Exhibit 10.1

 

 

LUMP SUM TURNKEY AGREEMENT

 

for the

 

ENGINEERING, PROCUREMENT AND CONSTRUCTION

 

of the

 

SABINE PASS LNG RECEIVING, STORAGE AND REGASIFICATION TERMINAL

 

by and between

 

SABINE PASS LNG, L.P.

 

as Owner

 

and

 

BECHTEL CORPORATION

 

as Contractor

 

Dated as of the 18^th Day of December, 2004

 

 

 

TABLE OF CONTENTS

 

RECITALS
ARTICLE 1		DEFINITIONS
ARTICLE 2		RELATIONSHIP OF OWNER, CONTRACTOR AND SUBCONTRACTORS
	2.1	Status of Contractor
	2.2	Key Personnel, Organization Chart and Contractor Representative
	2.3	Subcontractors and Sub-subcontractors
	2.4	Subcontracts and Sub-subcontracts
	2.5	Contractor Acknowledgements
ARTICLE 3		CONTRACTOR’S RESPONSIBILITIES
	3.1	Scope of Work
	3.2	Specific Obligations
	3.3	Design and Engineering Work
	3.4	Spare Parts
	3.5	Training Program in General
	3.6	Environmental Regulations and Environmental Compliance
	3.7	Construction Equipment
	3.8	Employment of Personnel
	3.9	Clean-Up
	3.10	HSE Plan; Security
	3.11	Emergencies
	3.12	Contractor Permits
	3.13	Books, Records and Audits
	3.14	Tax Accounting
	3.15	Temporary Utilities, Roads, Facilities and Storage
	3.16	Subordination of Liens
	3.17	Hazardous Materials
	3.18	Quality Assurance
	3.19	Reports
	3.20	Payment
	3.21	Commercial Activities
	3.22	Title to Materials Found
	3.23	Survey Control Points and Layout
	3.24	Cooperation with Others
	3.25	Responsibility for Property
	3.26	Explosives
	3.27	Taxes
	3.28	Equipment Quality
ARTICLE 4		OWNER’S RESPONSIBILITIES
	4.1	Payment and Financing
	4.2	Owner Permits

 

 

	4.3	Access to the Site and Off-Site Rights of Way and Easements
	4.4	Operation Personnel
	4.5	Sales and Use Tax Matters
	4.6	Legal Description and Survey
	4.7	Hazardous Materials
	4.8	Owner-Provided Items
	4.9	LNG Tanker Release
ARTICLE 5		COMMENCEMENT OF WORK, PROJECT SCHEDULE, AND SCHEDULING OBLIGATIONS
	5.1	Commencement of Work
	5.2	Limited Notice to Proceed/Notice to Proceed
	5.3	Project Schedule
	5.4	CPM Schedule Submissions
	5.5	Recovery and Recovery Schedule
	5.6	Acceleration and Acceleration Schedule
ARTICLE 6		CHANGES; FORCE MAJEURE; AND OWNER-CAUSED DELAY
	6.1	Change Orders Requested by Owner
	6.2	Change Orders Requested by Contractor
	6.3	Contract Price Adjustment; Contractor Documentation
	6.4	Change Orders Act as Accord and Satisfaction
	6.5	Timing Requirements for Notifications and Change Order Requests by Contractor
	6.6	Evidence of Funds
	6.7	Adjustment Only Through Change Order
	6.8	Force Majeure
	6.9	Extensions of Time and Adjustment of Compensation
	6.10	Delay
	6.11	Contractor Obligation to Mitigate Delay
ARTICLE 7		CONTRACT PRICE AND PAYMENTS TO CONTRACTOR
	7.1	Contract Price
	7.2	Interim Payments
	7.3	Final Completion and Final Payment
	7.4	Payments Not Acceptance of Work
	7.5	Payments Withheld
	7.6	Interest on Late Payments and Improper Collection
	7.7	Offset
	7.8	Procedure for Withholding, Offset and Collection on the Letter of Credit
	7.9	Payment Error
ARTICLE 8		TITLE AND RISK OF LOSS
	8.1	Title
	8.2	Risk of Loss
ARTICLE 9		INSURANCE AND LETTER OF CREDIT

 

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	9.1	Insurance
	9.2	Irrevocable Standby Letter of Credit
	9.3	Bechtel General Corporate Facts and Contractor Quarterly Confirmation
ARTICLE 10		OWNERSHIP OF DOCUMENTATION
	10.1	Work Product, Contractor’s Intellectual Property and Third Party Proprietary Work Product
	10.2	Return/Delivery of Certain Property
	10.3	Contractor’s Right to Use of Work Product
	10.4	Owner Provided Documents
ARTICLE 11		COMPLETION AND PERFORMANCE LIQUIDATED DAMAGES
	11.1	Notice of RFCD and Delivery of LNG for Commissioning, Start-Up and Performance Testing
	11.2	Delay in RFCD
	11.3	Notice and Requirements for Substantial Completion
	11.4	Owner Acceptance of RFCD and Substantial Completion
	11.5	Performance Liquidated Damages
	11.6	Punchlist
	11.7	Notice and Requirements for Final Completion
	11.8	Operations Activities
	11.9	Schedule Bonus
ARTICLE 12		WARRANTY AND CORRECTION OF WORK
	12.1	Warranty
	12.2	Correction of Work Prior to Substantial Completion
	12.3	Correction of Work After Substantial Completion
	12.4	Assignability of Warranties
	12.5	Waiver of Implied Warranties
ARTICLE 13		DELAY LIQUIDATED DAMAGES
	13.1	Delay Liquidated Damages
ARTICLE 14		CONTRACTOR’S REPRESENTATIONS
	14.1	Corporate Standing
	14.2	No Violation of Law; Litigation
	14.3	Licenses
	14.4	No Breach
	14.5	Corporate Action
	14.6	Financial Solvency
ARTICLE 15		OWNER’S REPRESENTATIONS
	15.1	Standing
	15.2	No Violation of Law; Litigation
	15.3	Licenses
	15.4	No Breach
	15.5	Corporate Action

 

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	15.6	Financial Solvency
ARTICLE 16		DEFAULT, TERMINATION AND SUSPENSION
	16.1	Default by Contractor
	16.2	Termination for Convenience by Owner
	16.3	Suspension of Work
	16.4	Suspension by Contractor
	16.5	Termination by Contractor
	16.6	Termination in the Event of Delayed Notice to Proceed
	16.7	Termination in the Event of an Extended Force Majeure
	16.8	Contractor’s Right to Terminate
ARTICLE 17		INDEMNITIES
	17.1	General Indemnification
	17.2	Injuries to Contractor’s Employees and Damage to Contractor’s Property
	17.3	Injuries to Owner’s Employees and Damage to Owner’s Property
	17.4	Patent and Copyright Indemnification Procedure
	17.5	Lien Indemnification
	17.6	Owner’s Failure to Comply with Applicable Law
	17.7	Landowner Claims
	17.8	Legal Defense
	17.9	Enforceability
ARTICLE 18		DISPUTE RESOLUTION
	18.1	Negotiation
	18.2	Arbitration
	18.3	Continuation of Work During Dispute
	18.4	Escrow of Certain Disputed Amounts By Owner
ARTICLE 19		CONFIDENTIALITY
	19.1	Contractor’s Obligations
	19.2	Owner’s Obligations
	19.3	Definitions
	19.4	Exceptions
	19.5	Equitable Relief
	19.6	Term
ARTICLE 20		LIMITATION OF LIABILITY
	20.1	Contractor Aggregate Liability
	20.2	Limitation on Contractor’s Liability for Liquidated Damages
	20.3	Liquidated Damages In General
	20.4	Consequential Damages
	20.5	Exclusive Remedies
	20.6	Applicability
	20.7	Term Limit
ARTICLE 21		MISCELLANEOUS PROVISIONS

 

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	21.1	Entire Agreement
	21.2	Amendments
	21.3	Joint Effort
	21.4	Captions
	21.5	Notice
	21.6	Severability
	21.7	Assignment
	21.8	No Waiver
	21.9	Governing Law
	21.10	Successors and Assigns
	21.11	Attachments and Schedules
	21.12	Obligations
	21.13	Further Assurances
	21.14	Priority
	21.15	Restrictions on Public Announcements
	21.16	Potential Lenders, Potential Equity Investors and Equity Participants
	21.17	Foreign Corrupt Practices Act
	21.18	Language
	21.19	Counterparts
	21.20	Federal Energy Regulatory Commission Approval
	21.21	Owner’s Lender
	21.22	Independent Engineer
	21.23	Survival

 

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LIST OF ATTACHMENTS AND SCHEDULES

 

ATTACHMENT A		Scope of Work and Design Basis
	SCHEDULE A-1	Scope of Work
	SCHEDULE A-2	Design Basis
	SCHEDULE A-3	Conceptual Engineering Documents and Trends List
ATTACHMENT B		Contractor Deliverables
ATTACHMENT C		Payment Schedule
	SCHEDULE C-1	Milestone Payment Schedule
	SCHEDULE C-2	Monthly Payment Schedule
ATTACHMENT D		Form of Change Order
	SCHEDULE D-1	Change Order Form
	SCHEDULE D-2	Unilateral Change Order Form
	SCHEDULE D-3	Contractor’s Change Order Request Form/Contractor’s Response to a Change Order Proposed by Owner
	SCHEDULE D-4	Unit Rates for Change Orders Performed on a Time and Materials Basis
ATTACHMENT E		Project Schedule
ATTACHMENT F		Key Personnel and Contractor’s Organization
ATTACHMENT G		Approved Subcontractors and Sub-subcontractors and List of Major Equipment
ATTACHMENT H		Form of Limited Notice to Proceed and Notice to Proceed
	SCHEDULE H-1	Form of Limited Notice to Proceed
	SCHEDULE H-2	Form of Notice to Proceed
ATTACHMENT I		Form of Contractor’s Invoices
	SCHEDULE I-1	Form of Contractor’s Interim Invoice

 

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	SCHEDULE I-2	Form of Contractor’s Final Invoice
ATTACHMENT J		HSE Plan Requirements
ATTACHMENT K		Form of Lien and Claim Waivers
	SCHEDULE K-1	Contractor’s Interim Conditional Lien Waiver
	SCHEDULE K-2	Contractor’s Interim Unconditional Lien Waiver
	SCHEDULE K-3	Subcontractor’s Interim Conditional Lien Waiver
	SCHEDULE K-4	Subcontractor’s Interim Unconditional Lien Waiver
	SCHEDULE K-5	Contractor’s Final Conditional Lien and Claim Waiver
	SCHEDULE K-6	Contractor’s Final Unconditional Lien and Claim Waiver
	SCHEDULE K-7	Subcontractor’s Final Conditional Lien and Claim Waiver
	SCHEDULE K-8	Subcontractor’s Final Unconditional Lien and Claim Waiver
ATTACHMENT L		Form of RFCD Completion Certificate
ATTACHMENT M		Form of Substantial Completion Certificate
ATTACHMENT N		Form of Final Completion Certificate
ATTACHMENT O		Insurance Requirements
ATTACHMENT P		Contractor Permits
ATTACHMENT Q		Owner Permits
ATTACHMENT R		Form of Irrevocable, Standby Letters of Credit
	SCHEDULE R-1	Form of Performance Letter of Credit
	SCHEDULE R-2	Form of Payment Letter of Credit
ATTACHMENT S		Performance Tests
ATTACHMENT T		Performance Guarantees, Performance Liquidated Damages, Minimum Acceptance Criteria and Delay Liquidated Damages
ATTACHMENT U		Owner-Provided Items and Responsibility
ATTACHMENT V		Pre-Commissioning, Commissioning, Start-Up and Training

 

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ATTACHMENT W		Operating Spare Parts List
ATTACHMENT X		[Not Used.]
ATTACHMENT Y		Site and Off-Site Rights of Way and Easements
ATTACHMENT Z		[Not Used.]
ATTACHMENT AA		Form of Acknowledgement and Consent Agreement with Lender
ATTACHMENT BB		Form of Contractor and Owner Confirmations
	SCHEDULE BB-1	Form of Contractor Quarterly Confirmation
	SCHEDULE BB-2	Form of Owner Monthly Confirmation
	SCHEDULE BB-3	Form of Owner Quarterly Confirmation
ATTACHMENT CC		Independent Engineer Activities
ATTACHMENT DD		Form of Escrow Agreement
ATTACHMENT EE		Stainless Steel Adjustment, Tank Subcontract Materials Adjustment, Marine Loading Arm Adjustment and BOG Compressor Adjustment

 

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SABINE PASS LNG RECEIVING,

STORAGE AND REGASIFICATION TERMINAL

ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT

 

THIS ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT (this “Agreement”), dated as of the 18^th Day of December, 2004 (the “Contract Date”), is entered into by and between SABINE PASS LNG, L.P., a Delaware limited partnership, having its principal place of business at 717 Texas Avenue, Suite 3100, Houston, Texas 77002 (“Owner”), and BECHTEL CORPORATION, a Nevada corporation, having an address at 3000 Post Oak Boulevard, Houston, Texas 77056 (“Contractor” and, together with Owner, each a “Party” and together the “Parties”).

 

RECITALS

 

WHEREAS, Owner desires to enter into an agreement with Contractor to provide services for the engineering, procurement and construction of a turnkey LNG receiving, storage and regasification terminal to be owned by Owner, located near the town of Johnson’s Bayou in Cameron Parish, Louisiana, and all related appurtenances thereto (as more fully described below, the “Facility” or “Project”), and to commission, start-up and test the Facility, all as further described herein; and

 

WHEREAS, Contractor, itself or through its vendors, suppliers, and subcontractors, desires to provide the foregoing engineering, procurement, construction, commissioning, start-up and testing services on a turnkey lump sum basis;

 

NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

Article 1
DEFINITIONS

 

1.1                                 In addition to other defined terms used throughout this Agreement, when used herein, the following capitalized terms have the meanings specified in this Section 1.1.

 

“AAA” has the meaning set forth in Section 18.2.

 

“AAA Rules” has the meaning set forth in Section 18.2.

 

“Acceleration Schedule” has the meaning set forth in Section 5.6A.

 

“Actual Insurance Cost” has the meaning set forth in Section 7.1B.

 

“Administrative Agent” means the administrative agent under the credit agreement for the financing of the Project.

 

“Advance Payment” has the meaning set forth in Section 7.2A.

 

 

“Affiliate” means any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a Party.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or otherwise.

 

“Agreement” means this Agreement for the performance of the Work (including all Attachments and Schedules attached hereto), as it may be amended from time to time in accordance with this Agreement.

 

“Applicable Codes and Standards” means any and all codes, standards or requirements applicable to the Work set forth or listed in Attachment A, in any Applicable Law (subject to an adjustment by Change Order in accordance with Section 6.2A.1), or which are set forth or listed in any document or Drawing listed in Attachment A, which codes, standards and requirements shall govern Contractor’s performance of the Work, as provided herein, provided that, with respect to Applicable Codes and Standards which are not set forth in any Applicable Law, any reference herein to Applicable Codes and Standards shall be deemed only to refer to such Applicable Codes and Standards in existence as of the Contract Date.

 

“Applicable Law” means all laws, statutes, ordinances, orders, decrees, injunctions, licenses, Permits, approvals, rules and regulations, including any conditions thereto, of any Governmental Instrumentality having jurisdiction over all or any portion of the Site or the Facility or performance of all or any portion of the Work or the operation of the Facility, or other legislative or administrative action of a Governmental Instrumentality, or a final decree, judgment or order of a court which relates to the performance of Work hereunder.

 

“Bechtel General Corporate Facts” has the meaning set forth in Section 9.3.

 

“BOG Compressor Adjustment” has the meaning set forth in Section 7.1G.

 

“Boil-Off” means Natural Gas which comes out of a liquid phase into a gas phase in various locations within the Facility (except Natural Gas produced by the vaporizers), and is collected in the boil-off or vapor handling system.

 

“Books and Records” has the meaning set forth in Section 3.13A.

 

“Business Day” means every Day other than a Saturday, a Sunday or a Day that is an official holiday for employees of the federal government of the United States of America.

 

“CAD” has the meaning set forth in Section 3.3E.

 

“Change Order” means, after the execution of this Agreement, any of the following: (i) a written order issued by Owner to Contractor, in the form of Schedule D-2, (ii) a written instrument signed by both Parties in the form of Schedule D-1, in each case executed pursuant to the applicable provisions of Article 6, or (iii) a determination issued pursuant to Article 18, that authorizes an addition to, deletion from, suspension of, or any other

 

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modification or adjustment to the requirements of this Agreement, including the Work or any Changed Criteria.

 

“Changed Criteria” has the meaning set forth in Section 6.1A.

 

“Changes in Law” means any amendment, modification, superseding act, deletion, addition or change in or to Applicable Law (excluding changes to tax laws where such taxes are based upon Contractor’s income or profits/losses) that occurs and takes effect after the Contract Date.  A Change in Law shall include any official change in the interpretation or application of Applicable Law (including Applicable Codes and Standards set forth in Applicable Law), provided that such change is expressed in writing by the applicable Governmental Instrumentality.

 

“Cheniere” means Cheniere Energy, Inc.

 

“Collateral Agent” means the collateral agent under the credit agreement for the financing of the Project.

 

“Confidential Information” has the meaning set forth in Section 19.3.

 

“Confirmed Acceleration Directive” has the meaning set forth in Section 5.6A.

 

“Consequential Damages” has the meaning set forth in Section 20.4.

 

“Construction Equipment” means the equipment, machinery, structures, scaffolding, materials, tools, supplies and systems owned, rented or leased by Contractor or its Subcontractors or Sub-subcontractors for use in accomplishing the Work, but not intended for incorporation into the Facility.

 

“Construction Equipment Lessor” means the Subcontractor or Sub-subcontractor, as the case may be, who rents or leases Construction Equipment.

 

“Contract Date” has the meaning set forth in the preamble.

 

“Contract Price” has the meaning set forth in Section 7.1, as may be adjusted by Change Order in accordance with the terms of this Agreement.

 

“Contractor” has the meaning set forth in the preamble hereto.

 

“Contractor Group” means (i) Contractor and its Affiliates and (ii) the respective directors, officers, agents, employees, representatives of each Person specified in clause (i) above.

 

“Contractor Permits” means the Permits listed in Attachment P and any other Permits (not listed in either Attachment P or Attachment Q) necessary for performance of the Work which are required to be obtained in Contractor’s name pursuant to Applicable Law.

 

“Contractor Quarterly Confirmation” has the meaning set forth in Section 9.3.

