Lump Sum Turnkey Agreement

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 CONTRACTOR92S 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 OWNER92S 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, Contractor92s Intellectual Property and Third Party Proprietary Work Product
10.2 Return/Delivery of Certain Property
10.3 Contractor92s 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 CONTRACTOR92S 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 OWNER92S 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 Contractor92s Right to Terminate

ARTICLE 17 INDEMNITIES
17.1 General Indemnification
17.2 Injuries to Contractor92s Employees and Damage to Contractor92s Property
17.3 Injuries to Owner92s Employees and Damage to Owner92s Property
17.4 Patent and Copyright Indemnification Procedure
17.5 Lien Indemnification
17.6 Owner92s 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 Contractor92s Obligations
19.2 Owner92s 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 Contractor92s 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 Owner92s 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 Contractor92s Change Order Request Form/Contractor92s 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 Contractor92s 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 Contractor92s Invoices

SCHEDULE I-1 Form of Contractor92s Interim Invoice




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SCHEDULE I-2 Form of Contractor92s Final Invoice

ATTACHMENT J HSE Plan Requirements

ATTACHMENT K Form of Lien and Claim Waivers

SCHEDULE K-1 Contractor92s Interim Conditional Lien Waiver

SCHEDULE K-2 Contractor92s Interim Unconditional Lien Waiver

SCHEDULE K-3 Subcontractor92s Interim Conditional Lien Waiver

SCHEDULE K-4 Subcontractor92s Interim Unconditional Lien Waiver

SCHEDULE K-5 Contractor92s Final Conditional Lien and Claim Waiver

SCHEDULE K-6 Contractor92s Final Unconditional Lien and Claim Waiver

SCHEDULE K-7 Subcontractor92s Final Conditional Lien and Claim Waiver

SCHEDULE K-8 Subcontractor92s 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




viii




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 Johnson92s 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 Contractor92s 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



2






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 Contractor92s 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 Contractor92s name pursuant to Applicable Law.



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



3






" Contractor Representative " means that Person or Persons designated by Contractor in a written notice to Owner specifying any and all limitations of such Person92s 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.



" Contractor92s Confidential Information " has the meaning set forth in Section 19.2.



" Contractor92s 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 - 260b0F) 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 Contractor92s mobilization to the Site until completion of the ...