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As filed with the Securities and Exchange Commission on June 23, 1998
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHENIERE ENERGY, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 95-4352386
(State of incorporation) (I.R.S. Employer Identification No.)
1200 Smith Street, Suite 1740
Houston, Texas 77002-4313
(713) 659-1361
(Address, including zip
code, and telephone number, including area code, of
registrant's principal executive offices)
Walter L. Williams
President and Chief Executive Officer
Cheniere Energy, Inc.
1200 Smith Street, Suite 1740
Houston, Texas 77002-4312
(713) 659-1361
(Name, address, including zip
code, and telephone number, including area code,
of agent for service)
Copies to:
John B. Clutterbuck
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
(713) 225-7000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of each maximum maximum
class of offering aggregate Amount of
securities to Amount to be price offering registration
be registered Registered per share price fee
<S> <C> <C> <C> <C>
Common Stock,
par value $.003
per share 1,219,216 $1.844(1) $2,247,930(1) $663
Common Stock,
par value $.003
per share, to be
issued upon
exercise of
Warrants 83,334(2) $1.844(3) $ 153,647 $ 45
Total 1,302,550 --- $2,401,577 $708
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee, based on the average of the high and low prices for the
Company's Common Stock as reported on The Nasdaq SmallCap Market on June
19, 1998 in accordance with Rule 457 under the Securities Act of 1933.
(2) Represents the number of shares issuable upon the exercise of Warrants.
(3) Estimated solely for the purpose of computing the amount of the
registration fee, based on the exercise price of the Warrants in accordance
with Rule 457(g).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
<PAGE>
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Prospectus Subject to Completion
- ---------- June __, 1998
1,302,550 SHARES
CHENIERE ENERGY, INC.
COMMON STOCK
This Prospectus covers 1,302,550 shares of Common Stock, $.003 par
value (the "Common Stock" or the "Shares"), of Cheniere Energy, Inc. ("Cheniere
Energy" or the "Company"), which may be offered from time to time by one or all
of the selling stockholders named herein (the "Selling Stockholders"). The
Company will receive no part of the proceeds of such sales, but it will receive
payment for the exercise price of any Warrants in the event that any of the
Warrants are exercised.
The shares of Common Stock being registered pursuant to the
registration statement of which this prospectus is a part include (i) 70,000
shares issued in connection with a Stock Purchase Agreement dated as of May 22,
1998 between the Company and Dewey Ballantine LLP, a New York limited liability
partnership ("Dewey Ballantine"), and related transactions described in a letter
agreement dated May 22, 1998 between the Company and Dewey Ballantine, (ii)
227,144 shares issued in connection with a private placement conducted by the
Company in April 1998, (iii) 31,428 shares issued in connection with a private
placement conducted by the Company in May 1998, (iv) 890,644 shares issued in
connection with a private placement conducted by the Company in June 1998 and
(v) 83,334 shares issuable upon the exercise of warrants exercisable on or
before June 4, 2002 at an exercise price of $2.00 per share. For more
information concerning the Shares and the transactions pursuant to which they
were or will be issued, see "Issuance of Securities to Selling Stockholders" and
"Description of Securities."
The Company will bear all expenses with respect to the offering of the
Common Stock, except any underwriting discounts, selling commissions, stock
transfer taxes, and fees and disbursements of counsel for the Selling
Stockholders. To the extent required, the specific shares of Common Stock to be
sold, the names of the Selling Stockholders, the public offering price, the
names of any agent dealer or underwriter and any applicable commission or
discount with respect to any particular offer is set forth herein or will be set
forth in an accompanying Prospectus Supplement. See "Selling Stockholders" and
"Plan of Distribution."
The Company's Common Stock is traded on The Nasdaq SmallCap Market
under the symbol "CHEX." The last reported sales price of the Common Stock on
The Nasdaq SmallCap Market on June 19, 1998 was $1.875 per share.
--------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4,
FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
--------------------------------------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------------
The date of this Prospectus is June__, 1998
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
shares offered hereby to any person in any jurisdiction in which it is unlawful
to make such an offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to the Registration Statement. Statements
contained herein concerning the provisions of any document are not necessarily
complete, and each such statement is qualified in its entirety by reference to
the copy of such document filed with the Commission.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Central Regional
Office, 1801 California Street, Suite 4800, Denver, Colorado 80202. Copies of
such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of the
prescribed fees. The Common Stock of the Company is quoted on The Nasdaq
SmallCap Market. Reports, proxy and
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information statements and other information concerning the Company may be
inspected at The Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C.
20006. In addition, the Commission maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended August 31,
1997, including the amendment thereto on Form 10-K/A;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1997;
(3) The Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1998;
(4) The Company's Current Report on Form 8-K dated August 28, 1997 (filed
September 24, 1997);
(5) The Company's Current Report on Form 8-K dated September 29, 1997 (filed
October 10, 1997); and
(6) The Company's Current Report on Form 8-K dated December 18, 1997 (filed
December 18, 1997).
(7) The Company's Current Report on Form 8-K dated April 21, 1998 (filed
April 23, 1998).
(8) The Company's Current Report on Form 8-K dated May 19, 1998 (filed May 22,
1998).
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein, to the extent required, and to be a part
hereof from the date of filing of such reports and documents. Any statement
incorporated herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be
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submitted in writing to Don A. Turkleson, Chief Financial Officer, Cheniere
Energy, Inc., 1200 Smith Street, Suite 1740, Houston, Texas 77002-4312 or by
telephone to Mr. Turkleson at (713) 659-1361.
RISK FACTORS
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents incorporated by reference herein)
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements regarding the Company's expectations, beliefs, intentions
or future strategies. All forward-looking statements included in this document
are based on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward looking statements.
Actual results could differ materially from those expressed or implied in the
forward-looking statements as a result of known and unknown risks, uncertainties
and other factors, including the risk factors set forth below and in the
documents incorporated by reference herein. In evaluating the Company's
business, prospective investors should carefully consider the following risk
factors in addition to the other information set forth herein or incorporated
herein by reference.
FACTORS RELATING TO THE COMPANY
Limited Operating History
The Company has a limited operating history with respect to its oil and gas
exploration activities which were commenced through a joint exploration program
in April 1996 by Cheniere Energy Operating Co., Inc. ("Cheniere Operating").
Following a reorganization with Bexy Communications, Inc. ("Bexy"), Cheniere
Operating became a wholly-owned subsidiary of Cheniere on July 3, 1996. From
inception (February 21, 1996) to February 28, 1998, the Company incurred a net
loss of $2,490,738 and for the six-month period ended February 28, 1998, the
Company incurred a net loss of $692,424. The Company is likely to continue to
incur losses during the remainder of 1998, and possibly beyond, depending on
whether it generates sufficient revenue from producing reserves acquired either
through acquisitions or drilling activities.
Limited Assets; No Proven Reserves or Current Production
The Company has not yet established oil and gas production, nor has it
booked proven oil and gas reserves. Currently, the Company's primary asset is
its interest in a joint exploration program pursuant to the Exploration
Agreement. Since almost all of the Company's assets are represented by the
investment to date in the 3-D Exploration Program (as defined below) and
additional amounts will be invested, the Company is highly dependent on the
success of the 3-D Exploration Program.