 

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“Contractor Representative” means that Person or Persons designated by Contractor in a written notice to Owner specifying any and all limitations of such Person’s authority, and acceptable to Owner, who shall have complete authority to act on behalf of Contractor on all matters pertaining to this Agreement or the Work including giving instructions and making changes in the Work.  The Contractor Representative as of the Contract Date is designated in Section 2.2B.

 

“Contractor’s Confidential Information” has the meaning set forth in Section 19.2.

 

“Contractor’s Intellectual Property” has the meaning set forth in Section 10.1A.

 

“Cool Down” means the controlled process by which a process system is taken from its ambient condition (purged and cleaned of air, moisture and debris, etc.) and cooled down to its cryogenic temperature (at or below - 260°F) through the use of LNG, which shall be set forth in the Project Commissioning Plan.  A system has achieved “Cool Down” when it has reached its cryogenic temperature in a stable condition.

 

“Corrective Work” has the meaning set forth in Section 12.3.

 

“CPM Schedule” has the meaning set forth in Section 5.4.

 

“Day” means a calendar day.

 

“Default” has the meaning set forth in Section 16.1A.

 

“Defect” or “Defective” has the meaning set forth in Section 12.1A.

 

“Defect Correction Period” means the period commencing upon Substantial Completion and ending eighteen (18) months thereafter.

 

“Delay Liquidated Damages” has the meaning set forth in Section 13.1C.

 

“Design Basis” means the basis of design and technical limits and parameters of the Facility as set forth in Schedule A-2.

 

“Disclosing Party” has the meaning set forth in Section 19.3.

 

“Dispute” has the meaning set forth in Section 18.1.

 

“Dispute Notice” has the meaning set forth in Section 18.1.

 

“Drawings” means the graphic and pictorial documents showing the design, location and dimensions of the Facility, generally including plans, elevations, sections, details, schedules and diagrams, which are prepared as a part of and during the performance of the Work.

 

“Effective Date” means the date on which Owner issues the Limited Notice to Proceed in accordance with Section 5.2A.

 

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“Equipment” means all equipment, materials, supplies, software, licenses and systems required for the completion of and incorporation into the Facility.

 

“Escrow Agent” means the escrow agent under the Escrow Agreement.

 

“Escrow Agreement” means the escrow agreement between Owner, Escrow Agent and Contractor, which shall be in the form attached hereto as Attachment DD.

 

“Escrowed Amounts” has the meaning set forth in Section 18.4.

 

“Excessive Monthly Precipitation” means that the total precipitation measured at the Site for the Month that the event in question occurred has exceeded the following selected probability levels for such Month for Weather Station 417174 BPT, Port Arthur AP Beaumont TX, as specified in the National Oceanic and Atmospheric Administration publication titled “Climatography of the U.S. No. 81, Supplement No. 1, Monthly Precipitation Probabilities and Quintiles, 1971-2000.”:

 

(1)                                  For the period from Contractor’s mobilization to the Site until completion of the last Tank pile cap, the selected probability level of 0.6 shall apply; and

 

(2)                                  For all other periods after Contractor’s mobilization to the Site, the selected probability level of 0.8 shall apply.

 

The Parties recognize that the assessment as to whether or not total precipitation measured at the Site for a given Month constitutes Excessive Monthly Precipitation can only be made after the end of the Month in question.

 

“Facility” means the facilities contemplated in this Agreement (including the Scope of Work), including the LNG receiving, storage and regasification facilities to be engineered, procured, constructed, pre-commissioned, commissioned and tested by Contractor under this Agreement.

 

“FERC” means the Federal Energy Regulatory Commission.

 

“FERC Authorization” means the authorization by the FERC granting to Owner the approvals requested in that certain application filed by Owner with the FERC on December 22, 2003, in Docket No. CP04-47-000 (as may be amended from time to time) pursuant to Section 3(a) of the Natural Gas Act and the corresponding regulations of the FERC.

 

“Final Completion” means that all Work and all other obligations under this Agreement (except for that Work and obligations that survive the termination or expiration of this Agreement, including obligations for Warranties and correction of Defective Work pursuant to Section 12.3 and any other obligations covered under Section 11.7), are fully and completely performed in accordance with the terms of this Agreement, including: (i) the achievement of Substantial Completion; (ii) any and all Liquidated Damages due and owing have been paid to Owner in accordance with Section 20.3C; (iii) the completion of all Punchlist items; (iv) delivery by Contractor to Owner of a fully executed Final

 

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Conditional Lien and Claim Waiver in the form of Schedule K-5; (v) delivery by Contractor to Owner of all documentation required to be delivered under this Agreement as a prerequisite of achievement of Final Completion, including Record Drawings; (vi) removal from the Site of all of Contractor’s, Subcontractors’ and Sub-subcontractor’s personnel, supplies, waste, materials, rubbish, and temporary facilities; (vii) delivery by Contractor to Owner of fully executed Final Conditional Lien and Claim Waivers from all Major Subcontractors in the form in Attachment K-7; (viii) fully executed Final Conditional Lien and Claim Waivers from Major Sub-subcontractors in a form substantially similar to the form in Attachment K-7; (ix) delivery by Contractor to Owner of a Final Completion Certificate in the form of Attachment N and as required under Section 11.7; and (x) Contractor has, pursuant to Section 3.4, delivered to the Project all Operating Spare Parts required by the Operating Spare Parts List to be delivered to the Project prior to Final Completion.

 

“Final Completion Certificate” has the meaning set forth in Section 11.7.

 

“Final Conditional Lien and Claim Waiver” means the waiver and release provided to Owner by Contractor, Major Subcontractors and Major Sub-subcontractors in accordance with the requirements of Section 7.3, which shall be in the form of Attachment K, Schedules K-5 and K-7.

 

“Final Unconditional Lien and Claim Waiver” means the waiver and release provided to Owner by Contractor, Major Subcontractors and Major Sub-subcontractors in accordance with the requirements of Section 7.3, which shall be in the form of Attachment K, Schedules K-6 and K-8.

 

“First Draw” has the meaning set forth in Section 4.1A.

 

“Force Majeure” means any act or event that (i) prevents or delays the affected Party’s performance of its obligations in accordance with the terms of this Agreement, (ii) is beyond the reasonable control of the affected Party, not due to its fault or negligence and (iii) could not have been prevented or avoided by the affected Party through the exercise of due diligence.  Force Majeure may include catastrophic storms or floods, Excessive Monthly Precipitation, lightning, tornadoes, hurricanes, a named tropical storm, earthquakes and other acts of God, wars, civil disturbances, revolution, acts of public enemy, acts of terrorism, credible threats of terrorism, revolts, insurrections, sabotage, riot, plague, epidemic, commercial embargoes, expropriation or confiscation of the Facility, epidemics, fires, explosions, industrial action or strike (except as excluded below), and actions of a Governmental Instrumentality that were not requested, promoted, or caused by the affected Party.  For avoidance of doubt, Force Majeure shall not include any of the following: (i) economic hardship unless such economic hardship was otherwise caused by Force Majeure; (ii) changes in market conditions unless any such change in market conditions was otherwise caused by Force Majeure; (iii) industrial actions and strikes involving only the employees of Contractor or any of its Subcontractors, except for industrial actions and strikes involving the employees of the Sub-subcontractor supplying the nickel steel for the Tanks; or (iv) nonperformance or delay by Contractor or its Subcontractors or Sub-subcontractors, unless such nonperformance or delay was otherwise

 

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caused by Force Majeure.

 

“GAAP” means generally accepted accounting principles.

 

“Geotechnical Reports” means the following reports, each prepared by Tolunay-Wong Engineers, Inc. and provided by Owner to Contractor prior to the Contract Date: (i) the Geotechnical Investigation, Sabine LNG Terminal, Cryogenic Tanks, Sabine, Louisiana, dated September 12, 2003; (ii) the Final Report, Geotechnical Investigation, Sabine LNG Terminal, Process Area, LNG Pipe Racks, Berth and Construction Docks, Sabine, Louisiana, dated September 19, 2003; and (iii) Geological Hazard Evaluation, Sabine LNG Terminal, Sabine, Louisiana, dated September 19, 2003.

 

“Good Engineering and Construction Practices” or “GECP” means the generally accepted practices, skill, care, methods, techniques and standards employed by the international LNG industry at the time of the Contract Date that are commonly used in prudent engineering, procurement and construction to safely design, construct, pre-commission, commission, start-up and test LNG related facilities of similar size and type as the Facility, in accordance with Applicable Law and Applicable Codes and Standards.

 

“Governmental Instrumentality” means any federal, state or local department, office, instrumentality, agency, board or commission having jurisdiction over a Party or any portion of the Work, the Facility or the Site.

 

“Guarantee Conditions” means the Sendout Rate Guarantee Conditions and Ship Unloading Time Guarantee Conditions.

 

“Guaranteed Substantial Completion Date” has the meaning set forth in Section 5.3A as may be adjusted by Change Order in accordance with the terms of this Agreement.

 

“Hazardous Materials” means any substance that under Applicable Law is considered to be hazardous or toxic or is or may be required to be remediated, including (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls and processes and certain cooling systems that use chlorofluorocarbons, (ii) any chemicals, materials or substances which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” or any words of similar import pursuant to Applicable Law, or (iii) any other chemical, material, substance or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental Instrumentality, or which may be the subject of liability for damages, costs or remediation.

 

“HSE Plan” has the meaning set forth in Section 3.10A.

 

“Indemnified Party” means any member of the Owner Group or the Contractor Group, as the context requires.

 

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“Indemnifying Party” means Owner or Contractor, as the context requires.

 

“Independent Engineer” means the engineer(s) employed by Lender.

 

“Insurance Allowance” has the meaning set forth in Section 7.1B.

 

“Interim Conditional Lien Waiver” means the conditional waiver and release provided to Owner by Contractor, Major Subcontractors and Major Sub-subcontractors in accordance with the requirements of Section 7.2D, which shall be in the form of Attachment K, Schedules K-1 and K-3.

 

“Interim Unconditional Lien Waiver” means the unconditional waiver and release provided to Owner by Contractor, Major Subcontractors and Major Sub-subcontractors in accordance with the requirements of Section 7.2D, which shall be in the form of Attachment K, Schedules K-2 and K-4.

 

“Insolvency Event” in relation to any Party means the bankruptcy, insolvency, liquidation, administration, administrative or other receivership or dissolution of such Party, and any equivalent or analogous proceedings by whatever name known and in whatever jurisdiction, and any step taken (including, without limitation, the presentation of a petition or the passing of a resolution or making a general assignment or filing for the benefit of its creditors) for or with a view toward any of the foregoing.

 

“Invoice” means Contractor’s request for a payment pursuant to Section 7.2, which invoice shall be in the form of Attachment I.

 

“Key Personnel” or “Key Persons” has the meaning set forth in Section 2.2A.

 

“Landowner” means any landowner that has leased land or provided a right of way or easement to Owner in connection with the Project.

 

“Lender” means any entity or entities providing temporary or permanent debt financing to Owner for the Facility.

 

“Letter of Credit” has the meaning set forth in Section 9.2.

 

“Level II” means a level of detail in the CPM Schedule that has two hundred (200) to three hundred (300) activities and has logical relationships at a summary level. The work breakdown structure in the Level II CPM Schedule is by Project phase (engineering, procurement, construction, startup and commissioning) and discipline/commodity (process engineering, mechanical engineering, etc. for engineering disciplines and Site work, concrete, steel, piping, etc. for construction).  Critical major Equipment (including bulk material requirements) and Subcontract procurement and deliveries are captured in the Level II CPM Schedule. All major schedule milestones are shown.  The Level II CPM Schedule may be resource loaded to check staffing levels or installation rates.

 

“Level III” means a level of detail in the CPM Schedule which is an implementation (control) schedule used to direct the Work by providing schedule parameters to the more

 

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detailed implementation level, identify and resolve schedule problems, status progress in terms of Milestones, measure the impact of scope changes and delays, develop recovery plans, and support schedule-related contractual action.  The work breakdown structure in the Level III CPM Schedule is at an area level (common area, turbine generator area, vaporizer area, Tanks, pipe racks, etc.), and shall involve over one thousand (1,000) activities.  The Level III CPM Schedule is developed with the assistance of and accepted by Contractor’s Key Personnel. The deliverables by each engineering discipline are captured at this level.  All major Equipment (including bulk material requirements) are scheduled at area level and detailed construction activities at each commodity level follow the same area concept.  The Subcontract schedules are similarly developed for each area, as applicable.

 

“Limited Notice to Proceed” or “LNTP” has the meaning set forth in Section 5.1.

 

“Liquidated Damages” means Delay Liquidated Damages and Performance Liquidated Damages.

 

“LNG” means liquefied Natural Gas.

 

“LNTP Work” has the meaning set forth in Section 11 of Attachment A.

 

“LDEQ” means the Louisiana Department of Environmental Quality.

 

“Louisiana Sales and Use Tax” has the meaning set forth in Section 4.5A.

 

“Louisiana Sales and Use Tax Allowance” has the meaning set forth in Section 7.1A.

 

“Major Equipment” means the items of Equipment listed as such in Attachment G.

 

“Major Subcontract” means any Subcontract having an aggregate value in excess of Five Million U.S. Dollars (U.S.$5,000,000) and any Subcontract listed in Attachment G as a Subcontract for a specified critical element of the Work even if the Subcontract aggregate value is less than Five Million U.S. Dollars (U.S.$5,000,000).

 

“Major Subcontractor” means the Subcontractors listed as such in Attachment G and, in addition, any Subcontractor with whom Contractor enters, or intends to enter, into a Major Subcontract.

 

“Major Sub-subcontract” means any Sub-subcontract with a Sub-subcontractor listed in Attachment G.

 

“Major Sub-subcontractor” means the Sub-subcontractors listed as such in Attachment G.

 

“Marine Loading Arm Adjustment” has the meaning set forth in Section 7.1F.

 

“Memorandum of Understanding” means the Memorandum of Understanding between Cheniere LNG, Inc., Cheniere and Contractor, dated August 22, 2003.

 

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“Milestone” means a designated portion of the Work, as shown in Attachment C, Schedule C-1.

 

“Minimum Acceptance Criteria” or “MAC” means the Sendout Rate MAC and the Ship Unloading Time MAC.

 

“Minimum Acceptance Criteria Correction Period” has the meaning set forth in Section 11.5B.

 

“MMSCFD” means million SCFD.

 

“Month” means a Gregorian calendar month; “month” means any period of thirty (30) consecutive Days.

 

“Monthly” means an event occurring or an action taken once every Month.

 

“Monthly Payments” has the meaning set forth in Section 7.2B.

 

“Monthly Progress Reports” has the meaning set forth in Section 3.19A.3.

 

“Natural Gas” means combustible gas consisting primarily of methane.

 

“Notice to Proceed” or “NTP” has the meaning set forth in Section 5.2B.

 

“Off-Site Rights of Way and Easements” has the meaning set forth in Section 4.3B.

 

“Operating Spare Part Allowance” has the meaning set forth in Section 7.1C.

 

“Operating Spare Parts” has the meaning set forth in Section 3.4.

 

“Operating Spare Parts List” has the meaning set forth in Section 3.4.

 

“Operations Activity” or “Operations Activities” has the meaning set forth in Section 11.8.

 

“Owner” has the meaning set forth in the preamble hereto.

 

“Owner Default” has the meaning set forth in Section 16.5.

 

“Owner Group” means (i) Owner, its parent, Lender, and each of their respective Affiliates and (ii) the respective directors, officers, agents, employees and representatives of each Person specified in clause (i) above.

 

“Owner Monthly Confirmation” has the meaning set forth in Section 4.1A.

 

“Owner Permits” means the Permits listed in Attachment Q and any other Permits (not listed in either Attachment P or Attachment Q) necessary for performance of the Work or the operation of the Facility and which are required to be obtained in Owner’s name pursuant to Applicable Law.

 

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“Owner Quarterly Confirmation” has the meaning set forth in Section 4.1B.

 

“Owner Representative” means that Person or Persons designated by Owner in a written notice to Contractor who shall have complete authority to act on behalf of Owner on all matters pertaining to the Work, including giving instructions and making changes in the Work.  Owner designates Ed Lehotsky as the Owner Representative.  Notification of a change in Owner Representative shall be provided in advance, in writing, to Contractor.

 

“Owner’s Confidential Information” has the meaning set forth in Section 19.1.

 

“P&ID’s” means piping and instrumentation diagrams.

 

“Party” or “Parties” means Owner and/or Contractor and their successors and permitted assigns.

 

“Payment Schedule” means the schedule of Milestone payments as set forth in Attachment C, Schedule C-1, and the schedule of Monthly Payments set forth in Attachment C, Schedule C-2.

 

“Payment Letter of Credit” has the meaning set forth in Section 9.2.

 

“Performance Guarantee(s)” means the Sendout Rate Performance Guarantee and the Ship Unloading Time Performance Guarantee.

 

“Performance Letter of Credit” has the meaning set forth in Section 9.2.

 

“Performance Liquidated Damages” means the Sendout Rate Performance Liquidated Damages and the Ship Unloading Time Performance Liquidated Damages.  The Performance Liquidated Damages are shown in Attachment T.

 

“Performance Test Procedures” has the meaning set forth in Section 11.3.

 

“Performance Tests” means the tests performed (including any repetition thereof) to determine whether the Facility meets the Performance Guarantees and/or Minimum Acceptance Criteria set forth in Attachment T, which tests shall be as specified in and consistent with Attachment S.

 

“Permit” means any valid waiver, certificate, approval, consent, license, exemption, variance, franchise, permit, authorization or similar order or authorization from any Governmental Instrumentality required to be obtained or maintained in connection with the Facility, the Site or the Work.

 

“Person” means any individual, company, joint venture, corporation, partnership, association, joint stock company, limited liability company, trust, estate, unincorporated organization, Governmental Instrumentality or other entity having legal capacity.

 

“Potential Lender” has the meaning set forth in Section 21.16A.

 

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“Progress Record Drawings and Specifications” means Drawings and Specifications that show all current “as-built” conditions, as required under Attachment B.

 

“Project” has the meaning specified for “Facility.”

 

“Project Commissioning Plan” means the detailed plan which shall be provided by Contractor to Owner in accordance with Attachment V.

 

“Project Insurances” has the meaning set forth in Section 7.1B.

 

“Project Schedule” means the schedule for performance of the Work, including the date for LNTP, the date for NTP, the Target Bonus Date and the Guaranteed Substantial Completion Date, as more particularly described in Attachment E.

