2) no Borrower Entity has been notified of the assignment of all or any part of the Partnership Interests in the Borrower.

 

(b)           As of the Closing Date, (i) no Borrower Entity has Debt of any nature, whether due or to become due, absolute, contingent or otherwise, except for (A) trade payables and (B) that certain account payable of the Borrower to Technip for services provided to the Borrower prior to the date of execution of this agreement estimated to be no greater than ***, which is not due by Borrower until *** and (ii) no Borrower Entity holds any Investments other than Investments permitted by Section 5.15

 

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4.4           Financial Condition.

 

(a)           The Borrower has delivered to the Administrative Agent the following financial statements (certified as set forth in the next sentence): the unaudited and, if available, audited financial statements (together with the auditor’s unqualified opinion meeting the requirements set forth in Section 5.1(b)), of the Borrower prepared in accordance with GAAP (i) as of and for the fiscal year ended on December 31, 2003 and (ii) as of and for the most recent period ended (on a month end) and after, and cumulative from, December 31, 2003.  An Authorized Officer of the Borrower shall have certified as of a recent date that the foregoing financial statements present fairly in all material respects the financial condition of the Borrower as of the date of such financial statements and the results of its operations for the period then ended on such date in accordance with GAAP; provided however that such certification is subject, in the case of interim statements, to normal year-end audit adjustments and the absence of footnotes.

 

(b)           No Borrower Entity has any outstanding Debt, obligations or liabilities, fixed or contingent, except as permitted under this Agreement.  Since (1) the date of the financial statements described in Section 4.4(a) above or, (2) if more recent financial statements have been delivered pursuant to Section 5.1(a) and Section 5.1(b), then in such financial statements delivered pursuant thereto, no event, condition or circumstance has occurred and is continuing which has resulted in or could reasonably be expected to result in a material adverse change in the financial condition, operations, business, profits or prospects of the Borrower from that set forth in such financial statements, and no event or condition has occurred which could reasonably be expected to have a Material Adverse Effect.

 

4.5           Legal Matters; Labor Disputes.  There is no Legal Matter nor any Governmental Approval pending or to Borrower’s knowledge threatened, (a)(1) against or affecting any Borrower Entity, any of such entity’s Property or rights, or the Project, or (2) that otherwise relates to the Project, any of the Transaction Documents or any of the transactions contemplated thereby and (b) that could reasonably be expected to have, a Material Adverse Effect.  There are no ongoing, or, to the knowledge of the Borrower, currently threatened, strikes, labor disputes, slowdowns or work stoppages by the employees of, or independent contractors or subcontractors used by or on behalf of, any Borrower Entity, the EPC Contractor, any party to a Construction Contract or EPC Guarantor that could materially and adversely affect the Project.

 

4.6           Necessary Approvals.

 

(a)           All Necessary Approvals have been duly obtained or made, were validly issued or executed and delivered, are in full force and effect, are final and not subject to modification, or pending or threatened dispute or appeal, and are held in the name of the Borrower (unless otherwise disclosed by the Borrower to the Administrative Agent in a writing referencing this Section 4.6(a)) except those Necessary Approvals that have not been obtained but will be obtained by the time such approvals are required for the performance by any Project Participant of any of its obligations respecting the Project and for which none of the Borrower or the General Partner has any reason to believe that any Necessary Approvals will not be obtained in due course prior to the time required;

 

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(b)           All Necessary Approvals obtained or to be obtained in Section 4.6(a), are (or in the case of those not obtained as set forth therein will be) free from conditions or requirements at all relevant times, the non-compliance with which could reasonably be expected to have a material adverse effect on the Construction Budget, each Phase 1 Addition Budget for construction (to the extent not in conflict with the Construction Budget), the Project Schedule, operation, maintenance or ownership of the Project or which any of the Borrower or the General Partner does not reasonably expect to be able to satisfy;

 

(c)           No event has occurred to the knowledge of the Borrower that could reasonably be expected to result in the revocation, termination or adverse modification of any such Necessary Approval or have a Material Adverse Effect or a material adverse effect on any other Project Participant (other than any Non-COP Shipper and any Non Smith LP) under any Necessary Approval.

 

(d)           The information set forth in each application submitted by or on behalf of any Borrower Entity in connection with each Necessary Approval and in all correspondence sent by or on behalf of any Borrower Entity in respect of each such application is, to the knowledge of the Borrower, true and correct in all material respects and such applications and correspondence do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained herein or therein not materially misleading.

 

(e)           The Facility, if imported, installed, constructed, owned, maintained and operated in accordance with the Plans and Specifications and the Transaction Documents, will conform to and comply in all material respects with all covenants, conditions, restrictions and requirements in all Necessary Approvals, in the Transaction Documents applicable thereto and under all zoning, environmental, land use and other Applicable Laws.

 

(f)            It is expressly agreed that for Sections 4.6(a), 4.6(b), 4.6(c), 4.6(d) and 4.6(e) on the Closing Date and during the Initial Period, (1) Necessary Approvals shall be construed to mean the FERC Approval, (2) notwithstanding Section 4.6(a) the FERC Approval may be subject to appeal under applicable U.S. federal law, (3) the Borrower and General Partner represent and warrant on the Closing Date and each Disbursement Date during the Initial Period that the exception in Section 4.6(a) does not apply to the FERC Approval.  Section 4.6(b) does not apply on the Closing Date and during the Initial Period.

 

4.7           Use of Proceeds; Margin Stock.

 

(a)           Unless used for repayment or prepayment of the Loans and other Obligations as permitted hereunder, the proceeds of the Loans have been used only to pay for Project Costs for Phase 1 or for reimbursement thereof as contemplated in the Construction Budget and substantially in accordance with the Drawdown Schedule (which amounts shall be deposited into the Construction Account), which Project Costs shall include the certain development and construction costs incurred by or on behalf of the Borrower and its Affiliates mutually agreed upon and listed on Schedule 5.20 on the Closing Date.

 

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(b)           For the avoidance of doubt and without limiting the generality of Section 5.20(a), the proceeds of the Tranche A Loans have not been used to pay, reimburse or finance (including by providing support for a financing of) (1) more than 50% of the Supplemental Cost in accordance with this Agreement, (2) any Phase 2 Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any costs or expenses for any Phase 1 Addition.  For the avoidance of doubt and without limiting the generality of Section 5.20(a), the proceeds of the Tranche B Loans have not been used to pay, reimburse or finance (including by providing support for a financing of) (1) more than *** of the Supplemental Cost in accordance with this Agreement (as such amount is reduced by such Supplemental Costs paid other than by the proceeds of Tranche A Loans), (2) any Phase 2 Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any costs or expenses for any Phase 1 Addition.

 

(c)           No Borrower Entity is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock.

 

(d)           Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation T, Regulation U or Regulation X.

 

4.8           ERISA.  Except as permitted under Section 5.28, no Borrower Entity has any Plan, Pension Plan, Multiemployer Plan, collective bargaining agreement or ERISA Affiliate, and no Borrower Entity or the Project or any part thereof is subject to regulation under ERISA.

 

4.9           Taxes; Tax Status.

 

(a)           Each Borrower Entity and Equity Pledgor has filed all Federal, state, local and foreign income tax returns, and all other Tax and informational returns that are required to be filed by it, if any, and has paid all Taxes due and payable, except such Taxes, if any, as are being contested in good faith and by proper proceedings and as to which adequate reserves are established in accordance with GAAP.  No claim for assessment or collection of Taxes has been asserted or threatened against the Borrower, its Affiliates or the Borrower’s Property or the Project by any Governmental Authority, unless contested as aforesaid.  The Base Case Projections accurately reflect in all material respects all Taxes that, under present Applicable Law, will be due and payable by the Borrower assuming that the Borrower has the income and other expenses reflected in the Base Case Projections.

 

(b)           Except as set forth on Schedule 4.9 hereto, no liability for any Tax will be incurred by any Borrower Entity or Equity Pledgor as a result of the execution, delivery or performance of this Agreement or any other Financing Document or the consummation of the transactions contemplated hereby or thereby and, based on present Applicable Laws, no deduction or withholding in respect of Taxes imposed by or for the account of any Governmental Authority is required to be made from any payment (or other performance) by any Borrower Entity under this Agreement or any other Financing Document.

 

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(c)           For United States federal income tax purposes, the Borrower shall be treated as a partnership.

 

4.10         Investment Company Act.  No Borrower Entity or Equity Pledgor is, or is subject to regulation as, an “investment company,” or company “controlled” by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.  Neither the making or receipt of any Disbursement, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Financing Documents will violate any provisions of such Act or any Applicable Law thereunder.

 

4.11         Regulation.  No Borrower Entity or Equity Pledgor is (a) a “holding company,” or an “affiliate” of a “holding company,” or a “subsidiary company” of a “holding company,” or a “public utility company” or an “associate company” of any of the foregoing, within the meaning of the Public Utility Holding Company Act of 1935, as amended or (b) subject to regulation under any Applicable Law relating to public utilities, gas utilities, public service corporations or similar entities.

 

4.12         Title; Security Documents.

 

(a)           The Borrower Entities (1) will, upon payment of the amounts payable by it under the EPC Contract prior to or on the Conversion Date, own and have good, marketable and indefeasible title to the Facility and (2) own and have a good, marketable and valid leasehold interest in the Land (subject only to Brazos River Authority obtaining title to the Outstanding Parcels as contemplated in, and to the extent provided in, Section 5.3(b)), and good, marketable and valid rights of easement in, to, over and under the lands covered by the Easements, all pursuant to provisions of the Site Leases and Easements, and good and marketable fee title to real estate, if any, it purports to own in fee simple, in each case free and clear of all Liens other than Permitted Liens and, in the case of Section 4.12(a)(2), by lease, in fee simple, condemnation or otherwise.

 

(b)           Each Borrower Entity has good, marketable and indefeasible title to all of the Property (except, to the extent permitted under Section 5.3(b), the Outstanding Parcels) purported to be owned by it, free and clear of all Liens, other than Permitted Liens, and holds such title and all of such Property in its own name and not in the name of any nominee or other Person.  No Borrower Entity has created or is contractually bound to create any Lien on or with respect to any of its Property, including any of its assets and rights, or revenues, except for Permitted Liens, and, except as set forth in the Financing Documents in respect of the Secured Parties, no Borrower Entity is restricted by contract, law or otherwise from creating Liens on any of its Property.

 

(c)           The provisions of the Account Agreement, the Deed of Trust, the Security Agreement, and, upon the execution and delivery by the parties thereto, each Equity Pledge, are effective to create, in favor of the Collateral Agent, for the benefit of the Secured Parties, legal, valid and enforceable Liens on or in all of the Collateral intended to be covered thereby, and all necessary recordings and filings have been made in all necessary public offices and all other

 

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necessary and appropriate action has been taken so that the Liens created by each such Security Document constitute perfected Liens on or in the Collateral intended to be covered thereby, prior and superior to all other Liens (other than Permitted Liens) for the full intended duration of such Liens created by the Security Documents to the extent permitted by Applicable Law, and all necessary consents to such creation, effectiveness, priority and perfection of each such Lien have been obtained.  There is no Lien or leasehold interest, and no effective recording or filing, including any mortgage, deed of trust or financing statement, covering all or any part of the Collateral, except in each such case as may be in favor of the Secured Parties or in respect of Permitted Liens.

 

(d)           No condemnation proceeding has commenced against all or any portion of the Project or Outstanding Parcels and no Governmental Authority has delivered written notice threatening condemnation against all or any portion of the Project or Outstanding Parcels except (1) as conducted by Brazos River Authority in order to acquire title to the Outstanding Parcels for inclusion in the Land and the Borrower Entities’ leasehold interests pursuant to the Site Leases or (2) as may be conducted by a Governmental Authority to acquire easement rights in the land necessary for the pipeline to the pipeline interconnection at Stratton Ridge, Texas in connection with Phase 1.

 

4.13         Environmental Matters.  Except as expressly set forth in the Pre Closing COP Site Report received by the Borrower, to the knowledge of the Borrower:

 

(a)           each Borrower Entity has complied and is now complying in all material respects with (i) all applicable Environmental Laws and (ii) the requirements of any Governmental Approvals relating to such Environmental Laws.

 

(b)           as of the Closing Date, there are no facts, circumstances, conditions or events relating to the Project that (i) could reasonably be anticipated to form the basis of an Environmental Claim against all or any part of the Project or land in proximity to the Land, any Borrower Entity, any Project Participant, the EPC Contractor, or the Operator or any other Person occupying, conducting operations on or about, or otherwise using the Land or land in proximity to the Land that if adversely determined could reasonably be expected to have a Material Adverse Effect, (ii) could reasonably be anticipated to cause the Land to be subject to any restrictions on its ownership, occupancy, use, marketability or transferability under any Environmental Law, or (iii) could be reasonably anticipated to require the filing or recording of any notice, registration, permit or disclosure document under any Environmental Law (other than Necessary Approvals).

 

(c)           as of the Closing Date, there are no past, pending, or threatened Environmental Claims against (i) any Borrower Entity or all or any part of the Project, or (ii) the EPC Contractor, the Operator or any other Person occupying, using, or conducting operations on or about the Land or land in proximity to the Land, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(d)           as of the Closing Date, no Hazardous Materials have at any time been generated, used, treated, recycled, stored on, or transported to or from, or Released, deposited or disposed of on all or any portion of the Land, or land in proximity to the Land, other than in

 

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compliance at all times with all applicable Environmental Laws, unless any such noncompliance could not reasonably be expected to have a Material Adverse Effect.

 

(e)           as of the Closing Date, there are not now and never have been any underground storage tanks located on the Land, there is no asbestos contained in, forming part of, or contaminating any part of the Project, and no polychlorinated biphenyls (PCBs) are used, stored, located at or contaminate any part of the Project.

 

(f)            as of the Closing Date, there is no evidence of groundwater contamination on the Land.

 

(g)           copies of all environmental studies regarding the Project, including the Land, held by any Borrower Entity have been delivered to the Administrative Agent.

 

4.14         Subsidiaries; Capital Stock Ownership.  Except for any wholly-owned Subsidiary permitted hereunder, neither the Borrower or the General Partner has any Subsidiaries and does not own, beneficially or of record, any Capital Stock of any other Person.

 

4.15         Intellectual Property.  The Borrower Entities own or have the right to use all intellectual property, including all patents, trademarks, permits, service marks, domain names, trade names, copyrights, franchises, formulas, licenses and other rights with respect thereto, and have obtained assignment of all licenses and other rights of whatsoever nature, necessary for the Project and the operation of its business as and for the duration currently contemplated by the Transaction Documents without any conflict or other infringement with the rights of others.  No product, process, method, substance, part or other material sold or employed or presently contemplated to be sold by or employed by any Borrower Entity in connection with its business infringes or will infringe any intellectual property, including any patent, trademark, permit, service mark, domain name, trade name, copyright, franchise, formula, license and other rights with respect thereto.

 

4.16         Project Documents.

 

(a)           To the knowledge of the Borrower, except for services and Property that can reasonably be expected to be available on commercially reasonable terms at the time required in the ordinary course of business, the Project Documents provide the Borrower with all services and Property, including rights (contractual and otherwise), title, materials, Necessary Approvals, easements and licenses, that are necessary for the design, construction, completion, start - up, operation and maintenance of the Project, including each Borrower Entity’s full and prompt performance of its obligations, and full and timely satisfaction of all conditions precedent to the performance by the other parties thereto of their obligations, under the Project Documents.  Each Project Document to which any Borrower Entity is a party has been duly authorized, executed and delivered by such Borrower Entity, is in full force and effect and is binding upon and enforceable against such Borrower Entity in accordance with its terms.  Each Borrower Entity, and to the Borrower’s knowledge, each Project Participant, is in compliance in all material respects with the terms and conditions of the Project Documents to which it is a party, and no event has occurred that could reasonably be expected to (1) result in an event of default under, or a material breach of, any Project Document (except any event of default or material

 

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breach by a Non Smith LP, Shipper or (solely as a party to the Shared Facilities Agreement, if any) Expansion unless such event of default or material breach could reasonably be expected to have a Material Adverse Effect), (2) result in the revocation, termination or adverse modification of any Project Document (other than a Non-COP TUA or Shared Facilities Agreement, if any, unless such revocation, termination or adverse modification could reasonably be expected to have a Material Adverse Effect), or (3) adversely affect the rights of any Borrower Entity under any Project Document (other than a Non-COP TUA or Shared Facilities Agreement, if any, unless such adverse affect could reasonably be expected to have a Material Adverse Effect).

 

(b)           All representations and warranties of any Borrower Entity and, to the Borrower’s knowledge, the other parties thereto, contained in the Project Documents (other than a Non-COP TUA) are true and correct in all material respects (except to the extent that any such representation or warranty is expressed to be made only as of an earlier date, in which case such representation or warranty was true and correct in all material respects on and as of such earlier date).

 

(c)           All conditions precedent to the obligations of the respective parties under the Project Documents (other than a Non-COP TUA) have been satisfied in all material respects, except for such conditions precedent which by their terms cannot be (and are not required to be) met until a later stage in the construction or operation of the Project, and the Borrower has no reason to believe that any such conditions precedent cannot be satisfied in all material respects prior to the time when such conditions are required to be met pursuant to the applicable Project Documents (other than a Non-COP TUA).

 

(d)           As of the Closing Date, each of the Project Documents consists only of the original document (including exhibits, schedules and other attachments) and the amendments thereto expressly described in the relevant definitions appearing in Appendix A hereto, and there are no other amendments, modifications, waivers or supplements, written or oral, with respect thereto.  The Administrative Agent has received a true and complete copy of each material Project Document, including all exhibits, schedules, attachments and disclosure letters referred to therein or delivered pursuant thereto, if any.  Since the Closing Date, none of the Project Documents has been amended, modified, waived or supplemented except as permitted under this Agreement.

 

4.17         No Default; Force Majeure.  No Default or Event of Default has occurred and is continuing.  No force majeure under any Transaction Document (other than the Non-COP TUAs or Shared Facilities Agreement, if any) has occurred and is continuing that could reasonably be expected to have a Material Adverse Effect.

 

4.18         Compliance with Applicable Laws and Necessary Approvals.  No Borrower Entity or Equity Pledgor, or any Property of any Borrower Entity or Equity Pledgor or any Site Lease or Easement, is in violation of any Applicable Law, Governmental Approval, Necessary Approval, or Charter Document (and no Borrower Entity or Equity Pledgor has received any written notification thereof), except for any violation of any Applicable Law, Governmental Approval or Necessary Approval that could not reasonably be expected to have a Material Adverse Effect.

 

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4.19         Disclosure.

 

(a)           All factual information (other than Projections) relating to the Borrower, its Affiliates, Expansion and its Affiliates, the Equity Pledgors, the MS Directors, the Project, any actual or proposed Phase 2 Project or any other transaction contemplated by the Transaction Documents or the Omnibus Agreement that has been furnished to any Agent, any Lender, the Insurance Advisor or the Independent Engineer by or on behalf of the Borrower, any of its Affiliates, Expansion, any of its Affiliates, the Equity Pledgors, or Smith (including (1) any application to any Lender for the extensions of credit provided for in the Financing Documents, (2) the Financing Documents, including the exhibits and schedules attached thereto, (3) all such information disclosed by the Borrower to any Agent or any Lender and (4) all such information disclosed by any Affiliates of the Borrower or any MS Director) taken as a whole with all of such information (other than Projections) furnished to such recipient, are true and correct in all material respects and do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained herein or therein not materially misleading.

 

(b)           There is no fact, event or circumstance known to the MS Directors or any officer (designated as an officer pursuant to the Stockholders Agreement) of the Borrower or General Partner (after due inquiry) that has not been disclosed to the Agents and Lenders in writing, the existence of which could reasonably be expected to have a Material Adverse Effect.

 

(c)           All Projections by or on behalf of the Borrower, its Affiliates, Expansion and its Affiliates, the Equity Pledgors and the MS Directors have been developed and made in good faith and with due care based upon reasonable assumptions by such Persons and do not require updating in any material respect in order to not be materially misleading.

 

(d)           Without limiting the generality of Section 4.19(c), (1) after the Initial Period, the Construction Budget will accurately specify in all material respects all costs and expenses incurred and the Borrower’s best estimate of all costs and expenses anticipated by the Borrower to be incurred prior to the Date Certain in order to construct and finance the construction of Phase 1, to implement Phase 1 of the Project in the manner contemplated by the Transaction Documents and to cause the Project Completion Date to occur on or prior to the Date Certain and (2) the Base Case Projections and, after the Initial Period, the Construction Budget (A) are based on reasonable assumptions as to all legal and factual matters, (B) are consistent with the provisions of the Transaction Documents in all material respects, (C) have been prepared in good faith and with due care and (D) fairly represent the Borrower’s reasonable expectations as to the matters covered thereby.

 

4.20         Utilities, etc.  To the knowledge of the Borrower, all utility services, infrastructure, means of transportation, facilities and other materials necessary for the construction, and operation of the Facility (including gas, potable and raw water supply, storm, electric, radio, cellular, telephone and sewage services and facilities) are or will be available to the Project (in the case of utility services, at the boundaries of the Land) when necessary for construction, operations, testing and start-up of the Facility and, to the extent necessary, arrangements have been made in the ordinary course of business on commercially reasonable

 

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terms for such services and other materials, in each case on terms consistent with those reflected in the Construction Budget.

 

4.21         Transactions with Affiliates

 

(a)           Except for the Partnership Agreement, the Management Fee Agreement, and the Omnibus Agreement, no Borrower Entity has engaged or agreed to engage in any transactions (including any transactions relating to the buying or selling of any Property or any products of the Project or involving the receipt of money as payment for goods or services) with any Affiliate of the Borrower except (i) transactions with Affiliates of the Borrower conducted on an “arms-length” basis in which such Borrower Entity receives value at least equal to what would be obtained from an unrelated third party or (ii) otherwise in accordance with Section 5.19.

 

(b)           No Borrower Entity has entered into any transaction or series of related transactions, whether or not in the ordinary course of business, with or for the benefit of Expansion or any Affiliate of Expansion which has not been previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor of such transaction or series of related transactions.

 

4.22         Single-Purpose Entity; Phase 1 Additions; Location of Business.  No Borrower Entity has engaged in any activities, business or otherwise, except as contemplated in Section 5.15.  Each Borrower Entity has established offices in Houston, Texas and does not have a place of business at any other location except the Facility site.

 

ARTICLE 5.           COVENANTS.

 

The Borrower (on its own behalf and on behalf of the General Partner and their respective Subsidiaries) covenants and agrees with each of the Lenders that, so long as any Commitment or any Loan or any other Obligation is outstanding and until payment in full of all amounts payable by the Borrower under the Financing Documents:

 

5.1           Financial Statements and Other Information.  The Borrower shall deliver or cause to be delivered to the Administrative Agent, and in the case of clauses (a) and (b), any Lender; provided, however, that in the case of clauses (e) and (f) of this Section 5.1 the Administrative Agent shall have made a prior specific written request of the Borrower for such materials set forth therein:

 

(a)           Quarterly Financial Statements.  As soon as available and in any event within 45 days after the end of each quarterly fiscal period of the Borrower, a copy of the complete unaudited financial statements as of and for such period (such financial statements being consolidated statements of income, retained earnings and cash flow of the Borrower for such period, and the related consolidated balance sheet of the Borrower as of the end of such period), setting forth in each case in comparative form the corresponding figures for the corresponding cumulative and quarterly period in the preceding fiscal year, if any, and accompanied by a certificate of an Authorized Officer of the Borrower substantially in the form of Exhibit I-1, which certificate shall state as of a recent date that the foregoing financial statements present fairly in all material respects the financial condition of the Borrower as of the

 

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date of such financial statements and the results of its operations for the period then ended on such date in accordance with GAAP; provided however that such certification is subject to normal year-end audit adjustments and the absence of footnotes.

 

(b)           Annual Financial Statements.  As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the complete audited financial statements as of and for such period (such financial statements being consolidated statements of income, retained earnings and cash flow of the Borrower for such period, and the related consolidated balance sheet of the Borrower as of the end of such period) and any related audit letters, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year and accompanied by (1) a certificate of an Authorized Officer of the Borrower substantially in the form of Exhibit I-2 and (2) an unqualified opinion thereon of the Independent Accountants which opinion (i) shall state in effect that such financial statements present fairly in all material respects the financial condition of the Borrower as of the date of such financial statements and the results of its operations for the period then ended on such date in accordance with GAAP and (ii) shall not contain any qualification or exception, including any “going concern” or like qualification or exception and any qualification or exception as to the scope of such audit;

 

(c)           Officer’s Certificate.  At the time it furnishes each set of financial statements pursuant to Section 5.1(a) or (b) above, an Officer’s Certificate certifying that no Default or Event of Default has occurred and is continuing (or, if any Default or Event of Default has occurred and is continuing, describing the same in reasonable detail and describing what action any Borrower Entity or Equity Pledgor has taken and proposes to take with respect thereto);

 

(d)           Defaults; Events of Default.  Promptly, and in any event within two Business Days after the Borrower obtains actual knowledge thereof, a written notice that (i) a Default or (ii) an Event of Default has occurred and is continuing, describing the same in detail satisfactory to the Administrative Agent and, together with such notice, a statement that such notice is provided under this section, a description of what action the Borrower or such Project Participant has taken and proposes to take with respect thereto, and that such notice is in accordance with Section 8.5;

 

(e)           Progress Reports.  Promptly upon receipt thereof, each progress report, and each other material report received by any Borrower Entity from a Construction Contractor.

 

(f)            Reports from Independent Engineer and Contractors; Operating Reports.

 

(1)         Reports from Independent Engineer and Contractors:

 

(A)          until Completion, on a quarterly basis, copies of all construction schedules, including the Project Schedule, construction budgets and monthly reports issued by the Independent Engineer prior to the Completion of the Project;

 

(B)           until Completion, on a quarterly basis, copies of all change orders under any Construction Contract and any document or written notice from an EPC Contractor (or other contractor) requesting or recommending the initiation of a

 

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change orders under any Construction Contract and any other document or written notice, including notices with respect to the occurrence of force majeure (as defined in any Project Document) or event of a similar effect that may result in a material increase in Project Costs within a reasonable period of time after receipt thereof; and

 

(C)           until Completion and if no certificate under Section 3.2(l) has been delivered to the Administrative Agent from the Independent Engineer within the last 30 days, the Borrower shall cause the Independent Engineer to deliver to the Administrative Agent and the Borrower at least every 90 days (or earlier if material updating is required) a notice of (1) the Independent Engineer’s determination of the date when the Project Completion Date is reasonably expected to occur and (2) whether Supplemental Costs are expected to be incurred within the next 12 months of the date of such notice.

 

(2)         Operating Reports for Operating Years. As soon as available and in any event within 60 days after the end of each calendar quarter following the Project Completion Date, an operating report with respect to the Project for such quarter and for the portion of the Operating Year then ended, which report shall (i) correspond to the items and classifications and periods set forth in the applicable Operating Budget (and any Phase 1 Addition Budget or budget for Phase 1 Addition (Stratton Ridge)) and shall show all Project Revenues, all expenditures for Operating and Maintenance Costs and Phase 1 Additions, and a reasonably detailed accounting of the use of any amounts transferred to the Payment Account from the O&M Account and Major Maintenance Reserve Account for application by Borrower, segregated at least by Phase 1 and the Phase 1 Additions, and (ii) be certified as complete and correct in a certificate of an Authorized Officer of the Borrower substantially in the form of Exhibit I-3, which certificate shall also state that the Operating and Maintenance Costs reflected therein complied with the Operating Budget under Section 5.23, or, if any such certifications cannot be given, shall state in detail any necessary qualifications to such certifications; provided that if a Default or Event of Default shall have occurred and so long as such Default or Event of Default shall be continuing, operating reports shall be delivered under this Section 5.1(f)(2) within 30 days after the end of each month covering such month and the portion of the Operating Year then ended;

 

(g)           Notices.  Promptly after delivery or receipt thereof by any Borrower Entity but in any event within 10 days thereafter, a copy of each material notice, demand or other communication given or received by such Borrower Entity (1) pursuant or relating to any of the Project Documents (including all requests for amendments or waivers), (2) relating to the Project whether from a Governmental Authority or otherwise, or (3) pursuant or relating to any Necessary Approval;

 

(h)           Environmental Reports.  Within a reasonable period of time after receipt thereof, any report related to material environmental matters, including: (1) the environmental performance of the Facility, (2) the results of any environmental monitoring or sampling activity relating to the Project, (3) any accidents relating to the Project having an impact on the environment or resulting in the loss of human life, (4) any environmental deficiencies relating to

 

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the Project identified by any Governmental Authority, (5) any material non-compliance with the Environmental Laws, and (6) any remedial actions taken with regard to any material environmental matters relating to the Project;

 

(i)            Approvals.  Promptly upon receipt or delivery thereof by any Borrower Entity, as the case may be, originals (or copies certified by an Authorized Officer of the Borrower to be true and complete copies) of all of the Necessary Approvals received by any Borrower Entity and if requested, copies (certified by an Authorized Officer of the Borrower to be true and complete copies) of all applications made for any Governmental Approvals for or on behalf of any Borrower Entity and all material correspondence received or sent in respect of such applications;

 

(j)            Acquisition of Outstanding Parcels.  At least five Business Days prior written notice of the acquisition of title by Brazos River Authority to an Outstanding Parcel.