Need for Additional Financing
4
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The Company presently has no operating revenues and does not expect to
generate meaningful operating revenues before 1999. Additional capital will be
required to pay for the Company's share of costs relating to the development of
prospects the Company may wish to pursue, to exercise lease options, to acquire
additional oil and gas leases and to drill wells on potential prospects, the
total amount of which will be determined by the results of seismic operations
and by the portion of the Company's 50% working interest that is retained. The
Company anticipates that its share of these expenditures could exceed $2 million
during the remainder of calendar 1998. In addition, the Company will need funds
for the repayment of $4.2 million in short-term senior notes payable that will
mature on or before September 15, 1998 as well as any accrued interest thereon.
As of February 28, 1998, the Company had only $482,173 of current assets. Should
the Company choose to make an acquisition of producing oil and gas properties,
it is likely that such an acquisition would require that some portion of the
purchase price be paid in cash, and thus create the need for additional capital.
Additional capital may be secured from a combination of funding sources that may
include borrowings from financial institutions, debt offerings (which would
increase the leverage of the Company and add to its need for cash to service
such debt), additional offerings of Cheniere's equity securities (which could
cause substantial dilution of the Common Stock), or sales of portions of
Cheniere Operating's working interest in the prospects within the 3-D
Exploration Program (which would reduce any future revenues from the 3-D
Exploration Program). The Company's ability to raise additional capital will
depend on its results of operations and the status of various capital and
industry markets at the time such additional capital is sought. Accordingly,
there can be no assurances that capital will be available to the Company from
any source or that, if available, it will be on terms acceptable to the Company.
3-D Exploration Program Payments; Insufficient Capital
In accordance with the terms of an Exploration Agreement between Cheniere
Operating and Zydeco Exploration, Inc. ("Zydeco"), an operating subsidiary of
Zydeco Energy, Inc. (the "Exploration Agreement"), Cheniere has made seismic
fund payments totaling $16.4 million and has earned a 50% interest in the
seismic data. Zydeco is obligated under the terms of the Exploration Agreement
to develop prospects from its analysis of the seismic data and to present such
prospects to Cheniere for Cheniere's election as to participation. Should
Cheniere elect to participate in a prospect proposed by Zydeco, Cheniere must
make payment to Zydeco as a reimbursement of prospect expenses within 45 days of
the date such expenses are billed by Zydeco. Cheniere Operating has in the past
failed to make seismic fund payments when due. While Cheniere Operating has in
such instances succeeded in obtaining waivers under, and amendments to, the
Exploration Agreement extending the due dates for such payments, there can be no
assurance that Cheniere Operating will successfully obtain similar amendments
should it fail to make required payments to the 3-D Exploration Program in the
future. Neither Cheniere Operating nor Cheniere currently has sufficient capital
to meet its future payment obligations under the Exploration Agreement if it
elects to participate in prospects proposed thereunder and there can be no
assurance that Cheniere Operating or Cheniere will successfully secure the
necessary funds.
5
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Arbitration Proceedings
On April 21, 1998, the Company announced that Zydeco had filed an
arbitration petition against the Company with respect to certain disputes
concerning the Exploration Agreement. Recently, differences have arisen between
the two companies over the rights and obligations of the parties and the claims
for reimbursement of certain seismic costs and expenses incurred by Zydeco.
Zydeco has characterized these differences as involving the scope of pre-
drilling activities that are permitted to be conducted by the Company and
allegations that the Company has disseminated confidential seismic data. The
Company believes that it has properly earned and preserved its interest in the
leases acquired in connection with the Exploration Agreement and that all of its
actions to date, including its handling of confidential data, are entirely
within the scope of the Exploration Agreement. The Company has filed a
counterclaim in the arbitration proceedings alleging Zydeco is liable for
material misrepresentations, mismanagement, and breaches of the Exploration
Agreement.
On May 15, 1998, Zydeco filed an amended claim against the Company and
Cheniere Operating that adds allegations of conversion, tortious interference
with prospective contacts, breach of fiduciary duties and an unspecified amount
of actual damages and punitive damages. The amended claim also adds allegations
against two of the Company's employees, which allegations had originally been
made in a lawsuit in state court.
On May 21, 1998, a panel of three arbitrators was appointed by the American
Arbitration Association to hear this dispute. The arbitrators have not yet held
an initial scheduled conference and there is not yet in place any schedule.
The Company feels that it will ultimately prevail in the arbitration
process. To the extent that Zydeco is awarded damages or that Cheniere is
ordered to cease certain activities under the Exploration Agreement, the Company
could be materially adversely affected.
Lack of Liquidity of the Common Stock
For January 1, 1998 through June 19, 1998, the average daily trading volume
of the Common Stock of Cheniere was approximately 25,000 shares. The completion
of the offering of the Common Stock provides no assurance that the trading
market for the Common Stock will become more active. Cheniere is listed on The
Nasdaq SmallCap Market.
No Dividends
Cheniere has not paid any dividends since its inception and presently
anticipates that all earnings, if any, will be retained for development of the
Company's business and that no dividends on its Common Stock will be declared in
the foreseeable future. Any future dividends will be subject to the discretion
of Cheniere's Board of Directors and will depend upon, among other things,
future earnings, the operating and financial condition of the Company, its
capital requirements and general business conditions.
Possible Issuance of Additional Shares; Shareholder Dilution
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Cheniere has 45,000,000 authorized shares of stock, consisting of (a)
40,000,000 shares of the Common Stock, having a par value of $.003 per share,
and (b) 5,000,000 shares of preferred stock, having a par value of $.0001 per
share (the "Preferred Stock"). As of June 19, 1998, approximately 59.5% of the
shares of the Common Stock remained unissued. Cheniere's Board of Directors has
the power to issue any and all of such shares without shareholder approval. It
is likely that Cheniere will issue shares of the Common Stock, among other
reasons, in order to raise capital to sustain operations, to repay $4.2 million
in short-term senior notes payable and/or to finance future oil and gas
exploration projects. In addition, Cheniere has reserved 1,853,334 and 2/3
shares of the Common Stock for issuance upon the exercise of outstanding
warrants and 950,000 shares of the Common Stock for issuance upon the exercise
of stock options. As of June 19, 1998, there are 686,444 and 2/3 issued and
outstanding options to purchase Common Stock. Any issuance of the Common Stock
by Cheniere may result in a reduction in the book value per share or market
price per share of the outstanding shares of the Common Stock and will reduce
the proportionate ownership and voting power of such shares. See "Description of
Securities."
Dependence on Key Personnel
The Company is dependent upon its executive officers for its various
activities. The Company does not maintain "key person" life insurance policies
on any of its personnel nor does it have employment agreements with any of its
personnel. The loss of the services of any of these individuals could
materially and adversely affect the Company. In addition, the Company's future
success will depend in part upon its ability to attract and retain additional
qualified personnel. The Company currently has eight full-time employees.
Dependence on Industry Partners
As the Company has few employees and limited operating revenues, the
Company will be largely dependent upon industry partners for the success of its
oil and gas exploration projects for the foreseeable future.
