SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
TELLURIAN, INC.
-----------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.
(3) Filing Party:
(4) Date Filed:
<PAGE>
TELLURIAN, INC.
300 K Route 17 South
Mahwah, New Jersey 07430
(201) 529-0939
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
IN LIEU OF ANNUAL MEETING TO BE HELD ON
AUGUST 31, 1998 AT 10:00 A.M.
To the Shareholders of Tellurian, Inc.
Notice is hereby given that a Special Meeting of Shareholders in lieu
of an Annual Meeting (the "Meeting") of Tellurian, Inc., a Delaware corporation
(the "Company" or "TELLURIAN"), will be held at the executive offices of
Tellurian at 300 K Route 17 South on August 31, 1998 at the hour of 10:00 A.M.
local time for the following purposes:
(1) To elect three Directors of the Company for the coming year;
(2) To consider and vote upon the ratification, adoption and approval of the
authorization of 5,000,000 shares of Preferred Stock, $.01 par value;
(3) To ratify, adopt and approve the 1998 Incentive and Non-Statutory Stock
Option Plan; and
(4) To transact such other business as may properly come before the Meeting.
Only shareholders of record at the close of business on July 16, 1998
are entitled to notice of and to vote at the Meeting or any adjournment thereof.
By Order of the Board of Directors
Stuart French, President
July 17, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND
THE MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU PREFER, REVOKE
YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
TELLURIAN, INC.
300 K Route 17 South
Mahwah, New Jersey 07430
(201) 529-0939
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are furnished by the
Board of Directors of Tellurian, Inc. ("Tellurian" or "the Company") in
connection with the solicitation of proxies for use at the Special Meeting of
Stockholders in lieu of an Annual Meeting (the "Meeting") referred to in the
foregoing notice. It is contemplated that this Proxy Statement (which includes
as Exhibit A the Company's Annual Report on Form 10-KSB for its fiscal year
ended December 31, 1997 together with the accompanying form of proxy will be
mailed together to shareholders on or about July 17, 1998.
The record date for the determination of shareholders entitled to
notice of and to vote at the Meeting is July 16, 1998. On that date there were
issued and outstanding, 3,959,663 shares of Common Stock, par value $.01 per
share. The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Meeting is
necessary to constitute a quorum. In deciding all questions, a shareholder shall
be entitled to one vote, in person or by proxy, for each share held in his name
on the record date. In proposal No. 1, directors will be elected by a plurality
of the votes cast at the Meeting. Proposal No. 2 will be decided by a majority
of the Company's outstanding shares entitled to vote. Proposal No. 3 and any
other proposals that may come before the meeting will be decided by a majority
of the votes cast at the Meeting.
All proxies received pursuant to this solicitation will be voted
(unless revoked) at the Special Meeting of Shareholders in lieu of an Annual
Meeting held on August 31, 1998 or any adjournment thereof in the manner
directed by a shareholder and, if no direction is made, will be voted for the
election of each of the management nominees for director in Proposal No. 1 and
in favor of Proposal Nos. 2 and 3. If any other matters are properly presented
at the meeting for action, which is not presently anticipated, the proxy holders
will vote the proxies (which confer authority to such holders to vote on such
matters) in accordance with their best judgment. A proxy given by a shareholder
may nevertheless be revoked at any time before it is voted by communicating such
revocation in writing to the transfer agent, Continental Stock Transfer & Trust
Company, at 2 Broadway, 19th floor, New York, New York 10004 or by executing and
delivering a later-dated proxy. Furthermore, any person who has executed a proxy
but is present at the Meeting may vote in person instead of by proxy; thereby
canceling any proxy previously given, whether or not written revocation of such
proxy has been given.
As of the date of this Proxy Statement, the Board of Directors knows of
no matters other than the foregoing that will be presented at the Meeting. If
any other business should properly come before the Meeting, the accompanying
form of proxy will be voted
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<PAGE>
in accordance with the judgment of the persons named therein, and discretionary
authority to do so is included in the proxies. All expenses in connection with
the solicitation of this proxy will be paid by the Company. In addition to
solicitation by mail, officers, directors and regular employees of the Company
who will receive no extra compensation for their services, may solicit proxies
by telephone, telegraph or personal calls. Management does not intend to use
specially engaged employees or paid solicitors for such solicitation. Management
intends to solicit proxies which are held of record by brokers, dealers, banks,
or voting trustees, or their nominees, and may pay the reasonable expenses of
such record holders for completing the mailing of solicitation materials to
persons for whom they hold the shares. All solicitation expenses will be borne
by the Company.