 

(k)           Notice of Refinancing and Material Amendments to Certain Debt.  At least 30 days prior written notice of any renewals, extensions, replacements or refinancings of (or material amendment, modification or supplement to the financing documents for) any TPS Obligations or Expansion Obligations; and

 

(l)            Other Information.  From time to time such other information regarding the financial condition, operations, business or prospects of any Borrower Entity or the Project or, to the extent obtainable by the Borrower upon the exercise of its reasonable best efforts, any Project Participant, as may be reasonably requested by the Administrative Agent.

 

5.2           Other Notices.  The Borrower shall promptly, but in any event no later than five Business Days after an Authorized Officer of the Borrower obtains actual knowledge thereof, give to the Administrative Agent notice of:

 

(a)           Any pending or threatened application or Legal Matter by or before any Governmental Authority for the purpose of revoking, terminating, withdrawing, suspending, modifying or withholding any Necessary Approval that could reasonably be expected to have a Material Adverse Effect;

 

(b)           Any Legal Matters, pending or threatened against or affecting (1)(A) the Borrower or its Property or rights or the Project or (B) to the knowledge of the Borrower, against any Affiliate of the Borrower or any of such Person’s Property or, in the case of any Project Participant, in connection with the Project, which, in each case if adversely determined, could reasonably be expected to have a Material Adverse Effect, or (2) affecting any Borrower Entity or Equity Pledgor or the Project (A) in which the amount involved is $1,000,000 or more (when aggregated with all similar Legal Matters against the other Borrower Entities and Equity Pledgors) or (B) in which injunctive, declaratory or similar relief is involved;

 

(c)           The discovery of any Hazardous Material on the Land or any other condition that could give rise to a material violation of or liability under any Environmental Law or of any Environmental Claim against or affecting any Borrower Entity or the Project, which, in each case, could reasonably be expected to have a Material Adverse Effect, including any such Environmental Claim against or affecting any Project Participant in connection with the Project;

 

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(d)           Any request by a Project Participant (other than ConocoPhillips) for an alternative dispute resolution proceeding under any Project Document;

 

(e)           Any default (or an event or condition that, with the giving of notice, the passage of time or both, would become a default) by any Project Participant under any Transaction Document has occurred that could reasonably be expected to have a Material Adverse Effect;

 

(f)            Any Expropriation Event, or other casualty, damage or loss to any Property of the Borrower Entities, taken as a whole, whether or not insured, through fire, theft, flood, hazard or other force majeure (as defined in any Transaction Document) or casualty, in excess of (when aggregated with all similar casualty, damage or loss of all Borrower Entities) $1,000,000 for any one casualty, damage or loss or $1,000,000 in the aggregate in any calendar year;

 

(g)           Any delay (other than weather-related delays that are not anticipated to have any effect on the Project Completion Date) for any reason in the critical path activities for the design or construction of Phase 1 of the Project and any unscheduled shutdown or reduction in operation of the Facility, in each case for a period in excess of 48 hours, or any substantial labor dispute which could lead to such a shutdown or reduction;

 

(h)           Any actual or proposed cessation, suspension or material slowdown for a period in excess of five days of the Work by a Construction Contractor for any reason;

 

(i)            Any event, circumstance, development or condition which could reasonably be expected to have a Material Adverse Effect; and

 

(j)            Any act, event, or circumstance constituting force majeure (as defined in any Project Document) or any claim, pending or threatened, by any Project Participant (other than ConocoPhillips) alleging that a force majeure act, event, or circumstance thereunder has occurred.

 

Each notice pursuant to this Section 5.2 shall be in writing and accompanied by a statement signed by an Authorized Officer of the Borrower setting forth a description in reasonable detail of the occurrence referred to therein and stating that such notice is provided under this Section and what action the Borrower has taken and proposes to take with respect thereto.

 

5.3           Conduct of Business; Title to Assets

 

(a)           Each Borrower Entity shall:

 

(1)         preserve and maintain its qualification to do business in each other jurisdiction in which the character of properties owned or leased by it or in which the transaction of its business as conducted or proposed to be conducted makes such qualification necessary except where such failure to be so qualified could not reasonably be expected to have a Material Adverse Effect,

 

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(2)         maintain and renew all of the powers, licenses, rights, privileges and franchises necessary for the transaction of its business as conducted or proposed to be conducted, except where such failure to do so could not reasonably be expected to have a Material Adverse Effect, and

 

(3)         preserve and maintain good, marketable and valid title, leasehold rights and easement rights to its Property, including the Land (including, upon their acquisition by the Brazos River Authority, the Outstanding Parcels) and other assets (subject to no Liens other than Permitted Liens) and defend such title and rights to the Collateral against the claims (except for claims solely relating to Permitted Liens) of all Persons.

 

(b)           Outstanding Parcels

 

(1)         All Outstanding Parcels are set forth on Schedule 5.3(b).

 

(2)         Borrower shall cause Brazos River Authority to obtain fee title to the Outstanding Parcels subject only to Permitted Liens as soon as practicable and shall cause the Title Insurance Company to issue to the Administrative Agent new mortgagee policies of title insurance for such Outstanding Parcels within 30 days after their acquisition.  Each such additional policy shall be written in an amount equal to the acquisition price for such Outstanding Parcel and shall conform to the requirements for the Title Insurance set forth in Section 3.1(s).

 

(3)         Once the Brazos River Authority obtains any right, title or interest in or to an Outstanding Parcel, the Borrower Entity’s leasehold interest in such Outstanding Parcel pursuant to the applicable Site Lease shall be deemed part of the Project, and such Outstanding Parcel shall be deemed part of the Land.  The Borrower Entity’s leasehold interests in such Outstanding Parcel shall be subject to the Lien created by the Security Documents.  Each Borrower Entity shall satisfy its obligations under Section 5.30 with respect to such Outstanding Parcel.

 

5.4           Compliance with Applicable Laws; Legal Matters

 

(a)           Each Borrower Entity shall conduct its business in compliance with all Applicable Laws, including all relevant Governmental Approvals and Environmental Laws and Applicable Laws that relate to the issuance of the Loans by the Lenders and performance by such Borrower Entity of its obligations under the Financing Documents.

 

(b)           Notwithstanding Section 5.4(a), any Borrower Entity may, at its expense, by appropriate proceedings conducted in good faith both contest the validity or application of any requirement of Applicable Law and engage in any Legal Matter, so long as:

 

(1)         none of the Administrative Agent, the Borrower, any Affiliate of the foregoing or any director, manager, officer, employee or agent of the foregoing could be subject to any criminal liability in connection with the failure of or delay in compliance with such Applicable Law or Legal Matter,

 

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(2)         all proceedings to enforce such requirement of Applicable Law or Legal Matter against the Administrative Agent, the Borrower, any Affiliate of the foregoing or any director, manager, officer, employee or agent of the foregoing, or the Project or any part of the Project shall have been duly stayed,

 

(3)         the Administrative Agent determines in good faith that such contest or engagement is not otherwise materially adverse to its interests, and

 

(4)         such contest or engagement does not involve any risk of the sale, forfeiture or loss of any of the Collateral.

 

(c)           Notwithstanding Section 5.4(b), if any judgment or order shall be rendered against a Borrower Entity that has had or could reasonably be expected to have a Material Adverse Effect, a stay of execution, modification (to the extent that such judgment or order could not thereupon reasonably be expected to have a Material Adverse Effect) or rescission shall be obtained by or on behalf of such entity within 30 days from the date of entry thereof.

 

5.5           Payment of Taxes, Tax Status etc.

 

(a)           Each Borrower Entity shall, prior to the time the same becomes overdue, pay and discharge or cause to be paid or discharged all Taxes, including any assessments and governmental charges or levies, imposed upon it, its Property, its income or profits, or the Project, except where such Taxes are being diligently contested in good faith by appropriate proceedings and adequate reserves are established in accordance with GAAP.

 

(b)           The Borrower shall not elect to be treated as an association taxable as a corporation for federal income tax purposes.

 

(c)           The Borrower shall not take any action or fail to take any action that would result in a change in the Federal income tax classification of the Borrower as described in Section 4.9(c) hereof. No Borrower Entity (other than the General Partner) shall take any action or fail to take any action that would cause (i) the representations and warranties set forth in Section 4.9(b) to be untrue at any time or (ii) a Borrower Entity (other than the General Partner) to be subject to any obligations under any agreements or arrangements with respect to Taxes.

 

5.6           Books and Records; Financial Management; Auditors.

 

(a)           Each Borrower Entity shall at all times (1) maintain adequate management information, including financial and accounting information and cost and internal control systems and (2) in order to permit the preparation of financial reports in accordance with GAAP, proper books and records of all of its business and financial affairs and (3) promptly deliver to the Administrative Agent a copy of any “management letter”, recommendations, reports or other similar communication received by it from its accountants relating to its management information, including financial and accounting information, cost and internal control systems and other systems.

 

(b)           The Borrower shall retain the Independent Accountants and authorize such firm to communicate directly with the Agents, Lenders, or any duly authorized agent or

 

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representative of the foregoing and the Independent Engineer, if any, including as provided in Section 5.7.

 

5.7           Inspection.

 

(a)           Each Borrower Entity shall permit each of the Agents or any duly authorized agent or representative of the foregoing and the Independent Engineer, from time to time (except while no Default or Event of Default has occurred and is continuing, then at all reasonable times and upon reasonable prior notice) to conduct reasonable inspections and examinations of the books and records and Property of any Borrower Entity and the Project, Collateral, and in connection therewith (i) make copies of the books and records as reasonably necessary and (ii) have communication regarding the affairs, finances and accounts of each Borrower Entity with, and be advised as to the same by, its officers, representatives, agents (including any advisors), auditors, the EPC Contractor, any other contractor in respect of the Project and any subcontractors in respect of the Project; provided that a representative of the Borrower shall at all times have the opportunity to be present (including being copied on any written communications under Section 5.7(a)(ii).

 

(b)           Without limiting the generality of Section 5.7(a), each Borrower Entity shall permit the Agents, Lenders, or any duly authorized agent or representative of the foregoing and the Independent Engineer, to review (1) all Plans and Specifications, (2) any quality control data and performance test data, and (3) any other data available and in existence relating to the Project or to the progress of construction of the Project as may be reasonably requested.  Further, each Borrower Entity shall permit the Administrative Agent, the Independent Engineer and any other consultant engaged by the Administrative Agent to monitor, witness and review the Work.

 

(c)           Without limiting the generality of Section 5.7(a), the Borrower shall give timely notice to the Agents of, and each Borrower Entity shall permit the Agents, Lenders, and any duly authorized agent or representative of the foregoing and the Independent Engineer, to attend, (1) all Phase 1 construction progress review meetings involving any Borrower Entity or its representatives or agents and (2) any and all acceptance tests or other performance tests of the Facility conducted prior to the Conversion Date.

 

(d)           Notwithstanding anything to the contrary in Section 5.7, no act or omission of Agents or any duly authorized agent or representative of the foregoing, including the Independent Engineer, shall in any way (1) affect the obligations of any Borrower Entity, the EPC Contractor or any other Person under any Transaction Document or any other contract relating to the Construction Contracts, (2) be deemed to be the acceptance of any defective work performed by the EPC Contractor or any other Person under any Construction Contract or otherwise, or (3) be deemed to be a waiver of any rights against the EPC Contractor or any other Person under the EPC Contract or other Construction Contracts or otherwise.

 

5.8           Governmental Approvals; Maintenance of Certain Rights.  Each Borrower Entity shall obtain in a timely manner and maintain in full force and effect (or where appropriate, renew) and comply with all Governmental Approvals, and all other powers, licenses, rights, privileges and franchises necessary (i) for the transaction of its business as conducted or

 

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proposed to be conducted and (ii) to execute and deliver the Financing Documents to which it is party and to perform its obligations thereunder.

 

5.9           Insurance.

 

(a)           Insurance Requirements.  The Borrower shall maintain or cause to be maintained in full force and effect at all times on and after the Closing Date (unless otherwise specified in Appendix C) and continuing throughout the term of this Agreement (unless otherwise specified in Appendix C) insurance coverages for the Project meeting the requirements set forth in Appendix C with responsible insurance companies authorized to do business in Texas with (1) a Best Insurance Reports rating of “A-” or better and a financial size category of “VIII” or higher or a S&P financial strength rating of “BBB+” or higher, or (2) other companies acceptable to the Collateral Agent (acting on the instruction of the Required Lenders), with limits and coverage provisions sufficient to satisfy the requirements set forth in each of the Project Documents, but in no event less than the limits and coverage provisions set forth in Appendix C; provided however, on the Closing Date and during the Initial Period the Borrower shall be obligated to maintain or cause to be maintained in full force and effect such insurance coverages only to the extent reasonably required by the Administrative Agent.

 

(b)           Endorsements.  All policies of liability insurance required to be maintained shall be endorsed as follows:

 

(1)         Other than for workers compensation insurance, to name the Borrower and its officers and employees as named insureds, and to name the Secured Parties, their Affiliates and their respective officers and employees as additional insureds;

 

(2)         To provide a severability of interests and cross liability clause; and

 

(3)         To provide that the insurance shall be primary and not excess to or contributing with any insurance or self-insurance maintained by the Secured Parties.

 

(c)           Waiver of Subrogation.  The Borrower hereby waives any and every claim for recovery from the Secured Parties for any and all loss or damage covered by any of the insurance policies to be maintained under this Agreement until such time as the Secured Parties shall have recovered the Obligations in full or until such Insurance Proceeds have been expended to restore the Facilities pursuant to an Approved Restoration Project.  Inasmuch as the foregoing waiver will preclude the assignment of any such claim to the extent of such recovery, by subrogation (or otherwise), to an insurance company (or other Person), the Borrower shall give written notice of the terms of such waiver to each insurance company that has issued, or that may issue in the future, any such policy of insurance (if such notice is required by the insurance policy) and shall cause each such insurance policy to be properly endorsed by the issuer thereof to, or to otherwise contain one or more provisions that, prevent the invalidation of the insurance coverage provided thereby by reason of such waiver.

 

(d)           Amendment of Requirements.

 

(1)         Amendment by the Collateral Agent:  The Collateral Agent (acting on the advice of the Insurance Advisor) may at any time amend the requirements (including the

 

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amount and scope of insurance coverage) and approved insurance companies described in this Section 5.9 due to (i) material new information not known on the Closing Date or (ii) changed circumstances after the Closing Date which in the reasonable judgment of the Collateral Agent (acting on the instruction of the Required Lenders) either render such coverage materially inadequate or materially reduce the financial ability of the approved insurance companies to pay claims.

 

(2)         Amendment Due To Commercial Unfeasibility:  In the event any insurance (including the limits or deductibles thereof) hereby required to be maintained shall not be reasonably available and commercially feasible in the commercial insurance market, the Required Lenders shall not unreasonably withhold their agreement to waive such requirement to the extent the maintenance thereof is not so available; provided, however, that (A) the Borrower shall first request any such waiver in writing, which request shall be accompanied by written reports prepared by the Insurance Advisor certifying that such insurance is “not reasonably available and commercially feasible” (and, in any case where the required amount is not so available, certifying as to the maximum amount which is so available) and explaining in detail the basis for such conclusions; (B) at any time after the granting of any such waiver, but not more often than once a year, the Collateral Agent (acting on the instruction of the Required Lenders) may request, and the Borrower shall furnish to the Collateral Agent within fifteen (15) days after such request, supplemental reports reasonably acceptable to the Collateral Agent from the Insurance Advisor updating its prior reports and reaffirming such conclusion; and (C) any such waiver shall be effective only so long as such insurance shall not be reasonably available and commercially feasible in the commercial insurance market, it being understood that the failure of the Borrower to timely furnish any such supplemental report shall be conclusive evidence that such waiver is no longer effective because such condition no longer exists, but that such failure is not the sole means to establish such non-existence.  The failure at any time to satisfy the condition to any waiver of an insurance requirement set forth in the proviso to the preceding sentence shall not impair or be construed as a relinquishment of the Borrower’s ability to obtain a waiver of an insurance requirement pursuant to the preceding sentence at any other time upon satisfaction of such conditions.  For the purposes of this Section 5.9(d) insurance will be considered “not reasonably available and commercially feasible” if it is obtainable only at excessive costs that are not justified in terms of the risk to be insured and is generally not being carried by or applicable to projects or operations similar to the Project because of such excessive costs.

 

(e)           Additional Provisions.

 

(1)         Loss Notification:  The Borrower shall promptly notify the Collateral Agent of any Event of Loss likely to give rise to a claim under the all-risk property (including physical damage and business interruption), machinery, delay-in-startup, marine cargo, marine delay-in-startup (advanced loss of profits) insurance policies.

 

(2)         Payment of Loss Proceeds:  The Collateral Agent, on behalf of the holders of the Loans, shall be named as the sole loss payee in insurance policies in respect of property loss, casualty and condemnation of the Project (pursuant to a standard lender’s

 

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loss payable endorsement equivalent to a CP 1218, in favour of the Collateral Agent and shall name the Collateral Agent as first loss payee) and as additional insured in respect of all other insurance policies in respect of all other Transaction Documents.

 

(3)         Loss Adjustment and Settlement:  A loss under the construction “all risks,” boiler and machinery, delay-in-startup, marine cargo, marine delay-in-startup (advanced loss of profits) property and business interruption insurance policies shall be adjusted with the insurance companies, including the filing in a timely manner of appropriate proceedings, by the Borrower, subject to the approval of the Collateral Agent (acting on the instructions of the Required Lenders) if such loss is in excess of $5,000,000.  In addition, the Borrower may in its reasonable judgment consent to the settlement of any loss, provided that in the event that the amount of the loss exceeds $5,000,000, the terms of such settlement are approved by the Collateral Agent (acting on the instructions of the Required Lenders).

 

(4)         Policy Cancellation and Change:  All policies of insurance except for the construction “all risks” required to be maintained pursuant to this Section 5.9 shall be endorsed so that if at any time they should be cancelled, or coverage be reduced or materially changed in any manner, such cancellation, reduction or material change shall not be effective as to the Secured Parties (A) in the case of non-payment of premium (or as otherwise specified in Appendix C), for ten days after receipt by the Collateral Agent of written notice from such insurer of such cancellation or reduction and (B) in all other cases, for 60 days after receipt of such notice.

 

(5)         Miscellaneous Policy Provisions: The construction “all risks,” boiler and machinery, delay-in-startup, marine cargo, marine delay-in-startup (advanced loss of profits) property and business interruption insurance policies shall (A) not include any annual or term aggregate limits of liability or clause requiring the payment of an additional premium to reinstate the limits after loss except as regards the insurance applicable to the perils of flood, pollution and earth movement, (B) include the Secured Parties as additional named insureds as their interest may appear, and (C) include a clause requiring the insurer to make final payment on any claim within 30 days after the submission of proof of loss and its acceptance by the insurer.

 

(6)         Separation of Interests:  All policies covering the Borrower’s assets and revenues shall insure the interests of the Secured Parties regardless of any breach or violation by the Borrower or any other Person of warranties, declarations or conditions contained in such policies, or any action or inaction of the Borrower or others.  This provision may be satisfied through the use of an acceptable multi-insured endorsement.

 

(7)         Acceptable Policy Terms and Conditions:  Except as otherwise agreed by the Collateral Agent, all policies of insurance required to be maintained pursuant to this Section 5.9 shall be the same in all material respects as the policies furnished to the Insurance Advisor (A) prior to the Closing Date or, (B) if not required to be maintained on the Closing Date pursuant to the proviso in Section 5.9(a), then prior to when such policies of insurance are required to be maintained pursuant to Section 5.9(a).

 

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(8)         Waiver of Subrogation:  All policies of insurance to be maintained by the provisions of this Section 5.9 shall (A) provide for waivers by the insurers of subrogation in favour of the Secured Parties and their respective officers and employees and (B) provide that there shall be no recourse against any Secured Party for payment of premiums or other amounts with respect thereto.

 

(f)            Evidence of Insurance.

 

(1)         On the Closing Date and on an annual basis on or before the insurance renewal dates, the Borrower shall provide the Collateral Agent with an Officer’s Certificate certifying that the insurance then carried or to be renewed is in accordance with the terms of this Section 5.9.

 

(2)         Concurrently with the furnishing of the Officer’s Certificate in Section 5.9(f)(1), the Borrower shall provide the Collateral Agent with (x) a certification that all required insurance is marked “premium paid” or is accompanied by other evidence of payment reasonably satisfactory to the Administrative Agent and (y) a schedule of the insurance policies held by or for the benefit of the Borrower and required to be in force by the provisions of this Section 5.9.

 

(A)          The certification required by this Section 5.9(f)(2) shall be executed by each insurer or by an authorized representative of each insurer where it is not practical for such insurer to execute the certificate itself.  Such certification shall identify underwriters, the type of insurance, the insurance limits and the policy term and shall specifically list the special provisions enumerated for such insurance required by this Section 5.9.

 

(B)           The schedule of insurance shall include the name of the insurance company, policy number, type of insurance, major limits of liability and expiration date of the insurance policies.

 

(3)         Upon request, the Borrower will promptly furnish the Administrative Agent with satisfactory evidence of such insurance relating to the insurance required to be maintained hereunder.

 

(g)           Reports.  Concurrently with the furnishing of the Officer’s Certificate in Section 5.9(f)(1), the Borrower shall furnish the Collateral Agent with a report of an independent insurance broker, signed by an officer of the broker, stating that in the opinion of such broker, the insurance then carried or to be renewed is in accordance with the terms of this Section 5.9.

 

(h)           Failure to Maintain Insurance.  In the event the Borrower fails, or fails to cause any Construction Contractor or the Operator, to obtain or maintain the full insurance coverage required by this Section 5.9, the Collateral Agent (acting on the instruction of the Required Lenders), upon 30 days’ prior written notice (unless the aforementioned insurance would lapse within such period, in which event notice should be given as soon as reasonably possible) to the Borrower of any such failure, may (but shall not be obligated to) obtain the required policies of insurance and pay the premiums on the same.  All amounts so advanced therefor by the Collateral Agent shall become an additional Obligation of the Borrower, and the

 

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Borrower shall forthwith pay such amounts to the Collateral Agent, together with interest thereon at the Default Rate from the date so advanced until fully paid.

 

(i)            No Duty of Collateral Agent to Verify or Review.  No provision of this Section 5.9 or any provision of any other Transaction Document shall impose on any Secured Party any duty or obligation to verify the existence or adequacy of the insurance coverage maintained pursuant to this Section 5.9, nor shall any Secured Party be responsible for any representations or warranties made by or on behalf of the Borrower to any insurance company or underwriter.  Any failure on the part of any Secured Party to pursue or obtain the evidence of insurance required by this Agreement and/or failure of any Secured Party to point out any non - compliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in this Agreement.

 

(j)            Assigned Insurance Policies.  Promptly following receipt of an Assigned Insurance Policy or any amendment, modification and supplement thereto, the Borrower shall deliver to the Administrative Agent a true and complete copy (as certified by an Authorized Officer of the Borrower) thereof.

 

5.10         Events of Loss; Project Document Claims and Performance Liquidated Damages.

 

(a)           If an Event of Loss shall occur, or a Project Document Claim shall arise or other right to Performance Liquidated Damages shall arise, the Borrower promptly notify the Administrative Agent thereof and shall (i), subject to Section 5.10(b), diligently pursue all its rights to compensation against any Person with respect thereto, and (ii) cause all Loss Proceeds, amounts received by or on behalf of a Borrower Entity as a result of any Project Document Claim and Performance Liquidated Damages to be deposited in the applicable Account pursuant to the Account Agreement.  To the extent that any such amounts are paid to any Borrower Entity, such amounts shall be held in trust for the Collateral Agent for the benefit of the Secured Parties segregated from other funds of the Borrower, and the Borrower shall cause such amounts to be deposited in the applicable Account as contemplated in this Section 5.10(a) as promptly as practicable.

 

(b)           The Borrower and Administrative Agent shall jointly (and the Borrower hereby consents to such participation by the Administrative Agent to the extent permitted by Applicable Law) compromise, adjust or settle any claim described in Section 5.10(a) in excess of $5,000,000 unless an Event of Default has occurred and is continuing, then all right of the Borrower to compromise, adjust or settle any amounts or rights respecting such claim (or any smaller claim) shall terminate and become vested in the Administrative Agent.  The Borrower shall from time to time deliver to the Administrative Agent all documents and information and take all other actions requested by the Administrative Agent in connection with its rights under this Section 5.10(b).

 

5.11         Application of Loss Proceeds; Expropriation Event.

 

(a)           Prepayment of Loans.  If an Event of Loss shall occur with respect to the Collateral or any Borrower Entity shall have a Project Document Claim or other matured right to Performance Liquidated Damages, the Borrower shall, if any Secured Party requests in its sole

 

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discretion, cause the Net Available Amount net of such amounts applied or to be applied to approved expenditures paid in an Approved Restoration Plan in accordance with Section 5.11(c) to be applied to the prepayment of the Loans held by such requesting Secured Party on the next Principal Payment Date (or if on or prior to the Conversion Date, the last Business Day of the month) after the earlier of (i) the completion of the related Restoration, and (ii) the applicable Restoration Date Certain pursuant to Section 6.3.

 

(b)           Restoration of Project.  The Borrower shall apply the Net Available Amount to Restore the Project subject to and in accordance with the following conditions precedent and continuing covenants:

 

(1)         Promptly following any Event of Loss, the occurrence of any Project Document Claim or the maturity of any other right to Performance Liquidated Damages, the Borrower shall give written notice of same to the Administrative Agent.  Following such notice, the Borrower and the Administrative Agent shall consult with the Independent Engineer to develop an Approved Restoration Plan regarding such Event of Loss, Project Document Claim or Performance Liquidated Damages.  Upon approval of the Independent Engineer of the Approved Restoration Plan and the delivery of the certificates provided for in the definition of such term, any related Net Available Amount deposited pursuant to the Account Agreement shall be, subject to the terms of the Account Agreement and this Section 5.11, used for the applicable Restoration through the Restoration Date Certain.  The Borrower shall cause the Restoration to be completed by the applicable Restoration Date Certain.

 

(2)         An Approved Restoration Plan shall be effective prior to commencement of the Restoration of the Project (other than temporary Restoration Work to protect Property of the Borrower or people or to prevent interference with the Borrower’s business) and shall be diligently complied with at all times during the Restoration Period;

 

(3)         The Restoration Work shall be supervised by the Independent Engineer and shall have commenced within the time period established by the Independent Engineer in the Approved Restoration Plan;

 

(4)         No Default or Event of Default shall have occurred and be continuing prior to or at any time during the Restoration Period; and

 

(5)         The Property of the Borrower constituting the Restoration Work shall be part of the Collateral (whether by amendment of the Security Documents or by entering into new Security Documents or otherwise).

 

(c)           Disbursements of Net Available Amount.  The Net Available Amount shall be disbursed in accordance with the applicable Approved Restoration Plan, this Section 5.11 and the Account Agreement.