 

“PSIG” means pounds per square inch, gauge.

 

“Punchlist” means a list of those finishing items required to complete the Work, the completion of which shall not materially interrupt nor affect the safe operation of all or any part of the Facility after RFCD or Substantial Completion, as more fully described in Section 11.6 of this Agreement.

 

“Qualified Research Expenditures” means the costs funded by Owner under this Agreement that are incurred in connection with Work performed by Contractor, its Subcontractors and Sub-subcontractors which meet all of the requirements of Section 41(d)(1) of the Internal Revenue Code of 1986, as amended, and which are related to the development or improvement of a business component of the Facility.

 

“Ready For Cool Down” or “RFCD” means that all of the following have occurred: (i) Contractor has completed all applicable Work, other than the Work meeting the definition of Punchlist, in accordance with the requirements contained in this Agreement to ensure that System 1, the first System to undergo Cool Down, is ready for use to receive and dispatch LNG and Natural Gas so that the Cool Down phase can commence; and (ii) Contractor has delivered to Owner a RFCD Completion Certificate for such System in the form of Attachment L as required under Section 11.1A.

 

“Ready for Performance Testing” means that all of the following have occurred with respect to the Facility: (i) Cool Down has been completed for System 1, System 2, and System 3; (ii) all Tanks have been successfully filled to their high levels (but not simultaneously); (iii) all vaporizers have been operated individually; (iv) Contractor has completed all procurement, fabrication, assembly, erection, installation and pre-commissioning checks and tests of the Facility to ensure that the entire Work and each component thereof was sufficiently fabricated, assembled, erected and installed so as to be capable of being operated safely within the requirements contained in this Agreement; and (v) all portions of the Facility have attained the state of completion necessary for commencement of the Sendout Rate Performance Test.

 

“Receiving Party” has the meaning set forth in Section 19.3.

 

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“Record Drawings and Specifications” means final, record Drawings and Specifications of the Facility showing the “as-built” conditions of the completed Facility, as required under Attachment B.

 

“Recovery Schedule” has the meaning set forth in Section 5.5.

 

“Reimbursable Costs” means the Unit Rates, other direct costs and applicable markups and allowances set forth in Schedule D-4.

 

“RFCD Completion Certificate” has the meaning set forth in Section 11.1A.

 

“RFCD Delay Liquidated Damages” has the meaning set forth in Section 13.1A.

 

“Safety Standards” has the meaning set forth in Section 3.10A.

 

“SCF” means standard cubic feet.

 

“SCFD” means standard cubic feet per Day.

 

“Schedule Bonus” has the meaning set forth in Section 11.9.

 

“Scope of Work” means the description of Work to be performed by Contractor as set forth in this Agreement, including as more specifically set forth in Attachment A.

 

“SEC” means the Securities and Exchange Commission or any successor entity thereto.

 

“Sendout Rate” has the meaning set forth in Attachment T.

 

“Sendout Rate Guarantee Conditions” has the meaning set forth in Attachment T.

 

“Sendout Rate MAC” has the meaning set forth in Attachment T.

 

“Sendout Rate Performance Guarantee” has the meaning set forth in Attachment T.

 

“Sendout Rate Performance Liquidated Damages” has the meaning set forth in Attachment T.

 

“Ship Unloading Time” has the meaning set forth in Attachment T.

 

“Ship Unloading Time Guarantee Conditions” has the meaning set forth in Attachment T.

 

“Ship Unloading Time MAC” has the meaning set forth in Attachment T.

 

“Ship Unloading Time Performance Guarantee” has the meaning set forth in Attachment T.

 

“Ship Unloading Time Performance Liquidated Damages” has the meaning set forth in Attachment T.

 

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“Site” means those areas shown in greater detail in Attachment Y.

 

“Specifications” means those documents consisting of the written requirements for Equipment, standards and workmanship for the Work, which are prepared as a part of and during the performance of the Work.

 

“Stainless Steel Adjustment” has the meaning set forth in Section 7.1D.

 

“Subcontract” means an agreement by Contractor with a Subcontractor for the performance of any portion of the Work.

 

“Subcontractor” means any Person, including an Equipment supplier or vendor, who has a direct contract with Contractor to manufacture or supply Equipment which is a portion of the Work, to lease Construction Equipment to Contractor in connection with the Work, or to otherwise perform a portion of the Work.

 

“Substantial Completion” means that all of the following have occurred with respect to the Facility: (i) all Minimum Acceptance Criteria have been achieved; (ii) all Performance Guarantees for the Facility have been achieved, or in the case that all Performance Guarantees have not been achieved but all Minimum Acceptance Criteria have been achieved, Contractor has paid Performance Liquidated Damages in accordance with Section 20.3C (except such Performance Liquidated Damages that are not due as a condition of Substantial Completion if Contractor, at Owner’s election, is taking corrective actions under Section 11.5A(i)); (iii) any Substantial Completion Delay Liquidated Damages due and owing have been paid in accordance with Section 20.3C; (iv) the Work (including training in accordance with Section 3.5 and the delivery of all documentation required as a condition of Substantial Completion under this Agreement (including documentation required for operation, including test reports)) has been completed in accordance with the requirements of this Agreement other than any Work which meets the definition of Punchlist; (v) Contractor has delivered to Owner the Substantial Completion Certificate in the form of Attachment M, as required under Section 11.3; (vi) Contractor has obtained all Contractor Permits for the Facility; and (vii) Contractor has, pursuant to Section 3.4, delivered to the Project all Operating Spare Parts required by the Operating Spare Parts List to be delivered to the Project prior to Substantial Completion.

 

“Substantial Completion Certificate” has the meaning set forth in Section 11.3.

 

“Substantial Completion Delay Liquidated Damages” has the meaning set forth in Section 13.1B.

 

“Sub-subcontract” means any agreement by a Subcontractor with a Sub-subcontractor or by a Sub-subcontractor with another Sub-subcontractor for the performance of any portion of the Work.

 

“Sub-subcontractor” means any Person, including an Equipment supplier or vendor, who has a direct or indirect contract with a Subcontractor or another Sub-subcontractor to manufacture or supply Equipment which comprises a portion of the Work, to lease Construction Equipment to Subcontractor or another Sub-subcontractor in connection with

 

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the Work, to perform a portion of the Work or to otherwise furnish labor or materials.

 

“Subsurface Soil Conditions” means subsurface conditions at the Site, including subsurface conditions on the sea bottom of the dredging basin where Work shall be performed.

 

“System” means a System of the Facility, being System 1, System 2 or System 3.  System 1, 2 and 3 shall compose the entire Facility.

 

“System 1” means the first System to undergo Cool Down and is comprised of all components of the Facility, with the exception of System 2 and System 3.

 

“System 2” means Tank 2.

 

“System 3” means Tank 3.

 

“Tank” means any of Tank 1, Tank 2 or Tank 3.

 

“Tank 1” means the first LNG storage tank to be constructed by Contractor.

 

“Tank 2” means the second LNG storage tank to be constructed by Contractor.

 

“Tank 3” means the third LNG storage tank to be constructed by Contractor.

 

“Tank Subcontract Materials Adjustment” has the meaning set forth in Section 7.1E.

 

“Target Bonus Date” means the date specified in Attachment E as may be adjusted by Change Order in accordance with the terms of this Agreement.

 

“Target Completion” means that all of the following have occurred with respect to the Facility: (i) Cool Down has been completed for System 1 and System 2; (ii) Contractor has completed all procurement, fabrication, assembly, erection, installation and precommissioning checks of all of the vaporizers for the Facility to ensure that all such vaporizers and each component thereof was sufficiently fabricated, assembled, erected and installed so as to be capable of being operated safely within the requirements contained in this Agreement, and thirteen vaporizers have been operated to their rated capacity; (iii) Contractor has completed all procurement, fabrication, assembly, erection, installation and pre-commissioning checks and tests of System 1 and System 2 to ensure that these Systems and each component thereof was sufficiently fabricated, assembled, erected and installed so as to be capable of being operated safely within the requirements contained in this Agreement; and (iv) System 1 and System 2 collectively achieve a Sendout Rate of 2,000 MMSCFD or above at a temperature of no less than 40°F and at a pressure of no less than 1,250 PSIG, as measured at the exit for the main Facility transfer meter, for a continuous period of a minimum of twenty-four (24) hours.

 

“Taxes” means any and all taxes, assessments, levies, duties, fees, charges and withholdings of any kind or nature whatsoever and howsoever described, including Louisiana Sales and Use Taxes, value-added, sales, use, gross receipts, license, payroll,

 

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federal, state, local or foreign income, environmental, profits, premium, franchise, property, excise, capital stock, import, stamp, transfer, employment, occupation, generation, privilege, utility, regulatory, energy, consumption, lease, filing, recording and activity taxes, levies, duties, fees, charges, imposts and withholding, together with any and all penalties, interest and additions thereto.

 

“Technical Services Agreement” means the Technical Services Agreement between Cheniere LNG, Inc., Cheniere and Contractor, dated October 14, 2003.

 

“Third Party” means any Person other than a member of (i) the Contractor Group, (ii) the Owner Group, or (iii) any Subcontractor or Sub-subcontractor or any employee, officer or director of such Subcontractor or Sub-subcontractor.

 

“Third Party Proprietary Work Product” has the meaning set forth in Section 10.1A.

 

“Unit Rates” has the meaning set forth in Section 6.1C.

 

“USACE” means the United States Army Corps of Engineers.

 

“U.S. Dollars” or “U.S.$” means the legal tender of the United States of America.

 

“Warranty” or “Warranties” has the meaning set forth in Section 12.1A.

 

“Work” means the work obligations, duties and responsibilities to be performed by or on behalf of Contractor in connection with the procurement, engineering, design, fabrication, erection, installation, manufacture, inspection, repair (including Corrective Work), testing (including Performance Tests), training, pre-commissioning, commissioning and placing into service of the Facility and the related component Equipment and Systems, and the required related labor and materials, all in accordance with the terms of this Agreement and the various Attachments, including Attachment A.

 

“Work Product” has the meaning set forth in Section 10.1A.

 

1.2                                 The meanings specified in this Article 1 are applicable to both the singular and plural. As used in this Agreement, the terms “herein,” “herewith,” “hereunder” and “hereof” are references to this Agreement taken as a whole, and the terms “include,” “includes” and “including” mean “including, without limitation,” or variant thereof.  Reference in this Agreement to an Article or Section shall be a reference to an Article or Section contained in this Agreement (and not in any Attachments or Schedules to this Agreement) unless expressly stated otherwise, and a reference in this Agreement to an Attachment or Schedule shall be a reference to an Attachment or Schedule attached to this Agreement unless expressly stated otherwise.

 

Article 2
RELATIONSHIP OF OWNER, CONTRACTOR AND SUBCONTRACTORS

 

2.1                                 Status of Contractor.  The relationship of Contractor to Owner shall be that of an independent contractor.  Any provisions of this Agreement which may appear to give Owner or the Owner Representative the right to direct or control Contractor as to details of performing the

 

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Work, or to exercise any measure of control over the Work, shall be deemed to mean that Contractor shall follow the desires of Owner or the Owner Representative in the results of the Work only and not in the means by which the Work is to be accomplished, and Contractor shall have the complete right, obligation and authoritative control over the Work as to the manner, means or details as to how to perform the Work.  Nothing herein shall be interpreted to create a master-servant or principal-agent relationship between Contractor, or any of its Subcontractors or Sub-subcontractors, and Owner.  Nevertheless, Contractor shall comply with all provisions, terms and conditions of this Agreement, and the fact that Contractor is an independent contractor does not relieve it from its responsibility to fully, completely, timely and safely perform the Work in compliance with this Agreement.  Except to the extent set forth in this Agreement, including Sections 6.1C, 6.2D, 11.5A, 11.8 and 16.3, and subject at all times to Section 6.7, Owner shall not be entitled to issue any instruction or directive to Contractor or any of its Subcontractors or Sub-subcontractors in connection with performance of the Work.  Owner shall provide a copy to Contractor of any written communication from Owner to any Subcontractor or Sub-subcontractor that relates to Contractor’s performance of the Work.

 

2.2                                 Key Personnel, Organization Chart and Contractor Representative.

 

A.                                   Key Personnel and Organization Chart. Attachment F sets forth Contractor’s organizational chart to be implemented for the Work and also contains a list of key personnel (“Key Personnel” or “Key Persons”) from Contractor’s organization who will be assigned to the Work.  Key Personnel shall, unless otherwise expressly stated in Attachment F, be devoted full-time to the Work until Substantial Completion, and Key Personnel shall not be removed or reassigned without Owner’s prior written approval (such approval not to be unreasonably withheld); provided, however, Owner’s prior written approval shall not be required in the event Contractor removes or reassigns a Key Person at any time prior to Owner’s issuance of the NTP.  All requests for the substitution of Key Personnel shall include a detailed explanation and reason for the request and the resumes of professional education and experience for a minimum of two (2) candidates of equal or greater qualifications and experience.  Should Owner approve of the replacement of a Key Person, Contractor shall, so far as reasonably practicable, allow for an overlap of at least one (1) week during which both the Key Person to be replaced and the Owner-approved new Key Person shall work together full time.  The additional cost of any replacement of such Key Personnel and overlap time shall be entirely at Contractor’s expense.  Owner shall have the right, but not the obligation, at any time to reasonably request that Contractor replace any Key Person with another employee acceptable to Owner.  In such event, Contractor shall reasonably consider Owner’s request that Contractor replace such Key Person.

 

B.                                     Contractor Representative.  Contractor designates Asok Kumar as the Contractor Representative.  Notification of a change in Contractor Representative shall be provided in advance, in writing, to Owner. The Contractor Representative is a Key Person.

 

2.3                                 Subcontractors and Sub-subcontractors.  Owner acknowledges and agrees that Contractor intends to have portions of the Work accomplished by Subcontractors pursuant to written Subcontracts between Contractor and such Subcontractors, and that such Subcontractors may have certain portions of the Work performed by Sub-subcontractors.  All Subcontracts shall,

 

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so far as reasonably practicable, be consistent with the terms or provisions of this Agreement.  No Subcontractor or Sub-subcontractor is intended to be or shall be deemed a third-party beneficiary of this Agreement.  Contractor shall be fully responsible to Owner for the acts and omissions of Subcontractors and Sub-subcontractors and of Persons directly or indirectly employed by either of them in the performance of the Work, as it is for the acts or omissions of Persons directly employed by Contractor.  The work of any Subcontractor or Sub-subcontractor shall be subject to inspection by Owner to the same extent as the Work of Contractor.  All Subcontractors and Sub-subcontractors and their respective personnel on Site or who may come on the Site or the Off-Site Rights of Way and Easements are to be instructed by Contractor in the terms and requirements of Contractor’s safety and environmental protection regulations and policies and shall be expected to comply with such regulations.  In the event that any personnel are not adhering to such regulations and policies, such personnel shall be removed by Contractor.  In no event shall Contractor be entitled to any adjustment of the Contract Price or Project Schedule as a result of compliance with such regulations and policies set forth in the HSE Plan, or any removal of personnel necessitated by non-compliance.  Nothing contained herein shall (i) create any contractual relationship between any Subcontractor and Owner, or between any Sub-subcontractor and Owner, or (ii) obligate Owner to pay or cause the payment of any amounts to Subcontractor or Sub-subcontractor.

 

2.4                                 Subcontracts and Sub-subcontracts.

 

A.                                   Approved List.   Attachment G sets forth a list of contractors and suppliers that Contractor and Owner have agreed are approved for selection as Subcontractors for the performance of that portion of the Work specified in Attachment G.   Approval by Owner of any Subcontractors or Sub-subcontractors does not relieve Contractor of any responsibilities under this Agreement.

 

B.                                     Additional Proposed Major Subcontractors  In the event that Contractor is considering the selection of a Subcontractor not listed on Attachment G that would qualify as a Major Subcontractor, Contractor shall (i) notify Owner of its proposed Major Subcontractor as soon as reasonably practicable during the selection process and furnish to Owner all information reasonably requested by Owner with respect to Contractor’s selection criteria, and (ii) notify Owner no less than ten (10) Business Days prior to the execution of a Major Subcontract with a Major Subcontractor not listed on Attachment G.  Owner shall have the discretion, not to be unreasonably exercised, to reject any proposed Major Subcontractor not listed on Attachment G for a Major Subcontract.  Contractor shall not enter into any Major Subcontract with a proposed Major Subcontractor that is rejected by Owner in accordance with the preceding sentence.  Owner shall undertake in good faith to review the information provided by Contractor pursuant to this Section 2.4B expeditiously and shall notify Contractor of its decision to accept or reject a proposed Major Subcontractor as soon as practicable after such decision is made.  Failure of Owner to accept or reject a proposed Major Subcontractor within ten (10) Business Days shall be deemed to be an acceptance of such Major Subcontractor, but Owner’s acceptance of a proposed Major Subcontractor shall in no way relieve Contractor of its responsibility for performing the Work in compliance with this Agreement.

 

C.                                     Other Additional Proposed Subcontractors.  For any Subcontractor not

 

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covered by Section 2.4A or 2.4B and having a Subcontract value in excess of One Million U.S. Dollars (U.S. $1,000,000), Contractor shall, within fifteen (15) Business Days after the execution of any such Subcontract, notify Owner in writing of the selection of such Subcontractor and inform Owner generally what portion of the Work such Subcontractor is performing.

 

D.                                    Delivery of Subcontracts.  Within ten (10) Days of Owner’s request, Contractor shall furnish Owner with a copy of any Subcontract, excluding provisions regarding pricing, discount or credit information, payment terms, payment schedules, retention, performance security, bid or proposal data, and any other information which Contractor or any Subcontractor reasonably considers to be commercially sensitive information.

 

E.                                      Terms of Major Subcontracts and Sub-subcontracts.  In addition to the requirements in Section 2.3 and without in any way relieving Contractor of its full responsibility to Owner for the acts and omissions of Subcontractors and Sub-subcontractors, each Major Subcontract and each Major Sub-subcontract shall contain the following provisions:

 

1.                                       the Major Subcontract and the Major Sub-subcontract may be assigned to Owner without the consent of the respective Major Subcontractor or Major Sub-subcontractor; provided, however, with respect to each Construction Equipment rental or lease agreement that falls within the definition of Major Subcontract or Major Sub-subcontract, Contractor shall only be obligated to use its best efforts to include a provision that such agreement may be assigned to Owner without the consent of the respective Construction Equipment Lessor; and

 

2.                                       so far as reasonably practicable, the Major Subcontractor and the Major Sub-subcontractor shall comply with all requirements and obligations of Contractor to Owner under this Agreement, as such requirements and obligations are applicable to the performance of the work under the respective Major Subcontract or Major Sub-subcontract.