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 1, 1998
regarding the beneficial ownership of the Company's Common Stock by all persons
known by the Company to be beneficial owners of more than 5% of its Common Stock
and all executive officers and directors, both individually and as a group. For
purposes of calculating the amount of beneficial ownership and the respective
percentages, the number of shares of Common Stock which may be acquired by a
person within sixty days of July 1, 1998 are considered outstanding, but shall
not be deemed to be outstanding for the purpose of computing the percentage of
Common Stock owned by any other person.
Amount
and Nature Approximate
Name and Address of of Beneficial Percent
Beneficial Owner (1) Ownership (1) of Class (2)
- -------------------- -------------- ------------
Dr. Ronald Swallow (3)(4) 370,908 11.0%
Dr. Richard Swallow(3)(5) 136,481 4.1%
Stuart French(3)(6) 249,261 6.0%
Michael Hurd (3)(7) 200,000 4.8%
Peter Colgan (3) -0- 0%
James G.H. Lin (3) -0- 0%
All officers and directors
as a group (6 persons)(7)(8) 956,650 32.8%
1174757 Ontario Inc. (9)
5700 Robinson Street
Niagara Falls, Ontario
Canada L2G 2A6 450,000 11.1%
Mary Elizabeth
Huggins Trust (10) 430,049 10.9%
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<PAGE>
Alpha International Corp.
P.O. Box 671, The Valley
Anguilla, British West Indies 2,200,000 35.8%
(11) (12)
Imafina S.A.
c/o Hubert Hendrickx
4 Route de Beaumont
CH 1701 Fribourg
Switzerland (11) (13) 800,000 16.9%
- -------------
(1) Unless otherwise indicated below, all shares are owned beneficially and of
record.
(2) Based upon 3,959,663 shares outstanding without giving effect to the
issuance of shares under the Company's outstanding Warrants and Stock
Options.
(3) The address for Dr. Ronald Swallow, Stuart French, Dr. Richard Swallow,
Michael Hurd, Peter Colgan and James G.H. Lin is c/o Tellurian, Inc. at
300K Route 17 South, Mahwah, NJ 07430.
(4) Includes options to purchase 73,000 shares.
(5) Includes options to purchase 27,000 shares.
(6) Includes options to purchase 200,000 shares.
(7) Includes options to purchase 200,000 shares.
(8) Includes options to purchase 500,000 shares.
(9) Includes options to purchase 100,000 shares.
(10) Trust set up by Charles H. Powers, a founder and former shareholder,
officer and director of the Company, for the benefit of his granddaughter,
with Jane Powers Huggins as Trustee. The Trustee's address is 2419 West
Sumter, Florence, SC 29572.
(11) Represents Common Stock issuable upon exercise of Warrants.
(12) Based upon a Schedule 13D received by counsel for the Company. The
beneficial owner of these Warrants is not shown on the Schedule 13D. These
Warrants were acquired from Jericho Limited.
(13) The beneficial owner and sole officer and director of Imafina S.A. is
Hubert Hendrickx.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Management recommends that you vote in favor
of the nominees named to the Board of
Directors.
Directors will be elected by a
plurality of the votes cast at the Meeting.
Three directors are to be elected at the meeting for terms of one year
each and until their successors shall be elected and qualified. It is intended
that votes will be cast pursuant to such proxy for the election of the three
persons whose names are first set forth below unless authority to vote for one
or more of the nominees is withheld by the enclosed proxy, in which case it is
intended that votes will be cast for those nominees, if any, with respect to
whom authority has not been withheld. All of the nominees are now members of the
Board of Directors. In the event that any of the nominees should become unable
or unwilling to serve as a director, a contingency which the management has no
reason to expect, it is intended that the proxy be voted, unless authority is
withheld, for the election of such person, if any, as shall be designated by the
Board of Directors. The following table sets forth information concerning each
director and officer of the Company, each of which has been nominated to
continue as a director of the Company.
<TABLE>
<CAPTION>
Term First
of Became Principal
Name Age Office Director Occupation
<S> <C> <C> <C> <C>
Stuart French 52 (1) 1995 President
James G.H. Lin 46 (1) 1998 President, Asian
International
Management
Peter Colgan 63 (1) 1998 Senior Vice-
President Computer
Horizons corp.