 

(d)           Expropriation Event.  Anything to the contrary in the foregoing provisions of this Section 5.11 notwithstanding, if an Expropriation Event shall occur with respect to any Collateral, the Borrower shall:

 

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(1)         promptly upon discovery or receipt of notice of any occurrence thereof provide written notice to the Administrative Agent,

 

(2)         not, without the written consent of the Administrative Agent, compromise or settle any claim with respect to such Expropriation Event, and

 

(3)         with respect to any Affected Property,

 

(A)          if the Independent Engineer determines within 60 days after the Expropriation Event that such Affected Property can reasonably be expected to be Restored pursuant to Section 5.11(b), then Section 5.11(b) shall apply;

 

(B)           otherwise deposit all Net Available Amount received in respect of such Expropriation Event in the Accounts pursuant to the Account Agreement and, subject to any sharing of Net Available Amount with the TPS Lenders set forth in an intercreditor arrangement between the Secured Parties and the TPS Secured Parties, apply such Net Available Amount to the prepayment of the Loans on the Principal Payment Date (or if on or prior to Conversion Date, the last Business Day of the month) next following the receipt of such proceeds in accordance with Section 6.3.

 

Nothing in this Section 5.11 shall be deemed to impair any rights any Secured Party may have with respect to any such Expropriation Event.

 

5.12         Limitation on Liens.  No Borrower Entity may create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except for the following Liens upon such Property of any Borrower Entity (each such Lien, a “Permitted Lien”):

 

(a)           Liens that do not secure Debt or other payment obligations specifically and that are permitted, required, or created by any Transaction Document listed on Schedule 5.12;

 

(b)           Liens on Property of the Borrower specified in Section 2.15 to secure Permitted Debt under Section 5.13(b) as limited in this Agreement; provided that the Secured Parties and the TPS Secured Parties, as applicable, shall have agreed to the intercreditor arrangements acceptable to the Secured Parties contemplated by Section 2.15;

 

(c)           Liens on Property of the Borrower specified in Section 2.16(a) to secure the Expansion Obligations under Section 2.16(a) as limited in this Agreement; provided that the Secured Parties and the Expansion Secured Parties shall have agreed to intercreditor arrangements acceptable to the Secured Parties contemplated by Section 2.16;

 

(d)           Liens created by the Security Documents in favor of any of the Secured Parties;

 

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(e)           Liens for Taxes, including any assessments or governmental charges, (i) which are not yet due or (ii) otherwise to the extent Taxes are not required to be paid under Section 5.5;

 

(f)            mechanic’s or materialmen’s Liens secured by bonds for which no Borrower Entity is liable;

 

(g)           Liens arising by operation of law in the ordinary course of business;

 

(h)           deposits or pledges to secure statutory obligations, appeals, releases, attachments, stay of execution, stay of injunction, or for purposes of like general nature in the ordinary course of business of such entity;

 

(i)            Permitted Title Defects and Liens expressly created by Section 25.21 of each of the Site Leases

 

(j)            defects, imperfections, easements, rights of way, restriction, irregularities, encumbrances and clouds on title and statutory Liens which, in the aggregate with the other Liens under this clause (j), do not materially impair or restrict the use of the Property affected and that do not materially impair the value of the Liens granted under the Security Documents;

 

(k)           pledges or deposits under worker’s compensation, unemployment insurance or other social security or pension obligations (other than ERISA);

 

(l)            legal or equitable encumbrances deemed to exist because of the existence of any litigation or other proceeding if brought in good faith provided that such encumbrances shall be cancelled by bonds, for which no Borrower Entity is liable, or other like means within 5 Business Days after their creation;

 

(m)          Liens that (i) are not Permitted Liens under any of clauses (a) - (l), (ii) are incidental to the conduct of such Borrower Entity’s business, (iii) were not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than vendor’s Liens for accounts payable in the ordinary course of business), and (iv) do not, in the aggregate with the other Liens under this clause (m), materially impair the use of any Borrower Entity’s Property in the operation of such Borrower Entity’s business;

 

(n)           the COP Royalty Lien; and

 

(o)           the Shared Facilities Agreement, if any.

 

5.13         Guarantees; Debt.  No Borrower Entity shall contingently or otherwise be or become liable, directly or indirectly, in connection with any Guarantee or Debt except for the following Debt only (such Debt, the “Permitted Debt”):

 

(a)           Debt incurred in respect of the Loans, or any other Financing Document;

 

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(b)           Debt incurred in respect of the TPS Loans as limited by this Agreement and the other Financing Documents; provided no Default or Event of Default has occurred and is continuing at the time of incurrence thereof;

 

(c)           after the Project Completion Date, Debt incurred by the Borrower to finance the reasonable cost of the construction, installation or acquisition of equipment or facilities required by Applicable Law for the continued operation of the Project in accordance with Applicable Laws provided that and only to the extent that the Projected Debt Service Coverage Ratio for the current and each subsequent fiscal year through the Term Loan Maturity Date will not be less than ***; and

 

(d)           after the Project Completion Date, Debt incurred by the Borrower under an unsecured revolving working capital credit facility issued by any lender in an aggregate principal amount not to exceed *** outstanding at any time.

 

5.14         Leases.  No Borrower Entity shall enter into any agreement, or be or become liable as lessee or lessor under any agreement, for the lease, hire or use of any real or personal Property, except for (i) the Site Leases and the arrangement contemplated by the Site Availability Letter, (ii) operating leases of personal Property (which do not constitute Capital Lease Liabilities) provided for in the prevailing Operating Budget, and (iii) leases that constitute Capital Lease Liabilities of the Borrower and that are permitted pursuant to Section 5.13 hereof; provided that (a) such items of personal Property are not affixed to, accession of or commingled with the Facility, do not constitute “fixtures” under Applicable Law, and are standard, non-customized items; and (b) the aggregate payment obligations of the Borrower Entities under all leases (except for the Site Leases) shall not exceed $500,000 in any calendar year.

 

5.15         Single Purpose Entity of the Borrower and General Partner; Subsidiaries and Investments; Phase 1 Additions.

 

(a)           Neither the Borrower, any of its Subsidiaries or any Subsidiaries of the General Partner shall engage in any activities, business or otherwise, other than the design, development, construction, testing, start-up, ownership, operation, maintenance, repair, improvement, equipping, preservation, insurance, financing, use (as intended by the Transaction Documents) and management of the Project, the transactions contemplated by the Transaction Documents and any activities related to any of the foregoing.  The General Partner shall not engage in any activities, business or otherwise other than those set forth in Section 2 of the Stockholders Agreement, the transactions contemplated by the Transaction Documents and any activities related to any of the foregoing.  No Borrower Entity shall engage in any activities, business or otherwise, in respect of a Phase 2 Project except pursuant to the Shared Facilities Agreement.

 

(b)           Without limiting the generality of Section 5.15(a), neither the Borrower or any of its Subsidiaries may (i) form or permit to exist any Subsidiaries of it and (ii) make any Investments, including (A) making any loans or advances to any Person and (B) acquiring or owning (beneficially or otherwise) the Capital Stock, Debt or other obligations of any Person; provided however that Borrower may (x) form the Site Lessee as a wholly owned Subsidiary and, with 15 day prior written notice to, and the written consent (such consent to not be

 

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unreasonably withheld) of, the Administrative Agent, any other wholly owned Subsidiary necessary to the ordinary course of business of the Borrower and (y) make any Permitted Investments, in each case in accordance with this Agreement and the Account Agreement.  Without limiting the generality of Section 5.15(a), except as contemplated by the immediately preceding sentence regarding the Borrower and its Subsidiaries, neither the General Partner nor any of its Subsidiaries may form or permit to exist any Subsidiaries of it; provided however that the General Partner may form the Borrower and the Site Lessee as wholly owned Subsidiaries and, with 15 day prior written notice to, and the written consent (such consent to not be unreasonably withheld) of, the Administrative Agent, any other wholly owned Subsidiary necessary to the ordinary course of business of the Borrower.  It is expressly understood that the Administrative Agent may withhold its consent under this Section 5.15(b) if (1) the formation, existence, intended purpose or future use of the Borrower Entity could have an adverse effect on either (A) the ability of a Borrower Entity to perform its obligations under any of the Transaction Documents or (B) the validity of the Lien of the Security Documents or the priority contemplated thereby or the material rights and remedies of the Secured Parties under any Financing Document or (2) the formation or intended purpose of the Borrower Entity was not previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor of the formation and intended purpose of such Borrower Entity.  Each Borrower Entity shall satisfy its obligations under Sections 5.30 and 9.18(b) with respect to such Subsidiary in connection with the formation thereof.

 

(c)           The duties, obligations, liabilities, covenants of the Borrower under the Financing Documents (and the provisions of the Financing Documents applicable to the Borrower) shall apply to the fullest extent permitted by Applicable Law to the Subsidiaries of the Borrower, and the duties, obligations, liabilities, covenants of the General Partner under the Financing Documents (and the provisions of the Financing Documents applicable to the Borrower) shall apply to the fullest extent permitted by Applicable Law to the Subsidiaries of the General Partner.  Without limiting the generality of the immediately preceding sentence, if either the Borrower is prohibited from performing an act or deed then the Subsidiaries of the Borrower are also prohibited from performing such act or deed.  Any duties, obligations or covenants of any Subsidiary of the Borrower or any Subsidiary of the General Partner (other than the Borrower) under any Financing Document to which such Subsidiary is not a party shall be construed to include a duty, obligation or covenant of the Borrower or the General Partner (as applicable) if the Borrower or the General Partner, as applicable, is a party to such Financing Document, to cause such Subsidiary to perform or comply with such duties, obligations and covenants.

 

(d)           Phase 1 Additions

 

(1)         No Borrower Entity may engage in any activity in connection with or relating to any Phase 1 Addition, including entering into any oral or written agreements, unless such Phase 1 Addition and such activities shall have been previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor thereof.

 

(2)         As a condition to the beginning of each Phase 1 Addition and as a continuing obligation of each Borrower Entity,

 

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(A)          No activity in respect of a Phase 1 Addition could reasonably be expected to have a material adverse effect on (1) the Services Quantity (as defined in the COP TUA) committed to be provided pursuant to the COP TUA or the amount or timing of the Fee or (2) the validity of the Lien of the Security Documents or the priority contemplated thereby or the material rights and remedies of the Secured Parties under any Financing Document;

 

(B)           As a condition to the beginning of each Phase 1 Addition and as a continuing obligation of each Borrower Entity, the risks associated with completion of any Phase 1 Addition shall be mitigated through engineering, procurement and construction arrangements that (A) utilize one or more internationally reputable construction contractors having significant experience in the type of work contemplated, who will serve as the primary contractors responsible for all of the work, (B) are contracted for on terms and conditions that are substantially similar to those governing the engineering, procurement and construction of Phase 1 of the Project, including substantially similar rights and remedies in respect of liabilities and damages for performance failures and third-party losses and injuries, and appropriate security for any non-performance damages to be provided by a Person or Persons (1) having a long term unsecured debt rating of at least “BBB–” by S&P and “Baa3” by Moody’s and (2) who shall not hold or be the beneficiary of any Liens on any or all of the Project, any Phase 1 Addition or Property of any Borrower Entity, Expansion or any of Expansion’s Subsidiaries, (C) require such contractors to provide and maintain construction–related insurances of substantially similar types, coverages, amounts and provisions as required in connection with the Project as set out in Section 5.9 and Appendix C, and (D) are designed so that there could not reasonably be expected to occur a material adverse interference to the Project’s design, construction, installation, operation, maintenance in conformity with the Construction Contracts, Good LNG Practices, Necessary Approvals and Applicable Law or the continuing availability of the Services Quantity (as used in each of the TUAs (or similar term if such term is not used therein)) as contemplated by the Financing Documents and the TUAs.

 

5.16         Restricted Payments.  Except as permitted by Section 5.16(a) and 5.16(b), no Borrower Entity shall make any Restricted Payments to any Partner or other Person.

 

(a)           Amounts on deposit in the Distribution Account may be transferred to the Payment Account and therefrom remitted to the Borrower on any Quarterly Distribution Date for the purpose of making Restricted Payments or any other lawful purpose, if each of the following conditions precedent (the “Distribution Conditions”) are satisfied:

 

(1)         The Conversion Date has occurred,

 

(2)         No Default or Event of Default shall have occurred and be continuing or could result from the making of such Distribution.

 

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(3)         For any Quarterly Distribution Date, the Projected Debt Service Coverage Ratio for the 12 month period succeeding such Quarterly Distribution Date (ending on the date immediately preceding the first anniversary of such Quarterly Distribution Date) shall be greater than or equal to ***, and the calculation thereof shall have been certified by the Borrower in the applicable Transfer Date Certificate and verified by the Independent Engineer to the Administrative Agent regarding the rates and assumptions used by the Borrower;

 

(4)         No transfers are required to be made from the Distribution Suspense Account pursuant to Section 4.12 of the Account Agreement (other than Section 4.12(b)(ii) thereof), and no transfers would be required to be made therefrom pursuant to Section 4.12 of the Account Agreement (other than Section 4.12(b)(ii) thereof) if funds were available to make such transfers; and

 

(5)         The Borrower certifies the foregoing conditions have been satisfied in the applicable Transfer Date Certificate.

 

(b)           After making the transfers specified in clauses (a), (b), (c) and (d) of Section 4.3 of the Account Agreement, from the monies remaining in the Revenue Account the amount set forth in the Transfer Date Certificate and certified therein to be the amount equal to the Partner Tax Distribution Amount may be transferred to the Partner Tax Distribution Account, if each of the following conditions precedent (the “Partner Tax Distribution Conditions”) are satisfied:

 

(1)         The Conversion Date has occurred;

 

(2)         No Default or Event of Default shall have occurred and be continuing or could result from the making of such distribution of the Partner Tax Distribution Amount or from any Distribution under Section 5.16(a) on such Monthly Transfer Date, if any;

 

(3)         Assuming no transfers were made pursuant to Section 4.3(e) of the Account Agreement, no transfers are required to be made from the Distribution Suspense Account pursuant to Section 4.12 of the Account Agreement (other than Sections 4.12(b)(i)(B), 4.12(b)(i)(C) and 4.12(b)(ii) thereof), and no transfers would be required to be made therefrom pursuant to Section 4.12 of the Account Agreement (other than Section 4.12(b)(ii) thereof) if funds were available to make such transfers;

 

(4)         Such amount to be distributed on such Monthly Transfer Date is equal to 1/12th of the good faith estimate by the Borrower of the distributions in regard to Taxes to be made to the Partners in accordance with Section 5.2 of the Partnership Agreement, where such estimate has been confirmed to the Administrative Agent in writing as a fair and reasonable estimate by a firm of independent certified public accountants of national standing mutually acceptable to the Administrative Agent and the Borrower, which firm may be the Independent Accountant (“Partner Tax Distribution Amount”); and

 

(5)         The Borrower certifies the foregoing conditions have been satisfied in the applicable Transfer Date Certificate.

 

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5.17         Hedging Agreements.  No Borrower Entity may enter into Hedging Agreements except that the Borrower may enter into any Hedging Agreement in the ordinary course of business in connection with the ownership, operation and maintenance of the Project and that is not for a speculative purpose.

 

5.18         Certain Security Interest Matters.  Each Borrower Entity shall:

 

(a)           maintain its chief executive office, principal office, and principal place of business at Two Allen Center, 1200 Smith Street, Suite 600 Houston, TX  77002, and maintain the office where it keeps its books and records concerning the Transaction Documents and Collateral at such address,

 

(b)           not keep any place or business or Property outside of the State of Texas,

 

(c)           not change its jurisdiction of organization,

 

(d)           not change its name or organizational identification number,

 

(e)           except for any inventory (as defined in the UCC) and equipment (as defined in the UCC) in transit, keep any inventory (as defined in the UCC) or any equipment (as defined in the UCC) that is part of the Security Agreement Collateral at any location other than Two Allen Center, 1200 Smith Street, Suite 600 Houston, TX  77002 or on the Land (as set forth in the most recent survey delivered to the Administrative Agent), and

 

(f)            not do business under any other name or have an assumed name, unless, in each such case, the Borrower shall have given the Administrative Agent at least 45 days’ prior written notice, and the requirements, if any, of Section 5.30 and the Security Documents are satisfied.  The originals of all documents evidencing the Collateral, including originals of all Assigned Agreements and Assigned Insurance Policies, and the only original books of account and records of each Pledgor relating thereto are, and will continue to be, kept at its chief executive office.

 

5.19         Transactions with Affiliates; Expansion

 

(a)           No Borrower Entity may enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with or for the benefit of any Affiliate of the Borrower which is not on terms and conditions at least as favorable as would be obtained in a comparable arm’s-length transaction with a Person other than an Affiliate of the Borrower, except (i) that any Borrower Entity may perform its obligations under the Transaction Documents listed on Schedule 5.19 as in effect on the Closing Date and delivered to the Administrative Agent under Section 3.1 (and any amendments, modifications and supplements to those Transaction Documents entered into and delivered to the Administrative Agent in accordance with this Agreement), (ii) for Restricted Payments permitted as set forth in Section 5.16 or (iii) as previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor of such transaction or series of related transactions.

 

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(b)           No Borrower Entity shall enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with or for the benefit of Expansion or any Affiliate of Expansion which has not been previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor of such transaction or series of related transactions.

 

(c)           Each Borrower Entity shall (and shall cause Expansion to) maintain or cause to be maintained (and shall use its reasonable best efforts to cause other Persons (that are not its Subsidiaries) to maintain or cause to be maintained) in full force and effect (1) the intercreditor agreements entered into in connection with the intercreditor arrangements contemplated by Section 2.16(b)(1) and (2) non-disturbance and recognition agreement(s) entered into by the Expansion Secured Parties with the COP Shipper as to the COP TUA contemplated by Section 2.16(b)(2).

 

(d)           Each Borrower Entity shall ensure the provisions of Section 2.16(c) are satisfied.

 

(e)           In the event the Administrative Agent advised the Borrower in writing of an identified activity within the reasonable control of Expansion or its Subsidiaries in respect of a Phase 2 Project which could reasonably be expected to have a material adverse effect on (1) the Services Quantity committed to be provided pursuant to the COP TUA or (2) the validity of the Lien of the Security Documents or the priority contemplated thereby or the material right and remedies of the Secured Parties under the Security Documents, the Borrower shall promptly, and in any event within five Business Days, cause Expansion or such Subsidiary to desist from such identified activity or cure any aspect of such activity which could result in such expected material adverse effect.

 

5.20         Use of Proceeds; Accounts; Construction Budget.

 

(a)           Unless used for repayment or prepayment of the Loans and other Obligations as permitted hereunder, the proceeds of the Loans shall be used only to pay for Project Costs for Phase 1 or for reimbursement thereof as contemplated in the Construction Budget and substantially in accordance with the Drawdown Schedule (which amounts shall be deposited into the Construction Account), which Project Costs shall include the certain development and construction costs incurred by or on behalf of the Borrower and its Affiliates mutually agreed upon and listed on Schedule 5.20 on the Closing Date.  The proceeds of the Loans will be used only in accordance with this Agreement and the other Financing Documents.

 

(b)           For the avoidance of doubt and without limiting the generality of Section 5.20(a), the proceeds of the Tranche A Loans will not be used to pay, reimburse or finance (including by providing support for a financing of) (1) more than *** of the Supplemental Cost in accordance with this Agreement, (2) any Phase 2 Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any costs or expenses for any Phase 1 Addition.  For the avoidance of doubt and without limiting the generality of Section 5.20(a), the proceeds of the Tranche B Loans will not be used to pay, reimburse or finance (including by providing support for a financing of) (1) more than *** of the Supplemental Cost in accordance with this Agreement (as such amount is reduced by such Supplemental Costs paid other than by the

 

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proceeds of Tranche A Loans), (2) any Phase 2 Expenditure, (3) Phase 2 Project, (4) any TUA Insurance and (5) any costs or expenses for any Phase 1 Addition.

 

(c)           The Borrower shall cause all Project Revenues and all payments from each Construction Contractor (including payments from its guarantors and sureties) to be deposited in, and disbursed from, the Accounts in accordance with the Account Agreement.

 

(d)           During the Initial Period, except as set forth in the immediately following sentence the board of directors of the General Partner shall approve the Construction Budget and the Drawdown Schedule and any amendments, supplements, and modifications to either of the foregoing, in each case in a vote where a majority of the COP Directors voted in favor thereof.  For purposes of the Closing Date and the Initial Disbursement Date (if such date is also the Closing Date), the Construction Budget and the Drawdown Schedule and any amendments, supplements, and modifications to either of the foregoing need to be approved only by the advisory board of the General Partner.

 

(e)           After the Initial Period, neither the Borrower nor the General Partner shall, without the prior written consent of the Independent Engineer (or if no Independent Engineer exists at such time, the Administrative Agent),

 

(1)         amend, supplement, or modify the Construction Budget, including to change the number or type of Construction Budget categories or amounts contained in any category or

 

(2)         request any Borrowing for the purpose of funding any Project Costs in excess of the amount contained in the Construction Budget for such category of Project Costs.

 

Notwithstanding the foregoing provisions of this Section 5.20(e), the Borrower may, without the consent of the Administrative Agent, (i) transfer unutilized amounts from a Construction Budget category to Contingency upon completion of the Work contemplated by such Construction Budget category, and (ii) request Loans in respect of the Contingency for the purpose of change orders under any Construction Contract permitted to be entered into pursuant to Section 5.25.

 

(f)            After the Initial Period, the Borrower shall not, without the prior written consent of the Independent Engineer (or Administrative Agent, as applicable), amend, supplement, or modify the Drawdown Schedule, except in connection with, but only to the extent necessary to reflect, changes to the Construction Budget and any other actions permitted by Section 5.20(e).

 

(g)           Each Borrower Entity shall use at least commercially reasonable efforts to cause initial satisfaction of all conditions set forth in Section 3.2 to occur as soon as possible after the Closing Date.

 

5.21         Project Construction; Maintenance.

 

(a)           Each Borrower Entity shall (i) cause construction of Project to be carried out with diligence and continuity in accordance with the Necessary Approvals, Good LNG

 

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Practices, the Construction Budget, each Phase 1 Addition Budget for construction (to the extent not in conflict with the Construction Budget), the Project Schedule, and the Construction Contracts, (ii) cause the Project Completion Date to occur on or before the Date Certain, and (iii) not enter into any change orders under any Construction Contract except as permitted by Section 5.25.

 

(b)           Each Borrower Entity shall maintain and operate, or cause to be maintained and operated, the Project in good working order and condition in accordance with the Project Documents and Good LNG Practices, including:

 

(1)         maintaining and preserving its Property, including as set forth in Section 4.16 hereof, necessary or useful in the proper conduct of its business in good working order and in such condition that the Facility will have the capacity and functional ability to perform, on a continuing basis (ordinary wear and tear excepted), in normal commercial operation, the functions for which it was specifically designed in accordance with the Construction Contracts at substantially the levels contemplated thereby and Good LNG Practices;

 

(2)         operating, servicing, maintaining and repairing the Project so that the condition and operating efficiency thereof will be maintained and preserved (ordinary wear and tear excepted) in all material respects in accordance and compliance with (A) Good LNG Practices, (B) such operating standards as shall be required to enforce any material warranty claims against dealers, manufacturers, vendors, contractors, and sub - contractors, (C) the terms and conditions of all insurance policies maintained with respect to the Project at any time, (D) all requirements of Applicable Law and all Necessary Approvals and (E) the terms of the Project Documents; and

 

(c)           The Borrower and the General Partner shall not, directly or indirectly, make or commit to make any expenditure in respect of the purchase or other acquisition of fixed or capital assets, other than (i) expenditures contemplated by the Construction Budget or the prevailing Operating Budget, as appropriate, (ii) expenditures permitted to be made pursuant to Section 5.11, (iii) Major Maintenance Expenses contemplated by Section 4.9 of the Account Agreement and (iv) any Phase 1 Additions permitted under Section 5.15(d).

 

(d)           Subject only to Borrower’s rights under Section 8.2(b) of the COP TUA with respect to the berthing and unloading dock, the Borrower shall not, directly or indirectly, alter, remodel, add to, reconstruct, improve or demolish any part of the Project or any other Collateral, except as contemplated by or in accordance with the Plans and Specifications or as provided in Section 5.21(a) or 5.21(c); provided however, that after the Conversion Date prior to beginning any such alterations, remodeling, additions, reconstructions, improvements or demolition, the Borrower shall provide written notice to the Administrative Agent of such actions to be taken.

 

(e)           The Borrower shall cause the Conversion Date to occur within 60 days after Conversion.

 

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5.22         Performance of Project Documents

 

(a)           Each Borrower Entity (1) shall perform and observe all of its covenants, obligations and agreements under any and all of the Transaction Documents, (2) shall take all necessary actions to prevent the termination or cancellation of any Transaction Document and (3) shall take any and all action as may be reasonably necessary promptly to enforce its rights and to collect any and all sums due to it under the Project Documents; provided, however, that clause (2) of this Section 5.22(a) shall not apply in the case of any Project Document for which such Borrower Entity has entered into an Material Additional Project Document and obtained any necessary Consent Agreement related thereto.

 

(b)           Each Borrower Entity shall instruct all Project Participants to make all payments payable to it, to the Depositary Agent for deposit in the appropriate Account in accordance with the Account Agreement.

 

(c)           No Borrower Entity will transport natural gas, or cause natural gas to be transported, by a pipeline to or near the limits of a municipality in which such gas is received and distributed or sold to the public by a gas utility or by the municipality in a situation where same is the only or practically the only supply of natural gas to such gas utility or municipality so as to subject Borrower to the provisions of V.T.C.A., Utilities Code § 121.001(a)(3) and § 121.051.

 

5.23         Operating Budget; Account Agreement; Phase 1 Addition Expenses.

 

(a)           Preparation of Operating Budget

 

(1)         Prior to a given Operating Year, the Borrower shall cause the Operator to prepare the Operating Budget for such year.  The Borrower shall permit the Operator to prepare an amended Operating Budget for the remainder of any then current Operating Year.

 

(2)         The Borrower will consult with, advise and provide information and access requested by the Operator and the Independent Engineer, if any, in connection with the preparation of such budget, including amended budgets, in clause (1).

 

(3)         The Borrower shall cause each Operating Budget (A) to be prepared on a cash basis, (B) to specify, for each month during the Operating Year (i) the Project Revenues anticipated to be received, (ii) the Operating and Maintenance Costs (by category), together with a comparative presentation of Operating and Maintenance Costs to the prior Operating Year, and (iii) if applicable, the COP O&M Percentage and the TPS O&M Percentage and (C) to describe in reasonable detail (x) the maintenance and overhaul schedule (including any major maintenance or overhauls that are projected for the next succeeding Operating Year), capital expenditures for Phase 1, anticipated staffing plans, mobilization schedules, equipment acquisitions and spare parts and consumable inventories (including a breakdown of capital items and expense items), and administrative activities and (y) any other material underlying assumptions in connection with the proposed Operating Budget.

 

(b)           Delivery of Operating Budget.  The Borrower shall deliver or cause to be delivered to the Administrative Agent:

 

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(1)         at least 30 days before the beginning of each Operating Year and prior to adoption thereof, the Operating Budget for such year and

 

(2)         at least 10 days prior to adoption thereof, any amended Operating Budget.

 

(c)           Approval and Adoption of Operating Budget.

 

(1)         The Borrower shall approve and adopt an Operating Budget for each Operating Year reasonably prior to the beginning of such year.

 

(2)         Prior to adoption of any such budget, including any amended budget, by the Borrower,

 

(A)          the Independent Engineer, if any, shall approve such Operating Budget and deliver such approval thereof to the Administrative Agent, and

 

(B)           the Borrower shall deliver a certificate from the controller or chief accounting officer of the Borrower to the Administrative Agent certifying that the proposed Operating Budget and the preparation thereof complies with this Section 5.23.

 

(d)           Account Agreement.

 

(1)         Operating and Maintenance Costs.  The Borrower shall ensure that the aggregate Operating and Maintenance Costs reflected in each Transfer Date Certificate delivered by the Borrower under the Account Agreement shall comply with the requirements set forth in Section 5.23(a) above.

 

(2)         Major Maintenance Reserve Requirement and Account.

 

(A)          The Borrower shall permit the Independent Engineer, if any, to review the amounts projected by the Borrower for the Major Maintenance Reserve Requirement and, if necessary, provide the Borrower with its recommendations for adjustments to such amounts.