 

2.5                                 Contractor Acknowledgements.

 

A.                                   The Agreement.  Prior to the execution of this Agreement under the Memorandum of Understanding and the Technical Services Agreement, Contractor performed engineering, cost estimating and related services and developed, provided or verified all of the information that forms the Scope of Work and Design Basis (subject to Section 4.8) listed in Attachment A, for the purpose of determining that such information is adequate and sufficiently complete for Contractor to engineer, procure, construct, pre-commission, commission, start-up and test a fully operational LNG receiving, storage and regasification facility for the Contract Price, within the required times set forth in the Project Schedule, and in accordance with all requirements of this Agreement, including Applicable Codes and Standards, Applicable Law, Warranties, Minimum Acceptance Criteria and Performance Guarantees.  Accordingly, subject to Section 4.8 and Section 13 of Schedule A-1, Contractor (i) hereby agrees that it shall have no right to claim or seek an

 

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increase in the Contract Price or an adjustment to the Project Schedule with respect to any incomplete, inaccurate or inadequate information that may be contained or referenced in Attachment A, (ii) hereby waives and releases Owner from and against any such claims, and (iii) shall not be relieved of its responsibility to achieve all requirements under this Agreement (including meeting Applicable Codes and Standards, Applicable Law, Minimum Acceptance Criteria and Performance Guarantees) due to any such incomplete, inaccurate or inadequate information.  Subject to Section 4.8, Owner makes no guaranty or warranty, express or implied, as to the accuracy, adequacy or completeness of any information that is contained in or referenced in Attachment A.

 

B.                                     Conditions of the Site.

 

1.                                       Subject to adjustment as appropriate pursuant to Section 4.3, Contractor agrees and acknowledges that it is sufficiently familiar with the Site and the Off-Site Rights of Way and Easements to perform the Work in accordance with the Project Schedule, and understands the climate, terrain, logistics, and other difficulties that it may encounter in performing the Work in accordance with the Project Schedule.  Except as otherwise provided in this Agreement, including Contractor’s rights pursuant to Section 6.8A, Contractor waives any right to claim an adjustment in the Contract Price or the Project Schedule in respect of any failure to timely perform the Work in accordance with the Project Schedule as a result of any of the following conditions at the Site: (i) river levels, topography; (ii) climatic conditions, tides, and seasons; (iii) availability of laborers, Subcontractors, Sub-subcontractors, Construction Equipment or any other items or supplies; (iv) adequate availability and transportation of Equipment; and (v) breakdown or other failure of Construction Equipment; provided, however, that Contractor does not assume the risk or waive its rights with respect to those conditions in Section 2.5B.2.  This Section 2.5B.1 shall not affect the rights of Contractor with respect to Change Orders in accordance with Section 4.3.

 

2.                                       If Contractor encounters Subsurface Soil Conditions that (i) are materially different from the information regarding such Subsurface Soil Conditions as provided in the Geotechnical Reports (including the encountering of Subsurface Soil Conditions that could not be reasonably be anticipated by Contractor using GECP based on the information provided in the Geotechnical Reports) and (ii) adversely affects (a) Contractor’s costs of performance of the Work, (b) Contractor’s ability to perform the Work in accordance with the Project Schedule or (c) Contractor’s ability to perform any material obligation under this Agreement, Contractor shall be entitled to a Change Order; provided that Contractor complies with the requirements set forth in Sections 6.2, 6.5 and 6.9.

 

C.                                     Applicable Law and Applicable Codes and Standards.  Contractor has investigated to its satisfaction Applicable Law and Applicable Codes and Standards in existence as of the Contract Date, and warrants that it can perform the Work at the Contract Price and within the Project Schedule in accordance with such Applicable Law and Applicable Codes and Standards.  Contractor shall perform the Work in accordance with Applicable Law (including Applicable Codes and Standards), whether or not such

 

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Applicable Law or Applicable Codes and Standards came into effect before the Contract Date or during the performance of the Work; provided, however, Contractor shall be entitled to a Change Order for any Change in Law to the extent allowed under Section 6.2A.1.  Contractor shall advise Owner of any change in Applicable Codes and Standards which does not constitute a Change in Law and, upon such advisement, Owner may elect, at its sole option, to implement a change in accordance with Section 6.1D.

 

Article 3
CONTRACTOR’S RESPONSIBILITIES

 

3.1                                 Scope of Work.

 

A.                                   Generally.  Subject to Section 3.1B, the Work shall be performed on a turnkey basis and shall include all of the Work required to achieve RFCD, Substantial Completion and Final Completion in accordance with the requirements of this Agreement, including achieving the Minimum Acceptance Criteria and Performance Guarantees.  Contractor shall be required to integrate and use Owner’s operations personnel in its pre-commissioning commissioning, testing, start-up efforts, subject to Owner’s obligations under Section 4.4.  Contractor shall perform the Work in accordance with GECP, Applicable Law, Applicable Codes and Standards, and all other terms and provisions of this Agreement, with the explicit understanding that the Facility will operate as a LNG receiving, storage and regasification facility meeting all requirements and specifications of this Agreement.  It is understood and agreed that the Work shall include any incidental work that can reasonably be inferred as necessary to complete the Facility in accordance with GECP, Applicable Law, Applicable Codes and Standards, and all other terms and provisions of this Agreement, excluding only those items which Owner has specifically agreed to provide under the terms of this Agreement.  Without limiting the generality of the foregoing, the Work is more specifically described in Attachment A.

 

B.                                     Exception to Scope of Work.  Contractor shall not be responsible for providing (i) the Owner Permits; (ii) LNG; (iii) those requirements set forth under Sections 4.3, 4.4 and 4.8; (iv) legal description of the Site and a survey of the Site showing the boundaries of the Site and one survey control point pursuant to Section 4.6; and (v) any other obligations or requirements set forth in this Agreement as required to be performed by Owner.

 

3.2                                 Specific Obligations.  Without limiting the generality of Section 3.1 or the requirements of any other provision of this Agreement, Contractor shall:

 

A.                                   procure, supply, transport, handle, properly store, assemble, erect and install all Equipment;

 

B.                                     provide construction, construction management (including the furnishing of all Construction Equipment used in the field, and all Site supervision and craft labor), inspection and quality control services required to ensure that the Work is performed in accordance herewith;

 

C.                                     negotiate all guarantees, warranties, delivery schedules and performance

 

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requirements with all Subcontractors so that all Subcontracts are, so far as reasonably practicable, consistent with this Agreement, as set forth in Sections 2.3 and 2.4;

 

D.                                    perform shop and other inspections of the work of Subcontractors and Sub-subcontractors as required by Contractor to ensure that such work meets all of the requirements of this Agreement;

 

E.                                      ensure that the Work is performed in accordance with the Project Schedule;

 

F.                                      until Substantial Completion, conduct and manage all pre-commissioning, start-up, operations, commissioning, Performance Testing of the Facility, while supervising and directing operating personnel provided by Owner;

 

G.                                     obtain all Contractor Permits;

 

H.                                    provide assistance, information and documentation as reasonably requested by Owner to enable Owner to obtain the Owner Permits; provided that such assistance, information and documentation shall not include Contractor’s provision of information, testimony, documents or data by Contractor’s employees under oath (unless specifically authorized by Contractor) and activities outside the field of Contractor’s expertise, training or experience of personnel assigned to the performance of the Work under this Agreement (expect to the extent provided for by Change Order issued pursuant to Section 6.1 and agreed by Contractor);

 

I.                                         provide training for Owner’s operating and maintenance personnel per Section 3.5;

 

J.                                        cooperate with and respond promptly to reasonable inquiries from Owner; provided that such cooperation shall not include Contractor’s provision of information, testimony, documents or data by Contractor’s employees under oath (unless specifically authorized by Contractor) and activities outside the field of Contractor’s expertise, training or experience of personnel assigned to the performance of the Work under this Agreement (expect to the extent provided for by Change Order issued pursuant to Section 6.1 and agreed by Contractor);

 

K.                                    be responsible for connecting the Facility to the permanent utilities to the extent set forth in Attachment A;

 

L.                                      supply all initial fills, excluding LNG and Natural Gas; and

 

M.                                 perform all design and engineering Work in accordance with this Agreement, including that specified in Section 3.3.

 

3.3                                 Design and Engineering Work.

 

A.                                   General.  Contractor shall, as part of the Work, perform all design and engineering Work in accordance with this Agreement and cause the Work to meet and achieve the requirements of this Agreement, including achieving the Minimum

 

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Acceptance Criteria and Performance Guarantees.

 

B.                                     Drawings and Specifications.  Upon receipt of the Limited Notice to Proceed or Notice to Proceed issued in accordance with Sections 5.1 and 5.2, Contractor shall commence the preparation of the Drawings and Specifications for all Work relating to such LNTP or NTP.  The Drawings and Specifications shall be based on the requirements of this Agreement, including the Scope of Work, Design Basis, GECP, Applicable Codes and Standards and Applicable Law.

 

C.                                     Review Process.

 

1.                                       Submission by Contractor.  Contractor shall submit copies of the Drawings and Specifications specified in Attachment B to Owner for formal review, comment or disapproval in accordance with Attachment B.

 

2.                                       Review Periods.  Owner shall have up to ten (10) Business Days from its receipt of Drawings and Specifications submitted in accordance with Section 3.3C.1 to issue to Contractor written comments, proposed changes and/or written disapprovals of the submission of such Drawings and Specifications to Contractor.

 

If Owner does not issue any comments, proposed changes or written disapprovals within such time periods, Contractor may proceed with the development of such Drawings and Specifications and any construction relating thereto, but Owner’s lack of comments or disapproval, if applicable, shall in no event constitute an approval of the matters received by Owner.

 

In the event that Owner disapproves the Drawings or Specifications (which disapproval shall not be unreasonably issued), Owner shall provide Contractor with a written statement of the reasons for such rejection within the time period required for Owner’s response, and Contractor shall provide Owner with revised and corrected Drawings and Specifications as soon as possible thereafter.  In the event Owner unreasonably disapproves such Drawings and Specifications and such unreasonable disapproval adversely impacts Contractor’s costs or ability to perform the Work in accordance with the Project Schedule, Contractor shall be entitled to a Change Order provided that Contractor complies with the requirements set forth in Sections 6.2, 6.5 and 6.9.

 

Provided that Owner has not disapproved of the Drawings and Specifications, such Drawings and Specifications shall be the Drawings and Specifications that Contractor shall use to construct the Work; provided that Owner’s lack of disapproval of or comments on, or any approval by Owner of, any Drawings and Specifications shall not in any way be deemed to limit or in any way alter Contractor’s responsibility to perform and complete the Work in accordance with the requirements of this Agreement.

 

D.                                    Design Licenses.  Contractor shall perform all design and engineering Work in accordance with Applicable Law, and all Drawings and Specifications shall be signed and stamped by design professionals licensed in accordance with Applicable Law.

 

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E.                                      CAD Drawings.  Those Drawings and Record Drawings specified in Attachment A and Attachment B and prepared by Contractor or its Subcontractors or Sub-subcontractors under this Agreement shall be prepared using computer aided design (“CAD”).  Contractor shall provide Drawings, including Record Drawings, in their native formats as set forth in Attachment B along with six (6) hard copies.

 

F.                                      Progress P&ID’s.  During the Project, Contractor shall maintain and provide Owner with access to a marked, up-to-date set of P&ID’s maintained for and by Contractor.

 

G.                                     Record Drawings and Specifications.  As a condition precedent to Final Completion, Contractor shall deliver to Owner the Record Drawings and Specifications in accordance with Attachment A and Attachment B.

 

H.                                    Other Information.  Contractor shall deliver copies of all other documents required to be delivered pursuant to Attachment B within and in accordance with the requirements and timing set forth in Attachment B.

 

3.4                                 Spare Parts.  Not later than one hundred and eighty (180) Days prior to the Guaranteed Substantial Completion Date, Contractor shall deliver to Owner a detailed list of all manufacturer and Contractor-recommended spare parts and special tools necessary for operating and maintaining all Equipment (including components and systems of such Equipment) for two (2) years following Substantial Completion (“Operating Spare Parts”).  Within thirty (30) Days thereafter, Owner shall specify in writing which items on the list it wishes Contractor to purchase and whether such items are requested to be delivered to the Site prior to Substantial Completion or prior to Final Completion. Within a further thirty (30) Days, Contractor shall confirm the extent to which it is able to comply with Owner’s request and shall submit to Owner the final list of Operating Spare Parts to be purchased (“Operating Spare Parts List”).  Prior to and as a condition precedent to Substantial Completion, Contractor shall deliver to the Site all Operating Spare Parts required to be delivered to the Site prior to Substantial Completion as set forth in the Operating Spare Parts List. Prior to and as a condition to achieving Final Completion, Contractor shall deliver to the Site all Operating Spare Parts required to be delivered to the Site prior to Final Completion as set forth in the Operating Spare Parts List.  The Operating Spare Parts List shall include all information specified in Attachment W.  An allowance for the cost of Operating Spare Parts is included in the Contract Price as set forth in Section 7.1C.

 

3.5                                 Training Program in General.  As part of the Work, a reasonable number of personnel designated by Owner in its sole discretion (but not to exceed the number of Persons listed in Attachment V) shall be given a training course designed and administered by Contractor, which shall be based on the outline of the program contained in Attachment V and shall cover at a minimum the following topics: (i) the testing of each item of Equipment; (ii) the start-up, operation and shut-down of each item of Equipment; (iii) the performance of routine, preventative and emergency maintenance for each item of Equipment; and (iv) spare parts to be maintained for each item of Equipment, and their installation and removal. Training shall be provided by personnel selected by Contractor who, in Contractor’s and the Equipment Subcontractor’s or Sub-subcontractor’s judgment, are qualified to provide such training, and shall take place at such locations and at such times as agreed upon by the Parties.  Contractor shall provide trainees with

 

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materials described in Attachment V.  Contractor shall also provide to Owner all training materials and aids developed to conduct such training in order to facilitate future training by Owner of additional personnel.

 

3.6                                 Environmental Regulations and Environmental Compliance.  Without limitation of Section 3.1, Contractor shall perform the Work and shall design, construct,  pre-commission, commission, start-up and test the Facility in compliance with Contractor’s HSE Plan.  Contractor shall dispose of all non-hazardous wastes and Hazardous Materials brought onto the Site or Off-Site Rights of Way and Easements by Contractor or any of its Subcontractors or Sub-subcontractors or generated during performance of the Work, all of which shall be disposed in off-Site locations permitted to receive such non-hazardous wastes and Hazardous Materials.  Contractor shall deliver to Owner (i) notice of any pending or threatened material environmental claim with respect to the Project, and (ii) promptly upon their becoming available, copies of written communications with any Governmental Instrumentality relating to any such material environmental claim.

 

3.7                                 Construction Equipment.  Contractor shall furnish all Construction Equipment necessary and appropriate for the timely and safe completion of the Work in compliance with this Agreement.  Notwithstanding anything to the contrary contained in this Agreement, Contractor shall be responsible for damage to or destruction or loss of, from any cause whatsoever, all such Construction Equipment.  Contractor shall require all insurance policies (including policies of Contractor and all Subcontractors and Sub-subcontractors) in any way relating to such Construction Equipment to include clauses stating that each underwriter will waive all rights of recovery, under subrogation or otherwise, against Owner, Lender and any Owner Affiliates.

 

3.8                                 Employment of Personnel.

 

A.                                   Contractor shall not employ, or permit any Subcontractor or Sub-subcontractor to employ, at the Site, in connection with its performance under this Agreement, any Person who is demonstrably not skilled or qualified in the work assigned to such Person.  Contractor agrees to promptly remove (or to require any Subcontractor to remove) from its services in connection with the Work any Person who does not meet the foregoing requirements.  In addition, Contractor agrees that, after receipt of written notice from Owner, it shall promptly remove from the Work any employee or agent of Contractor or of Contractor’s Subcontractors or Sub-subcontractors who, in Owner’s reasonable opinion, is unsafe, incompetent, careless, unqualified to perform the Work assigned to such Person, creates an unsafe work environment, disregards the terms and conditions of this Agreement, or is interrupting, interfering with or impeding the timely and proper completion of the Work.  NOTWITHSTANDING THE FOREGOING, OWNER SHALL HAVE NO LIABILITY AND CONTRACTOR AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS THE OWNER GROUP FROM AND AGAINST ANY AND ALL CLAIMS, CAUSES OF ACTION, DAMAGES, LOSSES, COST AND EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS’ FEES AND LITIGATION OR ARBITRATION EXPENSES) AND LIABILITIES, OF WHATSOEVER KIND OR NATURE, WHICH MAY DIRECTLY OR INDIRECTLY ARISE OR RESULT FROM CONTRACTOR OR ANY SUBCONTRACTOR OR SUB-SUBCONTRACTOR CHOOSING TO TERMINATE THE EMPLOYMENT OF ANY SUCH EMPLOYEE (INCLUDING ANY KEY PERSON) OR REMOVE SUCH EMPLOYEE FROM THE PROJECT WHO FAILS TO MEET THE FOREGOING

 

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REQUIREMENTS FOLLOWING A REQUEST BY OWNER TO HAVE SUCH EMPLOYEE REMOVED FROM THE WORK.  ANY SUCH EMPLOYEE SHALL BE REPLACED AT THE COST AND EXPENSE OF CONTRACTOR OR THE RELEVANT SUBCONTRACTOR, AS APPROPRIATE; PROVIDED, HOWEVER, THAT SHOULD (I) CONTRACTOR DISAGREE WITH OWNER’S IDENTIFICATION OF AN INDIVIDUAL FOR REMOVAL FROM THE PERFORMANCE OF SERVICES UNDER THIS SECTION 3.8A, (II) OWNER NOT RETRACT ITS REQUEST FOR REMOVAL UPON BEING ADVISED OF SUCH DISAGREEMENT, AND (III) SUCH INDIVIDUAL DOES NOT IN FACT CONFORM TO THE FOREGOING CRITERIA FOR REMOVAL, CONTRACTOR SHALL BE ENTITLED TO A RECIPROCAL INDEMNITY FROM OWNER IN RESPECT TO ANY CLAIMS, CAUSES OF ACTION, DAMAGES, LOSSES, COST AND EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS’ FEES AND LITIGATION OR ARBITRATION EXPENSES) AND LIABILITIES OF WHATEVER KIND OR NATURE, WHICH MAY DIRECTLY OR INDIRECTLY ARISE FROM CONTRACTOR’S REMOVAL OF ANY SUCH EMPLOYEE (INCLUDING ANY KEY PERSON) FROM THE PROJECT.