Control by Principal Stockholders
William D. Forster, Co-Chairman of the Board of Directors of the Company,
and BSR Investments, Ltd. ("BSR"), an entity under the control of a member of
the immediate family of Charif Souki, Co-Chairman of the Board of Directors of
the Company, own in the aggregate approximately 34.3% of the outstanding Common
Stock (including warrants held by BSR for the purchase of 166,667 shares of
Common Stock). Accordingly, it is likely that Mr. Forster and BSR will
effectively be able to elect all of the directors of Cheniere and to control
Cheniere's management, operations and affairs, including the ability to prevent
or cause a change in control of Cheniere.
Certain Anti-Takeover Provisions
The Company's Certificate of Incorporation and By-laws and the Delaware
General Corporation Law contain provisions that may have the effect of
discouraging unsolicited takeover proposals for the Company. These
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provisions, among other things, authorize the Board of Directors to designate
the terms of and issue new series of preferred stock, limit the personal
liability of directors, require the Company to indemnify directors and officers
to the fullest extent permitted by applicable law and impose restrictions on
business combinations with certain interested parties.
FACTORS RELATING TO THE OIL AND GAS INDUSTRY
Operating Hazards and Uninsured Risks
The oil and gas operations of the Company are subject to all of the risks
and hazards typically associated with the exploration for, and the development
and production of, oil and gas. Risks in drilling operations include cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution
and other environmental risks. The Company's activities are also subject to
perils specific to marine operations, such as capsizing, collision, and damage
or loss from severe weather. These hazards can cause personal injury and loss
of life, severe damage to and destruction of property and equipment, pollution
or environmental damage and suspension of operations. In accordance with
customary industry practices, the Company intends to maintain insurance against
some, but not all, of such risks and some, but not all, of such losses. The
occurrence of a significant event not fully insured or indemnified against could
materially and adversely affect the Company's financial condition and
operations. Moreover, no assurance can be given that the Company will be able
to maintain adequate insurance in the future at rates considered reasonable by
the Company.
Exploration Risks
The Company's exploration activities involve significant risks. There can
be no assurance that the use of technical expertise as applied to geophysical or
geological data will ensure that any well will encounter hydrocarbons. Further,
there is no way to know in advance of drilling and testing whether any prospect
encountering hydrocarbons in the Survey AMI (as defined below) by the 3-D
Exploration Program will yield oil or gas in sufficient quantities to be
economically viable. In addition, the Company is highly dependent upon seismic
activity and the related application of new technology as a primary exploration
methodology. There can be no assurance that the 3-D Exploration Program's
efforts will be successful.
High Dependence upon Lease Acquisition Activities
Both the United States Department of the Interior and the State of
Louisiana award oil and gas leases on a competitive bidding basis and non-
governmental owners of the onshore mineral interests within the Survey AMI are
not obligated to lease their mineral rights to the 3-D Exploration Program
except to the extent they have granted lease options to the 3-D Exploration
Program. Other major and independent oil and gas companies having financial
resources significantly greater than those of the 3-D Exploration Program may
bid against the 3-D Exploration Program for the purchase of oil and gas leases.
Accordingly, there can be no assurance that the 3-D Exploration Program or any
other oil and gas venture of the Company will be successful in acquiring
farmouts, seismic permits, lease options, leases or other rights to explore or
recover oil and gas. Consequently, the proportion of the Survey AMI
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which could be subsequently explored through drilling would be reduced to the
extent that the 3-D Exploration Program is not successful at such acquisitions.
Lack of Diversification; Oil and Gas Industry Conditions; Volatility of
Prices for Oil and Gas
As an independent energy company, the Company's revenues and profits will
be substantially dependent on the oil and gas industry in general and the
prevailing prices for oil and gas in particular. Oil and gas prices have been
and are likely to continue to be volatile and subject to wide fluctuations in
response to any of the following factors: relatively minor changes in the supply
of and demand for oil and gas; market uncertainty; political conditions in
international oil producing regions; the extent of domestic production and
importation of oil in certain relevant markets; the level of consumer demand;
weather conditions; the competitive position of oil or gas as a source of energy
as compared with other energy sources; the refining capacity of oil purchasers;
and the effect of federal and state regulation on the production, transportation
and sale of oil. It is likely that adverse changes in the oil market or the
regulatory environment would have an adverse effect on the Company's ability to
obtain capital from lending institutions, industry participants, private or
public investors or other sources.
Intense Competition in Oil and Gas Industry
The oil and gas industry is highly competitive. Most of the Company's
current and potential competitors have significantly greater financial resources
and a significantly greater number of experienced and trained managerial and
technical personnel than the Company and the 3-D Exploration Program. There can
be no assurance that the Company or the 3-D Exploration Program will be able to
compete effectively with such firms.
Risks of Turnkey Contracts
The Company anticipates that any wells to be drilled in which the Company
will have an interest will be drilled by established industry contractors under
turnkey contracts that limit the Company's financial and legal exposure. Under
a turnkey drilling contract a negotiated price is agreed upon and the money
placed in escrow. The contractor then assumes all of the risk and expense,
including any cost overruns, of drilling a well to contract depth and completing
any agreed upon evaluation of the wellbore. Upon performance of all these
items, the escrowed money is released to the contractor.
On a footage or day work basis, all risk and expense, including cost
overruns, of drilling a well to total depths lies with the operator.
Circumstances may arise where a turnkey contract is not economically beneficial
to the Company or is otherwise unobtainable from proven industry contractors. In
such instances, the Company may decide to drill, or cause to be drilled, the
applicable well(s) on either a footage or day work basis and the drilling
thereof will be subject to the usual drilling hazards such as cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution
and other environmental risks. The Company would also be liable for
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any cost overruns attributable to downhole drilling problems that otherwise
would have been covered by a turnkey contract had one been negotiated.
United States Governmental Regulation, Taxation and Price Control
Oil and gas production and exploration are subject to comprehensive
federal, state and local laws and regulations controlling the exploration for
and production and sale of oil and gas and the possible effects of such
activities on the environment. Failure to comply with such rules and
regulations can result in substantial penalties and may adversely affect the
Company. Present, as well as future, legislation and regulations could cause
additional expenditures, restrictions and delays in the Company's business, the
extent of which cannot be predicted and which may require the Company to limit
substantially, delay or cease operations in some circumstances. In most, if not
all, areas where the Company may conduct activities, there may be statutory
provisions regulating the production of oil and natural gas which may restrict
the rate of production and adversely affect revenues. The Company plans to
acquire oil and gas leases in the Gulf of Mexico, which will be granted by the
federal government and administered by the U.S. Department of Interior Minerals
Management Service (the "MMS"). The MMS strictly regulates the exploration,
development and production of oil and gas reserves in the Gulf of Mexico. Such
regulations could have a material adverse effect on the Company's operations in
the Gulf of Mexico. The federal government regulates the interstate
transportation of oil and natural gas, through the Federal Energy and Regulatory
Commission ("FERC"). The FERC has in the past regulated the prices at which oil
and gas could be sold. Federal reenactment of price controls or increased
regulation of the transport of oil and natural gas could have a material adverse
effect on the Company. In addition, the Company's operations are subject to
numerous laws and regulations governing the discharge of oil and hazardous
materials into the environment or otherwise relating to environmental
protection, including the Oil Pollution Act of 1990. These laws and regulations
have continually imposed increasingly strict requirements for water and air
pollution control, solid waste management, and strict financial responsibility
and remedial response obligations relating to oil spill protection. The cost of
complying with such environmental legislation will have a general adverse effect
on the Company's operations.