 

(B)           If, at any time, the Independent Engineer determines that a Major Maintenance Reserve Account is necessary to maintain and operate the Project in accordance with Section 5.21(b), then such Account shall be opened under the Account Agreement pursuant to a written instruction from the Collateral Agent to the Depositary Agent (with a copy to the Borrower) to open such Account.  Such Account shall remain open unless the Independent Engineer determines that such Account is not necessary to maintain and operate the Project in accordance with Section 5.21(b), and thereupon such Account shall be closed pursuant to a written instruction from the Collateral Agent to the Depositary Agent (with a copy to the Borrower) to close such Account.  Such Account may be reopened and reclosed in accordance with the preceding provisions of this Section 5.23(d)(2)(B).  The Borrower hereby acknowledges the transfers contemplated in the Account

 

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Agreement with respect to allocating funds for the Major Maintenance Reserve Requirement.

 

(e)           Phase 1 Addition Expenses.  Any payment for, or incurrence of, any expenses and costs by a Borrower Entity for any Phase 1 Addition (except for the Phase 1 Addition (Stratton Ridge)) shall be in compliance with and pursuant to applicable Phase 1 Addition Budget, in each case such budget shall have been previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor thereof.  Any payment for, or incurrence of, any expenses and costs by a Borrower Entity for the Phase 1 Addition (Stratton Ridge)) shall be in compliance with and pursuant to a budget for such Phase 1 Addition previously approved by the board of directors of General Partner in a vote where a majority of the MS Directors voted in favor thereof.  No costs or expenses for any Phase 1 Addition shall be included in the Construction Budget or Operating Budget.

 

5.24         Fundamental Changes.

 

(a)           Except as permitted in Section 5.24(b) or (c), each Borrower Entity shall preserve and maintain its current legal existence, and all of its respective material powers, licenses, rights, privileges and franchises necessary for the maintenance of its current organizational existence, and comply, in all material respects, with its Charter Documents;

 

(b)           No Borrower Entity shall enter into (or otherwise be a party to) any transaction of merger or consolidation, conversion or otherwise change its legal form including transferring to another jurisdiction of organization (except as permitted under Sections 5.24(b) or (c)), restructure or reclassify Capital Stock of a Borrower Entity, liquidate, wind-up or dissolve a Borrower Entity (or suffer any liquidation or dissolution), abandon or discontinue its business or purchase or acquire (in one transaction or in a series of related transactions) all or substantially all of the assets of any Person or Affiliates of any Person.  Notwithstanding anything else in any Financing Document to the contrary, subject to satisfaction of the conditions precedent set forth in the immediately following sentence, the Site Lessee may merge into the Borrower with the Borrower being the surviving entity of such merger and, to the extent permitted by Applicable Law, the certificate of formation and partnership agreement of Borrower immediately prior to the merger shall be the certificate of formation and partnership agreement of the surviving entity.  Any such merger set forth in the immediately preceding sentence is subject to the following conditions:

 

(1)         the Administrative Agent shall have received as of the date of such merger an Officer’s Certificate certifying that:

 

(A)          (1) all the representations and warranties of the Borrower and Site Lessee in the Financing Documents are true and correct in all material respects and (2) all the representations and warranties of the Borrower in the Financing Documents shall be true and correct in all material respects on the date of such merger immediately after giving effect to such merger;

 

(B)           such merger has received all necessary corporate and partnership approvals and consents from Governmental Authorities and third parties; and

 

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(C)           the other requirements set forth in this Section 5.24(b) have been satisfied;

 

(2)         the Administrative Agent shall have received prior to the date of such merger, a copy of the certificate of merger and the agreement of merger, in each case substantially in the form and substance to be executed and delivered and, if applicable, filed.

 

(3)         In such merger, (A) the Capital Stock of the Subsidiary shall be cancelled, retired and otherwise cease to exist and (B) the Partners of the Borrower immediately prior to such merger shall be the only Partners of the Borrower immediately after such merger.

 

(4)         When such merger shall have become effective, all of the rights, privileges and powers of the Site Lessee and the Borrower and all Property belonging to such Persons shall be vested in the Borrower and shall thereafter be the property of the Borrower as they were of each of the Site Lessee and the Borrower, and the title to any real property vested by deed or otherwise in either the Site Lessee or the Borrower shall not revert or be in anyway impaired by reason of such merger.

 

(5)         All Necessary Approvals and other Governmental Approvals in the name of the Site Lessee shall have been transferred to and in the name of the Borrower promptly after such merger with substantially similar rights, title and interests as immediately prior to such merger;

 

(6)         Such merger is permitted under all other Debt of the Borrower Entities;

 

(7)         No Default or Event of Default shall have occurred and be continuing prior to such merger or shall have occurred after giving effect to such merger;

 

(8)         The Brazos River Authority and any Project Participants from which any Consents have been obtained in respect of agreements with the Site Lessee (A) shall have acknowledged to the Collateral Agent, in form and substance reasonably satisfactory to the Collateral Agent, its understanding that such merger will occur as disclosed to the Collateral Agent and (B) shall have agreed to, ratified and confirmed its obligations under its Consent (or, in the case of the Brazos River Authority, the Brazos Consent) for the benefit of the Secured Parties notwithstanding such merger; and

 

(9)         The validity and priority of the Liens on the Collateral and the material rights and remedies of the Secured Parties under any Financing Document shall not be adversely affected, and the Borrower shall provide an endorsement to any title policy covering the Property of the Site Lessee immediately prior to the merger confirming that the validity and priority of the Liens on the Collateral constituting real property shall not be adversely affected.

 

Promptly after such merger, the Borrower shall deliver evidence of such merger to the Administrative Agent.  Upon the satisfaction of the conditions set forth in this Section 5.24(b), such merger shall be permitted under the Financing Documents.

 

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(c)           Except as permitted in Section 5.24(b), no Borrower Entity shall cancel, terminate, permit the cancellation or termination of, amend, modify, supplement or grant any material consent, waiver or approval under, or take or fail to take any other action that would impair the value of the interest or impair its rights under, any of its Charter Documents.  Notwithstanding the foregoing, subject to Section 5.18 and 5.30, the Borrower may become a limited liability limited partnership upon the prior written notice and consent of the Administrative Agent, such consent not to be unreasonably withheld.

 

(d)           No Borrower Entity shall transfer (including directly or indirectly by sale, assignment, disposal or exchange), lease, or sublease (in one transaction or in a series of related transactions) any of its Property (including Property of any of its Subsidiaries), except (1) Property sold, leased or subleased in the ordinary course of business, (2) Property that is obsolete and not integral to the business of any Borrower Entity, and (3) pursuant to Sections 5.12, 5.14, 5.24(b) and 5.25(a)(2) and the terms of the Shared Facilities Agreement, if any.

 

(e)           No Borrower Entity shall purchase or acquire any assets other than the purchase or acquisition of (1) assets reasonably required for the completion of Phase 1 of the Project in accordance with the Construction Budget, (2) assets in the ordinary course of business reasonably required in connection with the operation of the Project and (A) in accordance with the Operating Budget or (B) if permitted under Section 5.15(d) in accordance with any Phase 1 Addition Budget for operation or operating budget for Phase 1 Addition (Stratton Ridge), (3) Permitted Investments, (4) fixed or capital assets permitted to be purchased or acquired as described in Section 5.21 or (5) permitted to be purchased or acquired by Section 5.24(b).

 

5.25         Amendment of Transaction Documents; Material Additional Project Documents; Change Orders; etc.

 

(a)           No Borrower Entity may:

 

(1)         consent to, enter into or grant any amendment, waiver, forgiveness, release, consent, suspension, cancellation, termination, change or modification to:

 

(A)          any Project Document, including any Material Additional Project Document but excluding any Non-COP TUA, that (i) adversely affects the ability of any Borrower Entity or any guarantor of the obligations of any Borrower Entity under the Financing Documents to perform its obligations under any of the Financing Documents or the validity or priority of the Liens on the Collateral or the material rights and remedies of the Secured Parties under any Financing Document without the consent of the Administrative Agent or (ii) causes or results in a Default or an Event of Default; and

 

(B)           except in accordance with this Agreement, any Financing Document without the consent of the Administrative Agent.

 

For the avoidance of doubt, each Borrower Entity shall also satisfy the requirements of Section 5.30 to the extent applicable to this Section 5.25(a); or

 

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(2)         sell, assign or otherwise dispose of (by operation of law or otherwise) any part of its rights or interest in any Transaction Document or delegate any of its duties or obligations under any Transaction Document except (1) pursuant to the Security Documents, (2) the COP Royalty Lien, and TPS Collateral to the TPS Secured Parties to secure the obligations of any Borrower Entity to such TPS Secured Parties in respect of the Project and (3) as permitted by Section 2.16(a) and, if permitted under Section 5.19, any assignment of real property rights, title and interest to Expansion or any of its Subsidiaries (for any Phase 2 Project to the extent necessary for the operation and conduct of business of such Phase 2 Project) and assumption by such entity of any related liabilities, duties and obligations.

 

(b)           The Borrower shall provide the Administrative Agent with true and complete copies of each executed and delivered Project Document, including any amendments, waivers, modifications, supplements and replacements thereof promptly after execution and delivery thereof, provided however that in the case of a Non-COP TUA, the Administrative Agent shall have executed and delivered to Borrower and the Shipper under the relevant Non-COP TUA, if required by such Shipper, a confidentiality agreement between such Shipper and the Administrative Agent that is satisfactory to the Administrative Agent and such Shipper.

 

(c)           In the event that any Project Document (other than Non-COP TUAs) is terminated or cancelled prior to its expressed expiration date, each Borrower Entity party thereto shall use reasonable best efforts to enter into within 60 days after such termination or cancellation (subject to the consent of the Administrative Agent), a replacement agreement with a Replacement Project Participant constituting a replacement of the Project Document so terminated or cancelled. The obligations of the Borrower Entities under this Section 5.25(c) shall not be in derogation or limitation of the obligations of any Borrower Entity under Section 5.25(a) or in any way limit or impair the rights or remedies of the Secured Parties hereunder or under any other Financing Document directly or indirectly arising out of the termination or cancellation of any Project Document.

 

(d)           Notwithstanding the provisions of Section 5.25(a), after the Initial Period the Borrower may initiate or approve:

 

(1)         any change orders under any Construction Contract included in the Budgeted Construction Costs, and

 

(2)         upon five Business Days’ prior notice to the Independent Engineer, any change orders under any Construction Contract provided the Borrower certifies that such change order (i) is in accordance with Good LNG Practices, (ii) is not reasonably expected to materially and adversely affect the operation or reliability of Phase 1 of the Project, and (iii) if implemented, is not reasonably expected to materially delay the Project Completion Date.

 

(e)           No Borrower Entity shall enter into any capacity rights agreement, terminal use agreement, lease or other agreement and no agreement shall be binding on the Property of the Borrower with respect to which any projected payments receivable by a Borrower Entity in any 12 month period is in excess of *** of the Future Average Annual

 

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Payments.  For any given 12 month period, “Future Average Annual Payments” is equal to: (a – b) / c;

 

where:

 

“a” is the total projected payments receivable under the agreement

“b” is the total payments under the agreement received prior to such 12 month period

“c” is the remaining life of the agreement in years or part of years

 

To the degree payments under the contract are indexed, e.g., linked to a gas price index, payments and distributions referred to above shall be calculated using the same assumptions.

 

5.26         Environmental Compliance.  Each Borrower Entity shall:

 

(a)           comply in all material respects and cause all other Persons constructing, occupying, using, maintaining or conducting operations at the Project to comply in all material respects with all Environmental Laws now or hereafter applicable to the Project;

 

(b)           obtain or cause to be obtained, at or prior to the time required by applicable Environmental Laws, all Governmental Approvals, including any emissions credit or allowances, required pursuant to applicable Environmental Law for the design, construction, completion, start-up, operation and maintenance of the Project, and maintain or cause to be obtained such Governmental Approvals in full force and effect;

 

(c)           other than in compliance in all material respects with all applicable Environmental Laws, not generate, use, treat, recycle, store, Release or dispose of, or permit the generation, use, treatment, recycling, storage, Release or disposal of Hazardous Materials on the Land, or transport or permit the transportation of Hazardous Materials to or from the Project;

 

(d)           conduct and complete any investigation, study, sampling and testing and undertake any cleanup, removal, remediation or other action necessary or advisable to remove and clean up all Hazardous Materials generated, used, treated, recycled, stored, Released or disposed at, on, in, under or from the Project, in accordance with all applicable Environmental Laws and promptly notify the Administrative Agent of any such material action;

 

(e)           provide the Administrative Agent with written notice of (i) any fact, circumstance, condition, occurrence or Release at, on, under or from the Project that results in material noncompliance with any Environmental Law applicable to the Project or that has resulted or may result in personal injury or material Property damage or an Environmental Claim or otherwise that could reasonably be expected to have a Material Adverse Effect, such notice to be given promptly after the fact, circumstance, condition, occurrence or Release is discovered or such Release or occurrence takes place and (ii) any pending or threatened Environmental Claim against any Borrower Entity or any other Persons constructing, occupying, using, maintaining or conducting operations at the Project that, if adversely determined, could reasonably be expected to have a Material Adverse Effect, such notice to be given promptly after such Environmental Claim is commenced or threatened; all such notices shall describe in reasonable detail the nature of the claim, investigation, condition, incident, or occurrence and what action has been taken and any proposed action or response to be taken with respect thereto;

 

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(f)            provide the Administrative Agent with copies of all material communications with any Governmental Authority relating to any Environmental Law or any Environmental Claim promptly after the giving or receiving of any such communications; and

 

(g)           provide such information concerning any Environmental Claim or Governmental Approval required pursuant to applicable Environmental Law relating to the Project as may be reasonably requested by the Administrative Agent.

 

5.27         Completion; Construction Contracts; Performance Tests.

 

(a)           No Borrower Entity may without the prior approval of the Administrative Agent (after consultation with the Independent Engineer), unless in each case approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor thereof:

 

(1)         enter into any Construction Contract or any material amendment, modification or supplement thereof without the consent of the Administrative Agent (such consent to not be unreasonably withheld);

 

(2)         approve the addition, deletion or substitution of any material subcontractor from the subcontractors listed in or attached to a Construction Contract or enter into, or intend to enter into, any material subcontract with any subcontractor not listed in or attached to such Construction Contract;

 

(3)         approve the addition, deletion or substitution of any material sub-subcontractor from the list of sub-subcontractors listed in or attached to a Construction Contract;

 

(4)         make an election under any Construction Contract with respect to Performance Liquidated Damages;

 

(5)         take any action or fail to take any action which could cause an extension of any guaranteed completion or acceptance date under the Construction Contract or amend, modify, supplement or waive any provision of the Project Schedule relating to the Construction Contract;

 

(6)         accept or confirm that the Project has achieved Substantial Completion or Final Completion in respect of the EPC Contract, or fail to advise any contractor of any defects, deficiencies or discrepancies of which a Borrower Entity has knowledge and which such contractor is required to remedy pursuant to such Construction Contract;

 

(7)         notify the contractor that it accepts a “punchlist” under a Construction Contract, including the Punchlist, for the construction of any part of the Facility;

 

(8)         prior to the Conversion Date, issue, approve or execute any acceptance or completion certificate or otherwise confirm acceptance or completion of the Project or any portion or phase thereof;

 

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(9)         accept or confirm that the Facility or any part thereof has satisfied any of the performance tests set forth in any Construction Contract or met any of the performance guarantees set forth in any Construction Contract; or

 

(10)       reject the Facility or any material portion thereof.

 

Notwithstanding the foregoing, no Borrower Entity may without the prior approval of the Administrative Agent (after consultation with the Independent Engineer), waive, defer or reduce any of the requirements of any acceptance tests or performance guarantees set forth in any Construction Contract.

 

(b)           The Borrower shall provide at least five Business Days’ prior written notice to the Independent Engineer of the scheduled date for the commencement of the acceptance tests pursuant to each Construction Contract.

 

(c)           The Borrower shall provide the Independent Engineer with a copy of the recommended spare parts list provided by any contractor pursuant to any Construction Contract.  The Independent Engineer shall be allowed to review and comment on the list of spare parts that any Borrower Entity intends to purchase pursuant to any Construction Contract.

 

(d)           When available, the Borrower shall provide the Independent Engineer with a copy of each start-up manual or user manual that is part of the specifications of the Facility or portion thereof that is the subject of a Construction Contract.

 

(e)           The Borrower shall not accept Completion of the Project until an Authorized Officer of the Independent Engineer shall have delivered to the Administrative Agent a certificate confirming that Completion has occurred.

 

(f)            EPC Contract Closing  In connection with the entering into of the EPC Contract and the EPC Guaranty, the Borrower shall deliver or cause to be delivered to the Administrative Agent the following documents:

 

(1)         A true and complete copy of the EPC Contract and the EPC Guaranty;

 

(2)         Original counterparts of an opinion of counsel to each of the EPC Contractor and the EPC Guarantor addressed to each Secured Party, each of which opinions shall be in form, scope and substance and given by counsel satisfactory to the Administrative Agent, which legal opinions shall be dated the date of the EPC Contract; and

 

(3)         A certificate of an Authorized Officer of the EPC Contractor and the EPC Guarantor in the form attached hereto as Exhibit H-2, with appropriate insertions, certifying (i) that attached thereto is a true and complete copy of the Charter Documents of such Person, as in effect at all times from the date on which the resolutions referred to in clause (ii) below were adopted to and including the date of such certificate, (ii) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors (or other equivalent body) or evidence of all partnership or limited liability company action, as the case may be, of such Person, authorizing the execution, delivery

 

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and performance of the Transaction Documents to which such Person is or is intended to be a party, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, and (iii) as to the name, incumbency and specimen signature of each officer of such Person executing the Transaction Documents to which such Person is intended to be a party.

 

5.28         ERISA.  Unless previously approved by the board of directors of General Partner in a vote where a majority of the COP Directors voted in favor thereof, no Borrower Entity shall have any Plan, Pension Plan, Multiemployer Plan, collective bargaining agreement or ERISA Affiliate. No Borrower Entity or the Project or any part thereof shall be subject to regulation under ERISA except in connection with ERISA matters permitted under the immediately preceding sentence.

 

5.29         Certain Restrictive Agreements.  No Borrower Entity may enter into or suffer to exist or become effective any restriction or encumbrance of any kind (except for (i) the Financing Documents, (ii) any restriction or encumbrance approved by the Administrative Agent for the refinancing of any of the Loans, and (iii) any restriction or encumbrance in connection with Debt with respect to TPS Loans but solely as provided in by an intercreditor arrangement with the Secured Parties and in accordance with this Agreement) on the ability of a Borrower Entity to (a) amend this Agreement or any other Financing Document, (b) sell any of its Property, (c) create or permit to exist Liens on any property, now or hereafter existing, (d) create, incur, permit to exist any Debt or to pay any Debt owed to any other Borrower Entity, (e) make any Distribution, or (f) make loans, advances or Investments or transfer funds or assets to any other Borrower Entity.

 

5.30         Security Documents.

 

(a)           Each Borrower Entity shall take all actions necessary or requested by the Administrative Agent to maintain each Security Document in full force and effect and enforceable in accordance with its terms and to maintain and preserve the Liens created by the Security Documents and the priority contemplated thereby, including:

 

(1)         making filings and recordations,

 

(2)         executing and delivering additional Security Documents or amending, modifying or supplementing existing Security Documents,

 

(3)         actions necessary or requested to ensure that all the rights, title and interests and other Property of any Subsidiary of the Borrower or any Subsidiary of the General Partner and/or any Phase 1 Addition (other than the Phase 1 Addition (Stratton Ridge)) are included in the Collateral and that the Lien thereon pursuant to the Security Documents has the priority intended by the Security Documents and that each such Subsidiary guarantees the Obligations of the Borrower pursuant to documentation satisfactory to the Administrative Agent, including legal opinions;

 

(4)         making payments of fees and other charges,

 

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(5)         issuing and, if necessary, filing or recording supplemental documentation, including continuation statements,

 

(6)         discharging all claims or other Liens adversely affecting the rights of any Secured Party in any Collateral,

 

(7)         publishing or otherwise delivering notice to third parties,

 

(8)         executing, delivering and recording title documents and

 

(9)         taking all other actions either necessary or otherwise requested by the Administrative Agent to ensure that all Collateral (including any after-acquired Property of any Borrower Entity intended to be covered by any Security Document) is subject to a valid and enforceable first-priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the Secured Parties.

 

In furtherance of the foregoing, (A) each Borrower Entity shall ensure that all Property acquired or otherwise obtained by it intended by the Security Documents to be included in the Collateral shall be Collateral and shall have the priority contemplated by the Security Documents promptly upon the acquisition thereof and (B) except as set forth in the immediately following sentence, no Borrower Entity may open or maintain any bank account, deposit account, or securities account without first taking all such actions as may be necessary or otherwise requested by the Administrative Agent to ensure that such account is subject to a valid and enforceable first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the Secured Parties.  Without taking such action, a Borrower Entity may, upon prior written notice to the Administrative Agent, open and maintain bank accounts, deposit accounts, or securities accounts solely for: (1) TPS Accounts opened and maintained in accordance with Section 2.15 for the financing with the TPS Secured Parties, (2) capacity reservation fees, (3) proceeds of capital calls solely for any Phase 1 Addition, (4) withdrawals, transfers and/or remittances of payments from the Payment Account in accordance with the Account Agreement to be applied in accordance with the related transfers into the Payment Account pursuant to the Account Agreement and (5) the proceeds of the foregoing set forth in clauses (1)-(4) of this sentence.

 

(b)           Each Borrower Entity shall take all action necessary to cause each Material Additional Project Document intended to be included in the Collateral to be Collateral (whether by amendment to any Security Document, execution of a new Security Document or otherwise) in favor of the Collateral Agent, and shall deliver or cause to be delivered to the Administrative Agent such legal opinions, certificates or other documents with respect to each Material Additional Project Document as the Administrative Agent may reasonably request.  Each Borrower Entity shall cause each party to a Material Additional Project Document (other than the Borrower Entities and ConocoPhillips and its Affiliates) to execute and deliver a Consent Agreement with respect to each Material Additional Project Document and such legal opinions relating to such Material Additional Project Document as the Administrative Agent may reasonably request.

 

(c)           At such time as the Administrative Agent may reasonably request in writing, the Borrower shall furnish, or cause to be furnished, to the Collateral Agent and the

 

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Administrative Agent, an opinion or opinions of duly qualified legal counsel (which opinions may be of in-house counsel) either stating that, in the opinion of such counsel, as of the date of such opinion(s):

 

(1)         (A) such actions have been taken that are necessary to maintain each Security Document in full force and effect and enforceable in accordance with its terms and to maintain and preserve the Liens created by the Security Documents and the priority thereof, including any after-acquired Property intended to be covered by any Security Document, and the priority thereof and (B) a description of such actions or

 

(2)         no action is necessary to maintain each Security Document in full force and effect and enforceable in accordance with its terms and to maintain and preserve the Liens created by the Security Documents and the priority thereof, including any after-acquired Property intended to be covered by any Security Document, and the priority thereof.

 

Such opinion(s) shall also describe the taking of any other action that will, in the opinion of such counsel, be necessary to maintain each Security Document in full force and effect and enforceable in accordance with its terms and to maintain and preserve the Liens created by the Security Documents and the priority thereof, including any after-acquired Property intended to be covered by any Security Document, and the priority thereof after the date of such opinion.

 

5.31         Prepayment of Debt.  Except for prepayments required or permitted to be made pursuant to ARTICLE 6, the Borrower shall not make, or permit to be made on its behalf, any prepayment of any of the Loans.  The Borrower shall not reduce all or any portion of the Commitment of any Lender prior to the Conversion Date.

 

5.32         Transfers of Capital Stock in the Borrower and its Subsidiaries.  No Borrower Entity may transfer (including directly or indirectly by sale, assignment, gift, pledge, hypothecation, mortgage, deed of trust, disposal, or exchange), authorize or issue any Capital Stock of the Borrower (or any Subsidiary thereof or Subsidiary of the General Partner) or consent or permit any of the foregoing except (a) in the case of the Capital Stock of the Borrower in accordance with the Stockholders Agreement and the Partnership Agreement and (b) in the case of any other Capital Stock in accordance with the Financing Documents, but (c) in no case in violation of Applicable Laws, including if applicable the Securities Act and the Exchange Act.

 

5.33         Payment of Project Costs with Project Revenues.  Except as otherwise specified in the Account Agreement or this Agreement, any Project Revenues received on or prior to the Project Completion Date shall be deposited into the Accounts and applied, in accordance with the Account Agreement, to the payment of Project Costs, subject to the conditions precedent set forth in either Section 3.1 or 3.2, as applicable, which shall be satisfied both immediately prior to the application of such Project Revenues and also after giving effect thereto on and as of such Disbursement Date, as though made on and as of such disbursement date, unless such conditions are waived by the Administrative Agent.

 

5.34         Investment Company Act; PUHCA.  No Borrower Entity may take or permit to be taken any action that will cause any of them to be, or be subject to regulation as:

 

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(a)           an “investment company,” or company “controlled” by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended, or

 

(b)           a “holding company,” or an “affiliate” of a “holding company,” or a “subsidiary company” of a “holding company,” or a “public utility company” or an “associate company” of any of the foregoing, within the meaning of the Public Utility Holding Company Act of 1935, as amended or

 

(c)           subject to regulation under any Applicable Law relating to public utilities, gas utilities, public service corporations or similar entities.

 

5.35         Further Assurances.  Each Borrower Entity shall promptly and duly execute and deliver to the Administrative Agent such documents and assurances and take any further action as the Administrative Agent may from time to time reasonably request in order to carry out the intents and purposes of the Financing Documents and to establish, preserve, maintain, and perfect the rights and remedies (as well as the priority thereof) created or intended to be created in favor of the Secured Parties pursuant to the Security Documents.

 

ARTICLE 6.           PAYMENT PROVISIONS; FEES.

 

6.1           Repayment of Principal; Interest; Reduction of Commitment.

 

(a)           The Borrower shall repay the aggregate principal amount of the Tranche A Construction Loans outstanding, and such Tranche A Construction Loans shall mature on, the Tranche A Construction Loan Maturity Date (except to the extent that such Construction Loans are converted into Tranche A Term Loans in accordance with Section 2.2 hereof).  The Borrower shall repay the aggregate principal amount of the Tranche B Construction Loans outstanding, and such Tranche B Construction Loans shall mature on, the Tranche B Construction Loan Maturity Date (except to the extent that such Construction Loans are converted into Tranche B Term Loans in accordance with Section 2.2 hereof).  The Construction Loan Commitments shall automatically be reduced to zero at the close of business on the Term Date.

 

(b)           The Borrower agrees to pay interest in respect of the Tranche A Term Loans in arrears on the Principal Payment Dates at a rate per annum which is equal to the Tranche A Rate in accordance with 6.1(c).

 

(c)           The Borrower shall repay the aggregate principal amount of the Tranche A Term Loans outstanding on the Conversion Date (the “Principal Sum”) and interest thereon on the Payment Dates (each such date, a “Principal Payment Date”) commencing with the first such date occurring after the Conversion Date and continuing to and including the Tranche A Term Loan Maturity Date in the applicable amounts set forth in the notice delivered to the Borrower by the Administrative Agent on the Conversion Date.  Such amounts shall be in equal monthly installments of principal and interest and shall fully amortize the Principal Sum over the period set forth in the immediately preceding sentence while paying all outstanding accrued interest on a monthly basis in arrears as calculated by the Administrative Agent as of the Conversion Date, which calculations and resulting amounts set forth in the notice shall be conclusive absent

 

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manifest error.  All amounts paid by the Borrower pursuant to Section 6.3(c) in respect of Tranche A Loans shall be applied to reduce the accrued interest on the principal amount prepaid, and then to reduce the Principal Sum under this Section 6.1(c), and, upon such reduction of the Principal Sum, the monthly instalments referred to in the immediately preceding sentence shall be recalculated prior to, and such recalculated amount shall be in effect as of, the next Principal Payment Date.

 

(d)           The Borrower agrees to pay interest in respect of the Tranche B Term Loans in arrears on the amount unpaid and owed Tranche B Obligations at a rate per annum which is equal to the Tranche B Rate. The Borrower shall pay the Lenders and other Persons to whom Tranche B Obligations are unpaid and owed the entire amount in the COP Supplemental Debt Payment Account (ratably if sufficient funds are not available in such Account) on each Monthly Transfer Date in accordance with the Account Agreement until no Tranche B Obligations remain unpaid and owed.