 

B.                                     Contractor is responsible for maintaining labor relations in such manner that, so far as reasonably practicable, there is harmony among workers.  Contractor and its Subcontractors and Sub-subcontractors shall conduct their labor relations in accordance with the recognized prevailing local area practices. Contractor shall inform Owner promptly of any labor dispute, anticipated labor dispute, request or demand by a labor organization, its representatives or members which may reasonably be expected to affect the Work. Contractor further agrees to inform Owner, before any commitments are made, during the negotiations of any agreements or understandings with local or national labor organizations.

 

3.9                                 Clean-Up.  Contractor shall, to Owner’s reasonable satisfaction, at all reasonable times keep the Site free from all waste materials or rubbish caused by the activities of Contractor or any of its Subcontractors or Sub-subcontractors.  As soon as practicable after the completion of all Punchlist items, Contractor shall remove, at its own cost, all of its Construction Equipment and remove from the Site all waste material and rubbish that was generated or brought on to the Site by Contractor or any of its Subcontractors or Sub-subcontractors.  The Site shall be restored to the extent, if any, required by Attachment A.  In the event of Contractor’s failure to comply with any of the foregoing, Owner may accomplish the same; provided, however, that Contractor shall be responsible for all reasonable costs associated with such removal and/or restoration, including costs associated with permitting and transportation.

 

3.10                           HSE Plan; Security.

 

A.                                   Contractor recognizes and agrees that safety and physical security are of paramount importance in the performance of the Work and that Contractor is responsible for performing the Work in a safe and physically secure manner.  No later than sixty (60) Days after Owner’s issuance of the LNTP, Contractor shall submit to Owner for its review a health, safety and environmental plan (including a drug testing program) meeting the requirements set forth in Attachment J (the “HSE Plan”).  Contractor further agrees to perform the Work in accordance with the health, safety and environmental rules and standards of Applicable Law, GECP and the HSE Plan (collectively, the “Safety Standards”), and Contractor shall assume all costs associated with compliance therewith.  Owner’s review of the HSE Plan shall not in any way relieve Contractor of its obligations

 

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under this Agreement (including Contractor’s obligations to conduct the Work in accordance with the health, safety and environmental rules of Applicable Law and GECP).  Contractor shall appoint one or more (as appropriate) safety representative(s) reasonably acceptable to Owner who shall be resident at the Site, have responsibility to correct unsafe conditions or unsafe acts associated with the Work and the Facility, act on behalf of Contractor on health, safety and environmental matters, and participate in periodic safety meetings with Owner. Contractor further agrees to provide or cause to be provided necessary training and safety equipment to its employees, Subcontractors and Sub-subcontractors and to Owner personnel temporarily visiting the Site to ensure their compliance with the foregoing Safety Standards and enforce the use of such training and safety equipment.  Contractor shall maintain all accident, injury and any other records required by Applicable Law or by Permit and shall furnish Owner a Monthly summary of injuries and labor hours lost due to injuries.  Should Owner at any time observe Contractor, or any of its Subcontractors or Sub-subcontractors, performing the Work at the Site in violation of the Safety Standards or in an unsafe manner, or in a manner that would, if continued, violate the Safety Standards or become unsafe, then Owner shall have the right (but not the obligation) to require Contractor to stop the affected Work until such time as the manner of performing such Work has been rendered safe; provided, however, that at no time shall Contractor be entitled to an adjustment of the Contract Price or Project Schedule based on such Work stoppage.  Contractor shall be responsible for the security, fencing, guarding, lighting, and supervision of the Facility until all of the requirements of Substantial Completion have been satisfied.

 

B.                                     All Work performed hereunder, as applicable, shall comply with the minimum federal safety standards for the design, installation, inspection, testing, construction, extension, operation, replacement, and maintenance of facilities contained in Title 49, Code of Federal Regulations, Parts 192 (to the extent applicable) and 193 and in Title 33 C.F.R. Part 127. Contractor shall comply with requirements of the Operator Qualification Program that are outlined in Sub-Part H of 49 C.F.R. Part 193 and Sub-Part G of C.F.R. Part 195, where applicable, in connection with the Work.  The term “pipeline facilities” shall include new and existing pipe, rights-of-way, and any equipment, facility, or building used in the transportation of gas, including LNG, or treatment of gas during the course of transportation.  The term “transportation of gas” shall include the gathering, transmission, or distribution of gas by pipeline or the storage of gas.

 

3.11                           Emergencies.  In the event of any emergency endangering life or property in any way relating to the Work, whether on the Site or otherwise, Contractor shall take such action as may be reasonable and necessary to prevent, avoid or mitigate injury, damage, or loss and shall, as soon as reasonably possible, report any such incidents, including Contractor’s response thereto, to Owner.  If Contractor fails to take such action and the emergency requires immediate action, then Owner, with or without notice to Contractor may, but shall be under no obligation to, take reasonable action as required to address such emergency.  The taking of any such action by Owner, or Owner’s failure to take any action, shall not limit Contractor’s liability.  Contractor shall reimburse Owner in an amount equal to the reasonable costs incurred by Owner in taking such action.

 

3.12                           Contractor Permits.  Contractor shall be responsible for obtaining the Contractor

 

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Permits.  Contractor shall provide Owner with copies of such Contractor Permits as soon as reasonably practicable after they are obtained.  Contractor shall provide information, assistance and documentation to Owner as reasonably requested in connection with the Owner Permits; provided that such information, assistance and documentation shall not include Contractor’s provision of information, testimony, documents or data by Contractor’s employees under oath (unless specifically authorized by Contractor) and activities outside the field of Contractor’s expertise, training or experience of personnel assigned to the performance of the Work under this Agreement (expect to the extent provided for by Change Order issued pursuant to Section 6.1 and agreed by Contractor).

 

3.13                           Books, Records and Audits.

 

A.                                   Contractor shall keep full and detailed books, construction logs, records, daily reports, schedules, accounts, payroll records, receipts, statements, electronic files, correspondence and other pertinent documents as may be necessary for proper management under this Agreement, as required under Applicable Law or this Agreement, and in any way relating to this Agreement (“Books and Records”).  Contractor shall maintain all such Books and Records in accordance with GAAP and shall retain all such Books and Records for a minimum period of three (3) years after Final Completion, or such greater period of time as may be required under Applicable Law.

 

B.                                     Upon reasonable notice, Owner shall have the right to have audited Contractor’s Books and Records by Owner’s third party auditors but only to the extent necessary to validate payments made to Contractor or invoiced by Contractor on the basis of Reimbursable Costs and as permitted under Section 4.5.  When requested by Owner, Contractor shall provide Owner’s auditors with reasonable access to all such relevant Books and Records, and Contractor’s personnel shall cooperate with such auditors to effectuate the audit or audits hereunder.  Owner shall have the right upon consent of Contractor (such consent not to be unreasonably withheld or delayed) to have the auditors copy all such Books and Records.  Contractor shall bear all costs incurred by it in assisting with audits performed pursuant to this Section 3.13. Contractor shall include audit provisions identical to this Section 3.13 in all Major Subcontracts.  No access to Books and Records shall be granted to Owner’s auditors until such auditors have signed a confidentiality agreement with Contractor in accordance with the standard practice in the auditing industry for audits of this kind.

 

C.                                     Contractor shall not, and shall provide that its Subcontractors, Sub-subcontractors and agents or employees of any of them shall not, without Owner’s prior written approval, (i) pay any commissions or fees, or grant any rebates, to any employee or officer of Owner or its Affiliates, (ii) favor employees or officers of same with gifts or entertainment of a significant cost or value, or (iii) enter into any business arrangements with employees or officers of same.

 

3.14                           Tax Accounting.  Within a reasonable period of time following a request therefor by Owner, subject to Section 4.5C, Contractor shall provide Owner’s third party auditors with any information (including Books and Records) regarding quantities and descriptions of any Equipment installed on or ordered for the Facility and any other information as Owner’s third party

 

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auditors may deem reasonably necessary in connection with the preparation of Owner’s tax returns (including information reasonably required to determine the amount of Qualified Research Expenditures incurred in connection with the Work) or other tax documentation in connection with the Project; provided, however, if, in connection with such preparation, Owner’s third party auditors request information relating to the actual cost for any item of Work and such item of Work is included in the Contract Price or in any lump sum Change Order, Contractor shall provide such information to Owner’s third party auditors as provided in Section 4.5C.  No access to the aforementioned information (including Books and Records) shall be granted to Owner’s auditors until such auditors have signed a confidentiality agreement with Contractor in accordance with the standard practice in the auditing industry for audits of this kind.

 

3.15                           Temporary Utilities, Roads, Facilities and Storage.  Until Substantial Completion, Contractor shall provide and pay for all temporary utilities (i.e., electricity, water (other than the water provided by Owner for the hydrotest in accordance with Attachment U), communication, cable, telephone, waste and sewer) necessary for the performance of the Work, including installation and usage costs.  Subject to Section 4.3, Contractor shall construct and maintain temporary access and haul roads as may be necessary for the proper performance of this Agreement.  Contractor shall provide Owner with sufficient office space at the time of Contractor’s mobilization at the Site to accommodate Owner’s Site representative and support staff at the Site.  Contractor shall provide Owner with all office space, construction trailers, utilities, storage and warehousing, security, telephones, furnishings, and other temporary facilities required for their oversight of the Work, as set forth in more detail in Attachment A, Schedule A-1.  Once title to Equipment has passed to Owner as set forth in Section 8.1B, such Equipment shall, if stored at a location other than on the Site, be segregated from other goods, and shall be clearly marked as “Property of Sabine Pass LNG, L.P.”

 

3.16                           Subordination of Liens.  Contractor hereby subordinates any mechanics’ and materialmen’s liens or other claims or encumbrances that may be brought by Contractor against any or all of the Work, the Site or the Facility to any liens granted in favor of Lender, whether such lien in favor of Lender is created, attached or perfected prior to or after any such liens, claims or encumbrances, and shall require its Subcontractors and Sub-subcontractors to similarly subordinate their lien, claim and encumbrance rights.  Contractor agrees to comply with reasonable requests of Owner for supporting documentation required by Lender in connection with such subordination, including any necessary lien subordination agreements.  Nothing in this Section 3.16 shall be construed as a limitation on or waiver by Contractor of any of its rights under Applicable Law to file a lien or claim or otherwise encumber the Facility as security for any undisputed payments owed to it by Owner hereunder which are past due; provided that such lien, claim or encumbrance shall be subordinate to any liens granted in favor of Lenders.

 

3.17                           Hazardous Materials.  Contractor shall not, nor shall it permit or allow any Subcontractor or Sub-subcontractor to, bring any Hazardous Materials on the Site and shall bear all responsibility and liability for such materials; provided, however, that Contractor may bring onto the Site such Hazardous Materials as are necessary to perform the Work so long as the same is done in compliance with Applicable Law, Applicable Codes and Standards, and the HSE Plan, and Contractor shall remain responsible and liable for all such Hazardous Materials.  If Contractor or any Subcontractor or Sub-subcontractor encounter pre-existing Hazardous Materials at the Site, and Contractor or any Subcontractor or Sub-subcontractor knows or suspects that such material is

 

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Hazardous Material, Contractor and its Subcontractors and Sub-subcontractors shall promptly stop Work in the affected area and notify Owner.  If under such circumstances Contractor or any of its Subcontractors or Sub-subcontractors fail to stop Work and notify Owner, Contractor shall be responsible and liable to Owner for all damages, costs, losses and expenses to the extent attributable to such failure.

 

3.18                           Quality Assurance.  On or before the date Owner issues the NTP, Contractor shall submit to Owner for its review an outline of a Facility-specific quality assurance plan and an inspection plan.  No later than sixty (60) Days after the date Owner issues the NTP, Contractor shall submit to Owner for its written approval (which shall not be unreasonably withheld), a Facility-specific quality assurance plan and an inspection plan, including witness points, but excluding tests and inspections relating to commissioning.  No later than one hundred twenty (120) Days after the date Owner issues the NTP, Contractor shall submit to Owner for its written approval (which shall not be unreasonably withheld), detailed inspection procedures.  Contractor’s quality assurance plan shall provide for a quality assurance individual to be present at the Site to supervise the implementation of the quality assurance plan, the inspection plan, and the inspection procedures.  Owner’s review and approval of Contractor’s quality assurance plan, inspection plan and inspection procedure shall in no way relieve Contractor of its responsibility for performing the Work in compliance with this Agreement.

 

3.19                           Reports.

 

A.                                   Contractor shall provide Owner with an electronic copy of the following reports and other documentation:

 

1.                                       minutes for all weekly status and other Project-related meetings with Owner within five (5) Business Days following such meeting;

 

2.                                       safety incident reports within three (3) Business Days of the occurrence of any such incident; except for any safety incident involving a significant non-scheduled event such as LNG or Natural Gas releases, fires, explosions, mechanical failures, unusual over-pressurizations or major injuries which shall be provided to Owner within eight (8) hours of the occurrence of such incident; provided, however, notification shall be provided to Owner immediately if the incident is of significant magnitude to threaten public or employee safety, cause significant property damage or interrupt the Work;

 

3.                                       Monthly progress reports (“Monthly Progress Reports”) with the information specified in Attachment A.

 

3.20                           Payment.  Contractor shall timely make all payments required to be paid to Owner pursuant to the terms of this Agreement.

 

3.21                           Commercial Activities.  Neither Contractor nor its employees shall establish any commercial activity or issue concessions or permits of any kind to Third Parties for establishing commercial activities on the Site or any other lands owned or controlled by Owner.

 

3.22                           Title to Materials Found.  As between Owner and Contractor, the title to water,

 

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soil, rock, gravel, sand, minerals, timber, dredge material, and any other materials developed or obtained in the excavation or other operations of Contractor, any Subcontractor or Sub-subcontractor and the right to use said materials or dispose of same is hereby expressly reserved by Owner.  Notwithstanding the foregoing, Contractor shall be permitted, without charge, to use in the Work any such materials that comply with the requirements of this Agreement. Material dredged in the performance of the Work shall be deposited in the areas designated by Owner as set forth in Attachment Y.

 

3.23                           Survey Control Points and Layout.  Contractor shall establish all survey control points and layout the entire Work in accordance with the requirements of this Agreement, which shall be based on the survey control point established by Owner pursuant to this Agreement.  If Contractor or any of its Subcontractors, Sub-subcontractors or any of the representatives or employees of any of them move or destroy or render inaccurate the survey control point provided by Owner, such control point shall be replaced by Contractor at Contractor’s own expense.

 

3.24                           Cooperation with Others.

 

A.                                   Cooperation on the Site.  Subject to the provisions of this Agreement, including Section 4.3, Contractor acknowledges that Owner or Owner’s other contractors or subcontractors may be working at the Site during the performance of this Agreement and Contractor’s Work or use of certain facilities may be interfered with as a result of such concurrent activities. Owner shall provide Contractor with reasonable notice of any request for access to the Site by (i) any of Owner’s other contractors or subcontractors seeking to perform work at the Site or (ii) any Landowner.  Subject to Section 4.3, Contractor agrees to use reasonable efforts to accommodate such request and to coordinate the performance of the Work with such other contractors or subcontractors performing work at the Site so as not to materially interfere with any of Owner’s other contractors or subcontractors performing work at the Site.

 

B.                                     Cooperation Within the Off-Site Rights of Way and Easements.  Owner shall provide Contractor with reasonable prior notice of access to the Off-Site Rights of Way and Easements by (i) any of Owner’s other contractors or subcontractors seeking to perform work within such Off-Site Rights of Way and Easements (ii) any Landowner.  Likewise, Contractor shall provide Owner with reasonable prior notice of any access to the Off-Site Rights of Way and Easements by Contractor or any of its Subcontractors or Sub-subcontractors.  Subject to the provisions of this Agreement, including Section 4.3, Contractor acknowledges that Owner or Owner’s other contractors or subcontractors may be working within the Off-Site Rights of Way and Easements and that other Persons (including any Landowner) may be on or using the Off-Site Rights of Way and Easements during the performance of this Agreement and Contractor’s Work or use of certain facilities may be interfered with as a result of such concurrent activities. Subject to Section 4.3, Contractor agrees to use reasonable efforts to accommodate such request and to coordinate the performance of the Work with such other contractors or subcontractors performing work within the Off-Site Rights of Way and Easements so as not to materially interfere with any of Owner’s other contractors or subcontractors performing work within the Off-Site Rights of Way and Easements; provided, however, Contractor shall in all cases coordinate the Work with any Persons (other than Owner or Owner’s other contractors or

 

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subcontractors) on or using the Off-Site Rights of Way and Easements, and Contractor shall adhere to the reasonable instructions provided by Owner or the applicable Landowner(s) in connection with Work performed within such Off-Site Rights of Way and Easements.

 

3.25                           Responsibility for Property.  Contractor shall plan and conduct its operations so that neither Contractor nor any of its Subcontractors or Sub-subcontractors shall (i) enter upon lands (other than the Site and Off-Site Rights of Way and Easements) or waterbodies in their natural state unless authorized by the appropriate owner or entity; (ii) close or obstruct any utility installation, highway, waterway, harbor, road or other property unless Permits are obtained and authorized by the appropriate entity or authority; or (iii) disrupt or otherwise interfere with the operation of any portion of any pipeline, telephone, conduit or electric transmission line, ditch, navigational aid, dock or structure unless otherwise specifically authorized by the appropriate entity or authority.  The foregoing includes damage arising from performance of the Work through operation of Construction Equipment or stockpiling of materials.

 

3.26                           Explosives.  Explosives shall be transported to the Site only when required to perform the Work under this Agreement and with abundant, prior notice to and written approval of Owner. Contractor shall be responsible for properly purchasing, transporting, storing, safeguarding, handling and using explosives required to perform the Work under this Agreement. Contractor shall employ competent and qualified personnel for the use of explosives and, notwithstanding any other provision in this Agreement to the contrary, shall assume full responsibility for damages claimed by any Third Party to the extent caused by the improper use of explosives by Contractor or any Subcontractor or Sub-subcontractor. Residual surplus explosives shall be promptly removed from the Site and properly disposed of by Contractor.