THE COMPANY
Cheniere Energy, Inc., a holding company ("Cheniere," together with
Cheniere Operating (as defined below) and Cheniere California (as defined
below), the "Company"), is the owner of 100% of the outstanding common stock of
Cheniere Energy Operating Co., Inc. ("Cheniere Operating"). References herein
to the "Company" or "Cheniere" refer to Cheniere Energy, Inc. and its wholly
owned subsidiaries. Cheniere is a Houston-based company formed for the purpose
of oil and gas exploration, and if warranted, development and exploitation.
Cheniere is currently involved in a joint exploration program which is engaged
in the exploration for oil and natural gas along the Gulf Coast of Louisiana,
onshore and in the shallow waters of the Gulf of Mexico. The Company commenced
its oil and gas activities through such joint program in April 1996.
THE COMPANY HAS NOT YET ESTABLISHED OIL AND GAS PRODUCTION, NOR HAS IT
BOOKED PROVEN OIL AND GAS RESERVES. The Company is currently a development
10
<PAGE>
stage enterprise with no operating revenues and no expectation of generating
meaningful operating revenues before the latter part of calendar year 1998.
Cheniere is involved with one major project, a joint exploration program
pursuant to the Exploration Agreement with regard to a proprietary 3-D seismic
exploration project in southern Louisiana (the "3-D Exploration Program").
Cheniere owns a 50% interest in the 3-D Exploration Program. The 3-D seismic
survey covers 228 square miles within a 310 square-mile area running three to
five miles north and generally eight miles south of the coastline in the most
westerly 28 miles of Cameron Parish, Louisiana (the "Survey AMI"). Field
acquisition of the seismic data was completed in July 1997, area-wide processing
was completed in December 1997, leasing activities were begun in March 1998, and
further interpretation of the seismic data continues.
Cheniere has been publicly traded since July 3, 1996 under the name
Cheniere Energy, Inc. The Company's principal executive offices are located at
1200 Smith Street, Suite 1740, Houston, Texas 77002, and its telephone number is
(713) 659-1361.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
Based on the current exercise price of the Warrants (as defined below), if all
of the Warrants are exercised, the Company will receive proceeds of up to
approximately $166,668. The Company expects to use any such proceeds for ongoing
activities related to its 3-D seismic exploration project in Cameron Parish,
Louisiana, working capital and/or general corporate purposes.
11
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of June
19, 1998 by each Selling Stockholder.
<TABLE>
<CAPTION>
Amount of Shares Offered
Hereby(2)
--------------------------------------
Shares of Common
Number Stock Underlying
Name of Shares Beneficially of Shares Warrants Shares Beneficially
Selling Owned Prior of Common to Purchase Owned After
Stockholder to Offering(1) Stock Common Stock(3) the Offering(2)
---------- ------------------------- --------- --------------- -------------------------
Number Percent Number Percent
------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alfieri, John B. 18,000 * 18,000 0 0 0
Apex Investments, Ltd. 350,000 2.2 150,000 0 0 0
Astor, Laudimir Trust 89,286 * 26,786 0 62,500 *
Bahna, Ralph M. 25,000 * 25,000 0 0 0
Brander, Martin 29,286 * 14,286 0 15,000 *
Brandrup, Douglas W. 35,000 * 35,000 0 0 0
Bristol Asset Management, LLC 178,572 1.1 178,572 0 0 0
Decoteau, Murry A., DDS 150,000 * 50,000 0 100,000 *
Dewey Ballantine, L.L.P. (4) 70,000 * 70,000 0 0 0
Emerson, J. Steven IRA 71,429 * 21,429 0 50,000 *
Friedman, Joel 18,000 * 18,000 0 0 0
Gisborne Capital Ltd. 178,572 1.1 178,572 0 0 0
Guildford Manor, Ltd. 207,143 1.3 47,143 0 160,000 *
Hellmold, Ralph O. 196,583.33 1.2 35,000 0 161,583.33 1.0
Kessler, Paul L. IRA Rollover 89,286 * 26,786 0 62,500 *
Merback, Arden 17,571 * 8,571 0 9,000 *
Moshen, Eli 19,571 * 8,571 0 11,000 *
Neel, John S. 58,015 * 3,571 7,500 46,944 *
Ostis Ventures Ltd. 142,857 * 42,857 0 100,000 *
Piddock, James 9,500 * 9,500 0 0 0
Reimer, Charles M.(5) 28,571 * 8,571 0 20,000 *
Robinson, Joe Sam Jr., M.D. 262,390 1.6 28,571 60,000 173,819 1.1
Robinson, Mixon 121,429 * 71,429 0 50,000 *
Runnels, G. Tyler 71,429 * 21,429 0 50,000 *
Smisson, Hugh F. III, M.D. 184,039 1.1 67,857 15,834 100,348 *
Tuck, Patricia R. 18,000 * 18,000 0 0 0
Turkleson, Don A.(6) 25,000 * 25,000 0 0 0
Van Straaten, Thomas Trust 35,719 * 10,714 0 25,000 *
</TABLE>
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Commission and generally includes voting or investment
power with respect to securities. Information with respect to beneficial
ownership is based on information as of June 19, 1998 and assumes that
there is outstanding an aggregate of 16,207,082 shares of Common Stock.
Warrants to purchase shares of Common Stock which are currently exercisable
or will become exercisable within 60 days of June 19, 1998 are deemed to be
outstanding for purposes of the individuals named in this chart. Except as
indicated otherwise in the footnotes below, and subject to community
property laws where applicable, the Company believes based on information
furnished by the Selling Stockholders that the persons named in the table
above have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
(2) Assumes the sale of all Shares offered hereby and no other purchases or
sales of the Company's Common Stock. See "Plan of Distribution."
(3) All Warrants are immediately exercisable.
(4) Dewey Ballantine, L.L.P. previously served as the Company's outside
corporate legal counsel.
(5) Charles M. Reimer is a Director of the Company.
(6) Don A. Turkleson is the Chief Financial Officer of the Company.
12
<PAGE>
ISSUANCE OF SECURITIES TO SELLING STOCKHOLDERS
On May 22, 1998, the Company entered into a Stock Purchase Agreement and a
letter agreement with Dewey Ballantine LLP, a New York limited liability
partnership ("Dewey Ballantine"), pursuant to which the Company agreed to issue
70,000 shares of Common Stock to Dewey Ballantine to satisfy in whole or in part
a debt in the amount of $214,699.94 owed by the Company to Dewey Ballantine in
respect of professional services and advice rendered to the Company by Dewey
Ballantine. In the event the net proceeds received by Dewey Ballantine from the
sale of such 70,000 shares are less than $214,699.94, the Company has agreed
either (i) to issue Dewey Ballantine such number of additional shares of Common
Stock until Dewey Ballantine receives aggregate net proceeds from the sale of
such 70,000 shares and such additional shares of $214,699.94, or (ii) to pay
Dewey Ballantine an amount equal to the difference between $214,699.94 and the
net proceeds received by Dewey Ballantine from the sale of such 70,000 shares.