 

6.2           Voluntary Prepayments

 

(a)           The Borrower may not voluntarily prepay any Loans except in accordance with this section.

 

(b)           The Borrower may prepay the Tranche A Loans, in whole or in part at any time and from time to time after the initial Disbursement Date on the following terms and conditions: (i) each of the Lenders consent to such prepayment, which consent may be given or withheld in each Lenders’ sole discretion, (ii) the Borrower shall give the Administrative Agent at the Notice Office at least five Business Days’ prior written notice of its intent to prepay the Tranche A Loans and the aggregate principal amount of the prepayment; (iii) such prepayment shall be (A) in an aggregate principal amount of the lesser of $1,000,000 and the aggregate outstanding amount of the Loans and (B) if more than $1,000,000, in integral multiples of $1,000,000 in excess thereof.  The amount paid by the Borrower pursuant to this Section 6.2(b) shall be applied to reduce the accrued interest on the principal amount prepaid, and then to the remaining Scheduled Principal Payments in inverse chronological order of their due dates.

 

(c)           The Borrower may prepay the Tranche B Loans, in whole or in part at any time and from time to time after the initial Disbursement Date of the Tranche B Loans on the following terms and conditions: (i) the Borrower shall give the Administrative Agent at the Notice Office at least five Business Days’ prior written notice of its intent to prepay the Tranche B Loans and the aggregate principal amount of the prepayment; (ii) such prepayment shall be (A) in an aggregate principal amount of the lesser of $1,000,000 and the aggregate outstanding amount of the Loans and (B) if more than $1,000,000, in integral multiples of $1,000,000 in excess thereof.  The amount paid by the Borrower pursuant to this Section 6.2(c) shall be applied to reduce the accrued interest on the principal amount prepaid, and then to the other unpaid and owed Tranche B Obligations.

 

6.3           Mandatory Prepayments. The Borrower shall make mandatory prepayments of the Loans as follows:

 

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(a)           Loss Proceeds, Project Document Claims and Performance Liquidated Damages.  The Borrower shall prepay the outstanding Loans to the extent required pursuant to Section 5.11.

 

(b)           Change of Control.  Upon the occurrence of a Change of Control, each Lender shall immediately have the option of having its Loans prepaid, in all or in part, by delivering a notice of such prepayment to the Borrower within 30 days after delivery of the notice pursuant to Section 5.1(d)(ii) to the Administrative Agent. If a Lender so elects, the Borrower shall immediately prepay the outstanding amount of such Loans held by such Lender and set forth in such notice at such time at a price equal to *** of the outstanding principal amount of such Lender’s Loans, plus accrued interest thereon and shall pay any other Obligations due and payable in respect of such Loans.

 

(c)           Excess Construction Loan.  The Borrower shall prepay the outstanding Tranche A Loans and Tranche B Loans to the extent of the transfers to the COP Redemption Account from the Construction Account for such purpose made pursuant to Section 4.1(e) of the Account Agreement.

 

(d)           Application.  All amounts paid by the Borrower pursuant to this Section 6.3 (except for Section 6.3(c) in respect of Tranche A Loans) shall be applied to reduce the accrued interest on the principal amount prepaid, and then to the remaining Scheduled Principal Payments in inverse chronological order of their due dates.  All amounts paid by the Borrower pursuant to Section 6.3(c) in respect of Tranche A Loans shall be applied pursuant to the last sentence of Section 6.1(c).

 

6.4           Term Loan Maturity Date.  The outstanding principal amount of any Tranche A Term Loans shall be repaid in full on the Tranche A Term Loan Maturity Date.  The unpaid and owed amount of any Tranche B Term Loans shall be repaid in full on the Tranche B Term Loan Maturity Date.

 

6.5           Method and Place of Payment.

 

(a)           Except as set forth in the following sentence or as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 10:00 a.m. (New York City time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office pursuant to the instructions as the Administrative Agent shall designate to the Borrower in writing.  Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension.

 

(b)           All computations of interest hereunder shall be made on the basis of a 360-day year and the actual number of days elapsed.

 

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6.6           Application of Payments; Sharing.

 

(a)           Subject to the provisions of this Section 6.6, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations of the Borrower hereunder, it shall promptly distribute such payment to the Lenders pro rata based upon their respective shares, if any, of such Obligations.

 

(b)           Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Transaction Documents, or otherwise), which, in any such case, is in excess of its ratable share of payments on account of the Obligations obtained by all Lenders, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the Borrower to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided, however, that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

 

ARTICLE 7.           EVENTS OF DEFAULT AND REMEDIES.

 

7.1           Events of Default.  The occurrence of any of the following events or circumstances shall constitute an “Event of Default” hereunder:

 

(a)           The Borrower shall fail to pay any principal of or interest on any Loan when the same becomes due and payable, whether by scheduled maturity, required prepayment, redemption, acceleration or otherwise, within two Business Days after the date such payment is due;

 

(b)           With respect to the TPS Loans or other Debt of a Borrower Entity outstanding in excess of $*** (other than Debt incurred pursuant to the Credit Agreement) when aggregated with all Debt under the same facility of the other Borrower Entities.

 

(1)         a default in the payment obligations thereunder occurs after satisfaction of any applicable notice requirements and expiration of any applicable cure periods for such default in the financing documents for such Debt;

 

(2)         such Debt shall be required to be prepaid, redeemed or repurchased prior to its stated maturity after satisfaction of any applicable notice requirements and expiration of any applicable cure periods for such requirement to prepay, redeem or repurchase in the financing documents for such Debt;

 

(3)         such Debt shall be automatically due and payable prior to its stated maturity or be declared to be due and payable, or, in the case of any Hedging Agreement, the payments thereunder are or are permitted to be liquidated, other than by regularly scheduled required repayment, prior to the stated maturity thereof or

 

(4)         (A) any event occurs that permits the holders (or their representatives) of such Debt to cause such Debt to be prepaid, redeemed or repurchased or to be declared due and payable or, in the case of any Hedging Agreement, permits the payments

 

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thereunder to be liquidated other than by regularly scheduled required repayment and (B) all notice requirements shall have been satisfied, and all cure periods shall have expired, applicable to the right of such holders (or their representatives) to cause such prepayment, redemption or repurchase or obligation to pay to occur or applicable to the liquidation of payments to occur;

 

(c)           The Borrower shall fail to pay any unscheduled cost, charge or other amount due, which it is not disputing in good faith, under any of the Financing Documents within 10 days after the date the Borrower receives notice that such payment is due;

 

(d)           Any representation or warranty or certification made (or deemed made) by or on behalf of the Borrower, any of its Affiliates or any Equity Pledgor or any MS Director in the Credit Agreement or in any other Financing Document to which it is a party, or any representation, warranty or statement in any certificate, notice, financial statement or other document furnished is false or misleading in any material respect when made or deemed made, the effect of which could reasonably be expected to have a Material Adverse Effect;

 

(e)           Any Borrower Entity or any Equity Pledgor breaches any of its representations, warranties or fails to perform or comply with any of its covenants or other obligations under the COP TUA, the Omnibus Agreement, the Stock Purchase Agreement, the Stockholders Agreement, or any Project Document (other than a Non-COP TUA) and such breach or failure could reasonably to be expected to have a Material Adverse Effect;

 

(f)            The Borrower, the General Partner or any Equity Pledgor shall fail to perform or comply with any term, covenant or provision under Section 5.4(c), 5.5(b), 5.12, 5.13, 5.14, 5.15, 5.16, 5.19(c), 5.19(e), 5.20(a), 5.20(b), 5.21(e), 5.23(e), 5.28, 5.29 or 5.32;

 

(g)           Except as expressly set forth in Section 7.1(h), the Borrower or any of its Affiliates or any Equity Pledgor shall fail to perform or comply with any term, covenant or provision under the Credit Agreement (other than those referred to in clause (f)) or any other Financing Document and such failure shall continue uncured for 30 or more days from the date such Person obtains actual knowledge of such failure;

 

(h)           During the continuation of a MS Directors Cure Period, the failure of the Borrower or any of its Affiliates to perform or comply with any term, covenant or provision under Section 5.1(h), 5.2(c), 5.2(g), 5.4(a), 5.4(b), 5.6 or 5.21(b) shall not constitute an Event of Default unless such failure shall continue uncured for 30 or more days from the date the General Partner receives written notice of such failure from the Administrative Agent; provided that the Administrative Agent may not give such notice until 30 days after delivering a previous notice to the Borrower and the General Partner of the failure to perform or comply;

 

(i)            Any Borrower Entity, or any Affiliate thereof, or FLNGI or any Equity Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative Agent determines in its reasonable discretion that such failure could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby) shall (i) apply for or consent to the appointment of, or the taking of possession by, a trustee, receiver, custodian, liquidator or the like of itself or all or a substantial part of its Property, (ii) admit in writing its

 

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inability or be generally unable to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code or any other Debtor Relief Law, (v) file a petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to controvert in a timely and appropriate manner, acquiesce in writing to, or file an answer admitting the material allegations of any petition filed against it in an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law or (vii) take any action for the purpose of effecting any of the foregoing;

 

(j)            A proceeding or case shall be commenced without the application or consent of any Borrower Entity, Equity Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative Agent determines in its reasonable discretion that such failure could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby) or any of their Affiliates, or FLNGI or any Equity Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative Agent determines in its reasonable discretion that such failure could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby) in any court of competent jurisdiction, seeking with respect to such Person (i) its liquidation, reorganization, dissolution or winding-up or the composition or readjustment of its debts or similar action or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person or all or a substantial part of its Property under any Debtor Relief Law and such proceeding or case shall continue undismissed, or any order, judgment or decree approving any of the foregoing shall be entered and continue unstayed and in effect for a period of 60 or more consecutive days from and including the date of commencement of such proceeding or case, or any order for relief against such Person shall be entered in any involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law;

 

(k)           Any Project Participant (other than any Borrower Entity, any Affiliate of any Borrower Entity, FLNGI, a Non-COP Shipper, EPC Contractor, EPC Guarantor, and while such entity has no liabilities, duties or obligations under any Transaction Documents, for the Project (or its financing) or any Phase 1 Addition (or financing therefor), any Non Smith LP and Expansion) shall (i) apply for or consent to the appointment of, or the taking of possession by, a trustee, receiver, custodian, liquidator or the like of itself or all or a substantial part of its Property, (ii) admit in writing its inability or be generally unable to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code or any other Debtor Relief Law, (v) file a petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to controvert in a timely and appropriate manner, acquiesce in writing to, or file an answer admitting the material allegations of any petition filed against it in an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law or (vii) take any action for the purpose of effecting any of the foregoing, and the effect of any or all of the foregoing (i) – (vii) could reasonably be expected to have a Material Adverse Effect;

 

(l)            A proceeding or case shall be commenced without the application or consent of any Project Participant (other than any Borrower Entity, any Affiliate of any Borrower Entity, FLNGI, any Equity Pledgor, a Non-COP Shipper, EPC Contractor, EPC Guarantor, and while such entity has no liabilities, duties or obligations under any Transaction Documents, for the Project (or its financing) or any Phase 1 Addition (or financing therefor), any

 

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Non Smith LP and Expansion) in any court of competent jurisdiction, seeking with respect to such Person (i) its liquidation, reorganization, dissolution or winding-up or the composition or readjustment of its debts or similar action or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person or all or a substantial part of its Property under any Debtor Relief Law and such proceeding or case shall continue undismissed, or any order, judgment or decree approving any of the foregoing shall be entered and continue unstayed and in effect for a period of 60 or more consecutive days from and including the date of commencement of such proceeding or case, or any order for relief against such Person shall be entered in any involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law, and the effect of any or all of the foregoing (i) – (ii) could reasonably be expected to have a Material Adverse Effect;

 

(m)          Any Security Document shall cease to be in full force and effect in any material respect (other than by virtue of the scheduled expiration in the ordinary course of such Security Document in accordance with its terms) or any Lien purported to be granted thereby shall cease to be a valid and perfected Lien over the Collateral purported to be covered thereby in favor of the Collateral Agent for the benefit of the Secured Parties on the Collateral described therein with the priority purported to be created thereby and, in the case of any such cessation caused by the action or inaction of the Borrower, such cessation shall continue for a period of at least 10 days;

 

(n)           One or more final and non-appealable judgments or awards by a Governmental Authority or alternative dispute resolution authority for the payment of money in excess of $***, which excess is not fully covered by insurance, shall be entered against any Borrower Entity or Equity Pledgor (if, with respect to any Equity Pledgor, the Administrative Agent determines in its reasonable discretion that such judgment or award could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby) (when aggregated with all similar judgments and awards against other Borrower Entities and Equity Pledgors (if, with respect to any Equity Pledgor, the Administrative Agent determines in its reasonable discretion that such judgment or award could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby)) and shall remain undischarged (or provision satisfactory to the Administrative Agent shall not be made for such discharge) or unstayed for a period of 30 or more consecutive days from the date of entry thereof;

 

(o)           Any Borrower Entity or Equity Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative Agent determines in its reasonable discretion that such failure could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby) shall be terminated, dissolved or liquidated (as a matter of law or otherwise), or a proceeding shall be commenced by any Person seeking the termination, dissolution or liquidation of a Borrower Entity or an Equity Pledgor (other than a Non-Smith Equity Pledgor unless the Administrative Agent determines in its reasonable discretion that such failure could have a material adverse effect on the validity or enforceability of the Security Documents or the priority contemplated thereby) and, if such proceedings were commenced by any Person other than the Person for whom termination, dissolution or liquidation is sought either (i) such proceedings shall not be dismissed without any such termination, dissolution, liquidation or other Material Adverse Effect within 30 days from the date of commencement

 

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thereof or (ii) the Administrative Agent shall reasonably determine that such proceedings and the effect thereof could reasonably be expected to have a Material Adverse Effect;

 

(p)           (i) Any Acceptable Credit Support or Reserve Account Support Instrument ceases to be valid and binding and in full force and effect, (ii) any party to any Acceptable Credit Support or Reserve Account Support Instrument fails to make any required payments thereunder within three Business Days of the date when due or (iii) any other guarantor under any Project Document fails to make any required payments pursuant thereto within three Business Days of the date when due;

 

(q)           Sufficient funds from financing under Sections 2.15(a)(1), 2.15(a)(2) and/or 2.15(a)(3) shall not be available to pay or reimburse Supplemental Costs when such Supplemental Costs are required to be paid or reimbursed;

 

(r)            The requirements of Section 2.15(d), Section 2.16(b) or Section 2.16(c) are not satisfied; provided however, in the case of Section 2.16(b), such failure shall not be an Event of Default unless it is the result of the acts or omissions of a Borrower Entity;

 

(s)           The EPC Contractor fails to perform or comply with its obligations pursuant to the EPC Contract and such failure is not cured within *** days and could reasonably be expected to have a Material Adverse Effect; provided however, if an EPC Contractor Event occurs then the Board and the Administrative Agent will work together to mutually select a new EPC Contractor; and if a new EPC Contractor is not mutually selected by the Board and the Administrative Agent within *** days from the occurrence of an EPC Contractor Event, then the Administrative Agent will have the unilateral right to select the EPC Contractor (and the Borrower will not be in default under this Section 7.1(s)).

 

(t)            (i) Any Necessary Approval shall fail to be obtained, renewed, maintained or complied with, (ii) any Necessary Approval is revoked, terminated, suspended, withdrawn, withheld or ceases to be in full force and effect, or (iii) any proceeding, case or alternative dispute resolution with respect to any action relating to a Necessary Approval set forth in the immediately preceding clause (ii) is commenced, is not terminated within 30 days of such commencement; provided, however, that no such action shall be a Event of Default if the Borrower diligently pursues in good faith and in all material respects (x) obtains an additional Necessary Approval in substitution therefor or replacement thereof or (y) causes such Necessary Approval to be reissued, reinstated or otherwise to become in full force and effect; provided further, however, that the cure period pursuant to the immediately preceding proviso shall cease when the Administrative Agent determines (after consultation with the Borrower) that a cure pursuant thereto cannot reasonably be achieved;

 

(u)           Any Borrower Entity, or any Affiliate thereof, FLNGI, any Equity Pledgor or any other Project Participant (other than a Non-COP Shipper, EPC Contractor, EPC Guarantor, ConocoPhillips and any Non Smith LP) fails to perform or comply with any term, covenant or provision forth in under the Project Documents to which it is a party after any applicable cure periods contained therein that in the judgment of the Administrative Agent could reasonably be expected to have a Material Adverse Effect; provided that the Borrower may cure such Event of Default by causing a replacement agreement to be entered into in accordance with

 

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this Agreement and the necessary Consent Agreement, if any, related thereto promptly after such determination but no later than 30 days after such determination;

 

(v)           All or a material part of the Project is destroyed or suffers a material actual loss or material damage and an Approved Restoration Plan does not exist in respect thereof when required in accordance with Section 5.11;

 

(w)          (i) Any material Project Document (other than any Non-COP TUA and the EPC Contract), or any material provision of any such Project Document, ceases to be valid and binding and in full force and effect in any material respect (other than by virtue of the scheduled expiration in the ordinary course of such Project Document in accordance with its terms), (ii) any party thereto (not a party hereto) denies that it has any liability or obligation under any material Project Document (other than any Non-COP TUA and the EPC Contract) and such party ceases performance thereunder, (iii) any party to a material Project Document (other than the Borrower, the General Partner, Non-COP Shipper, EPC Contractor, EPC Guarantor, and ConocoPhillips) is in default under any material Project Document (other than any Non-COP TUA and the EPC Contract) (subject to satisfaction of any applicable notice and cure periods), or (iv) any material Project Document (other than any Non-COP TUA and the EPC Contract), or any material provision of any such Project Document, shall be declared to be null and void, or the validity or enforceability thereof shall be contested by any party thereto (not a party hereto), third party or any Governmental Authority; and in each case of clauses (i) - (iv) such cessation, default, declaration or contest has resulted or could reasonably be expected to result in a Material Adverse Effect and such circumstance remains uncured for a period of at least 30 days; it being understood that the Borrower may cure such circumstance by causing a replacement agreement to be entered into in accordance with this Agreement and any necessary Consent Agreement related thereto prior to the expiration of such 30 day period;

 

(x)            Completion shall not have occurred by the Date Certain; provided however, the Date Certain shall be extended up to *** if the Borrower Entities and the Construction Contractors on Phase 1 are working in good faith to achieve Completion;

 

(y)           A Change of Control shall have occurred; and

 

(z)            An Expropriation Event of all or a material part of the Collateral shall have occurred unless, with respect to the Affected Property, the Independent Engineer determines pursuant to Section 5.11(d)(3) within 60 days after the Expropriation Event that such Affected Property can reasonably be expected to be Restored pursuant to Section 5.11(a).

 

7.2           Acceleration.

 

(a)           If an Event of Default specified in clause (i) or (j) of Section 7.1 shall occur with respect to the Borrower, all Commitments shall automatically and immediately terminate and all Loans (with accrued interest thereon) and all other amounts owing under the Financing Documents shall immediately become due and payable.

 

(b)           If any Event of Default (other than an Event of Default referred to in Section 7.2(a)) shall occur, then the Administrative Agent (acting at the direction of the Required Lenders) may by notice to the Borrower either (1) declare the Commitments to be terminated,

 

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whereupon all Commitments shall immediately terminate and/or (2) declare the Loans, all accrued and unpaid interest thereon and all other amounts owing under the Financing Documents to be due and payable, whereupon the same shall become immediately due and payable.

 

(c)           Except for the notice delivered to the Borrower pursuant to Section 7.2(b) by the Administrative Agent, presentment, demand, protest and all other notices and other similar formalities are hereby expressly waived by each Borrower Entity.

 

7.3           Other Remedies.  Upon the occurrence and during the continuation of an Event of Default:

 

(a)           The Agents and Lenders may exercise any or all rights and remedies at law and in equity (in any combination or order that any of the foregoing may elect), including any and all rights and remedies available under any of the Financing Documents.

 

(b)           With the prior written consent of the Required Lenders, which consent may be given or withheld in the Required Lenders’ sole discretion, the EPC Contractor, any subcontractor or any other Person may submit an invoice for amounts owed thereto in connection with the Project or the transactions contemplated by the Transaction Documents to the Administrative Agent, and the Lenders may, in their sole discretion, make payments directly to the EPC Contractor, any subcontractor or any other Person.  The Administrative Agent shall give the Borrower prior written notice of payments to be made by the Lenders pursuant to this clause (b).  All sums advanced and disbursed pursuant to this clause shall be deemed to be Loans disbursed to the Borrower pursuant to the Financing Documents.

 

(c)           The Borrower hereby irrevocably appoints the Collateral Agent (acting on the instruction of the Required Lenders) as the agent and attorney-in-fact of the Borrower, with full power of substitution, and in the name, place and stead of the Borrower, pursuant to which the Collateral Agent may, if it so elects, at any time after the Loans have been declared immediately due and payable pursuant to this ARTICLE 7: (1) make such changes in the Plans and Specifications, employ such engineers and contractors as may be required, and advance and incur such expenses and obligations as the Required Lenders deem necessary, including any proceeds of the Loans, for the design, construction, timely and proper completion, start - up, operation, maintenance and preservation of the Project, and/or performance and compliance with any of a Borrower Entity’s covenants hereunder or under any other Transaction Document, (2) disburse and directly apply the proceeds of any Loan to the satisfaction of any of a Borrower Entity’s Debts and other obligations hereunder or under any other Financing Document, (3) hold, use, disburse and apply the Loans for payment of any Project Costs, and/or the payment or performance of any Debt or obligation of a Borrower Entity under any Project Document, (4) disburse any portion of any Loan, from time to time, to Persons other than the Borrower for the purposes specified herein or in any other Transaction Document, (5) advance and incur such expenses as the Required Lenders deem reasonably necessary for the completion of construction of the Facility and the preservation of the Project, (6) design, construct, complete, start-up, operate, maintain and preserve the Project and/or perform and comply with any of a Borrower Entity’s covenants hereunder or under any other Transaction Document, including (A) obtaining or renewing any Necessary Approvals in the name of a Borrower Entity and (B) executing all applications and certificates in the name of a Borrower Entity relating to the foregoing provisions

 

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of this clause (6), (7) endorse the name of a Borrower Entity on any checks, drafts or instruments representing proceeds of any insurance policies or hedging agreements, or other checks, drafts or instruments payable to a Borrower Entity with respect to the Project or any Transaction Document, (8) do every act or omit to do any act with respect to the Transaction Documents and the design, construction, timely and proper completion, start-up, operation, maintenance, and preservation of the Project that any Borrower Entity may or is required to do or omit doing, and (9) prosecute or defend any action, claim or proceedings, including any before a Governmental Authority or an alternative dispute resolution authority, relating or incident to the Project or any Transaction Document, and each Borrower Entity hereby subrogates any and all of its rights relating to such actions, claims and proceedings to the Collateral Agent effective immediately after the Loans have been declared immediately due and payable pursuant to this ARTICLE 7.  The appointments as agent and attorney-in-fact granted hereby each are coupled with an interest and are irrevocable.  The Collateral Agent shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action, it shall have no liability to any Borrower Entity to continue the same, for the sufficiency or adequacy thereof, or for the results thereof.  At the request of the Collateral Agent, any Borrower Entity shall ratify all actions taken by the Collateral Agent hereunder.

 

(d)           Any funds of any Lender or the Agents (including the proceeds of any Loans) used for any purpose referred to in this Section 7.3, whether or not in excess (without obligating any Lender to fund any Loans in excess of its Construction Loan Commitment) of the relevant Commitments shall (i) be governed hereby, (ii) constitute a part of the Obligations of the Borrower secured by the Security Documents, (iii) bear interest at the Default Rate, and (iv) be payable upon demand by such Lender or the Agent, as applicable.

 

7.4           No Default or Event of Default.  Notwithstanding anything in Section 7.1 to the contrary, the failure of any Borrower Entity in performance or compliance with any term, covenant or provision under any Financing Document shall not constitute a Default or an Event of Default if such failure is the reasonably foreseeable result of:

 

(a)           the COP Directors’ failure to approve or consent to any Board Action where:

 

(1)         such failure to approve or consent to such Board Action could reasonably be foreseen to result in a specific, identified risk of Default or Event of Default under any Financing Document, and

 

(2)         such risk is expressly noted in the Board minutes (such minutes to be provided to the Board and certified by the secretary of the General Partner within 45 days of such meeting), with specific reference to the certain Default or Event of Default and with a description of the connection between the Board Action and the foreseen risk of Default or Event of Default , and

 

(3)         the COP Directors have the right to vote on the matter under the Stockholders Agreement, and

 

(4)         the MS Directors voted to approve or consent to the Board Action, or

 

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(b)           any Board Action approved or consented to by a majority of the COP Directors where:

 

(1)         the good faith implementation of such Board Action could reasonably be foreseen to result in a specific, identified risk of Default or Event of Default under any Financing Document, and

 

(2)         such risk is expressly noted in the Board resolution with specific reference to the certain Default or Event of Default, or

 

(c)           any action or inaction under the exclusive control of the COP Directors under the Stockholders Agreement, but expressly excluding ConocoPhillips’ rights under Section 3(d) of the Stockholders Agreement and actions and inactions by any COP Designated Employees, or

 

(d)           any uncured and material breach by ConocoPhillips or its Affiliates under a Project Document, where the Borrower Entities and their Affiliates agents and other representatives (other than ConocoPhillips and its Affiliates and representatives) shall have performed all of their obligations to date in respect of such Project Document; provided however that (i) any dispute as to whether a “material breach” has occurred will be as finally determined under the applicable Project Document dispute resolution provision and (ii) no Secured Party shall be entitled to declare a Default or Event of Default due to the circumstances set out in this Section 7.4(d) until such time as a determination that no “material breach” has occurred has become final and non-appealable.

 

7.5           Administrative Agent Rights.  Notwithstanding Section 7.4, the failure of any Borrower Entity in performance or compliance with any term, covenant or provision under any Financing Document shall still constitute a Default or an Event of Default if the Administrative Agent determines in its reasonable discretion that such failure could have a material adverse effect on the validity of the Lien of the Security Documents or the priority contemplated thereby.

 

ARTICLE 8.           THE AGENTS.

 

8.1           Appointment and Authorization.

 

(a)           Each Lender hereby irrevocably (subject to Section 8.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Financing Document to which it is a party and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any such other Financing Document, together with such powers as are reasonably incidental thereto.

 

(b)           Each Lender hereby irrevocably (subject to Section 8.9) appoints, designates and authorizes the Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Financing Document to which it is a party and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this

 

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Agreement or any such other Financing Document, together with such powers as are reasonably incidental thereto.

 

(c)           Each Lender hereby irrevocably (subject to Section 8.4 of the Account Agreement and Section 8.9 hereof) consents to the appointment by the Collateral Agent of The Bank of New York Trust Company, N.A., as the Depositary Agent under the Account Agreement, and hereby authorizes such Agent to take such action on its behalf under the provisions of the Account Agreement and each other Financing Document to which it is a party and to exercise such powers and perform such duties as are expressly delegated to it by the terms thereof, together with such powers as are reasonably incidental thereto.

 

(d)           Each of the Lenders authorizes, respectively, each Agent to execute, deliver and perform each of the Financing Documents to which such Agent is or is intended to be a party and each Lender agrees to be bound by all of the agreements of such Agent contained in the Financing Documents.

 

(e)           Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Financing Document, none of the Agents shall have any duties or responsibilities except those expressly set forth herein and in the other Financing Documents, nor shall any of the Agents have or be deemed to have any fiduciary relationship with (or any fiduciary duties to) any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Financing Document or otherwise exist against any of the Agents.  Without limiting the generality of the foregoing sentence, the use of the terms “Administrative Agent,” “Collateral Agent,” and “Depositary Agent” in this Agreement with reference to the Administrative Agent, the Collateral Agent or Depositary Agent is not intended to connote any fiduciary or other implied (or express) duties or obligations arising under agency doctrine of any Applicable Law.  Instead, such terms are used merely as a matter of market custom, and are intended to create or reflect only an arm’s-length relationship between independent contracting parties.