 

3.27                           Taxes.  Subject to Sections 4.5 and 7.1A, the Contract Price includes all Taxes payable by Contractor, its Subcontractors and Sub-subcontractors in connection with the Work.  Subject to Section 4.5, as between Owner and Contractor, Contractor shall be responsible for the payment of all Taxes payable by Contractor, its Subcontractors and Sub-subcontractors in connection with the Work.

 

3.28                           Equipment Quality.  Contractor shall furnish reasonable evidence as to the kind, quality, and quantity of all Major Equipment.  Without prior written approval by Owner which specifically waives the requirements of this Agreement, where this Agreement specifies certain Major Equipment be incorporated into the Facility, Contractor shall not use any Major Equipment other than as specified in this Agreement.  If Contractor wishes to modify the requirements contained herein, then it shall make written application to Owner for Owner’s approval (such approval not to be unreasonably withheld), prior to performing any such Work.  Such application shall (i) identify the requirements being modified, (ii) certify that the quality of the proposed substitute is equal to or better than that currently specified, and (iii) certify that the substitute is suited to the same use and capable of performing the same function as that specified.  If the preceding requirements are not followed, then any substitution shall constitute a material failure by Contractor to comply with its obligations under this Agreement.  All Major Equipment shall be fabricated, applied, installed, connected, operated (during start-up and testing), cleaned and conditioned in accordance with the instructions of the applicable Subcontractor or Sub-subcontractor.

 

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Article 4
OWNER’S RESPONSIBILITIES

 

Owner shall comply with the following provisions in a timely manner in accordance with the Project Schedule at no cost to Contractor:

 

4.1                                 Payment and Financing.  Owner shall timely pay the Contract Price in accordance with the provisions of Article 7 hereof.  As a condition of NTP, Owner shall obtain and maintain financing for the Project sufficient to make payments to Contractor in accordance with the terms of this Agreement.

 

A.                                   Owner Monthly Confirmation. Beginning with Owner’s issuance of the NTP and continuing monthly thereafter until the first draw is made under the financing (the “First Draw”), Owner shall deliver to Contractor a statement in the form of Schedule BB-2 (“Owner Monthly Confirmation”) confirming that Owner has sufficient funds to continue to fulfill its payment obligations up to the date of the First Draw and confirming that no event has come to the attention of Owner which would materially and adversely affect the continued availability of such funding.  Each Owner Confirmation shall be signed by an appropriate senior officer of Owner.

 

B.                                     Owner Quarterly Confirmation.  After the First Draw, and continuing quarterly thereafter, Owner shall deliver to Contractor a statement in the form of Schedule BB-3 (“Owner Quarterly Confirmation”) confirming that Owner has sufficient funds through itself or financing to continue to fulfill its payment obligations under this Agreement and confirming that no event has come to the attention of Owner which would materially and adversely affect the continued availability of such funding. Such Owner Quarterly Confirmation shall be signed by an appropriate senior officer of Owner.

 

4.2                                 Owner Permits.  Owner shall be responsible for obtaining the Owner Permits.  Owner shall maintain and, to the extent applicable, renew such Owner Permits.  To the extent Owner has already obtained any of the Owner Permits as of the Effective Date of this Agreement, Owner shall provide copies of such Owner Permits to Contractor on or before the Effective Date.  To the extent Owner has not obtained any Owner Permits prior to the Effective Date, Owner shall obtain such Owner Permits in accordance with the schedule contained in Attachment Q and Owner shall provide Contractor with complete copies of such Owner Permits within five (5) Business Days after obtaining them.  The terms of all such Permits shall be compatible with Contractor’s performance of the Work, and Owner shall promptly notify Contractor of any changes to the terms of any such Owner Permit that impacts Contractor’s performance of the Work under this Agreement.  Owner shall provide information, assistance and documentation to Contractor as reasonably requested in connection with the Contractor Permits.

 

4.3                                 Access to the Site and Off-Site Rights of Way and Easements.

 

A.                                   In accordance with Attachment U and subject to the terms of this Agreement, including Sections 3.24A and 4.3C, Owner shall provide Contractor with access to and care and custody of the Site.  Such access shall be sufficient to permit Contractor to progress with construction on a continuous basis without material

 

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interruption or interference by others.  To the extent that (i) any of Owner’s other contractors or subcontractors working at the Site prior to Substantial Completion or (ii) any Landowner accessing the Site prior to Substantial Completion, in either case materially interrupts or interferes with Contractor’s performance of the Work and such interruption or interference adversely affects Contractor’s ability to perform the Work in accordance with the Project Schedule or Contractor’s cost of performance of the Work, Contractor shall be entitled to a Change Order; provided that Contractor complies with the requirements in Sections 6.2, 6.5 and 6.9.

 

B.            Subject to Section 3.24B, the Contract Price is based on Owner providing Contractor with access to the off-Site rights of way and easements listed in Attachment Y (the “Off-Site Rights of Way and Easements”) sufficient to permit Contractor to progress with construction without material interruption or interference by others while adhering to the reasonable instructions provided by Owner or the applicable Landowner(s) in connection with Work performed within such Off-Site Rights of Way and Easements.  To the extent Contractor is not provided with sufficient access to such Off-Site Rights of Ways and Easements to progress with construction without material interruption or interference by others, and such interruption or interference adversely affects Contractor’s cost of performance of the Work or Contractor’s ability to perform the Work in accordance with the Project Schedule, Contractor shall be entitled to a Change Order; provided that (i) Contractor complies with the requirements set forth in Sections 6.2, 6.5 and 6.9 and (ii) at or prior to the Contract Date, Contractor did not know or reasonably should have known (based on information made available by Owner to Contractor or investigations made by Contractor prior to the Contract Date) that its access was or would be restricted.

 

C.                                     Contractor shall provide Owner access to the Site at all times.

 

4.4                                 Operation Personnel.  Owner shall provide to Contractor a minimum of fifty (50) qualified and competent operating and maintenance personnel sufficient to commission and test the Facility under the supervision of Contractor as set forth in Attachment V.  Until Substantial Completion, such personnel shall be under the direction and control of and supervised by Contractor.  Such operating and maintenance personnel shall be available for training as required pursuant to Section 3.5.  To the extent not set forth in Attachment V, Contractor shall prepare for Owner’s review a Project Commissioning Plan regarding the utilization of Owner’s operation and maintenance personnel and Contractor’s personnel during commissioning and for the conduct of Performance Tests.  Such Project Commissioning Plan shall be mutually agreed-upon by the Parties, each acting reasonably, no later than forty-five (45) Days after Owner’s receipt of Contractor’s proposed Project Commissioning Plan.  Without in any way limiting Contractor’s obligation to provide forces and labor during commissioning and Performance Testing, Contractor agrees that if any activity during commissioning and Performance Testing requires direct supervision by Contractor, such supervision shall be performed by Contractor or a Subcontractor or Sub-subcontractor. Owner shall remain responsible for all costs associated with Owner’s operation and maintenance personnel, including salaries, travel and expenses.

 

4.5                                 Sales and Use Tax Matters.

 

A.                                   Owner shall participate in the Louisiana Enterprise Zone Program, which

 

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shall allow Owner to receive a rebate directly from the State of Louisiana Department of Revenue of the rebatable portion of Louisiana state, parish and local-option sales and use tax (“Louisiana Sales and Use Tax”) incurred and paid by Contractor and its Subcontractors or Sub-subcontractors in connection with performance of the Work.  Contractor shall provide to Owner, for itself and its Subcontractors and Sub-subcontractors, all documentation as may be reasonably requested by Owner and available to Contractor and its Subcontractors and Sub-subcontractors in order to allow Owner to secure such rebate.  Such documentation shall include invoice documentation supporting all Louisiana Sales and Use Taxes paid by Contractor and its Subcontractors and Sub-subcontractors for the purchase of Equipment, including purchases of Equipment made under lump sum contract agreements.  Such invoice documentation shall be provided to Owner on a timely basis and shall clearly identify (i) the item of Equipment purchased, (ii) the amount of Louisiana Sales and Use Tax paid; and (iii) all information (including Owner’s name, the taxpayer’s name, the Project name and the Project address) to properly establish that the Equipment was used in connection with or incorporated into the Facility.  If the Equipment was taken from Contractor’s, Subcontractor’s or Sub-subcontractor’s inventory, subject to Section 4.5C, Contractor shall provide Owner with an invoice, journal vouchers or other similar documentation as may be required to evidence that the applicable Louisiana Sales and Use Tax was paid by Contractor, Subcontractor or Sub-subcontractor on such inventory.  Owner’s tax consultant (as notified by Owner to Contractor) shall assist Owner to secure all available rebates of Louisiana Sales and Use Taxes and is authorized to request and receive information directly from Contractor and its Subcontractors and Sub-subcontractors on behalf of Owner.  No information shall be provided to Owner’s tax consultant until such tax consultant has signed a confidentiality agreement with Contractor and any applicable Subcontractor and Sub-subcontractor with terms customary in the audit industry for audits of this kind.

 

B.                                     Owner shall provide Contractor with any state and local manufacturing, pollution control or other applicable sales and use tax exemption certificates which are valid under Applicable Law, including the governing law specified in Section 21.9.  Contractor and Owner shall reasonably cooperate with each other to minimize any and all Taxes relating to the Project.  If Contractor or any Subcontractor or Sub-subcontractor incurs any sales and use taxes on any items of Equipment for which Owner has previously provided Contractor with a valid applicable sales and use tax exemption certificate, Contractor shall be responsible for the payment of such sales and use taxes without reimbursement by Owner; provided, however, the foregoing provision shall not affect Contractor’s right to a Change Order in accordance with Section 7.1A.

 

C.                                     Pursuant to Section 3.14, Owner shall have the right to have its third party auditors audit the Books and Records of Contractor and its Sub-contractors or Sub-subcontractors to confirm that all Louisiana Sales and Use Taxes paid by Contractor and its Subcontractors and Sub-subcontractors in connection with the Work are properly owed under Applicable Law; provided, however, if the determination of the proper amount of such Louisiana Sales and Use Tax assessed on any one or more items of Equipment is dependent upon knowing the actual cost incurred by Contractor or its Sub-contractors or Sub-subcontractors for such item of Equipment and the compensation of such item of Equipment is included in the Contract Price or in any lump sum Change Order, that portion

 

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of the audit devoted to reviewing the actual cost incurred by Contractor or its Sub-contractors or Sub-subcontractors for such item of Equipment shall be performed by Owner’s tax consultant, which shall be retained by Owner at Owner’s sole expense.  The Parties agree that (unless the amount of Louisiana Sales and Use Tax properly payable for an item of Equipment is subject to litigation) such tax consultant shall not disclose to Owner the actual cost incurred by Contractor or its Sub-contractors or Sub-subcontractors for any item of Equipment included in the Contract Price, but the Parties agree that such tax consultant may report to Owner the proper Louisiana Sales and Use Taxes properly payable under Applicable Law.  No access to Books and Records shall be granted to Owner’s third party auditors until such auditors have signed a confidentiality agreement with Contractor and any applicable Subcontractor or Sub-subcontractor with terms customary in the audit industry for audits of this kind.

 

4.6                                 Legal Description and Survey.   As of the Contract Date, Owner has provided to Contractor (i) the legal description of the Site as set forth in Attachment Y and (ii) a survey of the Site showing the boundaries of the Site and one survey control point, prepared by Lonnie G. Harper & Associates, dated January 26, 2004.  Contractor shall be entitled to rely upon the accuracy of this information.  To the extent any existing structures or utilities are shown in the survey, Contractor shall independently verify the locations of such existing structures and utilities.

 

4.7                                 Hazardous Materials.  Owner shall remove, transport and, as appropriate, dispose of any Hazardous Materials discovered or released at the Site, including any Hazardous Materials brought on the Site or generated by Third Parties, but excluding any Hazardous Materials brought on to the Site or generated by Contractor or any of its Subcontractors or Sub-subcontractors.  In addition, as between Owner and Contractor, Owner shall be responsible for any Hazardous Materials discovered or released within the Off-Site Rights of Way and Easements, including any Hazardous Materials brought on the Off-Site Rights of Way and Easements or generated by Third Parties but excluding any Hazardous Materials brought on the Off-Site Rights of Way and Easements by Contractor or any of its Subcontractors or Sub-subcontractors.  OWNER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS CONTRACTOR GROUP FROM AND AGAINST ALL DAMAGES, LOSSES, COSTS AND EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS’ FEES AND LITIGATION OR ARBITRATION EXPENSES) INCURRED BY CONTRACTOR GROUP TO THE EXTENT ARISING FROM ANY CONTAMINATION OR POLLUTION RESULTING FROM ANY HAZARDOUS MATERIALS FOR WHICH OWNER IS RESPONSIBLE UNDER THIS SECTION 4.7.

 

4.8                                 Owner-Provided Items.

 

A.                                   Owner shall be responsible for those items of information so identified in Attachment A, including information defined as “Rely Upon” in the Design Basis included in Attachment A, Schedule A-2 and for providing to Contractor the information specified in Attachment U.  Contractor shall not be required to examine or be deemed to have examined any such information and Owner shall remain fully responsible for the accuracy, completeness and sufficiency of such information.  If Owner makes a change to any such information, or if Contractor discovers an error in such information or non-compliance of such information with Applicable Law or Applicable Codes and Standards, Contractor shall be entitled to a Change Order; provided that Contractor complies with the requirements set forth in Sections 6.2, 6.5 and 6.9.  All other information in the Design

 

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Basis shall be the responsibility of Contractor.

 

B.                                     Owner shall provide those items in Attachment A which are expressly listed as being the obligation of Owner and the items listed in Attachment U (within the times listed in Attachment U).  The items already provided by Owner are listed in Attachment U.

 

4.9                                 LNG Tanker Release.  Owner shall endeavor to obtain a release of Contractor Group and Owner Group from the owner of any LNG tanker and related LNG cargo from any and all damages, losses, costs and expenses arising out of or resulting from claims for damage to or destruction of an LNG tanker and loss of the related LNG cargo or personal injury or death of any employee, officer or director employed by the company operating, owning or leasing such LNG tanker or owning the related LNG cargo in connection with the delivery of LNG of any LNG tanker to the Project where such damage, destruction, loss, injury or death occurs prior to Substantial Completion.  Owner shall endeavor to obtain a release which shall apply regardless of the cause of such damage, destruction, injury or death, including the sole or joint negligence, breach of contract or other basis of liability of any member of the Contractor Group and any member of the Owner Group.

 

Article 5
COMMENCEMENT OF WORK, PROJECT SCHEDULE, AND SCHEDULING OBLIGATIONS

 

5.1                                 Commencement of Work.  Upon Contractor’s receipt from Owner of the limited notice to proceed (“Limited Notice to Proceed” or “LNTP”), Contractor shall promptly commence with the performance of the LNTP Work.  The LNTP shall be issued in the form attached hereto as Attachment H, Schedule H-1.  Contractor shall not, and shall not be obligated to, commence performance of the LNTP Work until receipt from Owner of such LNTP.

 

5.2                                 Limited Notice to Proceed/Notice to Proceed.

 

A.                                   Limited Notice to Proceed.  The portion of the Contract Price payable for the LNTP Work shall be made in accordance with the Payment Schedule set forth in Attachment C, Schedule C-2 and the applicable provisions of Article 7.  Owner shall not issue the LNTP until the following conditions have been met:

 

1.                                       Owner has furnished to Contractor documentation which demonstrates that Owner has sufficient funds to fulfill its payment obligations in connection with Contractor’s performance of the LNTP Work, or that Owner has obtained financing from one or more Lenders to fulfill its payment obligations in connection with such LNTP Work;

 

2.                                       Owner has obtained all Owner Permits that are necessary for performance of the LNTP Work, or if Owner has not obtained all such Owner Permits at the commencement of the LNTP Work, by issuance of the LNTP, Owner commits to obtain any such remaining Owner Permits in such time so as to not delay the performance of Contractor’s LNTP Work; and

 

3.                                       Owner shall be in compliance with its other obligations set forth in

 

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Article 4 as necessary for the LNTP Work.

 

B.                                     Notice to Proceed.  Contractor shall not, and shall not be obligated to, commence performance of the Work (other than the LNTP Work) until Owner issues the full notice to proceed (“Notice to Proceed” or “NTP”) authorizing the same pursuant to the terms and conditions of this Agreement.  Upon Contractor’s receipt from Owner of the NTP, Contractor shall promptly commence with the performance of the Work.  The NTP shall be issued in the form attached hereto as Attachment H, Schedule H-2.  Contractor shall timely file in the required superior court and post at the Site a notice of commencement as required under La. Rev. Stat. §9:4801, et. seq. and shall provide copies of such notice of commencement to Subcontractors and Sub-subcontractors as required under La. Rev. Stat. §9:4801, et. seq.  Owner shall not issue an NTP until the following conditions have been met:

 

1.                                       Owner has furnished to Contractor reasonable documentation which demonstrates that Owner (i) has sufficient funds to fulfill its payment obligations under this Agreement, or (ii) has obtained financing from one or more Lenders to fulfill its payment obligations under this Agreement, including (a) satisfaction, or waiver by Lenders, of all applicable conditions precedent to the occurrence of the closing date of the financing, which shall be prior to or contemporaneous with the issuance of the Notice to Proceed, and (b) evidence of the execution of the credit agreement with respect to such financing by Owner and Lenders (including a copy of such executed credit agreement);

 

2.                                       Owner has obtained all Owner Permits (including the FERC Authorization) which are shown in Attachment Q as required to be obtained prior to the issuance of the NTP;

 

3.                                       Owner has made payment to Contractor of all undisputed amounts owed as of the date of the NTP that were earned in connection with Contractor’s performance of the LNTP Work;

 

4.                                       the Advance Payment has been received by Contractor in cleared funds;

 

5.                                       Owner shall be in compliance with its other obligations set forth in Article 4 as necessary for the commencement of the Work; and

 

6.                                       ninety (90) Days or more have elapsed since Owner’s issuance of the LNTP and, provided, in any event, that NTP shall not be issued earlier than April 4, 2005.

 

5.3                                 Project Schedule.  Contractor shall perform the Work in accordance with the Project Schedule.

 

A.                                   Guaranteed Substantial Completion Date.  Contractor shall achieve Substantial Completion no later than the date specified in Attachment E (“Guaranteed Substantial Completion Date”).  The Guaranteed Substantial Completion Date shall only

 

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be adjusted by Change Order as provided under this Agreement.

 

B.                                     Final Completion.  Contractor shall achieve Final Completion no later than ninety (90) Days after achieving Substantial Completion for the Facility.

