Debt Restructure Agreement Dated January 4, 2000

Exhibit 10.32


DEBT RESTRUCTURE AGREEMENT


The parties to this Debt Restructure Agreement are Cheniere Energy, Inc. ("Cheniere") and Anadrill, Schlumberger Well Services and Dowell, divisions of Schlumberger Technology Corporation (collectively hereinafter referred to as "Schlumberger").


R E C I T A L S


WHEREAS, Cheniere entered into the Subject Contracts (defined below) with Schlumberger pursuant to which Schlumberger provided certain services, materials and equipment in connection with operations performed on State Lease #16017 in Cameron Parish, Louisiana;


WHEREAS, Schlumberger has previously issued to Cheniere the Subject Invoices (defined below);


WHEREAS, Cheniere has not been able to pay the Subject Invoices in accordance with their terms and the terms of the Subject Contracts;


WHEREAS, Schlumberger has filed the Subject M&M Liens (defined below) to secure payment of the Subject Invoices;


WHEREAS, certain of the Subject Contracts provide for a discount on the dollar amount charged for the services, materials and equipment provided by Schlumberger which is only earned if the applicable Subject Invoices are timely paid;


WHEREAS, Cheniere has not earned the price discounts that were conditioned on timely payment;


WHEREAS, the Subject Invoices include price discounts which Cheniere is not entitled to pursuant to the terms of the Subject Contracts;


NOW, THEREFORE, for and in consideration of the premises, the mutual covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Cheniere and Schlumberger agree as follows:


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ARTICLE I


DEFINITIONS


The following terms, as used in this Agreement, shall have the meanings indicated below, unless the context otherwise requires:


1.01 "AGREEMENT" means this Debt Restructure Agreement.


1.02 "CHENIERE" means Cheniere Energy, Inc.


1.03 "CLOSING" shall mean the occurrence of all of the actions described in Article IV.


1.04 "DECEMBER PAYMENT" means a payment by Cheniere to Schlumberger in the amount of Three Hundred Sixty Thousand Dollars ($360,000) to be made on or before December 30, 1999 and to be applied in the manner specified in Article III.


1.05 "ENCAP" means Encap Energy Capital Fund III, L.P.


1.06 "EVENT OF DEFAULT" shall mean the occurrence of any of the events set forth in Section 10.01.


1.07 "MORTGAGE" means the Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement substantially in the form attached hereto as Exhibit A.


1.08 "NOTE" means a Promissory Note in the original principal amount of One Million One Hundred Seventeen Thousand Five Hundred Sixty-Nine and 84/100 Dollars ($1,117,569.84), dated January 4, 2000, executed by Cheniere in favor of Schlumberger substantially in the form attached hereto as Exhibit B.


1.09 "SCHLUMBERGER" means Schlumberger Technology Corporation, including its Dowell, Schlumberger Well Services and Anadrill divisions.


1.10 "SCHLUMBERGER ORIGINAL CLAIM" means the indebtedness of Cheniere under the Subject Contracts after charging back any price discounts which were initially issued by Schlumberger but Cheniere failed to earn due to failure to timely pay the Subject Invoices, plus interest and legal fees.


1.11 "SUBJECT CONTRACTS" means the Service Order Receipts and Contracts entered into by Schlumberger and Cheniere in connection with the provision of services, equipment and materials for operations on the State Lease #16017.


1.12 "SUBJECT INVOICES" means the invoices identified in Exhibit C.


1.13 "SUBJECT M&M LIENS" means the following mechanic's and materialman's liens which were filed in Cameron Parish as to the State Lease #16017:


Filing
Claimant Amount Date of Filing Information
-------- ------ -------------- ------------ Dowell $751,585.09 12/20/99 File #262981 Schlumberger Well Services $537,380.59 12/20/99 File #262982 Anadrill $172,459.12 12/20/99 File #262980


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1.14 "SUBORDINATION AGREEMENT" means an agreement between Cheniere, Schlumberger and Encap substantially in the form of Exhibit D.


1.15 "THREE PARTY AGREEMENT" means an agreement between Cheniere, Schlumberger and Encap substantially in the form of Exhibit E.


ARTICLE II


ACKNOWLEDGMENTS


2.01 DEBT. Prior to crediting the December Payment, and after allowance for all claims and offsets, Cheniere was indebted to Schlumberger for services, materials and equipment furnished pursuant to the Subject Contracts in the amount of One Million Four Hundred Sixty Thousand Five Hundred Sixty-Nine and 84/100 Dollars ($1,460,569.84), plus (i) the unearned discounts, (ii) interest, and (iii) legal fees and expenses.


2.02 SCHLUMBERGER'S PERFORMANCE. Schlumberger fully satisfied all of its obligations under the Subject Contracts, including, but not limited to, all representations and warranties whether express or otherwise.


2.03 SUBJECT M&M LIENS. The Subject M&M Liens are valid, properly perfected and encumber Cheniere's interest in the property described therein.


ARTICLE III


DECEMBER PAYMENT


The sum of Three Hundred Sixty Thousand Dollars ($360,000) has been paid by Cheniere to Schlumberger on or before December 30, 1999. The December Payment shall be applied first against all legal fees and expenses incurred by Schlumberger as a result of Cheniere's breach of the Subject Contracts, including those incurred in connection with (i) the preparation of the Subject M&M Liens, and (ii) negotiation and drafting of this Agreement and the various documents provided for herein.


ARTICLE IV


CLOSING


4.01 CLOSING. The Closing shall be held on or before January 4, 2000, provided that all conditions to Closing have been satisfied or waived. The Closing shall be held at the offices of Ware, Snow, Fogel, Jackson & Greene, L.L.P., whose address is 1111 Bagby, 49th Floor, Houston, Texas 77002.


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4.02 DELIVERY BY CHENIERE TO SCHLUMBERGER AT CLOSING. Cheniere shall deliver or cause to be delivered to Schlumberger duly executed originals of the following:


a. the Note;


b. the Mortgage;


c. financing statements;


d. the Three Party Agreement; and


e. the Subordination Agreement.


4.03 DELIVERY BY ENCAP AT CLOSING. Encap shall deliver or cause to be delivered to Schlumberger and Cheniere duly executed originals of the following:


a. the Three Party Agreement; and


b. the Subordination Agreement.


4.04 DELIVERY BY SCHLUMBERGER AT CLOSING. Schlumberger shall deliver or cause to be delivered to Encap and Cheniere duly executed originals of the following:


a. the Three Party Agreement; and


b. the Subordination Agreement.


ARTICLE V


CONDITIONS


5.01 CONDITIONS TO OBLIGATIONS OF CHENIERE. The obligations of Cheniere hereunder are subject to the satisfaction, unless waived in writing by Cheniere, at its option and in its sole discretion, on or before the Closing of the conditions set forth below:


a. Performance of Covenants and Agreements. Schlumberger shall have
performed and complied with all covenants, agreements and obligations
contained in this Agreement required to be performed or complied with by it
prior to or at the Closing.


b. Delivery by Encap. Encap shall have delivered to Schlumberger and
Cheniere duly executed originals of the Three Party Agreement and the
Subordination Agreement.


5.02 CONDITIONS TO OBLIGATIONS OF SCHLUMBERGER. The obligations of Schlumberger hereunder are subject to the satisfaction, unless waived in writing by Schlumberger, at its option and in its sole discretion, on or before the Closing of the conditions set forth below:


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a. Representations and Warranties of Cheniere to be True and Correct.
The representations and warranties of Cheniere contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing, with the same effect as though such representations and warranties
had been made on and as of each such date.


b. Performance of Covenants and A ...