In June 1998, the Company issued 890,644 shares of Common Stock to 16
investors at a price of $1.40 per share pursuant to Regulation D promulgated by
the Securities and Exchange Commission. The Company had previously sold shares
of Common Stock to investors at a price of $2.00 per share in April 1998 and May
1998 pursuant to Regulation D. In view of the disparity in the sales prices
among offerings conducted in close proximity to one another, the Board of
Directors of the Company elected to grant the investors who purchased shares in
the April 1998 and May 1998 offerings an additional number of shares to enable
such investors to receive the benefit of purchasing shares at a price of $1.40
per share. Accordingly, 236,572 additional shares of Common Stock have been
issued to 12 investors who purchased shares from the Company in April 1998 and
May 1998.
In connection with the issuance of $180,000 of senior term notes payable in
June 1998, the Company issued warrants to purchase 83,334 shares of Common
Stock. Such warrants are exercisable, in whole or in part, at any time on or
before June 4, 2002 at an exercise price of $2.00 per share.
DESCRIPTION OF SECURITIES
Cheniere has 45,000,000 authorized shares of stock, consisting of (a)
40,000,000 shares of the Common Stock, having a par value of $.003 per share,
and (b) 5,000,000 shares of preferred stock, having a par value of $.0001 per
share (the "Preferred Stock").
The shares of Common Stock being registered pursuant to the registration
statement of which this prospectus is a part include (i) 70,000 shares issued in
connection with a Stock Purchase Agreement dated as of May 22, 1998 between the
Company and Dewey Ballantine, and related transactions described in a letter
agreement dated May 22, 1998 between the Company and Dewey Ballantine, (ii)
227,144 shares issued in connection with a private placement conducted by the
Company in April 1998, (iii) 31,428 shares issued in connection with a private
placement conducted by the Company in May 1998, (iv) 890,644 shares issued in
connection with a private placement conducted by the Company in June 1998 and
(v) 83,334 shares issuable upon the exercise of warrants exercisable on or
before June 4, 2002 at an exercise price of $2.00 per share. For more
13
<PAGE>
information concerning the Shares and the transactions pursuant to which they
were or will be issued, see "Issuance of Securities to Selling Stockholders."
COMMON STOCK
As of June 19, 1998, there were 16,207,082 shares of the Common Stock
outstanding. All of such outstanding shares of Common Stock are fully paid and
nonassessable. Each share of the Common Stock has an equal and ratable right to
receive dividends when, as and if declared by the Board of Directors of Cheniere
out of assets legally available therefor and subject to the dividend obligations
of Cheniere to the holders of any Preferred Stock then outstanding.
In the event of a liquidation, dissolution or winding up of Cheniere, the
holders of Common Stock are entitled to share equally and ratably in the assets
available for distribution after payment of all liabilities, and subject to any
prior rights of any holders of Preferred Stock that at the time may be
outstanding.
The holders of Common Stock have no preemptive, subscription, conversion or
redemption rights, and are not subject to further calls or assessments of
Cheniere. There are no sinking fund provisions applicable to the Common Stock.
Each share of Common Stock is entitled to one vote in the election of directors
and on all other matters, submitted to a vote of stockholders. Holders of
Common Stock have no right to cumulate their votes in the election of directors.
See "Possible Anti-Takeover Provisions."
PREFERRED STOCK
As of the date of this Prospectus, there were no shares of Preferred Stock
outstanding. Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors, without further approval of the
stockholders, is authorized to fix the dividend rates and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences and
any other rights, preferences, privileges and restrictions applicable to each
series of Preferred Stock. The purpose of authorizing the Board of Directors to
determine such rights, preferences, privileges and restrictions is to eliminate
delays associated with a stockholder vote on specific issuances. The issuance
of Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of
Cheniere.
WARRANTS
Cheniere has issued and outstanding certain warrants described herein
(collectively, the "Warrants"). Cheniere is registering the Common Stock
issuable upon the exercise of certain of such Warrants pursuant to the
registration statement of which this Prospectus is a part.
Cheniere has issued and outstanding 141,666 and 2/3 warrants (collectively,
the "June Warrants"), each of which entitles the registered holder thereof to
purchase one share of Common Stock. The June Warrants are
14
<PAGE>
exercisable at any time on or before June 14, 1999, at an exercise price of
$3.00 per share (subject to customary anti-dilution adjustments). The June
Warrants were originally issued by Cheniere Operating and were converted to
warrants of Cheniere following the Reorganization. The June Warrants were issued
to a group of 11 investors in connection with a private placement of unsecured
promissory notes of Cheniere Operating in the aggregate principal amount of
$425,000. In connection with the payment of an additional promissory note to one
such investor, Cheniere has issued to such investor an additional warrant to
purchase 64,500 shares of the Common Stock (on the same terms as the June
Warrants), in accordance with the terms of the original Note Agreement, which
expires on June 14, 1999.
In consideration of certain investment advisory and other services to the
Company, pursuant to warrant agreements each dated as of August 21, 1996,
Cheniere issued to C.M. Blair, W.M. Foster & Co., Inc. and Redliw Corp.
warrants to purchase 13,600 and 54,400 shares of Common Stock, respectively
(collectively, the "Adviser Warrants"). The Adviser Warrants are exercisable at
any time on or before May 15, 1999 at an exercise price of $3.00 per share
(subject to customary anti-dilution adjustments).
In connection with the July and August 1996 placement of 508,400 shares of
the Common Stock pursuant to Regulation S promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), Cheniere issued warrants to purchase
12,500 shares of Common Stock to one of two distributors who placed the shares
(the "Commission Warrants"). Such Commission Warrants are exercisable on or
before the second anniversary of the sale of the shares of Common Stock at an
exercise price of $3.125 per share (subject to customary anti-dilution
adjustments).
In August 1996, the Company sold 100,000 units, each unit consisting of 5
shares of Common Stock and a warrant to purchase one share of Common Stock.
Each warrant is exercisable on or before September 1, 1999 at an exercise price
of $3.125 per share (subject to customary anti-dilution adjustments).
In December 1997, the Company issued Bridge Warrants to purchase 1,333,334
shares of Common Stock on or before December 31, 2001 at an exercise price of
$2.375 per share. The Bridge Notes were originally scheduled to mature on March
15, 1998. The maturity date was extended, at the option of the Company, to
September 15, 1998. The Company is obligated to issue additional Bridge Warrants
to purchase 266,667 shares of Common Stock with respect to each month that the
Bridge Notes remain outstanding beyond March 15, 1998. However, the Common
Stock issuable upon the exercise of any such additional Bridge Warrants is not
being registered pursuant to the registration statement of which this Prospectus
is a part. See "Issuance of Securities to Selling Stockholders."
In conjunction with a private placement of Common Stock in March 1997 the
Company issued 50,000 warrants to a financial advisor. The warrants were issued
in March 1998 at an exercise price of $3.125 per share and are exercisable on or
before March 31, 2000.
In conjunction with the issuance of $180,000 senior term notes payable in
June 1998, the Company issued warrants to purchase 83,334 shares of Common Stock
at an exercise price of $2.00 per share. Such warrants are exercisable
15
<PAGE>
on or before June 4, 2002 at an exercise price of $2.00 per share (subject to
customary anti-dilution adjustments).
The Warrants do not confer upon the holders thereof any voting or other
rights of a stockholder of Cheniere.