</TABLE>
(1) Directors are elected at the annual meeting of shareholders and hold
office until the following annual meeting.
Stuart French has been President since October 1993, has served as a
member of the Board of Directors since March 1995 and prior thereto was the Vice
President of Operations and Marketing from August 1991 to October 1993 and Chief
Financial Officer from January 1996 to March 1997. Mr. French joined the Company
after the sale of Flightmatic Corp. which he owned and operated from 1987
through 1991. Flightmatic was a flight simulation company manufacturing and
selling low cost general aviation training equipment. Previously, he spent ten
years at Grumman Aerospace as a Business Development Manager for US Air Force
contracts. After receiving a BS degree in Marketing from New England College,
Mr. French was a pilot in the US Navy.
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<PAGE>
James G.H. Lin joined the Board of Directors in March 1998. He is has
been the President of Asian International Management since 1992. Mr. Lin is a
graduate of National Chuang Hsin University in Taiwain and holds his MBA from
North Texas State University with a major in Accounting.
Peter Colgan joined the Board of Directors in March 1998. He has served
as the Senior Vice President of Computer Horizons Corp. since 1977. He is a
graduate of City College of New York with an accounting major and holds his
Master of Business Administration from New York University.
In March 1998, the Company established an Audit Committee consisting of
Messrs. Colgan and Lin. The Audit Committee has the power to (i) select the
independent certified public accountant, (ii) satisfy itself on behalf of the
Board that the external and internal auditing procedures assure reliable and
informative accounting and financial reporting, (iii) have meetings with
management, or with the auditors, or with both management and auditors, to
review the scope of the auditor's examination, audit reports and the Company's
internal auditing procedures and reviews, (iv) monitor policies established to
prohibit unethical, questionable, or illegal activities by those associated with
the Company; and (v) review the compensation paid to the auditors through annual
audit and non-audit fees and the effect on the independence on the auditors in
relation thereto, and it may exercise the powers and authority of the Board of
Directors to implement changes in connection with the foregoing or, at its
option, may make recommendations to the entire Board of Directors for its
approval. Prior to March 1998, the Company did not have an audit committee. The
Company does not have an executive compensation committee.
In connection with the Company's initial public offering completed in
November 1996, J.W. Barclay & Co., Inc., the Representative of the Company's
initial public offering, was granted the right, for a period of five years
expiring in November 2001 to designate one person to act as an advisor to the
Board of Directors. Such person, if designated, would be entitled to attend all
such meetings and to receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors. The
Company would be required to reimburse the designee of the Representative for
his out-of-pocket expenses incurred in connection with his attendance at such
meetings. As of June 1, 1998, the Representative has not designated any person.
During 1997, while no actual meetings were held by the Board of
Directors, the board took action by unanimous written consent on five occasions.
Upon the completion of a public offering by the Company of at least
$6,000,000 in gross proceeds, the Company intends to expand its board of
directors to at least four members and elect Michael Hurd as its Chairman of the
Board and Chief Executive Officer.
Michael Hurd joined the Company in February 1997 and was elected a director
and Vice President of Administration and Finance and Chief Financial and
Accounting in March 1997. Mr. Hurd resigned from his position as a director of
the Company in March 1998. Mr. Hurd has a BBS degree in Accounting from New
Hampshire College and has been a
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<PAGE>
Certified Public Accountant in New Jersey since 1973. Since 1985, he served in
various officer capacities for Bobst Group Inc., a Swiss machinery manufacturing
and sales company with revenues in excess of $200 million. Previously, Mr. Hurd
was a partner in a printing machinery manufacturing and sales company in New
Jersey. Prior to that, he served in various positions with the consulting group
of a then Big 8 public accounting firm.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. To Management's knowledge, no
officer, director or person owning more than 10% of the Company's Common Stock
filed any reports late during its 1997 fiscal year.
Executive Compensation
Incorporated by reference is the contents of Item 10 of Tellurian's
Form 10-KSB for its fiscal year ended December 31, 1997, a copy of which is
annexed to this Proxy Statement as Exhibit A.
Certain Transactions
Incorporated by reference is the contents of Item 12 of Tellurian's
Form 10-KSB for its fiscal year ended December 31, 1997, a copy of which is
annexed to this Proxy Statement as Exhibit A.