 

8.2           Delegation of Duties.  Any of the Agents may execute any of its duties under this Agreement or any other Financing Document by or through agents, officers, managers, members, partners, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  None of the Agents shall be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

 

8.3           Liability of the Agents.  NONE OF THE AGENTS OR ANY AGENT-RELATED PERSONS SHALL (A) BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY OF THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (EXCEPT FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OR (B) BE RESPONSIBLE IN ANY MANNER TO ANY OF THE SECURED PARTIES OR ANY OTHER PERSON FOR ANY RECITAL, STATEMENT, REPRESENTATION OR WARRANTY MADE BY THE BORROWER OR ANY AFFILIATE OF THE BORROWER, OR ANY OFFICER, DIRECTOR, MANAGER, OWNER AND/OR HOLDER OF CAPITAL STOCK, TRUSTEE,

 

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BENEFICIARY, EMPLOYEE, COUNSEL, AGENT, OR ATTORNEY-IN-FACT THEREOF, CONTAINED IN THIS AGREEMENT OR IN ANY OTHER TRANSACTION DOCUMENT, OR IN ANY CERTIFICATE, REPORT, STATEMENT OR OTHER DOCUMENT REFERRED TO OR PROVIDED FOR IN, OR RECEIVED BY ANY AGENT OR AGENT-RELATED PERSON UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR FOR THE VALUE OF OR TITLE TO ANY COLLATERAL, OR THE VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY OR SUFFICIENCY OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR FOR ANY FAILURE OF THE BORROWER OR ANY OTHER PARTY TO ANY TRANSACTION DOCUMENT TO PERFORM ITS OBLIGATIONS HEREUNDER OR THEREUNDER OR FOR ANY OTHER INDEMNIFIED LIABILITY.  NONE OF THE AGENTS OR ANY AGENT-RELATED PERSON SHALL BE UNDER ANY OBLIGATION TO ANY SECURED PARTY TO ASCERTAIN OR TO INQUIRE AS TO THE OBSERVANCE OR PERFORMANCE OF ANY OF THE AGREEMENTS CONTAINED IN, OR CONDITIONS OF, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR TO INSPECT THE PROPERTY, BOOKS OR RECORDS OF THE BORROWER OR ANY AFFILIATE OF THE BORROWER.  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH AGENT SHALL NOT BE LIABLE FOR THE NEGLIGENCE OF ITSELF AND OTHERS.

 

8.4           Reliance by the Agents.  Each of the Agents (and each Agent-Related Person) shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement, webpage, email or other document, conversation or communication believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and, if such Agent so determines in its sole discretion, upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by any such Agent.  Each of the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document (a) if such action would, in the opinion of such Agent (after consultation with counsel), be contrary to Applicable Law or the terms of any Financing Document, (b) if such action is not specifically provided for in the Financing Documents to which such Agent is a party, and it shall not have received such advice or concurrence of the Required Lenders as it deems appropriate, (c) if in connection with the taking of any such action that would constitute the making of a payment due under any Project Document pursuant to the terms of any Consent Agreement, it shall not first have received from any or all of the other Secured Parties funds equal to the amount of such payment, or (d) unless, if it so requests, such Agent shall first be indemnified to its satisfaction by the Lenders against any and all Losses which may be incurred by it by reason of taking or continuing to take any such action.  Each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Transaction Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Secured Parties.

 

8.5           Notice of Default.

 

(a)           The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the

 

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payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “Notice of Default.”  If the Administrative Agent receives any such notice of the occurrence of a Default or an Event of Default, it shall give notice thereof to the Lenders.  The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with this ARTICLE 8; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

 

(b)           The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Collateral Agent shall have received written notice from the Administrative Agent, a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “Notice of Default”.  If the Collateral Agent receives any such notice of the occurrence of a Default or an Event of Default, it shall give notice thereof to the Administrative Agent and the Lenders.  The Collateral Agent shall take such action with respect to such Default or Event of Default, and such action on behalf of the Secured Parties under any other Financing Document as may be requested by the Required Lenders; provided, however, that unless and until the Collateral Agent has received any such request, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

 

8.6           Credit Decision.  Each Lender acknowledges that none of the Agents or the Agent-Related Persons has made any representation or warranty to it, and that no act by or on behalf of any of the Agents hereafter taken, including any review of the Project or of the affairs of any Borrower Entity, shall be deemed to constitute any representation or warranty by any Agent or Agent-Related Person to any Lender.  Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, Property, financial and other condition and creditworthiness of the Borrower, the Project, the value of and title to any Collateral, and all applicable bank regulatory Applicable Laws relating to the transactions contemplated hereby or by any Transaction Document, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder.  Each Lender also represents that it will, independently and without reliance upon any Agent or Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, Property, financial and other condition and creditworthiness of the Borrower and the Project.  Except for notices, reports and other documents expressly required pursuant to any Financing Document to be furnished to the Lenders by the Agents, the Agents shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations,

 

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Property, financial and other condition or creditworthiness of the Project or of the Borrower which may come into the possession of any Agent or any of the Agent-Related Persons.

 

8.7           Indemnification of Agents.

 

(a)           WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED, THE LENDERS SHALL INDEMNIFY UPON DEMAND EACH AGENT AND THE AGENT-RELATED PERSONS (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO), PRO RATA IN ACCORDANCE WITH THE SUM OF THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE LOANS AND UNUTILIZED COMMITMENTS OF SUCH LENDER, FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES; PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT TO ANY AGENT OR THE AGENT-RELATED PERSONS OF ANY PORTION OF SUCH INDEMNIFIED LIABILITIES RESULTING SOLELY FROM SUCH PERSON’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH AGENT SHALL NOT BE LIABLE FOR THE NEGLIGENCE OF ITSELF AND OTHERS.

 

(b)           WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH LENDER SHALL REIMBURSE EACH AGENT UPON DEMAND FOR ITS RATABLE SHARE AS PROVIDED ABOVE OF ANY COSTS OR OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEY COSTS) INCURRED BY SUCH AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL MATTERS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO HEREIN, TO THE EXTENT THAT SUCH AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY OR ON BEHALF OF THE BORROWER.

 

(c)           THE UNDERTAKINGS OF THE LENDERS IN THIS ARTICLE SHALL SURVIVE THE TERMINATION OF THE COMMITMENTS, THE PAYMENT OF ALL OBLIGATIONS HEREUNDER, THE LOAN TERMINATION DATE AND THE RESIGNATION OR REPLACEMENT OF ANY AGENT.

 

8.8           Agents in Individual Capacities; Other Business with the Borrower.  Each of the Agents and their respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Capital Stock in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with any Borrower Entity or any of its Affiliates or Expansion or any of its Affiliates, including any business related to or in connection with LNG and any activities relating thereto or related to, in connection with or contemplated by the Omnibus Agreement, the COP TUA or any of the other Transaction Documents, as though such Agent were not an Agent hereunder or under any other Transaction Document and without notice or any other formality to or consent of the Lenders.  The Lenders hereby acknowledge that, pursuant to such activities, an Agent or its Affiliates may receive information regarding the Borrower Entity or any of its Affiliates or Expansion or any of its

 

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Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Affiliates) and acknowledge that the Agents shall be under no obligation to provide such information to any of the Lenders.  Any Agent which is also a Lender hereunder shall have the same rights and powers under this Agreement and the other Transaction Documents as any other Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include such Agent in its individual capacity.

 

8.9           Successor Agents.

 

(a)           The Collateral Agent may, on the instructions of the Required Lenders, remove and replace the Depositary Agent pursuant to the terms and conditions of the Account Agreement and may, on the instructions of the Required Lenders, direct the Depositary Agent according to the terms of this Agreement and the relevant Financing Documents.

 

(b)           Subject to the appointment and acceptance of a successor as provided below, each of the Administrative Agent and the Collateral Agent may resign at any time by giving notice thereof to the other Agents, the Lenders and the Borrower, and each such Agent may be removed at any time with or without cause by the Required Lenders.  Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor to the applicable Agent.  If no successor Agent shall have been appointed by the Required Lenders, and shall have accepted such appointment within 30 days after the resigning Agent’s giving of notice of resignation or the giving of any notice of removal of any such Agent, then the resigning Agent or Agent being removed, as the case may be, may appoint a successor to such Agent.  If the Collateral Agent shall resign or be removed pursuant to the foregoing provisions, upon the acceptance of appointment by a successor Collateral Agent hereunder, the former Collateral Agent shall deliver all Collateral then in its possession to the successor Collateral Agent.  Upon the acceptance of its appointment as a successor Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of such resigning or removed Agent, and such resigning Agent or removed Agent shall be discharged from its duties and obligations hereunder.

 

(c)           After any Agent’s resignation or removal, the provisions of this ARTICLE 8 and of Sections 9.1 and 9.2 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent.

 

8.10         Withholding Tax.

 

(a)           If any Lender is a “United States Person”, as such term is defined in Code Section 7701(a)(30), such Lender agrees with and in favor of the Administrative Agent to deliver to the Administrative Agent a properly completed and executed Form W-9, or successor form thereto (i) before the first payment of any interest to such Lender under this Agreement and (ii) at such other times as shall be necessary to establish such Lender’s exemption from U.S. backup withholding Taxes during any period in which interest may be paid under this Agreement.  If any Lender is a “foreign corporation, partnership or trust” within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441, 1442 or 6049 of the Code, such Lender agrees with and in favor of the Administrative Agent to deliver to the Administrative Agent:

 

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(1)         if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty or pursuant to the portfolio interest exemption, a properly completed and executed IRS Form W-8BEN or successor form thereto (i) before the first payment of any interest to such Lender under this Agreement, and (ii) at such other times as shall be necessary to establish such Lender’s exemption from or reduction in the rate of U.S. withholding tax during any period in which interest may be paid under this Agreement;

 

(2)         if such Lender claims that interest paid under this Agreement is exempt from U.S. withholding tax because it is effectively connected with a United States trade or business of such Lender, a properly completed and executed IRS Form W-8ECI or successor form thereto (i) before the first payment of any interest to such Lender under this Agreement, and (ii) at such other times as shall be necessary to establish such Lender’s exemption from U.S. withholding tax during any period in which interest may be paid under this Agreement, and IRS Form W-9 or successor form thereto; or

 

(3)         such other form or forms at such times in each case as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax.

 

Such Lender agrees to promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction and to file a new Form W-9, W-8BEN or W8ECI or successor form thereto, as the case may be.

 

(b)           If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN or successor form thereto and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations to another Person, such Lender agrees to notify the Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations to such Lender.  To the extent of such percentage amount, the Administrative Agent will treat such Lender’s IRS Form W-8BEN or successor form thereto as no longer valid.

 

(c)           If any Lender claiming exemption from U.S. withholding tax by filing IRS Form W-8ECI or Form W-9 or successor form thereto with the Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations to another Person, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441, 1442 or 6049 of the Code.

 

(d)           If any Lender is entitled to a reduction in the applicable withholding tax, the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction.  If the forms or other documentation required by Section 8.10(a) are not delivered to the Administrative Agent in a timely manner, then the Administrative Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

 

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(e)           If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered in a timely manner, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, together with all costs and expenses (including Attorney Costs).  The obligation of the Lenders under this Section shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent.

 

ARTICLE 9.           MISCELLANEOUS.

 

9.1           COSTS AND EXPENSES.  FOR THE AVOIDANCE OF DOUBT AND WITHOUT IN ANY WAY LIMITING THE GENERALITY OF SECTION 9.2, THE BORROWER SHALL, WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED AND WHETHER OR NOT ANY OF THE FOLLOWING ARE INCURRED BEFORE OR AFTER THE CLOSING DATE, PAY, WITHIN 30 DAYS AFTER INITIAL DEMAND: (A) ALL COSTS AND EXPENSES OF THE AGENTS RELATING TO OR IN CONNECTION WITH THE ENFORCEMENT OF AND SIMILAR ACTIONS RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, AND ANY OTHER DOCUMENTS RELATING THERETO OR WHICH MAY BE DELIVERED IN CONNECTION THEREWITH, INCLUDING ALL REASONABLE ATTORNEY COSTS, AND (B) ALL COSTS AND EXPENSES OF ANY SECURED PARTY (INCLUDING ATTORNEY COSTS) RELATING TO OR IN CONNECTION WITH: (I) ANY AND ALL AMOUNTS WHICH ANY SECURED PARTY HAS PAID RELATING TO OR IN CONNECTION WITH ANY EVENT OF DEFAULT OR ACTUAL OR ATTEMPTED CURE THEREOF OR (II) THE ENFORCEMENT OR ATTEMPTED ENFORCEMENT OF, OR THE INVESTIGATION OR PRESERVATION OF ANY RIGHTS OR REMEDIES UNDER, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER DOCUMENTS RELATING THERETO OR WHICH MAY BE DELIVERED IN CONNECTION THEREWITH.

 

9.2           INDEMNITY.  WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED AND WHETHER OR NOT ANY OF THE FOLLOWING ARE INCURRED BEFORE OR AFTER THE CLOSING DATE:

 

(a)           THE BORROWER SHALL PAY, INDEMNIFY, AND HOLD (1) EACH SECURED PARTY, (2) EACH OF THEIR AFFILIATES AND (3) EACH OF THE OFFICERS, DIRECTORS, MEMBERS, MANAGERS, PARTNERS, OWNERS AND/OR HOLDERS OF CAPITAL STOCK, CONTROLLING PERSONS, TRUSTEES, BENEFICIARIES, EMPLOYEES, COUNSEL, CONSULTANTS, AGENTS, SERVANTS, CONTRACTORS, ATTORNEYS-IN-FACT AND OTHER REPRESENTATIVES OF THE FOREGOING (EACH, AN “INDEMNIFIED PERSON”) HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES (INCLUDING AT LAW OR BY OPERATION THEREOF, IN

 

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EQUITY, CONTRACT, TORT (INCLUDING SUCH LIABILITY THAT IS SOLE, JOINT, SEVERAL, ALTERNATIVE, CONCURRENT, ACTIVE OR PASSIVE) AND STRICT LIABILITY), OBLIGATIONS, LOSSES, CLAIMS AND DAMAGES (INCLUDING FORESEEABLE AND UNFORESEEABLE CONSEQUENTIAL, SPECIAL, DIRECT, INDIRECT AND PUNITIVE), PENALTIES, FINES, FEES, ACTIONS, JUDGMENTS, AWARDS, SUITS, COSTS, CHARGES, DISBURSEMENTS, AND EXPENSES AND SIMILAR MATTERS (INCLUDING ANY ATTORNEY COSTS AND FEES, DISBURSEMENTS AND OTHER CHARGES OF ANY CONSULTANT) OF ANY KIND OR NATURE WHATSOEVER (COLLECTIVELY, “LOSSES”) THAT MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE LOANS, TERMINATION OF THE COMMITMENTS OR THE TERMINATION, RESIGNATION OR REPLACEMENT OF ANY AGENT OR ANY LENDER) BE IMPOSED ON, PAID OR INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY SUCH PERSON DIRECTLY OR INDIRECTLY BASED ON, RESULTING FROM, OR IN ANY WAY RELATING TO, IN CONNECTION WITH OR ARISING OUT OF (I) THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING THE SECURITY DOCUMENTS, AND ANY OTHER DOCUMENT OR INSTRUMENT RELATING THERETO, IN CONNECTION THEREWITH, CONTEMPLATED THEREIN, AND THE TRANSACTIONS CONTEMPLATED THEREBY, (II) THE LOANS AND THE USE AND ANY INTENDED USE OF THE PROCEEDS THEREOF, (III) ANY OR ALL OF THE PROJECT, (IV) ANY ACTION TAKEN OR OMITTED BY ANY INDEMNIFIED PERSON RELATING TO, IN CONNECTION WITH OR CONTEMPLATED BY ANY INDEMNIFIED LIABILITIES, INCLUDING ANY SUCH ACTION WITH RESPECT TO THE EXERCISE BY ANY SECURED PARTY OF ANY OF ITS RESPECTIVE RIGHTS OR REMEDIES UNDER ANY OF THE FINANCING DOCUMENTS, (V) ANY GOVERNMENTAL APPROVAL, NECESSARY APPROVAL OR LEGAL MATTER (INCLUDING ANY LEGAL MATTER RELATING TO ANY DEBTOR RELIEF LAW) RELATING TO, IN CONNECTION WITH OR CONTEMPLATED BY ANY OF THE FOREGOING WHETHER OR NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO; EXCEPT IN CONNECTION WITH THE CLOSING DATE CLAUSES (I)-(V) SHALL NOT INCLUDE ANY LOSSES FOR THE PREPARATION, EXECUTION, DELIVERY, FILING, OR RECORDING OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING THE SECURITY DOCUMENTS, AND ANY OTHER DOCUMENT OR INSTRUMENT RELATING THERETO, IN CONNECTION THEREWITH OR CONTEMPLATED THEREIN (ALL THE FOREGOING, COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”); PROVIDED, HOWEVER, THAT THE BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO AN INDEMNIFIED PERSON FOR INDEMNIFIED LIABILITIES TO THE EXTENT SUCH INDEMNIFIED LIABILITIES ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON (AS DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL NON-APPEALABLE DECISION).  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT (I) EACH INDEMNIFIED PERSON SHALL BE PAID, INDEMNIFIED AND HELD HARMLESS FOR THE NEGLIGENCE OF ITSELF AND OTHERS AND (II) NEGLIGENCE IS INCLUDED IN THE TERM “INDEMNIFIED LIABILITIES”.

 

(b)           SURVIVAL; DEFENSE.  THE OBLIGATIONS IN THIS SECTION 9.2 AND IN SECTION 9.1 SHALL SURVIVE TERMINATION OF THE COMMITMENTS AND

 

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PAYMENT OF THE LOANS AND ALL OTHER OBLIGATIONS.  AT THE ELECTION OF ANY INDEMNIFIED PERSON, THE BORROWER’S INDEMNIFICATION OBLIGATIONS UNDER SUCH SECTIONS SHALL INCLUDE THE OBLIGATION TO DEFEND SUCH INDEMNIFIED PERSON IN CONNECTION WITH OR RELATING TO ANY INDEMNIFIED LIABILITY TO SUCH INDEMNIFIED PERSON’S SATISFACTION, INCLUDING USING LEGAL COUNSEL SATISFACTORY TO AND CONSULTING WITH SUCH INDEMNIFIED PERSON, AT THE SOLE COST AND EXPENSE OF THE BORROWER.  ALL AMOUNTS OWING UNDER THIS SECTION 9.2 SHALL BE PAID WITHIN 30 DAYS AFTER INITIAL DEMAND.  IN CONNECTION WITH ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION COVERED BY SECTION 9.1 OR SECTION 9.2 AGAINST MORE THAN ONE INDEMNIFIED PERSON, ALL SUCH INDEMNIFIED PERSONS SHALL BE REPRESENTED BY THE SAME LEGAL COUNSEL SELECTED BY THE INDEMNIFIED PERSONS; PROVIDED, HOWEVER, THAT IF SUCH LEGAL COUNSEL DETERMINES IN GOOD FAITH AND NOTIFIES THE BORROWER IN WRITING (1) THAT REPRESENTING ALL SUCH INDEMNIFIED PERSONS COULD BE CONTRARY TO APPLICABLE LAWS OR APPLICABLE STANDARDS OF CONDUCT OR ETHICAL PRINCIPLES, COULD RESULT IN A CONFLICT OF INTEREST OR (2) THAT A DEFENSE, COUNTERCLAIM OR THIRD PARTY CLAIM APPLICABLE THERETO IS AVAILABLE TO AN INDEMNIFIED PERSON THAT IS NOT AVAILABLE TO ALL SUCH INDEMNIFIED PERSONS, THEN EACH INDEMNIFIED PERSON SHALL BE ENTITLED TO SEPARATE REPRESENTATION BY LEGAL COUNSEL SELECTED BY THAT INDEMNIFIED PERSON.

 

(c)           CONTRIBUTION.  TO THE EXTENT THAT ANY UNDERTAKING IN SECTION 9.1 OR THE PRECEDING CLAUSES OF THIS SECTION 9.2 MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY LAW OR PUBLIC POLICY, THE BORROWER WILL CONTRIBUTE THE MAXIMUM PORTION THAT IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW TO THE PAYMENT AND SATISFACTION OF SUCH UNDERTAKING.

 

(d)           SETTLEMENT.  SO LONG AS THE BORROWER IS IN COMPLIANCE WITH ITS OBLIGATIONS UNDER SECTIONS 9.1 AND 9.2, THE BORROWER SHALL NOT BE LIABLE TO ANY INDEMNIFIED PERSON UNDER SUCH SECTIONS FOR ANY SETTLEMENT MADE BY SUCH INDEMNIFIED PERSON WITHOUT THE BORROWER’S CONSENT (SUCH CONSENT TO NOT BE UNREASONABLY WITHHELD).

 

(e)           WAIVER OF CONSEQUENTIAL DAMAGES, ETC.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT AS SET FORTH IN SECTION 9.1 OR THE PRECEDING CLAUSES OF THIS SECTION 9.2 EACH PARTY HERETO (FOR ITSELF AND ALL WHO MAY CLAIM THROUGH OR UNDER IT, INCLUDING ANY SECURED PARTIES OR LENDERS SUBORDINATE TO THE SECURED PARTIES, INSOFAR AS IT OR THEY NOW OR HEREAFTER LAWFULLY MAY) HEREBY AGREES IT SHALL NOT ASSERT IN ANY LEGAL MATTER, AND HEREBY WAIVES AND RELEASES THE OTHER PARTIES HERETO AND THE INDEMNIFIED PERSONS FROM, ANY CLAIM AGAINST ANY OTHER PARTY HERETO AND/OR ANY INDEMNIFIED PERSON, ON ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT,

 

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INCLUDING THE SOLE, ALTERNATE OR CONTRIBUTORY NEGLIGENCE OF ANY PARTY OR ANY INDEMNIFIED PERSON, WARRANTY, STRICT LIABILITY, OR STATUTE, UNDER ANY INDEMNITY PROVISION, OR OTHERWISE), FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING DAMAGES ASSOCIATED WITH LOST PROFITS, BUSINESS INTERRUPTION AND LOSS OF GOODWILL) DIRECTLY OR INDIRECTLY BASED ON, RESULTING FROM, OR IN ANY WAY RELATING TO, IN CONNECTION WITH OR ARISING OUT OF AT ANY TIME ANY INDEMNIFIED LIABILITIES.

 

9.3           Notices.

 

(a)           All notices, requests and other communications provided for hereunder shall be in writing (including by facsimile, unless the context expressly otherwise provides, provided that any writing transmitted by a Borrower Entity by facsimile (a) shall be immediately confirmed by a telephone call to the recipient at the number specified on the applicable signature page hereof or (or at such other number as shall be designated by such party in a written notice to the other parties hereto), and (b) shall be followed promptly by a hard copy original thereof by express courier) and delivered, to the address or facsimile number specified for notices on the applicable signature page hereof or to such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto.

 

(b)           All such notices, requests and other communications (i) sent by express courier will be effective upon delivery to or refusal to accept delivery by the addressee, and (ii) transmitted by facsimile will be effective when facsimile confirmation received; except that all notices, requests and other communications to any Agent set forth in ARTICLE 2 shall not be effective until actually received.

 

(c)           Each Borrower Entity hereby acknowledges and agrees that any agreement of the Secured Parties to receive certain notices, requests and other communications by telephone and facsimile is solely for the convenience and at the request of the Borrower Entities.  The Secured Parties shall be entitled to rely on the authority of any Person purporting to be a Person authorized by a Borrower Entity to give such notice, request or other communication, and the Secured Parties shall not have any liability to any Borrower Entity or other Person on account of any action taken or not taken by any of the Secured Parties in reliance upon such telephonic or facsimile notice, request or communication.

 

(d)           All notices, requests and other communications hereunder and under the other Financing Documents shall be in the English language.

 

9.4           Benefit of Agreement; Assignment by Borrower.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto.  No Borrower Entity may assign or otherwise transfer any of its rights under this Agreement or any of the other Financing Documents.

 

9.5           No Waiver; Remedies Cumulative.  No failure or delay on the part of any of the Secured Parties or the holder of any Note in exercising any right, power or privilege hereunder or under any other Financing Document and no course of dealing between the

 

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Borrower and any Secured Party or the holder of any Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Financing Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Secured Party or the holder of any Note to take any other or further action in any circumstances without notice or demand.  All remedies, either under this Agreement or any other Financing Document or pursuant to any Applicable Law or otherwise afforded to any Secured Party and to the holder of any Note shall be cumulative and not alternative.

 

9.6           No Third Party Beneficiaries.  The agreements of the parties hereto set forth in the Financing Documents are solely for the benefit of the Borrower and the Secured Parties and their respective successors and permitted assigns, and no other Person (a) shall have any rights, powers remedies or claims hereunder or thereunder and/or (b) shall be entitled to rely on any of the representations, warranties, covenants, obligations, duties, liabilities or provisions or matters set forth herein or therein.

 

9.7           Confidentiality.  Each Lender agrees to hold any information designated as “confidential” that it receives from the Borrower pursuant to this Agreement in confidence, except for disclosure: (a) to its Affiliates, (b) its and its Affiliates’ officers, directors, members, managers, partners, trustees, beneficiaries, employees, counsel, consultants, agents, contractors, and attorneys in fact, (c) to another party to a Financing Document, (d) as required by any court of law or any law, rule, or regulation, or as requested by a Governmental Authority having or asserting jurisdiction over a Lender and having or asserting authority to require such disclosure in accordance with that authority, or pursuant to the rules of any recognized stock exchange or agency established in connection therewith (e) with the consent of the Borrower, (f) pursuant to Applicable Law or any Legal Matter, (g) to another financial institution in connection with a participation or assignment as contemplated by Section 9.11 hereof or a proposed participation or assignment as contemplated by Section 9.11 hereof, provided that the recipient agrees to keep such information confidential subject to the exceptions set forth herein (and further provided that such exceptions shall be construed as if such recipient were a Lender) and (h) in connection with the exercise of the rights and remedies of such Lender as a Secured Party.  The confidentiality obligations set forth above shall not, however, apply to any information (i) that is not treated by the Borrower in a manner designed to maintain the confidentiality thereof, (ii) filed with any Governmental Authority and obtainable by the public, (iii) that is published in any public medium or otherwise becomes publicly available in either case other than as a result of a breach of this Section 9.7 and (iv) disclosed by or on behalf of the Borrower (or an Affiliate thereof) to any Person not associated with the Borrower without first obtaining a confidentiality agreement substantially similar to this Section 9.7.  Any Person required to hold any information designated as “confidential” in confidence shall be deemed to have complied with such requirement if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord to its own confidential information.  For the avoidance of doubt, nothing in this Section 9.7 shall be construed to create or give rise to any fiduciary duty on the part of any Lender to the Borrower.

 

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9.8           No Immunity.  To the extent that the Borrower, the General Partner or any of their Subsidiaries may be entitled, in any jurisdiction in which any Legal Matter may at any time be commenced with respect to this Agreement or any other Financing Document, to claim for itself or its revenues, assets or Property any immunity from suit, the jurisdiction of any court, attachment prior to judgment, attachment in aid of execution of judgment, set-off, execution of a judgment or any other legal process, and to the extent that in any such jurisdiction there may be attributed to such Person such an immunity (whether or not claimed), each such Person (for itself and all who may claim through or under it, insofar as it or they now or hereafter lawfully may, including any secured parties or lenders subordinate to the Secured Parties) hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the fullest extent permitted by Applicable Law.

 

9.9           Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

 

9.10         Amendment or Waiver.

 

(a)           No provision of this Agreement or any other Financing Document may be amended, supplemented, modified or waived, without the express written consent of the Required Lenders and, if the Borrower is a party thereto, the Borrower, and, to the extent that its rights or obligations may be affected thereby, the Agent or Agents party thereto.  Notwithstanding the immediately preceding sentence, no such waiver and no such amendment, supplement or modification shall (i) increase or extend the Commitment of any Lender (it being understood that waivers, amendments, supplements and modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment (with corresponding reductions in the Commitments of the Lenders), shall not constitute a change in the terms of any Commitment of any Lender including any increase or extension thereof), without the prior written consent of such Lender, (ii) postpone or delay any date fixed by this Agreement or any other Financing Document for any payment of principal, interest, fees or other amounts due to any Lender hereunder or under any other Financing Document, without the prior written consent of such Lender, (iii) reduce the principal of, or the rate of interest, premium or penalty specified in any Financing Document on, any Loan of any Lender, without the prior written consent of such Lender, (iv) release all or substantially all of the Collateral except as provided in any Security Document or other Financing Document or consent to the assignment or transfer by the Borrower of any of its respective obligations under this Agreement or any other Financing Document, without the prior written consent of each Lender, (v) amend, supplement, modify or waive the EPC Guarantee or any other Guarantee, (vi) amend, supplement, modify or waive any provision of this Section 9.10 or Section 9.1 or 9.2 without the prior written consent of each Lender or (vii) reduce the percentage specified in or otherwise amend, supplement, modify or waive the definition of Required Lenders or any provision in any Financing Document providing for the consent or other action by all of the Lenders, without the prior written consent of each Lender.