POSSIBLE ANTI-TAKEOVER PROVISIONS
The Amended and Restated Certificate of Incorporation of Cheniere (the
"Charter") contains certain provisions that might be characterized as anti-
takeover provisions. Such provisions may render more difficult certain possible
takeover proposals to acquire control of Cheniere and make removal of management
of Cheniere more difficult.
As described above, the Charter authorizes a class of undesignated
Preferred Stock consisting of 5,000,000 shares. Preferred Stock may be issued
from time to time in one or more series, and the Board of Directors, without
further approval of the stockholders, is authorized to fix the rights,
preferences, privileges and restrictions applicable to each series of Preferred
Stock. The purpose of authorizing the Board of Directors to determine such
rights, preferences, privileges and restrictions is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of
Cheniere.
Cheniere is incorporated under the laws of the State of Delaware. Section
203 of the Delaware General Corporation Law prevents an "interested stockholder"
(defined as a stockholder owning 15 percent or more of a corporation's voting
stock) from engaging in a business combination with such corporation for a
period of three years from the time such stockholder became an interested
stockholder unless (a) the corporation's board of directors had earlier approved
either the business combination or the transaction by which the stockholder
became an interested stockholder, or (b) upon attaining that status, the
interested stockholder had acquired at least 85 percent of the corporation's
voting stock (not counting shares owned by persons who are directors and also
officers), or (c) the business combination is later approved by the board of
directors and authorized by a vote of two-thirds of the stockholders (not
including the shares held by the interested stockholder). Cheniere is currently
subject to Section 203.
In addition, William D. Forster, Co-Chairman of the Board of Directors of
the Company, and BSR Investments, Ltd. ("BSR"), an entity under the control of a
member of the immediate family of Charif Souki, Co-Chairman of the Board of
Directors of the Company, own in the aggregate approximately 34.3% of the
outstanding shares of the Common Stock. Accordingly, it is likely that Mr.
Forster and BSR will have the ability to effectively prevent or cause a change
in control of the Company.
16
<PAGE>
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is U.S. Stock
Transfer Corporation.
PLAN OF DISTRIBUTION
Shares of Common Stock covered hereby may be offered and sold from time to
time by the Selling Stockholders. The Selling Stockholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Stockholders may sell the Shares
being offered hereby: (i) on the Nasdaq SmallCap Market, or otherwise at prices
and at terms then prevailing or at prices related to the then current market
price; or (ii) in private sales at negotiated prices directly or through a
broker or brokers, who may act as agent or as principal or by a combination of
such methods of sale. The Selling Stockholders and any underwriter, dealer or
agent who participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act. The Company has agreed to
indemnify the Selling Stockholders against certain liabilities arising under the
Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Stockholders (and, if acting as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the Selling Stockholders. Broker-dealers may agree with the
Selling Stockholders to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the Selling Stockholders, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to the Selling
Stockholders. Broker-dealers who acquire shares as principal may thereafter
resell such shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other broker-
dealers, including transactions of the nature described above) in the over-the-
counter market, in negotiated transactions or by a combination of such methods
of sale or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), any person engaged in the distribution of
the Common Stock may not simultaneously engage in market making activities with
respect to Cheniere for a period of five business days prior to the commencement
of such distribution. In addition and without limiting the foregoing, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of shares of
Common Stock by the Selling Stockholders.
17
<PAGE>
The Selling Stockholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act if any such broker-dealers
purchase shares as principal.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Common Stock may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
The Company will keep this Registration Statement or a similar registration
statement effective until the earliest to occur of (i) the date that all
securities registered pursuant to the Registration Statement of which this
Prospectus is a part have been disposed of in accordance with the plan of
disposition indicated herein, (ii) the date that all securities registered
pursuant to the Registration Statement of which this Prospectus is a part have
become eligible for sale pursuant to Rule 144(k) under the Securities Act. No
sales may be made pursuant to this Prospectus after such date unless the Company
amends or supplements this Prospectus to indicate that it has agreed to extend
such period of effectiveness. There can be no assurance that the Selling
Stockholders will sell all or any of the shares of Common Stock offered
hereunder.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, counsel to the
Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report on Form 10-K for the year ended August 31, 1997,
have been audited by Merdinger, Fruchter, Rosen & Corso, P.C., independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The Registrant will bear no expenses in connection with any sale or other
distribution by the Selling Stockholders of the shares being registered other
than the expenses of preparation and distribution of this Registration Statement
and the Prospectus included in this Registration Statement. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
the Securities and Exchange Commission ("SEC") registration fee.
SEC registration fee $ 708
Legal fees and expenses 10,000
Accounting fees and expenses 2,000
Miscellaneous expenses 1,000
-------
Total $13,708
=======
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Certificate of Incorporation and By-laws provide for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the Delaware General Corporation Law. The
Registrant has also entered into agreements with its directors and officers that
will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors to the fullest extent not prohibited by law. In addition, the
Registrant carries director and officer liability insurance.
In connection with this offering, the Selling Stockholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the Selling Stockholders and contained
herein.
19
<PAGE>
Item 16. Exhibits.
Exhibits.
4.1 Specimen Common Stock Certificate of Cheniere (Incorporated by
reference to Exhibit 4.1 of the Company's Registration Statement
under the Securities Act of 1933 on Form S-1 filed on August 27,
1996 (File No. 333-10905))
5.1 Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
23.1 Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (included in
Exhibit 5.1)
23.2 Consent of Merdinger, Fruchter, Rosen & Corso, P.C.
24.1 Powers of Attorney (included on signature page)
99.1 Stock Purchase Agreement dated as of May 22, 1998 between Cheniere
and Dewey Ballantine
99.2 Letter Agreement dated May 22, 1998 between Cheniere and Dewey
Ballantine
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
20
<PAGE>
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Cheniere Energy, Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Houston, State of Texas, on June 23, 1998.
CHENIERE ENERGY, INC.
By: /s/ WALTER L. WILLIAMS
----------------------
Walter L. Williams
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Walter L.
Williams and Don A. Turkleson, and each of them acting individually, as his or
her attorney-in-fact, each with full power of substitution, for him or her in
any and all capacities to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ WALTER L. WILLIAMS President, Chief Executive June 22, 1998
- --------------------------- Officer and Director
Walter L. Williams (Principal Executive Officer)
/s/ DON A. TURKLESON Chief Financial Officer June 22, 1998
- --------------------------- (Principal Financial and
Don A. Turkleson Accounting Officer)
/s/ WILLIAM D. FORSTER Co-Chairman of the Board June 22, 1998
- ---------------------------
William D. Forster
/s/ CHARIF SOUKI Co-Chairman of the Board June 22, 1998
- ---------------------------
Charif Souki
/s/ KENNETH R. PEAK Director June 22, 1998
- ---------------------------
Kenneth R. Peak
/s/ CHARLES M. REIMER Director June 22, 1998
- ---------------------------
Charles M. Reimer
/s/ EFREM ZIMBALIST, III Director June 23, 1998
- ---------------------------
Efrem Zimbalist, III
</TABLE>
22
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF MAYOR, DAY, CALDWELL & KEETON, L.L.P.]
June 23, 1998
Cheniere Energy, Inc.