7
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
Management recommends that you vote in favor of this proposal. A majority of the
Company's issued and outstanding shares entitled to be cast at the meeting is
required to adopt the amendment.
In June 1998, the Board of Directors adopted a proposal declaring it
advisable to create a class of 5,000,000 shares of Preferred Stock, $.01 par
value, by amendment to the Company's Certificate of Incorporation. If approved,
the Company's Certificate of Incorporation will be amended to provide the
Company's Board of Directors with the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company has no present plans to issue any shares of Preferred Stock beyond
the purposes described below.
Reasons for the increase in capitalization
The Company has filed a Registration Statement with the Securities and
Exchange Commission (the "SEC") to register for sale an estimated 1,200,000
shares of Series 1 Preferred Stock and an estimated 1,200,000 Warrants to
purchase Series 1 Preferred Stock plus a 15% over-allotment option (an estimated
360,000 shares). The Registration Statement filed with the SEC names J.W.
Barclay & Co., Inc. as the Managing Underwriter (the "Underwriter"). Pursuant to
the terms of the proposed Underwriting Agreement, if the offering is successful,
of which no assurances can be given, the Company will receive gross proceeds of
approximately $6,300,000 before offering expenses estimated of approximately
$1,400,000. The specific terms of the Series 1 Preferred Stock including,
without limitation, the rights and privileges of the Series 1 Preferred Stock,
the offering price and the number of securities to be offered for sale is
subject to change at any time prior to the effective date of the Registration
Statement. The Underwriter will be entitled to receive at closing, Warrants (on
a fully exercised basis) to purchase up to an estimated 240,000 shares of Series
1 Preferred Stock, bringing the total number of shares of Series 1 Preferred
Stock to be reserved for issuance to an estimated 3,000,000 in connection with
the aforementioned offering.
Aside from the foregoing, the Company has no plans to issue any shares
of Preferred Stock. The estimated remaining 2,000,000 shares of Preferred Stock
(and if the offering described above is unsuccessful, then the entire 5,000,000
shares of Preferred Stock) may be issued in Series by the Board of Directors
without further stockholder approval.
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<PAGE>
In order to complete the above described financing transaction, the
Company must authorize at least 3,000,000 shares of Preferred Stock; however,
the authority of the Board of Directors to issue the shares of Series 1
Preferred Stock or any other Series of Preferred Stock is not conditioned upon
the completion of the financing transaction. Additionally, the Preferred Stock
will be available for issuance from time to time for such other purposes and
consideration as the Board of Directors may approve and no further vote of
stockholders will be required, except as may be required under Delaware law or
the rules of any exchange or quotation system in which the Company's securities
are then listed or included. The availability of additional shares of Preferred
Stock for issue, without the expense or delay of obtaining the approval of
stockholders, will afford the Company greater flexibility in acting upon
proposed transactions, including financing transactions and acquisitions and
will eliminate the expense and delay involved in calling a special meeting to
authorize the Preferred Stock. Shareholders of the Company do not have any
preemptive rights with respect to any of the presently authorized but unissued
shares of Common Stock of the Company and no such rights will pertain to the
Preferred Stock.
As described in the Company's Form 10-KSB for its year ended December
31, 1997, the Company has had discussions regarding the acquisition of two
companies engaged in the manufacture and sale of doll and souvenir products.
Pursuant to the terms of the letters of intent regarding such acquisitions, the
Company agreed, subject to completion of due diligence investigation, the
execution of definitive contracts and the fulfillment of certain other
conditions precedent, to issue a total of 4,000,000 shares of the Company's
Common Stock in return for the assets of these companies. Since the filing of
the above referenced reports, the Company has abandoned any discussions to
complete such acquisitions due to the financial statements of such combined
companies being unsatisfactory and other business reasons.
The Company currently has 3,959,663 shares of Common Stock issued and
outstanding and approximately 6,250,000 shares reserved for issuance upon
exercise of outstanding Warrants and pursuant to the Company's Stock Option
Plan. The Company currently has no authorized shares of Preferred Stock and is
seeking to authorize 5,000,000 shares of Preferred Stock. The Company presently
has no provisions in its Certificate of Incorporation or By-Laws which are
designed to make a potential takeover more difficult. The authority of the Board
to issue Common Stock or Preferred Stock might be considered as having the
effect of discouraging an attempt by another person or entity to effect a
takeover or otherwise gain control of the Company, since the issuance of Common
Stock and/or Preferred Stock would dilute the voting power of the Common Stock
then outstanding. Such shares could also be sold in public or private
transactions to purchasers who might assist the Board of Directors in opposing a
takeover bid which the Board determines not to be in the best interests of the
Company and its shareholders. Accordingly, the authority of the Board to issue
Common Stock and/or Preferred Stock could be used in a manner calculated to
prevent the removal of Management, and make more difficult or discourage a
change in control of the Company.