 

5.4                                 CPM Schedule Submissions.  On or before Owner’s issuance of the Notice to Proceed, Contractor shall prepare and submit to Owner for its review a detailed critical path method schedule for the Work (“CPM Schedule”), which shall be detailed at a Level II for all activities for the Project (including engineering, procurement, construction, pre-commissioning, commissioning, testing and startup). In addition, no later than one hundred and twenty (120) Days after the delivery of the initial CPM Schedule by Contractor to Owner, Contractor shall submit to Owner for its review a revised CPM Schedule, which shall be detailed at a Level III for all activities for the Project (including engineering, procurement, construction, pre-commissioning, commissioning, testing and startup).  The initial CPM Schedule shall govern Contractor’s Work until the revised CPM Schedule is prepared and reviewed by Owner.  Each of the initial and revised CPM Schedules shall be referred to as the “CPM Schedule,” and each shall comply with the requirements of this Section 5.4 and shall be provided to Owner in its native electronic format.  The CPM Schedule shall be prepared by Contractor using Primavera Project Planner (P3).  Without limitation of the foregoing, the CPM Schedule shall include the information and meet the requirements set forth in Section 9.4 of Attachment A.

 

5.5                                 Recovery and Recovery Schedule.  If, at any time during the prosecution of the Work, (i) should the Monthly Progress Report show that any activity on the critical path is forty-five (45) or more Days behind schedule, or should Contractor fail to provide a Monthly Progress Report in compliance with the requirements of this Agreement and Owner reasonably determines that any activity on the critical path is forty-five (45) or more Days behind schedule and (ii) Contractor or any of its Subcontractors or Sub-subcontractors are in Owner’s reasonable judgment responsible for such delay, Owner may, in addition to any other remedies that it may have under this Agreement, require that Contractor prepare a schedule to explain and display how it intends to regain compliance with the CPM Schedule (“Recovery Schedule”). Within ten (10) Business Days after the determination by Owner of the requirement for a Recovery Schedule, Contractor shall prepare the Recovery Schedule and submit it to Owner for its review.  The Recovery Schedule shall (i) represent Contractor’s best judgment as to how it shall regain compliance with the CPM Schedule, (ii) be prepared in accordance with GECP, (iii) have a level of detail sufficient for Contractor to direct, manage and perform the Work, and (iv) have a maximum duration of sixty (60) Days unless recovery cannot be reasonably achieved in such time, in which case the duration of the Recovery Schedule shall be for that period of time reasonably necessary to regain compliance with the CPM Schedule.  Contractor shall address all comments received from Owner during Owner’s review of the Recovery Schedule, and Contractor shall provide a written statement describing why any of Owner’s comments or proposed changes to the Recovery Schedule were not implemented by Contractor.  Any of Owner’s comments or proposed changes to the Recovery Schedule that Contractor implements should be reflected in the revised Recovery Schedule.  The revised Recovery Schedule shall then be the schedule which Contractor shall use in planning, organizing, directing, coordinating, performing, and executing the Work (including all activities of Subcontractors and Sub-subcontractors) to regain compliance with the CPM Schedule.  The cost of preparing and executing the Recovery Schedule shall be at Contractor’s sole cost and expense; provided, however, if the preparation of a Recovery Schedule is combined with

 

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a request by Owner for a Change Order and the cost of preparing the Change Order for such request (excluding any costs associated with recovery) exceeds Thirty Thousand U.S. Dollars ($30,000), then Contractor is entitled to reimbursement for such preparation costs in accordance with Section 6.1A.  Owner’s review and comments regarding the Recovery Schedule shall not relieve Contractor of any obligations for performance of the Work, change the Guaranteed Substantial Completion Date or be construed to establish the reasonableness of the Recovery Schedule.

 

5.6                                 Acceleration and Acceleration Schedule.

 

A.                                   Even if the Work is otherwise in compliance with the CPM Schedule, Owner may, at any time, direct Contractor in writing to advance one or both of the Target Bonus Date and Guaranteed Substantial Completion Date; provided, however, such directive shall be reasonable and Contractor shall have agreed in writing that such acceleration is commercially and technically feasible and, provided further no such directive shall adversely affect Contractor’s ability to earn the Schedule Bonus in accordance with Section 11.9.  For the purposes of this Section 5.6A, Contractor’s ability to earn the Schedule Bonus would be adversely affected if Contractor would achieve the Schedule Bonus but for the directive.  In the event of such agreement, the directive shall be termed herein a “Confirmed Acceleration Directive” and shall be set forth in a Change Order.  In no event shall Owner have the right to issue a unilateral acceleration directive requiring Contractor to achieve Substantial Completion prior to the original Guaranteed Substantial Completion Date specified in this Agreement as of the Contract Date, nor shall Owner have the have the right to issue a unilateral acceleration directive requiring Contractor to achieve Target Completion prior to the original Target Bonus Date specified in this Agreement as of the Contract Date.  In the event of a Confirmed Acceleration Directive, Owner shall pay Contractor for the documented costs plus fee attributable to such acceleration and appropriate incentives, if any, shall be mutually agreed upon by the Parties with respect to such early proposed completion and set forth in the Change Order.  Such costs may include any shift differential, premium, or overtime payments to workers or field supervisors and other employees of Contractor dedicated to the Work on a full-time basis actually incurred over and above Contractor’s normal rates, and overtime charges for Construction Equipment.  Any adjustment to the Contract Price or any other Changed Criteria necessitated by such acceleration of the Work shall be implemented by Change Order.  Upon execution of the Change Order, Contractor shall immediately commence and diligently perform the acceleration of the Work, and shall prepare a schedule to explain and display how it intends to accelerate the Work and how that acceleration will affect the critical path of the CPM Schedule (the “Acceleration Schedule”).  With respect to the Acceleration Schedule, Contractor shall do the following:

 

1.                                       No later than the tenth (10^th) Business Day after execution of the Change Order with respect to the Confirmed Acceleration Directive, Contractor shall prepare the Acceleration Schedule and submit it to Owner for its review.  The Acceleration Schedule shall represent Contractor’s best judgment as to how it shall satisfy the Confirmed Acceleration Directive.  The Acceleration Schedule shall be prepared using GECP and to a similar level of detail as the CPM Schedule.

 

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2.                                       On the tenth (10^th) Business Day after execution of the Change Order with respect to the Confirmed Acceleration Directive (or such longer time as specified in writing by Owner), Contractor shall participate in a conference with Owner, and with any other Person (including Subcontractors and Sub-subcontractors) whom Owner reasonably designates to participate, to review and evaluate the Acceleration Schedule.  Any revisions to the Acceleration Schedule necessary as a result of this review shall be resubmitted for review by Owner as soon as reasonably practicable or as mutually agreed by the Parties.  The revised Acceleration Schedule shall then be the schedule which Contractor shall use in planning, organizing, directing, coordinating, performing, and executing that portion of the Work that is affected by such acceleration, with the CPM Schedule governing the performance of all other Work.

 

Owner’s review of the Acceleration Schedule shall not constitute an independent evaluation or determination by Owner of the workability, feasibility, or reasonableness of that schedule.

 

Article 6
CHANGES; FORCE MAJEURE; AND OWNER-CAUSED DELAY

 

6.1                                 Change Orders Requested by Owner.  Until Substantial Completion, Owner shall be entitled to a Change Order upon request in accordance with this Section 6.1.

 

A.                                   If Owner submits to Contractor in writing a duly signed proposed Change Order, Contractor must respond to Owner, to the extent practicable, within thirty (30) Days with a written statement setting forth the effect, if any, which such proposed Change Order would have on the Contract Price (including any adjustments in the Contract Price or Project Schedule resulting from a proposed Change Order issued with respect to any of the items identified in Section 12.3 of Schedule A-1), the Project Schedule, the Design Basis, the Payment Schedule, any of the Minimum Acceptance Criteria, Performance Guarantees or Guarantee Conditions, and/or any other obligation or potential liability of Contractor hereunder (collectively or individually, the “Changed Criteria”).  The written statement shall be in the form of Schedule D-3, and shall include, to the extent practicable, all information required by Section 6.5B.  Owner shall respond to Contractor’s written statement within fourteen (14) Business Days of receipt, responding to Contractor’s statement as to the effects of the proposed Change Order on the Changed Criteria.  If it is not practicable for Contractor to provide all of the information required under this Section 6.1A to be submitted with such written statement within such thirty (30) Day period, Contractor shall provide Owner with as much information as practicable as well as a written explanation of the reason additional time is required.  To the extent Contractor incurs costs exceeding Thirty Thousand U.S. Dollars (U.S.$30,000) (which costs shall be adequately documented and supported by Contractor) in responding to any one proposed Change Order, Contractor shall be reimbursed for such excess costs in responding to such Change Order within twenty-five (25) Days after receipt of Contractor’s invoice therefor; provided that Contractor first gives Owner written notice of the estimate of the cost of such preparation before preparing the response, such estimate is in excess of Thirty Thousand U.S. Dollars (U.S.$30,000), Owner approves in writing the preparation of the response,

 

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and such proposed Change Order is not implemented.

 

B.                                     If the Parties agree on such Changed Criteria of the proposed Change Order (or modify such proposed Change Order so that the Parties agree on such Changed Criteria), the Parties shall execute such Change Order incorporating the Changed Criteria, which shall be in the form of Schedule D-1, and such Change Order shall become binding on the Parties, as part of this Agreement.

 

C.            If the Parties cannot agree on such Changed Criteria of the proposed Change Order within ten (10) Days of Contractor’s receipt of Owner’s response to Contractor’s written statement, or if Owner desires that the proposed changed Work set forth in the proposed Change Order commence immediately without the requirement of a written statement by Contractor as required under Section 6.1A, Owner may (subject to this Section 6.1C), by issuance of a unilateral Change Order in the form attached hereto as Schedule D-2, require Contractor to commence and perform the changed Work specified in the unilateral Change Order on a time and material basis as set forth in Schedule D-4 with the effect of such unilateral Change Order on the Changed Criteria (or if the Parties agree on the effect of such unilateral Change Order for some but not all of the Changed Criteria, the impact of each of the components of the Changed Criteria on which the Parties disagree) to be determined as soon as possible but without prejudice to Contractor’s right to refer any Dispute for resolution in accordance with Article 18.  The rates specified in Schedule D-4 are “Unit Rates,” and the Unit Rates and all other Reimbursable Costs shall be used to the extent applicable to the changed Work.  The Parties acknowledge and agree that unilateral Change Orders submitted by Owner in accordance with this Section 6.1C shall be limited to additions or modifications to, or deductions from the Work and that Owner shall not have the unilateral right to change, amend or modify any of the other Changed Criteria or the terms of this Agreement.  Pending resolution of the Dispute, Contractor shall perform the Work as specified in such unilateral Change Order and Owner shall continue to pay Contractor in accordance with the terms of this Agreement and any previously agreed Change Orders.  When Owner and Contractor agree on the effect of such unilateral Change Order on all of the Changed Criteria, such agreement shall be recorded by execution by the Parties of a Change Order in the form attached hereto as Schedule D-1, which shall supersede the unilateral Change Order previously issued and relating to such changed Work.  With the exception of any Contract Price adjustment contemplated under Sections 7.1A through 7.1H, in no event shall Owner be entitled to issue any unilateral Change Order in accordance with this Section 6.1C where such unilateral Change Order (i) would result in an increase equal to or exceeding an amount equal to five percent (5%) of the Contract Price as originally set forth in Section 7.1, or (ii) in conjunction with other unilateral Change Orders issued by Owner (other than any Contract Price adjustment contemplated under Sections 7.1A through 7.1H), would in themselves result in an increase equal to or exceeding an amount equal to ten percent (10%) of the Contract Price as originally set forth in Section 7.1.  For the avoidance of doubt, the Parties agree that the adjustments contemplated under Sections 7.1A through 7.1H do not constitute unilateral Change Orders.

 

D.                                    In the event of a change in any Applicable Code and Standard which does not constitute a Change in Law, Contractor shall provide written notice to Owner regarding

 

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such change.  Upon receipt of such notice from Contractor, Owner may submit a proposed Change Order to Contractor in accordance with this Section 6.1 in the event Owner, at its sole option, elects for Contractor to implement such change in Applicable Code and Standard.  In the event Owner does not, at its sole option, elect for Contractor to implement such change in Applicable Code and Standard, Contractor shall not be required to perform in accordance with such Applicable Code and Standard.  In the event, however, that compliance with such Applicable Code and Standard is mandatory for Contractor to comply with GECP and Owner does not, at its sole option, after receipt of written notice from Contractor regarding same, elect for Contractor to implement such change in Applicable Code and Standard, then Owner waives its rights to claim a breach of GECP with respect to such change in Applicable Code and Standard.

 

6.2                                 Change Orders Requested by Contractor.

 

A.                                   Contractor shall have the right to a Change Order in the event of any of the following occurrences:

 

1.                                       Any Change in Law that adversely affects (i) Contractor’s costs of performance of the Work; (ii) Contractor’s ability to perform the Work in accordance with the Project Schedule or (iii) Contractor’s ability to perform any material obligation under this Agreement;

 

2.                                       Acts or omissions of any member of Owner Group or any other Person for whom Owner is responsible, including in the case of Owner any failure to perform any obligation under this Agreement, that adversely affects (i) Contractor’s costs of performance of the Work, (ii) Contractor’s ability to perform the Work in accordance with the Project Schedule or (iii) Contractor’s ability to perform any material obligation under this Agreement; provided that Contractor shall not be entitled to a Change Order to the extent that such acts or omissions of Owner are caused, directly or indirectly, by Contractor’s failure to perform its obligations under this Agreement;

 

3.                                       Force Majeure to the extent allowed under Section 6.8A;

 

4.                                       Acceleration of the Work directed by Owner pursuant to Section 5.6, provided that a Change Order has been issued;

 

5.                                       Owner’s request for an increase in coverage under the Letter of Credit pursuant to Section 9.2 to cover any increase in the Contract Price as a result of Change Orders to the extent set forth in Section 9.2;

 

6.                                       To the extent expressly permitted under Sections 3.3C, 4.3A, 4.3B, 4.8A, 7.1, 8.2A, 11.2, 12.2A and 16.4;

 

7.                                       Delay beyond the permissible times specified in Section 1A.9(g)(i) or Section 1A.11(ii) of Attachment O for the delivery by Owner to Contractor of builder’s risk or marine cargo insurance proceeds received by the Collateral Agent shall relieve Contractor of any obligation under this Agreement to effect repairs or

 

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other restoration of the Work affected by the insured occurrence for any costs of repairs or restoration exceeding the sum of the deductible under such insurance and any amounts previously paid to Contractor under such insurance and shall entitle Contractor to a Change Order adjusting the Contract Price and Project Schedule, but only to the extent such delay adversely affects (i) Contractor’s cost of performance of the Work, (ii) Contractor’s ability to perform the Work in accordance with the Project Schedule, or (iii) or Contractor’s ability to perform any material obligation under this Agreement;  provided that, notwithstanding the foregoing, in no event shall this Section 6.2A.7 in any way relieve Contractor from any obligation to perform any work necessary to maintain the builder’s risk and marine cargo insurance in full force and effect;

 

8.                                       Suspension in Work ordered by Owner pursuant to Section 16.3;

 

9.                                       Subsurface Soil Conditions to the extent allowed under Section 2.5B.2;

 

10.                                 Discovery of Hazardous Materials at the Site or on the Off-Site Rights of Way and Easements for which Owner is responsible under Section 4.7 that adversely affects (i) Contractor’s costs of performance of the Work, (ii) Contractor’s ability to perform the Work in accordance with the Project Schedule or (iii) Contractor’s ability to perform any material obligation under this Agreement;

 

11.                                 Owner’s issuance of (i) the LNTP in accordance with Section 5.2A after January 4, 2005 or (ii) the NTP in accordance with Section 5.2B after April 4, 2005, but only to the extent that such delay adversely affects (i) Contractor’s costs of performance of the Work, (ii) Contractor’s ability to perform the Work in accordance with the Project Schedule or (iii) Contractor’s ability to perform any material obligation under this Agreement; and

 

12.                                 Owner’s election to issue a Change Order with respect to any of the items identified in Section 12.3 of Schedule A-1, but only to the extent the implementation of any such activity previously identified as an exclusion adversely impacts (i) Contractor’s cost of performance of the Work, (ii) Contractor’s ability to perform the Work in accordance with the Project Schedule or (iii) Contractor’s ability to perform any obligation under this Agreement.

 

B.                                     Should Contractor desire to request a Change Order under this Section 6.2, Contractor shall, pursuant to Section 6.5, notify Owner in writing and issue to Owner, at Contractor’s expense, a request for a proposed Change Order in the form attached hereto as Schedule D-3, a detailed explanation of the proposed change and Contractor’s reasons for proposing the change, documentation necessary to verify the effects of the change on the Changed Criteria, and all other information required by Section 6.5.  Any adjustments to the Contract Price shall (unless otherwise agreed) be requested on a lump sum basis and shall be based on the requirements in Schedule D-4 and the Unit Rates specified therein to the extent applicable to the Change Order.

 

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C.                                     Owner shall respond to Contractor’s request for a Change Order within twenty (20) Days of receipt, stating (i) whether Owner agrees that Contractor is entitled to a Change Order and (ii) the extent, if any, to which Owner agrees with Contractor’s statement regarding the effect of the proposed Change Order on the Changed Criteria, including any adjustment to the Contract Price and the estimated costs for each item making up the adjustment to the Contract Price.  If Owner agrees that a Change Order is necessary and agrees with Contractor’s statement regarding the effect of the proposed Change Order on the Changed Criteria, including mutual agreement on the costs, then Owner shall issue such Change Order, which shall be in the form of Schedule D-1, and such Change Order shall become binding on the Parties as part of this Agreement upon execution thereof by the Parties.  Owner shall be entitled to decline a Change Order with respect to any request by Contractor for a Change Order if the Change Order request, when submitted, is not adequately documented and supported by Contractor as required under this Agreement.

 

D.                                    If the Parties agree that Contractor is entitled to a Change Order but cannot agree on the effect of the proposed Change Order on the Changed Criteria within thirty (30) Days of Owner’s receipt of Contractor’s written notice and proposed Change Order and all other required information, or if Owner desires that the proposed changed Work set forth in the proposed Change Order commence immediately, the rights, obligations and procedures set forth in Section 6.1C are applicable.