1200 Smith Street, Suite 1740
Houston, Texas 77002
Ladies and Gentlemen:
We have acted as counsel for Cheniere Energy, Inc., a Delaware corporation
(the "Company"), in connection with the registration of up to an aggregate of
1,302,550 (the "Shares") of Common Stock, par value $0.003 per share, of the
Company ("Common Stock"), to be sold by certain selling stockholders of the
Company as described in the Company's Registration Statement on Form S-3, filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended ("Registration Statement"). In such capacity, we have familiarized
ourselves with the Articles of Incorporation, as amended to date, and Bylaws of
the Company, as amended to date, and have examined all statutes and other
records, instruments and documents pertaining to the Company that we have deemed
necessary to examine for the purposes of this opinion.
Based upon our examination as aforesaid, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware; and
2. The Shares currently outstanding are, and the Shares underlying warrants
when delivered for sufficient consideration and pursuant to the provisions of
the warrants will be, duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name in the Registration Statement at each place in which it appears.
Sincerely,
/s/ Mayor, Day Caldwell & Keeton, L.L.P.
----------------------------------------
Mayor, Day, Caldwell & Keeton, L.L.P.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS
CHENIERE ENERGY, INC.
As independent public accountants, we hereby consent to the incorporation by
reference of our report in the Cheniere Energy, Inc. Annual Report on Form 10-K
for the year ended August 31, 1997 (and to all references to our firm) in this
Registration Statement on Form S-3.
/s/ Merdinger, Fruchter, Rosen & Corso, P.C.
--------------------------------------------
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
June 22, 1998
New York, New York
<PAGE>
EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement dated as of May 22, 1998 (this
"Agreement") is between Cheniere Energy, Inc. (the "Company"), a Delaware
corporation, and Dewey Ballantine LLP ("Dewey Ballantine"), a New York limited
liability partnership.
W I T N E S S E T H :
WHEREAS, the Company is indebted to Dewey Ballantine in the amount of
$214,699.94 (the "Indebtedness") in respect of professional services and advice
rendered to the Company by Dewey Ballantine; and
WHEREAS, Dewey Ballantine desires to purchase 70,000 shares of Common
Stock, par value $.003 per share, of the Company (the "Shares") from the
Company, and the Company desires to sell and transfer the Shares to Dewey
Ballantine, in exchange for the cancellation by Dewey Ballantine of the
Indebtedness.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF SHARES
SECTION 1.1. SALE OF SHARES. Subject to all of the terms and
conditions of this Agreement, at the Closing hereunder, the Company will sell,
transfer, assign, convey and deliver the Shares to Dewey Ballantine, and Dewey
Ballantine will purchase, accept and acquire the Shares from the Company in
exchange for the cancellation of the Indebtedness.
SECTION 1.2. CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at 10:00 a.m. on
May 29, 1998 (the "Closing Date") at the offices of Dewey Ballantine, 1301
Avenue of the Americas, New York, New York, or at such other location as the
Company and Dewey Ballantine may mutually agree.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Dewey Ballantine as follows:
(a) Organization, Standing and Qualification of the Company. The
Company is a duly organized and validly existing corporation in good standing in
the State of Delaware and is duly qualified to do business in each jurisdiction
where qualification is necessary under applicable law and where failure to be so
qualified could have a material adverse effect on the Company.
<PAGE>
(b) Authority; Execution and Delivery, Etc. The execution delivery
and performance of this Agreement has been duly and effectively authorized by
the Board of Directors of the Company and no other corporate proceedings on the
part of the Company or its shareholders are required. This Agreement has been
duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights in
general, moratorium laws or general principles of equity. Neither the execution
or delivery of this Agreement, nor the fulfillment of or compliance with the
terms and provisions of this Agreement will violate the terms of the Certificate
of Incorporation or By-laws of the Company or any agreement, instrument,
judgment, decree, statute or regulation to which the Company is subject. Except
for the applicable reporting requirements under federal or state securities
laws, no consent, approval, permission or other authorization of or by, or
designation, declaration, filing, registration or qualification with any Federal
or state court, administrative agency, other governmental authority or any other
third party, is required by the Company in connection with the execution,
delivery or performance of this Agreement by the Company.
(c) Issuance of Shares. The Shares being purchased pursuant to this
Agreement have been duly authorized and upon issuance will be validly issued,
fully paid and non-assessable.
(d) Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company before any court, arbitrator or administrative or governmental body
seeking to prohibit or restrain the transactions contemplated by this Agreement.
SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF DEWEY BALLANTINE.
Dewey Ballantine represents and warrants to the Company as follows:
(a) Organization, Standing and Qualification of Dewey Ballantine.
Dewey Ballantine is a limited liability partnership duly constituted and validly
existing under the laws of the State of New York, and has all requisite power to
own its respective property and to carry on its business as now being conducted.
Dewey Ballantine is duly qualified to do business and in good standing in every
jurisdiction where the character of the properties owned or leased by it or the
nature of any business transacted by it makes such qualification necessary.
(b) Authority; Execution and Delivery, Etc. The execution delivery
and performance of this Agreement has been duly and effectively authorized by
Dewey Ballantine and no further action on the part of Dewey Ballantine or its
Partners is required. This Agreement has been duly executed and delivered by
Dewey Ballantine and constitutes the legal, valid and binding obligation of
Dewey Ballantine enforceable against Dewey Ballantine in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights in general,
moratorium laws or general principles of equity. Neither the execution or
delivery of this Agreement, nor the fulfillment of or compliance with the terms
and provisions of this Agreement will violate the terms of the Partnership
Agreement of Dewey Ballantine or any agreement, instrument, judgment, decree,
statute or regulation to which Dewey Ballantine is subject. No consent,
approval, permission or other
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<PAGE>
authorization of or by, or designation, declaration, filing, registration or
qualification with any Federal or state court, administrative agency, other
governmental authority or any other third party, is required by Dewey Ballantine
in connection with the execution, delivery or performance of this Agreement by
Dewey Ballantine.
(c) Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of Dewey Ballantine, threatened against
Dewey Ballantine before any court, arbitrator or administrative or governmental
body seeking to prohibit or restrain the transactions contemplated by this
Agreement.
ARTICLE III.
CONDITIONS TO CLOSING
SECTION 3.1. CONDITIONS TO DEWEY BALLANTINE'S OBLIGATIONS. Dewey
Ballantine's obligation to consummate the transactions contemplated by this
Agreement on the Closing Date is subject to the satisfaction, on or before the
Closing Date, of the following conditions:
(a) Representations and Warranties of the Company. The
representations and warranties of the Company set forth in Section 2.1 hereof
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though the same had been made on and as of the
Closing Date.
SECTION 3.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's
obligation to consummate the transactions contemplated by this Agreement on the
Closing Date is subject to the satisfaction, on or before the Closing Date, of
the following condition:
(a) Representations and Warranties of the Company. The
representations and warranties of Dewey Ballantine set forth in Section 2.2
hereof shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though the same had been made on
and as of the Closing Date.
ARTICLE IV.
COVENANTS
SECTION 4.1. COVENANTS BY THE COMPANY. The Company agrees as
follows:
(a) Registration of the Shares. On or before the fifth business day
following the Closing Date, the Company will file with the Securities and
Exchange Commission (the "SEC") a registration statement pursuant to the
Securities Act of 1933 on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate which form shall be available for
resales by Dewey Ballantine of the Shares.
(b) Effectiveness of Registration. The Company will use its best
efforts to cause the registration statement with respect to the Shares to
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<PAGE>
become effective as soon as possible and to remain effective until Dewey
Ballantine has disposed of all of the Shares.