 

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(b)           Any waiver and any amendment, supplement or modification made or entered into in accordance with Section 9.10(a) shall be binding upon the Borrower, the Agents and the Lenders.

 

(c)           The Borrower will not directly or indirectly pay or cause to be paid any remuneration in any manner whatsoever to any Secured Party as consideration for or as an inducement to the entering into by such Secured Party of any waiver or amendment of any of the terms or provisions of any of the Transaction Documents unless such remuneration is concurrently paid ratably to each Secured Party even if any such Secured Party is not required to, objects or did not consent to such waiver or amendment.

 

9.11         Assignments by Lenders, Participations, etc.

 

(a)           Subject to the conditions set forth in Section 9.11(b) below, any Lender may assign to one or more assignees that is an Eligible Institution (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and Loans at the time owing to it) with the prior written consent of the Administrative Agent (such consent to not be unreasonably withheld); provided, however, that no consent of the Administrative Agent shall be required for an assignment to (i) another Lender or (ii) an Eligible Affiliate of any Lender.

 

(b)           Each assignment shall be subject to the following additional conditions precedent:

 

(1)         except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitments or Loans, the amount, if any, of the Commitments and the amount, if any, of the Loans to be assigned shall in each case not be less than $5,000,000 (and if more than $5,000,000 is to be assigned, in each case integral multiples of $1,000,000 in excess thereof) unless the Administrative Agent otherwise consents;

 

(2)         each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations (including its Commitments, if any) under the Financing Documents;

 

(3)         the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a total processing and recordation fee of $3,500 payable to the Administrative Agent for its own account;

 

(4)         the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and

 

(5)         the Assignee may not be a LNG Supply Project until after Completion unless the Initial Lender would constitute the Required Lenders immediately after giving effect to such assignment.

 

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(c)           Subject to the condition precedent of the acceptance and recording thereof pursuant to Section 9.11(e), from and after the effective date specified in the relevant Assignment and Assumption:

 

(1)         the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement; and

 

(2)         except for the funding obligation of the Initial Lender set forth in Section 2.6 that the Initial Lender shall retain until the expiration of the Construction Loan Availability Period regardless of any assignment or transfer, the assigning Lender thereunder shall, to the extent of the rights and obligations assigned by such Assignment and Acceptance, be released and discharged from its obligations under the Financing Documents and its rights thereunder shall be similarly reduced (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under the Financing Documents, such Lender shall cease to be a party hereto and thereto, and its obligations shall be released and discharged, but shall continue to be entitled to the benefits of Sections 2.10, 2.11, 2.12, 2.13, 2.14, 9.1, 9.2, 9.12, 9.13 and 9.18).

 

Any assignment or transfer by a Lender of rights or obligations under the Financing Documents that does not comply with this Section 9.11 shall be treated for all purposes of the Financing Documents as a sale by such Lender of a participation in such rights and obligations subject to Section 9.11(g).

 

(d)           The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”); provided, however, that each Lender shall duly inform the Administrative Agent in writing of any changes to such information relating to it prior to the Administrative Agent being required to update such information contained in the Register.  The entries in the Register shall be conclusive, and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, the Agents and any Lender, at any reasonable time during normal business hours upon reasonable prior notice.

 

(e)           Upon its receipt of a completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in this Section and any written consent to such assignment required by this section, the Administrative Agent shall accept such Assignment and Acceptance and record the relevant information contained therein in the Register.  No assignment shall be effective for purposes of the Financing Documents unless it has been recorded in the Register as provided in this Section 9.11(e).

 

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(f)            Within five Business Days after its receipt of notice, if any, from the Administrative Agent that it has recorded the relevant information in the Register required by Section 9.11(d) and referred in Section 9.11(e), the Borrower shall execute and deliver to the Administrative Agent new Notes evidencing the Assignee’s assigned Commitments and Loans and, if the assigning Lender has retained a portion of its Loans, replacement Notes reflecting the Commitment and the principal amount of the Loans retained by the assigning Lender (such Notes to be in exchange for, but not in payment of, the Notes held by such Lender).

 

(g)           Participations.  Any Lender (the “Originating Lender”) may, without any consent being required, sell participations to one or more commercial banks or other Persons in either case that is not an Affiliate of the Borrower (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement and the other Financing Documents (including all or a portion of its Commitments and the Loans owing to it); provided that

 

(1)         such Lender’s obligations under this Agreement and the other Financing Documents shall remain unchanged,

 

(2)         such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and

 

(3)         the Borrower, the Agents, and the other Lenders and the Affiliates of each of the foregoing shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Documents.

 

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Financing Documents and to approve any amendment, supplement, modification or waiver of any provision of this Agreement or any other Financing Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, supplement, modification or waiver described in the second sentence of Section 9.10(a) that would require the consent of the originating for such amendment, supplement, modification or waiver to be effective against such Originating Lender.  In the case of any participation, the Participant shall not have any rights under this Agreement or any of the other Financing Documents (the participant’s rights against the Originating Lender in respect of such Participation to be those set forth in the agreement executed by the Originating Lender in favor of the Participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation..

 

(h)           Certain Pledges.  Any Lender may at any time pledge or assign a Lien in all or any portion of its rights under this Agreement or the other Financing Documents to secure obligations of such Lender or its Affiliates, including any such pledge or assignment to secure obligations to a Federal Reserve Bank, and the provisions of this Section other than this clause shall not apply to any such pledge or assignment of a Lien; provided, however, that no such pledge or assignment of a Lien shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

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(i)            No Assignments to the Borrowers or Affiliates.  Notwithstanding anything to the contrary in this section, no Lender may assign or participate any of its rights and obligations under any Financing Document, including any part of any Loan owed to it or its Commitments, to the Borrower or any of its Affiliates without the prior written consent of each Lender and any such assignment or participation in violation of this Section shall be void from the beginning.

 

9.12         Survival.  All indemnities set forth herein, including Sections 9.1 and 9.2, shall survive the execution and delivery of this Agreement and the Notes, the making and repayment of the Loans, the termination of the Commitments and the Loan Termination Date.  In addition, each representation and warranty made or deemed to be made pursuant hereto shall survive the making or deemed making of such representation or warranty, and no Lender shall be deemed to have waived, by reason of making any extension of credit, any Default or Event of Default that may arise by reason of such representation or warranty to have been false or misleading when made or deemed made, notwithstanding that such Lender may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such extension of credit was made.

 

9.13         WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES THE RIGHTS ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL MATTER BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES, OR ANY OTHER FINANCING DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO AND, FOR THE AVOIDANCE OF DOUBT, ANY INDEMNIFIED LIABILITIES.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTIES TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS.

 

9.14         Right of Set-off.  In addition to any rights now or hereafter granted under Applicable Law or otherwise, and not by way of limitation of any such rights, upon the occurrence and continuance of an Event of Default whether or not any Loans are accelerated pursuant to Section 7.2, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or any other notice or similar formality to any Borrower Entity or to any other Person, any such notice or formality being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Debt and other obligations at any time held or owing by such Lender (including by branches, offices and agencies of any Lender wherever located), to or for the credit or the account of the Borrower against and on account of the Obligations, Debt and other obligations of the Borrower to such Lender under this Agreement and any of the other Financing Documents, including all Legal Matters of any nature or description arising out of or connected with this Agreement or any other Financing Document, irrespective of whether such Lender shall have made any demand or other formality hereunder or thereunder and although said Obligations, Debt, other obligations and Legal Matters, or any of them, shall be contingent or unmatured.

 

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9.15         Severability.  Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and without affecting the validity or enforceability of any provision in any other jurisdiction.

 

9.16         Domicile of Loans.  Each Lender may transfer and carry its Loans at, to or for itself or any of its Affiliates or any branch, office, agency of the foregoing.

 

9.17         Limitation of Recourse.

 

The Obligations and the other obligations of the Borrower, its Subsidiaries and the Subsidiaries of the General Partner under the Financing Documents (a) will be obligations of the Borrower, its Subsidiaries and the Subsidiaries of the General Partner, (b) will be with full recourse to the Borrower, its Subsidiaries and the Subsidiaries of the General Partner and to all of their Property and (c) will be secured by the Collateral.  None of the Partners, Smith, Cheniere Energy, Contango, or any other Affiliate thereof (other than the Borrower, its Subsidiaries and the Subsidiaries of the General Partner) or the owners and/or holders of Capital Stock (including any partners and members), officers, directors and employees thereof shall be personally liable or obligated for such obligations of the Borrower, its Subsidiaries and the Subsidiaries of the General Partner, except as may be specifically provided in any Transaction Document to which such Person is a party.  Nothing contained herein shall (x) limit or be construed to limit the obligations and liabilities of any such Person in any Transaction Document creating such liabilities and obligations to which such Person is a party or (y) affect or diminish any rights of any Person against any other Person as a result of such other Person’s fraud, violation of law, willful misrepresentation, gross negligence or willful misconduct.

 

9.18         Governing Law; Submission to Jurisdiction.

 

(a)           THIS AGREEMENT AND EACH OF THE OTHER FINANCING DOCUMENTS (UNLESS SUCH DOCUMENT EXPRESSLY STATES OTHERWISE THEREIN) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY CONFLICT OF LAW RULES AND PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.

 

(b)           Each Borrower Entity (in the case the Borrower and the General Partner, each, on its own behalf and on behalf of its respective Subsidiaries) hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for the purposes of all legal proceedings, including any suits or actions, arising out of or relating to this Agreement, any other Financing Document or the transactions contemplated hereby or thereby.  Each Borrower Entity (in the case the Borrower and the General Partner, each, on its own behalf and on behalf of its respective Subsidiaries) hereby irrevocably waives, to the fullest extent permitted by Applicable Law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.  Each Borrower Entity (in the case the Borrower and the General Partner, each, on its own behalf and on behalf of its respective

 

104



 

Subsidiaries) hereby irrevocably appoints Corporation Service Company (the “Process Agent”), with an office on the date hereof at 80 State Street, Albany, New York 12207, as its agent to receive on its behalf and on behalf of its Property, service of copies of the summons and complaint and any other process that may be served in any such proceeding.  Service upon the Process Agent shall be deemed to be personal service on the Borrower Entity and shall be legal and binding upon the entity deemed served for all purposes notwithstanding any failure to mail copies of such legal process to such entity, or any failure on the part of such entity to receive the same.  Nothing herein shall affect the right to serve process in any other manner permitted by Applicable Law or any right to bring legal proceedings, including any suits or actions, in any other competent jurisdiction, including judicial or non-judicial foreclosure of real property interests which are part of the Collateral.  Each Borrower Entity (in the case the Borrower and the General Partner, each, on its own behalf and on behalf of its respective Subsidiaries) further agrees that the aforesaid courts of the State of New York and of the United States of America for the Southern District of New York shall have exclusive jurisdiction with respect to any claim or counterclaim it has based upon the assertion that the rate of interest charged by or under this Agreement or under the other Financing Documents is usurious.  To the extent permitted by Applicable Law, each Borrower Entity (in the case the Borrower and the General Partner, each, on its own behalf and on behalf of its respective Subsidiaries) further irrevocably agrees to the service of process of any of the aforementioned courts in any proceeding, including any suit or action, by the mailing of copies thereof by certified mail, postage prepaid, return receipt requested, to it at the address referenced in Section 9.3, such service to be effective upon the date indicated on the postal receipt returned from it.

 

(c)           Each Borrower Entity agrees that it will at all times continuously maintain an agent to receive service of process in the State of New York on behalf of itself and its Property, and, in the event that for any reason the agent mentioned above shall not serve as agent for a Borrower Entity to receive service of process in the State of New York on its behalf, such Borrower Entity shall promptly appoint a successor satisfactory to the Administrative Agent to so serve, advise the Administrative Agent thereof, and deliver to the Administrative Agent evidence in writing of the successor agent’s acceptance of such appointment.

 

(d)           To the extent any Borrower Entity may, in any action or proceeding arising out of or relating to any of the Financing Documents, be entitled under any Applicable Law to require or claim that any Secured Party post security for costs or other amounts or take similar action, such Borrower Entity hereby irrevocably waives and agrees not to claim the benefit of such entitlement.

 

9.19         Reinstatement.  To the extent that any Secured Party receives any payment by or on behalf of any Borrower Entity, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to the Borrower or to its estate, trustee, receiver, custodian, liquidator or any other party under any Debtor Relief Law or otherwise, then to the extent of the amount so required to be repaid, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid (and the Financing Documents) shall be reinstated by the amount so repaid and shall be included within the Obligations as of the date such initial payment, reduction or satisfaction occurred.

 

105



 

9.20         Complete Agreement.  THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS REPRESENT THE FINAL AND COMPLETE EXPRESSION OF AGREEMENT ON THE MATTERS ADDRESSED THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS ORAL AGREEMENTS OF THE PARTIES. ALL PRIOR NEGOTIATIONS, REPRESENTATIONS, UNDERSTANDINGS, WRITINGS AND STATEMENTS OF ANY NATURE RELATING TO SUCH MATTERS ARE HEREBY SUPERSEDED IN THEIR ENTIRETY BY THE TERMS OF THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

9.21         Maximum Interest Rate.  Notwithstanding any provision contained in this Agreement or any other Financing Document, no Lender shall ever be entitled to receive, collect, take, reserve, charge or apply as interest (whether termed interest herein or deemed to be interest by operation of law or judicial determination) on any Loan any amount in excess of interest calculated at the Maximum Rate, and, in the event that any Lender ever receives, collects, or applies as interest any such excess, then the amount that would be excessive interest shall be deemed to be a partial prepayment of principal and treated hereunder as such; and, if the principal amount of the applicable Loans are paid in full, then any remaining excess shall forthwith be paid to the Borrower.  In determining whether or not the interest paid or payable under any specific contingency exceeds interest calculated at the Maximum Rate, the Borrower and the Lenders shall, to the maximum extent permitted under applicable law: (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread, in equal parts, the total amount of interest throughout the entire contemplated term of the Loans, including any conversion from Construction Loans to Term Loans; provided, however, that, if Loans are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds interest calculated at the Maximum Rate, then the applicable Lender shall refund to the Borrower the amount of such excess or credit the amount of such excess against the principal amount of the applicable Loans and, in such event, no Lender shall be subject to any penalties provided by any Applicable Laws for contracting for receiving, collecting, taking, reserving, charging or applying interest in excess of interest calculated at the Maximum Rate.  “Maximum Rate” means the highest nonusurious rate of interest (if any) permitted from day to day by Applicable Law.  To the extent Texas law is applicable, each Lender hereby notifies and discloses to the Borrower that, for purposes of Texas Finance Code § 303.001, as it may from time to time be amended, the “applicable ceiling” shall be the “weekly ceiling” from time to time in effect as limited by Texas Finance Code § 303.009; provided, however, that each Lender reserves the right to change the “applicable ceiling” from time to time by further notice and disclosure to the Borrower.  The parties agree that Chapter 346 of the Texas Finance Code, which regulates certain revolving loan accounts and revolving tri-party accounts, shall not be applicable to this Agreement, any other Financing Document or any Loan.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.  NEXT PAGE IS A
SIGNATURE PAGE.]

 

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.

 

 

 

FREEPORT LNG DEVELOPMENT, L.P.

Notice Address:

 

 

 

 

By: FREEPORT LNG-GP, INC., its general partner

Freeport LNG Development, L.P.

 

 

1200 Smith Street, Suite 600

 

 

Houston, TX  77002

 

 

By:

 /s/ Michael S. Smith

 

Attn: Michael S. Smith

 

 

Name:

Michael S. Smith

Telephone No.: 713.980.2888

 

 

Title:

Chief Executive Officer

Telecopier No.: 713.982.2903

 

 

 



 

 

 

FREEPORT LNG-GP, INC.

Notice Address:

 

 

 

 

 

Freeport LNG-GP, Inc.

 

By:

 /s/ Michael S. Smith

 

1200 Smith Street, Suite 600

 

Name:

Michael S. Smith

Houston, TX  77002

 

Title:

Chief Executive Officer

Attn: Michael S. Smith

 

 

Telephone No.: 713.980.2888

 

 

Telecopier No.: 713.982.2903

 

 

 



 

 

CONOCOPHILLIPS COMPANY, as Lender and

Notice Address:

Administrative Agent

 

 

ConocoPhillips Company

 

600 North Dairy Ashford

By:

 /s/ J.W. Sheets

 

Room ML-3092

Name: J.W. Sheets

Houston, TX 77079-1175

Title: V.P. and Treasurer

Attn: Vice President and Treasurer

 

Telephone No.: 281.293.2797

 

Telecopier No.: 281.293.6067

 

 



 

 

CONOCOPHILLIPS COMPANY, as Collateral Agent

Notice Address:

 

 

 

ConocoPhillips Company

By:

 /s/ J.W. Sheets

 

600 North Dairy Ashford

Name: J.W. Sheets

Room ML-3092

Title: V.P. and Treasurer

Houston, TX 77079-1175

 

Attn: Vice President and Treasurer

 

Telephone No.: 281.293.2797

 

Telecopier No.: 281.293.6067

 

 



 

APPENDIX A

to

Credit Agreement

 

DEFINED TERMS AND RULES OF INTERPRETATION

 

1.             Defined Terms.

 

Acceptable Credit Support” means (1) immediately available Dollars pledged, including being funded into the Supplemental Reserve Account, (2) any irrevocable standby letter of credit issued by an Acceptable Credit Support Issuer for which no Borrower Entity is an account party, or (3) any unconditional guarantee issued by an Acceptable Credit Support Issuer in respect of which no Borrower Entity is an obligor or otherwise liable.

 

Acceptable Credit Support Issuer” means an Eligible Institution issuing or primarily obligated on any Acceptable Credit Support.

 

Acceptable Use Agreement” means a use agreement in respect of which or that (a) the counterparty of which or the credit support provider for such counterparty (including any parent of such counterparty which guarantees such counterparty’s obligations) is rated at least “BBB–” by S&P and “Baa3” by Moody’s, (b) has a minimum term remaining at the time of determination of at least two years and (c) the pricing and commercial terms  that are fair and reasonable and of the kind which would be entered into by a prudent Person in the position of the Borrower.

 

Account Agreement” means the Collateral Account Agreement, dated as of the date of the Credit Agreement, among the Borrower, the Collateral Agent and the Depositary Agent.

 

Accounts” has the meaning provided in the Account Agreement and shall include any other accounts or sub-accounts established pursuant to the Account Agreement.

 

Administrative Agent” means ConocoPhillips, acting in its capacity as agent for the Lenders pursuant to the Credit Agreement.

 

Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.

 

Affected Property” means: (1) with respect to any Event of Loss, the Property lost, destroyed, damaged, condemned (including through an Expropriation Event) or otherwise taken as a result of such Event of Loss and (2) with respect to any Project Document Claim or Performance Liquidated Damages, the Property, including any part of the Project, failing to meet the performance standards set forth in any Construction Contract.

 

Affiliate” means, (i) as to any Person, any Subsidiary of such Person and any other Person which, directly or indirectly, controls or is controlled by or under direct or indirect common control with such specified Person and (ii) as to any Borrower Entity, any Person included in clause (i) and, whether or not included therein, the Equity Pledgors.  For the purposes of this definition, “control,” when used with respect to any Person, means the possession of the

 



 

power to direct or cause the direction of management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.  Notwithstanding the foregoing, (1) no individual shall be an Affiliate of any Person solely by reason of his or her being a director, manager, officer or employee of such Person, (2) none of ConocoPhillips and its Subsidiaries shall be deemed to be Affiliates of the Borrower or any of the Borrower’s Affiliates and (3) none of Expansion and its Subsidiaries shall be deemed to be Affiliates of the Borrower or ConocoPhillips or any of their respective Affiliates.  As of the Closing Date, CLNGI and Contango LP are not Affiliates of the Borrower.

 

Affiliate Payment” means any payments made or amounts distributed by or on behalf of a Borrower Entity or Equity Pledgor to or for the benefit of an Affiliate of any Person at any time a Partner in connection with the Project pursuant to a written agreement that are not reimbursements of reasonable expenses incurred on behalf of the Borrower or reasonable consideration for services rendered to the Borrower.

 

Agent-Related Persons” means each Agent, and any successor Agent appointed pursuant to Section 8.9 of the Credit Agreement or Section 8.4 of the Account Agreement, together with their respective Affiliates, officers, directors, managers, owners and/or holders of Capital Stock, trustees, beneficiaries, employees, counsel, agents, and attorneys-in-fact.

 

Agents” means, collectively, the Administrative Agent, the Collateral Agent and the Depositary Agent.

 

Applicable Law” means, with respect to any Person, property or matter, any of the following applicable thereto: any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, Governmental Approval, approval, concession, grant, franchise, license, agreement, directive, ruling, guideline, policy, requirement or other governmental restriction or any similar form of decision of, or determination by, or any interpretation, construction or administration of any of the foregoing by, any Governmental Authority, in each case as amended.

 

Applicable Lending Office” means, for each Lender, the “Lending Office” of such Lender (or of an affiliate thereof ) designated in its Administrative Questionnaire or such other office of such Lender (or an affiliate thereof) as such Lender may from time to time specify to the Administrative Agent by written notice in accordance with the terms hereof as the office by which its Loans are to be made and maintained.

 

Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

Approved Restoration Plan” means a plan for Restoration Work that is submitted to and approved by the Independent Engineer, if any, no more than three months after the related Event of Loss or event giving rise to Performance Liquidated Damages and that provides for the

 

2



 

Restoration of the Affected Property and includes a scope of the Restoration Work, conditions for the disbursement of any Net Available Amounts and other amounts to be expended in such Approved Restoration Plan, a completion test for such Approved Restoration Plan to be administered by the Independent Engineer and, a date specified (the “Restoration Date Certain”), which date may be extended by the Independent Engineer if such Independent Engineer determines that the delay in completion is due to force majeure and that the material terms (other than projected completion date) of such Approved Restoration Plan shall continue to be satisfied during such extension of the Restoration Date Certain, by which the Independent Engineer shall certify successful completion of such completion test and that is accompanied by a certificate of (A) the Independent Engineer, if any, certifying that in its professional judgment (i) such plan is reasonable and technically feasible and economically viable and is reasonably expected to Restore the Project to at least as good condition or state of repair as it was in (1) prior to such Event of Loss, (2) if such failure in meeting performance standards that gave rise to the Project Document Claim or Performance Liquidated Damages did not occur and the performance standards under such Construction Contract were fully met or (3) its original specifications, (ii) after taking into consideration the Net Available Amount (together with all other proceeds reasonably expected to be available for the Restoration of the Affected Property that are secured obligations of an Acceptable Credit Support Issuer or otherwise secured by Acceptable Credit Support) there will be adequate cash flow during the Restoration Period to Restore the Project and to pay all ongoing obligations as they become due, including Debt Service, all Operating and Maintenance Costs, Taxes (not included in Operating and Maintenance Costs), and reserves, and the Borrower’s ability to pay such obligations will not be materially adversely affected following such Restoration and (iii) if the Project has not yet reached Completion, the Restoration in accordance with the plan will not materially adversely affect the Construction Budget, Phase 1 Addition Budget (to the extent not in conflict with the Construction Budget), any construction schedule, including the Project Schedule, and otherwise, any budget for such Approved Restoration Plan, and (B) the Borrower certifying that the Restoration of the Project in accordance with the plan or the operation of the Project following such Restoration will not violate in any material respect (x) the terms of any Transaction Document, (y) Applicable Law or (z) any Necessary Approval.

 

Assignee” has the meaning provided in Section 9.11 of the Credit Agreement.

 

Assignment and Acceptance” means an assignment and acceptance agreement, substantially in the form of Exhibit G to the Credit Agreement, duly completed and signed by the assigning Lender and the applicable Assignee.

 

Attorney Costs” means all fees, disbursements and charges of any law firm or other external counsel.

 

Authorized Officer” means, with respect to any Person, the chief executive officer, president, chief financial officer, general counsel, principal accounting officer or any vice president of such Person or such Person’s general partner or managing member.

 

Base Case Projections” means the financial statement projections of the Borrower as of the Closing Date over a period ending no sooner than 20 years beyond the Closing Date, showing the Borrower’s reasonable good faith estimates for the Project, as of the

 

3



 

Closing Date, of revenue, expenses, Debt Service Coverage Ratios and sources and uses of revenues over the forecast period as confirmed by, and set forth in the report of, the Independent Engineer, if any.

 

Board” has the meaning provided in the Stockholders Agreement.

 

Board Action” means any written action or resolution presented to the Board in accordance with the General Partner’s written bylaws, the terms of the Stockholders Agreement and Applicable Law.

 

Borrower” means Freeport LNG Development, L.P., a limited partnership organized and existing under the laws of the State of Delaware.

 

Borrower Completion Certificate” means a certificate, substantially in the form of Exhibit E-1 to the Credit Agreement, duly completed and signed by an Authorized Officer of the Borrower.

 

Borrower Entities” means the Borrower, the General Partner, each Subsidiary of the Borrower and each Subsidiary of the General Partner.

 

Borrowing” means the borrowing of Loans from the Lenders on a given date

 

Brazos Consent” means the consent and agreement between the Brazos River Authority, the Borrower, the Site Lessee and the Collateral Agent entered into in connection with the Credit Agreement that incorporates provisions of Exhibit G to certain of the Site Leases.

 

Brazos River Authority” means the Brazos River Harbor Navigation District of Brazoria County, Texas.

 

Budgeted Construction Costs” means the anticipated Project Costs of Phase 1 of the Project.  During the Initial Period, such Project Costs of Phase 1 of the Project shall be as set forth in the Construction Budget established, modified, amended and supplemented in accordance with Section 5.20 of the Credit Agreement, which Project Costs shall include some level of initial working capital as agreed between the Administrative Agent and the Borrower but shall exclude the initial funding of the O&M Account, the O&M Reserve Account, Major Maintenance Reserve Account, the other Reserve Accounts, COP Supplemental Debt Payment Account, COP Debt Payment Account, and the TPS Accounts.  After the Initial Period, such Project Costs of Phase 1 of the Project shall be as confirmed by the Independent Engineer and set forth in the Construction Budget as of the first day after the Initial Period and shall include the Budgeted Construction Costs during the Initial Period, all as confirmed by the Independent Engineer (after consultation with the Administrative Agent).

 

Business Day” means any day that is not a Saturday, Sunday or legal holiday in the State of Texas or the State of New York, or a day on which banking institutions chartered by the State of Texas, the State of New York or the United States, are legally required or authorized to close.

 

4



 

Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other Applicable Law, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

 

Capital Stock” means, with respect to any Person, any and all shares, interests, participations and/or rights in or other equivalents (however designated, whether voting or nonvoting, ordinary or preferred), including any partnership interest or membership interest, in the equity, capital or ownership of such Person, now or hereafter outstanding and any and all rights, warrants or options exchangeable for or convertible into any thereof.

 

Capitalized Lease Liabilities” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

Change of Control” means any breach of Section 7 of the Stockholders Agreement other than by ConocoPhillips or a Subsidiary (other than, if applicable, the General Partner) of ConocoPhillips.

 

Channel Widening Costs” means the actual costs incurred by or on behalf of the Borrower in connection with the widening of the Channel (as defined in the Omnibus Agreement) contemplated by the Omnibus Agreement up to a maximum of $***.

 

Charter Documents” means, with respect to any Person, (i) the articles of incorporation, certificate of limited partnership, certificate of formation, statement of qualification, limited partnership agreement, partnership agreement, operating agreement or other similar organizational document of such Person, (ii) the by-laws or other similar document of such Person, (iii) any certificate of designation or other filed instrument relating to the rights of preferred shareholders or other holders of Capital Stock of such Person and (iv) any shareholder rights agreement or other similar agreement.

 

Cheniere Energy” means Cheniere Energy, Inc., a Delaware corporation.