 

E.                                      If the Parties cannot agree upon whether Contractor is entitled to a Change Order within thirty (30) Business Days of Owner’s receipt of Contractor’s written notice and proposed Change Order, then the Dispute shall be resolved as provided in Article 18.  Pending resolution of the Dispute, Contractor shall continue to perform the Work required under this Agreement, and Owner shall continue to pay Contractor in accordance with the terms of this Agreement, any Change Orders and any previously agreed or unilateral Change Orders.

 

6.3                                 Contract Price Adjustment; Contractor Documentation.  If a Change Order is executed on a time and material basis pursuant to Section 6.1C or 6.2D, then the Contract Price shall be adjusted as set forth in Schedule D-4.  Contractor shall use reasonable efforts to minimize such costs (consistent with the requirements of this Agreement).

 

6.4                                 Change Orders Act as Accord and Satisfaction.  Unless otherwise expressly stated in the Change Order, Change Orders agreed pursuant to Section 6.1B or 6.2C by the Parties shall constitute a full and final settlement and accord and satisfaction of all effects of the change as described in the Change Order upon the Changed Criteria and shall be deemed to compensate Contractor fully for such change.  Accordingly, unless otherwise expressly stated in such Change Order, Contractor expressly waives and releases any and all right to make a claim or demand or to take any action or proceeding against Owner for any other consequences arising out of, relating to, or resulting from such change reflected in such Change Order, whether the consequences result directly or indirectly from such change reflected in such Change Order, including any claim or demand for damages due to delay, disruption, hindrance, impact, interference, inefficiencies or extra work arising out of, resulting from, or related to, the change reflected in that Change Order (including any claims or demands that any Change Order or number of Change Orders,

 

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individually or in the aggregate, have impacted the unchanged Work).

 

6.5                                 Timing Requirements for Notifications and Change Order Requests by Contractor.  Should Contractor desire to seek an adjustment to the Contract Price, the Project Schedule, the Payment Schedule, any of the Minimum Acceptance Criteria or Performance Guarantees or any other modification to any other obligation of Contractor under this Agreement for any circumstance that Contractor has reason to believe may give rise to a right to request the issuance of a Change Order, Contractor shall, with respect to each such circumstance:

 

A.                                   notify Owner in writing of the existence of such circumstance within twenty (20) Days of the date that Contractor knew of the first occurrence or beginning of such circumstance; provided however, if such circumstance is an emergency, notice shall be given as soon as reasonably practicable.  In such notice, Contractor shall state in detail all known and presumed facts upon which its claim is based, including the character, duration and extent of such circumstance, the date Contractor first knew of such circumstance, any activities impacted by such circumstance, a good faith estimate of the cost (which such costs shall be adequately documented and supported by Contractor) and time consequences of such circumstance (including showing a good faith estimate of the impact of such circumstance, if any, on the critical path of the CPM Schedule) and any other details or information that are expressly required under this Agreement.  Contractor shall only be required to comply with the notice requirements of this Section 6.5A once for continuing circumstances, provided that the notice expressly states that the circumstance is continuing and includes Contractor’s best estimate of the time and cost consequences of such circumstance; and

 

B.                                     submit to Owner a request for a Change Order as soon as reasonably practicable after giving Owner written notice but in no event later than forty-five (45) Days after the completion of each such circumstance, together with a written statement with all information currently available (i) detailing why Contractor believes that a Change Order should be issued, plus all documentation reasonably requested by Owner, including information and details expressly required under this Agreement (including the information required by Schedule D-4, applicable detailed estimates and cost records and a graphic demonstration using the CPM Schedule and Monthly Progress Reports showing Contractor’s entitlement to a time extension to the Project Schedule pursuant to the terms of this Agreement); and (ii) setting forth the effect, if any, which such proposed Change Order has or would have for the Work on any of the Changed Criteria.  Contractor shall promptly supplement its request for Change Order with additional information as such additional information (if any) becomes available.

 

If Contractor fails to provide the notice as required under this Section 6.5, and if Owner demonstrates that it has been prejudiced on account of such failure to provide notice, then, to the extent that Owner is so prejudiced, Contractor waives its right for, and releases Owner from and against any claims for, adjustments in the Contract Price, the Project Schedule, Payment Schedule, any Work, any of the Minimum Acceptance Criteria or Performance Guarantees or any other modification to any other obligation of Contractor under this Agreement.  Oral notice, shortness of time, or Owner’s actual knowledge of a particular circumstance shall not waive, satisfy, discharge or otherwise excuse

 

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Contractor’s strict compliance with this Section 6.5.  Contractor shall have the burden of proof with respect to any claim made by it.

 

6.6                                 Evidence of Funds.  With the exception of any Contract Price adjustment contemplated under Sections 7.1A through 7.1H, Contractor shall not be obligated to proceed with any Change Order that, alone or in conjunction with other Change Orders, would result in an increase exceeding an amount equal to five percent (5%) of the Contract Price unless Owner furnishes, to Contractor’s reasonable satisfaction, documentation which demonstrates either that Owner has (i) sufficient funds to pay for such Change Order, or (ii) obtained financing from one or more Lenders in sufficient funds to pay for such Change Order.

 

6.7                                 Adjustment Only Through Change Order.  Unless otherwise provided in this Agreement, no change in the requirements of this Agreement, whether an addition to, deletion from, suspension of or modification to this Agreement, including any Work, shall be the basis for an adjustment for any change in the Contract Price, the Project Schedule, Payment Schedule, any Work, any of the Minimum Acceptance Criteria or Performance Guarantees or any other obligations of Contractor or right of Owner under this Agreement unless and until such addition, deletion, suspension or modification has been authorized by a Change Order executed and issued in accordance with and in strict compliance with the requirements of this Section 6.7.  Contractor shall not perform any change in the Work unless and until such change is authorized pursuant to this Section 6.7, and should Contractor perform or claim to perform any changes in the Work prior to authorization by Change Order, all such costs and expenses incurred by Contractor shall be for Contractor’s account.  No course of conduct or dealings between the Parties, nor implied acceptance of additions, deletions, suspensions or modifications to this Agreement, including any Work, and no claim that Owner has been unjustly enriched by any such addition, deletion, suspension or modification to this Agreement, whether or not there is in fact any such unjust enrichment, shall be the basis for any claim for an adjustment in the Contract Price, the Project Schedule, the Payment Schedule, any Work, any of the Minimum Acceptance Criteria or Performance Guarantees or any other obligations of Contractor under this Agreement.

 

6.8                                 Force Majeure.

 

A.                                   Contractor Relief.  If the commencement, prosecution or completion of the Work is prevented or delayed by Force Majeure (including the effects of such Force Majeure), then Contractor shall be entitled to an extension to the Target Bonus Date and/or the Guaranteed Substantial Completion Date to the extent, if any, permitted under Section 6.8A.1 and an adjustment to the Contract Price to the extent, if any, permitted under Section 6.8A.2, provided that Contractor has complied with the notice and Change Order requirements in Section 6.5 and the mitigation requirements in Section 6.11.  In addition, if Force Majeure (including the effects of such Force Majeure) prevents Contractor’s performance with respect to any portion of the Work, Contractor shall, subject to Section 6.11, be relieved from performance of such portion of the Work for the time period that such Force Majeure, or the effects of such Force Majeure, are continuing.  All time extensions to the Project Schedule and adjustments to the Contract Price for such delays or preventions shall be by Change Order implemented and documented as required under Article 6.

 

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1.                                       Time Extension.  Contractor shall be entitled to an extension to the Target Bonus Date and/or the Guaranteed Substantial Completion Date for delay or prevention that meets the requirements of Section 6.8A, if and to the extent such delay or prevention causes a delay in the critical path of the Work.  Contractor shall demonstrate to Owner its entitlement to relief under this Section by providing to Owner an updated CPM Schedule using Primavera Project Planner (P3) in its native electronic format with actual durations entered for all activities on the critical path and re-forecasted clearly to indicate Contractor’s entitlement to a time extension under this Section 6.8A.

 

2.                                       Compensation. Contractor shall be entitled to an adjustment to the Contract Price for any delay or prevention that meets the requirements of Section 6.8A, if such delay or prevention occurs for a continuous period of at least thirty (30) Days.  If Contractor is entitled to such adjustment to the Contract Price, the adjustment to the Contract Price shall only include reimbursement for the standby time for Contractor’s employees and Construction Equipment and other standby expenses which are incurred by Contractor after the expiration of such thirty (30) Day period and which are caused by such Force Majeure and the effects thereof.  Reimbursement for such standby costs shall be in the amount of Ninety-Three Thousand Seven Hundred Fifty U.S. Dollars (U.S.$93,750) per Day that the Force Majeure event, or the effects of such Force Majeure, continues, up to an aggregate amount of Three Million Seven Hundred Fifty Thousand U.S. Dollars (U.S.$3,750,000).

 

B.                                     Owner Relief.  Subject to Section 6.8C, Owner’s obligations under this Agreement shall be suspended to the extent that performance of such obligations is delayed or prevented by Force Majeure, but without prejudice to Contractor’s entitlement to a Change Order to the extent set forth in Section 6.2A.

 

C.                                     Payment Obligations.  No obligation of a Party to pay moneys under or pursuant to this Agreement shall be excused by reason of Force Majeure.

 

6.9                                 Extensions of Time and Adjustment of Compensation.  With respect to any of the circumstances set forth in Section 6.2A which cause delay of the commencement, prosecution or completion of the Work for which Contractor is entitled to a Change Order (with the exception of delay resulting from an event of Force Majeure, which shall be governed in accordance with Section 6.8), Contractor shall be entitled to an extension to the Target Bonus Date and/or Guaranteed Substantial Completion Date if and to the extent: (i) such delay causes a delay in the critical path of the Work; (ii) Contractor has complied with the notice and Change Order requirements in Section 6.5 and the mitigation requirements of Section 6.11; and (iii) such delay is not attributable to Contractor or any of its Subcontractors or Sub-subcontractors.  Contractor shall demonstrate to Owner its entitlement to relief under this Section by providing to Owner an updated CPM Schedule using Primavera Project Planner (P3) in its native electronic format with actual durations entered for all activities on the critical path and re-forecasted clearly to indicate Contractor’s entitlement to a time extension under this Section 6.9.  Contractor shall be entitled to an adjustment to the Contract Price for reasonable, additional costs incurred by Contractor for delay or in mitigation or avoidance of a delay which would otherwise meet such requirements of

 

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this Section 6.9.  For the avoidance of doubt, Section 6.9 shall govern the determination of any right of Contractor to an adjustment to the Target Bonus Date and/or the Guaranteed Substantial Completion Date for delay unless such delay is caused by Force Majeure.

 

6.10                           Delay. For the purposes of this Agreement, the term “delay” shall include hindrances, disruptions or obstructions, or any other similar term in the industry and the resulting impact from such hindrances, disruptions or obstructions, including inefficiency, impact, ripple or lost production.

 

6.11                           Contractor Obligation to Mitigate Delay.  Contractor shall not be entitled to any adjustment to the Project Schedule or adjustment to the Contract Price for any portion of delay to the extent Contractor could have taken, but failed to take, reasonable actions to mitigate such delay.

 

Article 7
CONTRACT PRICE AND PAYMENTS TO CONTRACTOR

 

7.1                                 Contract Price.  As compensation in full to Contractor for the full and complete performance of the Work and all of Contractor’s other obligations under this Agreement, Owner shall pay and Contractor shall accept Six Hundred Forty-Six Million, Nine Hundred Thirty-Six Thousand U.S. Dollars (U.S.$646,936,000) (the “Contract Price”) plus payment for Reimbursable Costs which Contractor is entitled to receive under the terms of this Agreement.  The Contract Price is subject to adjustment only by Change Order as provided in Article 6, and includes all Taxes payable by Contractor and its Subcontractors and Sub-subcontractors in connection with the Work, the Louisiana Sales and Use Tax Allowance, the Insurance Allowance, the Operating Spare Part Allowance, and costs, charges, and expenses of whatever nature necessary for performance of the Work.

 

A.                                   Louisiana Sales and Use Tax Allowance.  Included in the Contract Price is an allowance of Fourteen Million Three Hundred Sixteen Thousand U.S. Dollars ($14,316,000) for Louisiana Sales and Use Taxes arising in connection with the Work (“Louisiana Sales and Use Tax Allowance”).  If the actual amount of Louisiana Sales and Use Taxes paid by Contractor and its Subcontractors and Sub-subcontractors is less than the Louisiana Sales and Use Tax Allowance, Owner shall be entitled to a Change Order reducing the Contract Price by such difference.  If the actual amount of Louisiana Sales and Use Taxes paid by Contractor and its Subcontractors and Sub-subcontractors is greater than the Louisiana Sales and Use Tax Allowance, Contractor shall be entitled to a Change Order increasing the Contract Price by such difference; provided that Contractor shall reasonably cooperate with Owner to minimize any and all Louisiana Sales and Use Taxes arising in connection with the Work, and provided further that in the event Owner discovers that it has paid Contractor for any improperly assessed Louisiana Sales and Use Taxes, Contractor shall reasonably assist Owner in the recovery of such refunds and overpayments.

 

B.                                     Insurance Allowance.  Included in the Contract Price is an allowance of Five Million Six Hundred Thousand U.S. Dollars (U.S.$5,600,000) for the cost of insurance premiums for the builders risk insurance, marine cargo insurance, delay in

 

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startup insurance, marine delay in startup insurance, charterer legal liability insurance, and marine terminal liability operations insurance (the “Project Insurances”) required to be provided by Contractor in accordance with Attachment O (“Insurance Allowance”).  On or before the date Owner issues the NTP, Contractor shall notify Owner in writing of the actual cost of the insurance premiums charged to Contractor by Contractor’s insurance carrier for the Project Insurances (“Actual Insurance Cost”), which Actual Insurance Cost shall be adequately documented by Contractor. If the Actual Insurance Cost is less than the Insurance Allowance, Owner shall be entitled to a Change Order reducing the Contract Price by such difference.  If the Actual Insurance Cost is greater than the Insurance Allowance, Contractor shall be entitled to a Change Order increasing the Contract Price by such difference.  Contractor shall be responsible for the placement of the Project Insurances required to be provided by Contractor in accordance with Attachment O, provided that Contractor shall reasonably cooperate with Owner to minimize such Actual Insurance Cost to the extent reasonably practicable.

 

1.                                       The Contract Price has been based upon naming the Owner Group as additional insureds on the commercial general liability and umbrella or excess liability policies specified in Section 1A.2 and 1A.4 of Attachment O and providing sudden and accidental pollution liability coverage (including clean up on or off the Site) under such commercial general liability policy.  Accordingly, should (i) the insurance provider(s) charge any additional premium for naming the Owner Group as named insureds under such policies as compared to naming the Owner Group as additional insureds or (ii) Contractor not be able to procure such sudden and accidental liability coverage and, instead, is required to procure a stand-alone pollution policy, Contractor shall be entitled to a Change Order increasing the Contract Price in the actual amount of such increased premium associated with naming the Owner Group as named insureds rather than additional insureds or procurement of such stand-alone pollution policy.

 

C.                                     Operating Spare Part Allowance.         Included in the Contract Price is an allowance of Two Million Eight Hundred Thousand U.S. Dollars (U.S.$2,800,000) for supply and delivery of Operating Spare Parts (“Operating Spare Part Allowance”).  If the actual cost charged to Contractor for the supply and delivery of Operating Spare Parts provided to Owner under this Agreement is less than the Operating Spare Part Allowance, Owner shall be entitled to a Change Order reducing the Contract Price by such difference.  If the actual cost for the supply and delivery of Operating Spare Parts provided to Owner under this Agreement is greater than the Operating Spare Part Allowance, Contractor shall be entitled to a Change Order increasing the Contract Price by such difference.

 

D.                                    Stainless Steel Adjustment.  On the date Owner issues the NTP, the Contract Price shall be subject to an upward or downward adjustment by Change Order to account for changes in the commodity pricing of 304L stainless steel pipe, fittings and flanges, as set forth in Section 1 of Attachment EE (the “Stainless Steel Adjustment”).

 

E.                                      Tank Subcontract Materials Adjustment.  The Contract Price shall be subject to an upward or downward adjustment by Change Order to account for changes in the commodity pricing of certain materials used in the Tanks, as set forth in Section 3 of

 

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Attachment EE (the “Tank Subcontract Materials Adjustment”).

 

F.                                      Marine Loading Arm Adjustment.  On the date Owner issues the NTP, the Contract Price shall be subject to an upward or downward adjustment by Change Order to account for currency fluctuations between the Euro and the U.S. Dollar as set forth in Section 2 of Attachment EE for the marine loading arms (the “Marine Loading Arm Adjustment”).

 

G.                                     BOG Compressor Adjustment.  On the date Owner issues the NTP, the Contract Price shall be subject to an upward or downward adjustment by Change Order to account for currency fluctuations between the Yen and the U.S. Dollar as set forth in Section 2 Attachment EE for the Boil-Off gas compressor (the “BOG Compressor Adjustment”).

 

H.                                    Reimbursable Scope of Work Items.  Until such time as the Parties otherwise mutually agree to a lump sum Change Order, Owner shall be invoiced by Contractor for Work performed in connection with the following items (other than the development of such Change Order) on the basis of Reimbursable Costs in accordance with the procedures set forth in, and to the extent provided under, Section 13 of Attachment A:

 

1.                                       Submerged combustion vaporizers;

 

2.                                       High pressure sendout compressor;

 

3.                                       Requirements issued by the FERC after June 1, 2004;

 

4.                                       Requirements issued by the LDEQ after March 1, 2004; and

 

5.                                       Requirements issued by the USACE after June 1, 2004.

 

In the event the Parties mutually agree to a lump sum Change Order, the Contract Price shall be subject to an adjustment in accordance with Section 13 of Attachment A.  In addition, the Project Schedule may be adjusted for items 3, 4 or 5 above, but only to the extent that such items 3, 4 or 5 adversely affects Contractor’s ability to perform the Work in accordance with the Project Schedule, provided that Contractor complies with the requirements set forth in Sections 6.2, 6.5 and 6.9.

 

7.2                                 Interim Payments.

 

A.                                   Advance Payment.  On or before and as a condition precedent to the issuance of the Notice to Proceed in accordance with Section 5.2B and upon Owner’s receipt of an Invoice from Contractor, Owner shall pay Contractor a lump sum equal to five percent (5%) of the Contract Price (the “Advance Payment”).

 

B.                                     Payments.  Subject to Section 5.2A, with the exception of the Advance Payment, payments shall be made by Owner to Contractor in accordance with the Payment Schedule set forth in Attachment C (as may be amended by Change Order), which allocates

 

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