(c) Blue Sky. The Company will take any and all actions necessary to
register or otherwise qualify the Shares and to enable resales of the Shares by
Dewey Ballantine until Dewey Ballantine has disposed of all of the Shares.
(d) Securities Exchange Listing. The Company will take all necessary
action to cause the Shares to be listed on each securities exchange and/or
automated quotation system on which similar securities issued by the Company are
then listed.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. AMENDMENT AND WAIVER. Any provision of this Agreement
may be amended or waived, but only if such amendment is in writing and is signed
by the Company and Dewey Ballantine.
SECTION 5.2. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained in this Agreement or made by or on behalf of either of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
SECTION 5.3. NOTICES. Any notice or communication provided for by
this Agreement shall be in writing and shall be delivered in person, sent by
telecopy, mailed, first class, postage prepaid, or sent by a nationally
recognized overnight delivery service addressed to Dewey Ballantine or the
Company at the following addresses:
If to the Company:
Cheniere Energy, Inc.
Two Allen Center, Suite 1740
Houston, Texas 77002
Attn: Mr. Donald Turkleson
Telecopy: (713) 659-5459
If to Dewey Ballantine:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attn: Timothy J. Alvino
Telecopy: (212) 259-6333
Such address may be changed by a party by written notice to the other party
hereto. All notices shall be deemed to be properly given or made upon the
earliest to occur of (i) actual delivery, (ii) 3 days after being deposited in
the mail addressed as aforesaid, or (iii) 2 days after being sent by telecopy
(followed promptly by the sending of the original of such notice by overnight
delivery service as aforesaid) or overnight delivery service.
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<PAGE>
SECTION 5.4. FURTHER ASSURANCES. From time to time both before and
after the Closing Date, as the case may be, each party hereto undertakes
generally to execute all such agreements and other instruments and to do all
such other acts as are necessary or appropriate to give full effect to the
terms, conditions and provisions of this Agreement and to make them binding upon
the parties.
SECTION 5.5. GOVERNING LAW. This Agreement and, unless otherwise
provided, all amendments, modifications, supplements, waivers and consents
relating hereto shall be construed and enforced in accordance with the law of
the State of New York (without giving effect to its conflict of laws
principles).
SECTION 5.6. HEADINGS. The descriptive headings of the Sections of
this Agreement are inserted for convenience only.
SECTION 5.7. SEVERABILITY. In the event that any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
SECTION 5.8. COUNTERPARTS. This Agreement may be executed in two or
more counterparts each of which shall be deemed an original but all of which
together shall be deemed one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CHENIERE ENERGY, INC.
By: /s/ Don A. Turkleson
------------------------------------
Name: Don A. Turkleson
Title: Chief Financial Officer
DEWEY BALLANTINE, LLP
By: /s/ Timothy J. Alvino
------------------------------------
Timothy J. Alvino
Partner
By: /s/ Paul L. Nash
------------------------------------
Paul L. Nash
Administrative Partner
6
<PAGE>
EXHIBIT 99.2
CHENIERE ENERGY, INC.
TWO ALLEN CENTER
1200 SMITH STREET, SUITE 1740
HOUSTON, TEXAS 77002
May 22, 1998
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attn: Timothy J. Alvino
Gentlemen:
Reference is made to that certain Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of May 22, 1998, between Cheniere Energy, Inc.
(the "Company") and Dewey Ballantine LLP ("Dewey Ballantine"). As a further
inducement to the parties to enter into the Stock Purchase Agreement, the
Company hereby agrees with you as follows:
1. DEFINITIONS. For purposes hereof, terms used but not defined
herein have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
2. DISPOSITION OF THE SHARES BY DEWEY BALLANTINE. The parties
acknowledge that Dewey Ballantine intends to dispose of the Shares as soon as
practicable upon the Closing of the Stock Purchase Agreement. Dewey Ballantine
agrees that it will not dispose of more than 5,000 of the Shares (including any
True-up Shares) during any calendar day.
3. CONTINGENT Actions BY THE COMPANY. The Company agrees that if the
amount of proceeds received by Dewey Ballantine after payment of all costs and
expenses (including brokers' commissions, discounts and similar items) (the "Net
Proceeds") from the sale of the Shares is less than $214,699.94, then the
Company will either (A) issue such number of additional shares of common stock
of the Company (the "True-up Shares") until Dewey Ballantine receives aggregate
Net Proceeds from the sale of the Shares and the True-up Shares of $214,699.94
or (B) pay to Dewey Ballantine an amount equal to the difference between
$214,699.94 and the Net Proceeds received by Dewey Ballantine from the sale of
the Shares.
4. ISSUANCE OF TRUE-UP SHARES OR PAYMENT BY THE COMPANY. Any True-
up Shares to be issued by the Company to Dewey Ballantine or any payment to be
made by the Company to Dewey Ballantine pursuant to this letter shall be made
within 10 days after receipt by the Company from Dewey Ballantine of evidence of
the amount of Net Proceeds from the sale of the Shares. Any such issuance of
True-up Shares shall be subject to the same terms and conditions as set forth in
the Stock Purchase Agreement. Any such payment shall be made by wire transfer
of immediately available funds to the following account:
<PAGE>
The Chase Manhattan Bank, N.A.
ABA# 021000021
For account of: Dewey Ballantine Attorney Business
Account
Acct. #: 910-1-062983
Reference: 55239
Attention: Allen R. Yurko
Telephone: (212) 391-7694
5. EVIDENCE OF SATISFACTION OF INDEBTEDNESS. Upon receipt by Dewey
Ballantine of an amount equal to $214,699.94 from the sale of the Shares and
the True-up Shares and/or payment by the Company to Dewey Ballantine pursuant to
Section 4 hereof, Dewey Ballantine shall furnish the Company with a certificate
to the effect that the Indebtedness has been satisfied.
6. NOTICES. Any notice or communication provided for by this letter
shall be given in the manner set forth in Section 5.3 of the Stock Purchase
Agreement.
7. SUCCESSORS AND ASSIGNS. All agreements contained in this letter
or made by or on behalf of either of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
8. GOVERNING LAW. This letter and, unless otherwise provided, all
amendments, modifications, supplements, waivers and consents relating hereto
shall be construed and enforced in accordance with the law of the State of New
York (without giving effect to its conflict of laws principles).
9. AMENDMENT AND WAIVER. Any provision of this letter may be amended
or waived, but only if such amendment is in writing and is signed by the Company
and Dewey Ballantine.
10. COUNTERPARTS. This letter may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
11. HEADINGS. The descriptive headings of the Sections of this
letter are inserted for convenience only.
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<PAGE>
If the foregoing accurately reflects our agreement, kindly sign, date
and return to the Company the enclosed duplicate copy of this letter.
Very truly yours,
CHENIERE ENERGY, INC.
By: /s/ Don A. Turkleson
--------------------------------
Name: Don A. Turkleson
Title: Chief Financial Officer
ACKNOWLEDGED AND AGREED
This 22nd day of May, 1998
DEWEY BALLANTINE LLP
By: /s/ Timothy J. Alvino
------------------------------
Timothy J. Alvino, Partner
By: /s/ Paul L. Nash
------------------------------
Paul L. Nash, Administrative Partner
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