 

CLNGI” means Cheniere LNG, Inc. a Delaware corporation and wholly owned Subsidiary of Cheniere Energy.

 

Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or, if applicable, the Loans comprising such Borrowing, are Tranche A Loans or Tranche B Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Tranche A Commitment or Tranche B Commitment.

 

Closing Date” means the date upon which the conditions precedent set forth in Section 3.1 of the Credit Agreement have been initially satisfied (or waived by the Administrative Agent).

 

5



 

Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to the Code are to the Code as in effect at the date of the Credit Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

 

Collateral” means all Property that, in accordance with the terms of the Security Documents, is or is intended to be subject to any Lien in favor of any or all of the Secured Parties as security for the Obligations.

 

Collateral Agent” means ConocoPhillips, acting in its capacity as Collateral Agent for the Secured Parties, and shall include any successor Collateral Agent appointed pursuant to Section 8.9 of the Credit Agreement.

 

Commitments” means the Construction Loan Commitments and the Term Loan Commitments.

 

Completion” means the satisfaction of all the items set forth in the Independent Engineer Completion Certificate as certified by the Independent Engineer to the Administrative Agent.

 

ConocoPhillips” means ConocoPhillips Company, a corporation organized and existing under the laws of the State of Delaware.

 

Consent Agreement” means an Acknowledgment and Consent Agreement between a Project Participant and the Collateral Agent and acknowledged by the Borrower, substantially in the form of Exhibit F to the Credit Agreement or such other form of acknowledgment and consent agreement consented to by the Administrative Agent; such consent to not be unreasonably withheld; provided however, the Administrative Agent may withhold its consent in its sole discretion in order to protect the validity of the Lien of the Security Documents or the priority contemplated thereby or the material rights and remedies of the Secured Parties under any Financing Document from being impaired.

 

Construction Account” has the meaning provided in the Account Agreement.

 

Construction Advisory Services Agreement” means the construction advisory services agreement dated as of July 2, 2004 between ConocoPhillips and the Borrower.

 

Construction Budget” means the budget dated the Closing Date for Phase 1, prepared and certified as such by an Authorized Officer of the Borrower of all Project Costs theretofore incurred and thereafter expected to be incurred by the Borrower Entities on or prior to the final completion of the Construction Contracts including the Final Completion of the EPC Contract, as the same may be amended from time to time in accordance with Section 5.20 of the Credit Agreement.

 

Construction Contractor” means any contractor pursuant to a Construction Contract, including the EPC Contractor.

 

6



 

Construction Contracts” means the EPC Contract and all other material contracts or agreements for the engineering, procurement, construction, design, installation, completion, and startup of the Project, including the construction of the pipeline to the pipeline interconnection at Stratton Ridge, Texas, but excluding the Construction Advisory Services Agreement and any subcontract under the EPC Contract.

 

Construction Loan Availability Period” means the period commencing on the Closing Date, and ending on the earlier to occur of (i) the full utilization of the Construction Loan Commitments of the Lenders, (ii) the Term Date, (iii) the Project Completion Date, and (iv) the termination of the Total Commitment pursuant to the provisions of the Credit Agreement; provided, however, the Tranche B Commitments shall terminate if financing is utilized under a TPS Loan facility.

 

Construction Loan Commitment” means, as to any Lender, the aggregate of such Lender’s Tranche A Construction Loan Commitment and Tranche B Construction Loan Commitment.

 

Construction Loans” means the Tranche A Construction Loans and the Tranche B Construction Loans.

 

Construction Notes” means the Tranche A Construction Notes and the Tranche B Construction Notes.

 

Construction Requisition” means a certificate, substantially in the form of Exhibit D-1 to the Credit Agreement, executed and delivered by an Authorized Officer of the Borrower to the Administrative Agent and the Depositary Agent, including all attachments referred to therein (a) pursuant to Section 3.1(e) or 3.2(a) of the Credit Agreement in connection with each Disbursement of Construction Loans and (b) pursuant to Section 5.33 of the Credit Agreement in connection with the application of Project Revenues contemplated thereby.

 

Contango” means Contango Oil & Gas Company, a Delaware corporation.

 

Contango LP” means Contango Sundance, Inc., a Delaware corporation and wholly owned Subsidiary of Contango.

 

Contingency” means the aggregate amount specified in the “Contingency” line item in the Construction Budget.

 

Conversion” means the actions to be taken on the Conversion Date pursuant to Section 2.2(a) of the Credit Agreement.

 

Conversion Date” means the date on which the conditions precedent set forth in Section 3.3 of the Credit Agreement are satisfied or waived and Conversion occurs.

 

COP Debt Payment Account” has the meaning provided in the Account Agreement.

 

7



 

COP Designated Employees” means the Designated Employees that may be terminated, removed or replaced solely by the COP Directors under the Stockholders Agreement.

 

COP Directors” has the meaning provided in the Stockholders Agreement.

 

COP O&M Percentage has the meaning provided in the Account Agreement.

 

COP Redemption Account” has the meaning provided in the Account Agreement.

 

COP Revenue Account” has the meaning provided in the Account Agreement.

 

COP Royalty” means the “FLNG Component” as that term is defined in the COP TUA.

 

COP Royalty Lien” means the Liens, if any, upon COP Royalty granted by the Borrower in favor of either (1) any or all TPS Secured Parties to secure the TPS Obligations or (2) any or all Expansion Secured Parties to secure the Expansion Obligations.

 

COP Shipper” means “Customer” (as that term is defined in the COP TUA) and “Temporary Customer” (as that term is defined in the COP TUA) and their respective successors and assigns in whole or in part.

 

COP Supplemental Debt Payment Account” has the meaning provided in the Account Agreement.

 

COP TUA” means the TUA between COP Shipper and the Borrower together with the Services Quantity Increase Agreement, and any partial or full replacement of either of the foregoing, including any Parallel TUA (as defined in the TUA between COP Shipper and the Borrower).

 

Credit Agreement” means the Credit Agreement, dated as of July 2, 2004, among the Borrower, the General Partner, the Administrative Agent, the Lenders, and the Collateral Agent.

 

Crest” means Crest Investment Company.

 

Crest Agreement” means the Settlement and Purchase Agreement dated as of June 14, 2001, among Crest, Cheniere Energy and the other parties thereto, which for purposes of the transfers in to the Crest Reserve Account under Section 4.3 of the Account Agreement will be as in effect on the Closing Date.

 

Crest Reserve Account” has the meaning provided in the Account Agreement.

 

Date Certain” means ***.

 

Debt” of any Person means, without duplication, (i) all obligations of such Person for borrowed money; (ii) all obligations issued, undertaken or assumed as the deferred

 

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purchase price of property or services which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof or is evidenced by a note or other instrument, except trade accounts arising in the ordinary course of business; (iii) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (iv) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by the Person; (v) (A) all Capitalized Lease Liabilities and (B) Operating Lease Liabilities that are entered into in the ordinary course of business in an aggregate amount in excess of $*** in rental payments annually; (vi) all net payment obligations with respect to interest rate cap agreements, interest rate swap agreements, sales of foreign exchange options and other hedging agreements or arrangements; (vii) all payment obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guarantee; (viii) all Debt referred to in clauses (i) through (vii) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt; and (ix) all Guarantees by such Person of the Debt of others.  The Debt of any Person shall include the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt provide that such Person is not liable therefor.

 

Debt Service” means, for any period, the sum of (i) all amounts payable by the Borrower during such period pursuant to the terms and conditions of the Financing Documents (including all amounts that are required to be prepaid and all amounts overdue from any prior period) in respect of principal of the Loans during such period plus (ii) all amounts payable in respect of Interest Expense for such period.

 

Debt Service Coverage Ratio” means for any period, without duplication, the ratio of (a) the sum of all Project Revenues of the Borrower during such period less the aggregate amount of the Operating and Maintenance Costs (including amounts to be deposited in the Major Maintenance Reserve Account during such period) for such period to (b) the sum of all principal, premium (if any) and interest due and payable with respect to the Loans and other Permitted Debt outstanding.

 

Debt Service B.I./Delay Insurance” has the meaning provided in the Account Agreement.

 

Debt Service Installment” has the meaning provided in the COP TUA.

 

Debtor Relief Law” means any applicable liquidation, dissolution, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, readjustment of debt or similar law affecting the rights or remedies of creditors generally, as in effect from time to time, including the Federal Bankruptcy Code.

 

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Deed of Trust” means the Leasehold Deed of Trust, Security Agreement, Assignment of Rents and Financing Statement, dated as of July 2, 2004, by the Site Lessee to Robert W. Mahood as trustee for the benefit of the Collateral Agent for the Secured Parties.

 

Default” means any event or condition that, with the giving of notice, the passage of time or both, would become an Event of Default.

 

Default Notice Date” has the meaning provided in the Account Agreement.

 

Default Rate” has the meaning provided in Section 2.8(b) of the Credit Agreement.

 

Defaulting Lender” means any Lender that does not make available to the Administrative Agent its pro rata portion of the aggregate amount of the Loans requested to be made on the date specified in the applicable Notice of Borrowing pursuant to Section 2.6 of the Credit Agreement.

 

Delay Liquidated Damages” means all liquidated damages payable under the EPC Contract or other Construction Contract in respect of delays by or on behalf of the contractor or delays in meeting standards, criteria or deadlines.  Notwithstanding the immediately preceding sentence, Delay Liquidated Damages shall not include Performance Liquidated Damages.

 

Depositary Agent” has the meaning provided in the Account Agreement.

 

Designated Employees” has the meaning provided in the Stockholders Agreement.

 

Disbursement” means any disbursement of a Loan pursuant to the Credit Agreement.

 

Disbursement Date” means the date specified in a Construction Requisition as the date on which Disbursements of Construction Loans are requested by the Borrower.

 

Disposition” means any sale, transfer, assignment, lease, conveyance or other disposition by the Borrower to any Person of any Property.

 

Distribution Account” has the meaning provided in the Account Agreement.

 

Distribution Conditions” has the meaning provided in Section 5.16 of the Credit Agreement.

 

Distribution Suspense Account” has the meaning provided in the Account Agreement.

 

Dollars” and the sign “$” shall each mean freely transferable, lawful money of the United States.

 

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Drawdown Schedule” means the schedule of Disbursements of the Construction Loans to be made during each month prior to the Conversion Date, prepared by the Borrower and delivered to the Administrative Agent pursuant to Section 3.1 or 3.2 of the Credit Agreement, as the same may be amended from time to time in accordance with the Credit Agreement.

 

Easements” means the easements described in the Site Leases and any other easements which are appurtenant to the Land.

 

Eligible Affiliate” means, with respect to a Lender, an Affiliate of such Lender (1) that is a commercial bank or other financial institution having a combined capital and surplus of at least $50,000,000 or (2) whose obligations under the Credit Agreement are guaranteed by an Eligible Institution.

 

Eligible Institution” means (1) a commercial bank or other financial institution rated at least “A–” by S&P and “A3” by Moody’s, or (2)(A) in the case of the Lenders, also a LNG Supply Project and (B) in the case of either the TPS Secured Parties or Expansion Secured Parties, also a Person acceptable in writing to the Administrative Agent (such acceptance not to be unreasonably withheld).

 

Enforcement Action” means any action or proceeding against any Borrower Entity, any Equity Pledgor, the Project or all or any part of the Collateral taken for the purpose of (i) enforcing the rights of any Secured Party under or in respect of the Collateral or the Security Documents, including the initiation of action in any court or before any Governmental Authority to enforce such rights, and any action to exercise any rights provided in Sections 7.2, 7.3 or 7.5 of the Credit Agreement, and (ii) adjudicating or seeking a judgment on a claim.

 

Environmental Claim” means, with respect to any Person, (i) any notice, claim, administrative, regulatory or judicial or equitable action, suit, Lien, judgment, demand by any other Person or other Legal Matter and (ii) any other written communication by any Governmental Authority, in either case alleging or asserting such Person’s liability for investigatory costs, cleanup costs, consultants’ fees, governmental response costs, damages to natural resources (including wetlands, wildlife, aquatic and terrestrial species and vegetation) or other Property, property damages, personal injuries, fines or penalties arising out of, based on or resulting from (x) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person or (y) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or Governmental Approval issued under any Environmental Law.

 

Environmental Laws” means any and all Applicable Laws, now or hereafter in effect, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, human health or safety, or to emissions, discharges, releases or threatened releases of pollutants, contaminants, condensate, chemicals, Hazardous Material, or toxic or hazardous substances or wastes into the environment including ambient air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or toxic or hazardous substances or wastes.

 

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EPC Contract” means an engineering, procurement, and construction contract between Borrower and the EPC Contractor for the construction of certain work on Phase 1, including, berthing facilities, unloading facilities, a vapor return line system, LNG storage facilities, and LNG regasification facilities, but excluding (i) a pipeline to the pipeline interconnection at Stratton Ridge, Texas (ii) any improvements included in a Phase 2 Project and (iii) Phase 1 Addition (Stratton Ridge).

 

EPC Contractor” means a joint venture or partnership between Technip and Zachry Construction Corporation, or another Person or Persons acceptable to the Administrative Agent and the Borrower.

 

EPC Contractor Event” means any of the following:

 

(a)                                  the EPC Contractor shall (i) apply for or consent to the appointment of, or the taking of possession by, a trustee, receiver, custodian, liquidator or the like of itself or all or a substantial part of its Property, (ii) admit in writing its inability or be generally unable to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code or any other Debtor Relief Law, (v) file a petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to controvert in a timely and appropriate manner, acquiesce in writing to, or file an answer admitting the material allegations of any petition filed against it in an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law or (vii) take any action for the purpose of effecting any of the foregoing;

 

(b)                                 A proceeding or case shall be commenced without the application or consent of the EPC Contractor in any court of competent jurisdiction, seeking with respect to such Person (i) its liquidation, reorganization, dissolution or winding-up or the composition or readjustment of its debts or similar action or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person or all or a substantial part of its Property under any Debtor Relief Law and such proceeding or case shall continue undismissed, or any order, judgment or decree approving any of the foregoing shall be entered and continue unstayed and in effect for a period of 60 or more consecutive days from and including the date of commencement of such proceeding or case, or any order for relief against such Person shall be entered in any involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law; and

 

(c)                                  the EPC Contractor is terminated.

 

EPC Guarantor” means Technip, S.A., société anonyme organized under the laws of France.

 

EPC Guaranty” means the Guaranty entered into in connection with the EPC Contract made by the EPC Guarantor in favor of the Borrower.

 

Equity Pledge” means, collectively, the Equity Pledge (Smith), the Equity Pledge (FGP), Equity Pledge (FLNGI) and any other Equity Pledge delivered pursuant to Section 3.6(f) or the applicable Equity Pledge.

 

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Equity Pledge (FGP)” means the Pledge Agreement to be delivered by FGP in favor of the Collateral Agent pursuant to Section 3.6(f).

 

Equity Pledge (FLNGI)” means the Pledge Agreement to be delivered by FLNGI in favor of the Collateral Agent pursuant to Section 3.6(f).

 

Equity Pledge (Smith)” means the Pledge Agreement to be delivered by Smith in favor of the Collateral Agent pursuant to Section 3.6(f).

 

Equity Pledgors” means for any determination of whether the conditions of Sections 3.2, 3.3 and 3.6 to making or converting any Tranche B Loan have been satisfied and at any time any Tranche B Loan is outstanding, FLNGI and its permitted successors and assigns, Smith, FGP and any Non-Smith Equity Pledgor.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

ERISA Affiliate” shall mean, with respect to any Person, (a) a corporation which is a member of a controlled group of corporations with such Person within the meaning of Section 414(b) of the Code, (b) a trade or business (including a sole proprietorship, partnership, trust, estate or corporation) which is under common control with such Person within the meaning of Section 414(c) of the Code or Section 4001(b)(1) of ERISA, (c) a member of an affiliated service group with such Person within the meaning of Section 414(m) of the Code or (d) an entity described in Section 414(o) of the Code.

 

Event of Default” has the meaning provided in Section 7.1 of the Credit Agreement.

 

Event of Loss” means an event that causes all or a material part of the Project to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever, or any Expropriation Event, or transfer under threat of an Expropriation Event, of any material part of the Project by any Governmental Authority.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

Expansionmeans a Person (other than an individual) (1) that as of the Closing Date the parties to the Credit Agreement anticipate may be formed for the purpose of undertaking the development, construction and ownership of LNG facilities on or near Quintana Island, Texas and/or underground storage capacity at or near Stratton Ridge, Texas and any other facilities and activities related to or in connection therewith, (2) that is not the Borrower or the General Partner and (3) of which neither the Borrower nor General Partner owns directly or indirectly any Capital Stock.

 

Expansion Agents” means, collectively, the administrative agent, the collateral agent and the depositary agent, if any, or other similar agent for and on behalf of the Expansion Lenders appointed in or pursuant to the Expansion Financing Documents.

 

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Expansion Financing Documents” means, collectively, the notes, the credit agreement, the security documents and any other similar or related documents executed in connection with the making of the Expansion Loans other than opinions and certificates.

 

Expansion Lenders” means the lenders of the Expansion Loans.  No such lender may be an Affiliate of the Borrower or Expansion.

 

Expansion Loans” means loans to Expansion, its general partner or any their Subsidiaries made by the lenders financing (i) the development and construction of a Phase 2 Project and (ii) interest on such loans during the development and construction of the Phase 2 Project for which such loans were made.

 

Expansion Obligations” means, collectively, all loans, advances, Debts, debts, liabilities, and obligations, howsoever arising or owed by any and all of Expansion and its Subsidiaries under any or all Expansion Financing Documents or otherwise to any Expansion Secured Party of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all interest, fees, charges, expenses, attorneys’ fees and consultants’ fees chargeable to the Expansion; and which, for the avoidance of doubt, includes (a) any and all amounts advanced by any Expansion Secured Party in order to preserve the Expansion Collateral or to preserve the related Liens; (b) in the event of any enforcement action, the expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Expansion Collateral, or of any exercise by any Secured Party of its rights under the Expansion Financing Documents, together with attorneys’ fees and court costs and (c) performance of its obligations under the documents executed in connection therewith.

 

Expansion Secured Parties” means, collectively, the Expansion Agents and the Expansion Lenders.

 

Expropriation Event” means (a) any condemnation, nationalization, seizure, compulsory transfer or expropriation by a Governmental Authority of all or any portion of the Project or the Property or the assets of any Borrower Entity or of its Capital Stock, (b) any assumption by a Governmental Authority of control or ownership of the Property, assets or business operations of any Borrower Entity or of its Capital Stock, (c) any taking of any action by a Governmental Authority for the dissolution or disestablishment of any Borrower Entity, (d) any taking of any action by a Governmental Authority that would prevent any Borrower Entity from carrying on its business or operations or a substantial part thereof or (e) any circumstance or event, or series of circumstances or events in consequence of which any of the foregoing occurs.

 

Facility” means the “Freeport Facility” (as that term is defined in the COP TUA) on the Closing Date and any alterations, remodeling, additions, reconstructions, improvements or demolitions in compliance with Section 5.21(d) of the Credit Agreement together with any and all Phase 1 Additions (other than the Phase 1 Addition (Stratton Ridge)), but excluding the foregoing from the definition of “Facility” solely to the extent the foregoing includes any Phase 2 Project.

 

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Federal Bankruptcy Code” means Title 11, Section 101 et seq. of the United States Code titled “Bankruptcy,” as amended from time to time, and any successor statute thereto.

 

Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (ii) if such rate is not so published for such day pursuant to clause (i), the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent.

 

Fee” has the meaning provided in the COP TUA.

 

FERC” means the Federal Energy Regulatory Commission of the United States or any successor agency thereto.

 

FERC Approval” means the FERC order issued June 18, 2004 (Docket No. CP03-75-000) granting authorization under Section 3(a) of the Natural Gas Act (available at 15 U.S.C. §717(c)) for the Project, pursuant to the application filed by the Borrower with the Federal Energy Regulatory Commission on March 28, 2003 and that meets the requirements of Sections 7.1(b)(iii) and 7.1(c)(ii) of the Omnibus Agreement.

 

FGP” means Freeport LNG-GP, Inc., a Delaware corporation.

 

Final Completion” shall have the meaning provided in the EPC Contract.

 

Final Maturity Year” means, as of any date of determination, the year in which the latest stated maturity of any Debt then outstanding shall occur.

 

Financing Documents” means:

 

1.               the Credit Agreement,

2.               the Equity Pledges,

3.               the Notes,

4.               the Security Documents,

5.               the Reserve Account Support Instruments,

6.               the Acceptable Credit Support,

7.               any intercreditor agreement between any Secured Party and another creditor of the Borrower and/or a creditor of Expansion relating to, among other things, the Project and/or any Phase 2 Project and

8.               any other similar or related documents executed in connection with the making of the Loans other than opinions and certificates.

 

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FLNGI” means Freeport LNG Investments LLLP, a Delaware limited liability limited partnership.

 

Foreign Lender” means any Lender that is not a United States person as defined in Code Section 7701(a)(30).

 

GAAP” means the generally accepted accounting principles in effect from time to time in the U.S.

 

General B.I./Delay Insurance” has the meaning provided in the Account Agreement.

 

General Partner” means any Person that becomes and is a general partner of the Borrower in accordance with the Partnership Agreement.

 

Good LNG Practices” means (1)(A) International LNG Terminal Standards (as defined in the COP TUA); and (B) to the extent not inconsistent with International LNG Terminal Standards, such good and prudent practices as are generally followed in the LNG industry by Reasonable and Prudent Operators (as defined in the COP TUA) of LNG receiving and regasification terminals and (2)(A) Pipeline Standards (as defined in the COP TUA); and (B) to the extent not inconsistent with Pipeline Standards, such good and prudent practices as are generally followed by Reasonable and Prudent Operators of U.S. Gas (as defined in the COP TUA) pipelines; provided however, it is expressly understood that the foregoing standards and practices shall apply to (and the defined terms referenced in the definition of “Good LNG Practices” shall be construed to) the engineering, procurement, design, construction, installation, testing, completion, startup, use, equipping, operation, maintenance, repair, improvement, management and/or conduct of the Project or Collateral or any part of either of the foregoing and all activities incidental or related to or in connection with any of the foregoing and not just the operation and maintenance of the Facility, except to the extent such standards and practices are inconsistent with the standards and practices in the Construction Contracts, in which case such applicable standards and practices set forth in the Construction Contracts shall apply to such Construction Contractors.

 

Governmental Approval” means any authorization, consent, approval, license, action, lease, ruling, permit, tariff, rate, credit, directive, certification, exemption, filing, variance, claim, order, judgment, decree, publication, notice by, of or with, declaration of or with, or registration by or with, any Governmental Authority.

 

Governmental Authority” means the government of any federal, state, local, municipal, or other political subdivision in which the Project or any part thereof is at any time located, within or without the United States, and any other government or political subdivision thereof exercising jurisdiction over the Project or any party to any of the Project Documents, including any governmental department, commission, board, bureau, agency, regulatory authority, instrumentality of such governments and political subdivisions.

 

Guarantee” of or by any Person means any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Debt or other obligation (the “primary obligation”) of any other Person (the “primary obligor”) in any manner,

 

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whether directly or indirectly, and including any obligation of such guaranteeing Person, direct or indirect contingent or otherwise, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital, net worth or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guarantee issued to support such Debt or obligation; provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum possible liability of such Person as determined by such Person in good faith.

 

Hazardous Material” means any substance that is regulated or could lead to liability under any Environmental Law, including any petroleum or petroleum product, hydrocarbons, natural gas in any form, asbestos in any form that is or could become friable, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs), hazardous waste, hazardous material, hazardous substance, toxic substance, contaminant or pollutant, as defined or regulated as such under any applicable Environmental Law.

 

Hedging Agreement” means any agreement in respect of any capacity sales, fuel supply, interest rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, any other interest rate, commodity or currency contract or any other similar transaction  or agreement (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.  For the avoidance of doubt, the term “Hedging Agreement” does not include an Acceptable Use Agreement.

 

Indemnified Liabilities” has the meaning provided in Section 9.2(a) of the Credit Agreement.

 

Indemnified Person” has the meaning provided in Section 9.2(a) of the Credit Agreement.

 

Independent Accountants” means, at any time, a firm of independent certified public accountants of national standing appointed by agreement of the Board of Directors of the General Partner.

 

Independent Engineer” means the Person appointed after consultation with the Borrower by the Administrative Agent as independent engineer or successor appointed by the Administrative Agent or pursuant to an intercreditor arrangement between the Secured Parties and the TPS Secured Parties.  The Administrative Agent shall endeavour to require in its contract

 

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with the Independent Engineer that the Independent Engineer will deliver the Independent Engineer Completion Certificate within 30 days of the satisfactory completion of the performance tests achieving minimum acceptance criteria.

 

Independent Engineer Completion Certificate” means a certificate, substantially in the form of Exhibit E-2 to the Credit Agreement, duly completed and signed by an Authorized Officer of the Independent Engineer that (1) provides that Phase 1 of the Project has achieved Completion and (2) sets forth the specific date that is the Project Completion Date.

 

Initial Lender” means ConocoPhillips, not in its individual capacity except as expressly provided in the Transaction Documents, but solely as Lender.

 

Initial Period” has the meaning provided in Section 3.1 of the Credit Agreement.

 

Insurance Advisor” means the Person appointed after consultation with the Borrower by the Administrative Agent as insurance advisor or successor appointed by the Administrative Agent or pursuant to an intercreditor arrangement between the Secured Parties and the TPS Secured Parties.

 

Insurance Proceeds” means all amounts payable to any Borrower Entity or the Collateral Agent in respect of any insurance required to be maintained (or caused to be maintained) by any Borrower Entity pursuant to Section 5.9 of the Credit Agreement (other than general liability insurance, delayed completion insurance and business interruption insurance), regardless of whether such payments are received from any insurer or from a Construction Contractor pursuant to a Construction Contract or otherwise.

 

Interest Expense” means, for any period, all interest on the Loans accrued or capitalized during such period (whether or not actually paid during such period) pursuant to the Financing Documents.

 

Investment” in any Person means, without duplication: (a) the acquisition (whether for cash, securities, other Property, services or otherwise) or holding of Capital Stock, bonds, notes, debentures, or other securities of such Person, or any agreement to make any such acquisition or to make any capital contribution to such Person; or (b) the making of any deposit with, or advance, loan or other extension of credit to, such Person.

 

Land” means the site upon which the Facility will be installed and all real property rights, title and interests of any or all Borrower Entities, together with any fixtures, crops, timber, aerial rights, subsurface rights, and civil works constructed thereon and any other easements, licenses and other real property rights, title and interests whether now owned or hereafter acquired by or on behalf of any Borrower Entity, including the land referred to in the Site Leases and the Easements but excluding the foregoing from the definition of “Land” solely to the extent (1) sublet, sold or otherwise assigned in fee or leasehold to Expansion or an Affiliate of Expansion in accordance with Section 2.16 of the Credit Agreement or (2) such foregoing includes the site solely for the Phase 1 Addition (Stratton Ridge) and is not otherwise part of the site for Phase 1 or another Phase 1 Addition.

 

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Legal Matter” means any action, suit, litigation other legal proceeding, alternative dispute resolution proceeding, inquiry, investigation or other proceeding by or before any Governmental Authority or any arbitral or other forum, including any of the foregoing in which injunctive, declaratory or similar relief is involved and any condemnation proceedings.

 

Lender” means each Lender referenced on Annex I to the Credit Agreement and any Assignee thereof pursuant to Section 9.11 of the Credit Agreement.

 

Lien” means, with respect to any Property of any Person, any mortgage, pledge, hypothecation, assignment, mandatory deposit arrangement with any other Person owning Debt of such Person, encumbrance, lien (statutory or other), deed of trust, fiduciary transfer of title, charge, lease, sale and lease-back arrangement, easement, servitude, trust arrangement, security interest, preference, priority or other security agreement of any kind or nature whatsoever that has the substantial effect of constituting a security interest, including any conditional sale or other title retention agreement, any financing lease having substantially the same effect as any of the foregoing and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction, domestic or foreign.

 

Limited Partner” means any Person that becomes and is a limited partner of the Borrower in accordance with the Partnership Agreement.

 

LNG” means liquefied natural gas.

 

LNG Supply Project” has the meaning provided in the COP TUA.

 

Loan Termination Date” means the date on which all Obligations, other than contingent liabilities and obligations