The Company is not aware of any efforts to accumulate the Company's
securities or to obtain control of the Company and has no present intention,
agreement or negotiation requiring the issuance of any additional shares of
Common Stock and/or Preferred Stock
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other than as described herein. The Company has no present intention of
soliciting a shareholder vote on any proposal, or series of proposals, to deter
takeovers.
The affirmative vote of the owners of a majority of the issued and
outstanding shares entitled to be cast at the meeting is required to adopt the
Amendment. No dissenting shareholder will have a right of appraisal or right to
receive payment for his stock by reason of such dissent.
PROPOSAL NO. 3
PROPOSAL TO RATIFY, ADOPT AND APPROVE THE 1998 INCENTIVE AND NON-
STATUTORY STOCK OPTION PLAN
Management recommends that you vote in favor of the ratification, adoption and
approval of the 1998 Incentive and Non-Statutory Stock Option Plan.
This Proposal will be decided by a majority of the votes cast at the meeting of
Stockholders by the holders of shares entitled to vote thereon.
The information which follows contains a description of the 1998 Plan.
General
The 1998 Incentive and Non-Qualified Stock Option Plan, was approved by
the Board of Directors on March 2, 1998 and will be amended by the Board at its
meeting scheduled to occur on July 20, 1998. Such plan, as amended, (the "1998
Plan") covers 1,500,000 shares of Common Stock, subject to adjustment of shares
under the anti-dilution provisions of the 1998 Plan. The 1998 Plan authorizes
the issuance of the options covered thereby as either "Incentive Stock Options"
within the meaning of the Internal Revenue Code of 1986, as amended, or as
"Non-Statutory or Non-Qualified Stock Options." Persons eligible to receive
options under the 1998 Plan includes employees, directors, officers, consultants
or advisors, provided that bona fide services shall be rendered by consultants
or advisors and such services must not be in connection with the offer or sale
of securities in a capital raising transaction; however, only employees (who may
also be officers and/or directors) are eligible to receive an Incentive Stock
Option. The 1998 Plan also provides that no options may be granted after March
2, 2008.
The Board of Directors alone shall have the right to alter, amend,
extend or revoke the 1998 Plan or any part thereof at any time, or from time to
time, provided, however, that without the consent of the optionees, no change
may be made in any option theretofore granted which will impair the rights of
existing optionees.
On July 14, 1998, the closing sales price of the Company's Common Stock
as reported on the NASDAQ Small Cap System was $1.875. The above price reflects
an inter-dealer prices, without retail markup, markdown or commission.
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Purpose
The purpose of the 1998 Plan is to encourage and enable officers,
directors and employees of the Company upon whose judgment, initiative and
efforts the Company largely depends for the successful conduct of its business,
to acquire a closer identification of their interests with those of the Company
by providing them with a more direct stake in its welfare, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company. The 1998 Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
Eligibility and Participation
Incentive Stock Options Under the 1998 Plan may be granted under this
Plan only to officers (who are employees) and to other key employees of (a) the
Company and (b) "subsidiaries" of the Company. A director of the Company or any
subsidiaries may receive an Incentive Stock Option under this Plan if such
person is otherwise an employee of the Company and/or any subsidiaries. An
employee, director or officer of the Company (or any subsidiaries), may receive
a Non-Qualified Stock Option. In addition, consultants and advisors who the
Board determines is providing bona fide services to the Company or any
subsidiaries, whether or not otherwise compensated, may receive a Non-Qualified
Stock Option so long as the Plan would continue to qualify as an Employee
Benefit Plan under the Securities Act of 1934, as amended. In determining the
persons to whom Options shall be granted and the number of shares to be covered
by each Option, the Board may take into account the nature of the services
rendered by, and the responsibilities borne by, such respective persons, their
present and potential contributions to the Company's success and such other
factors as the Board in its discretion shall deem relevant. Under the 1998 Plan,
the aggregate fair market value (determined at the time the option is granted)
of the optioned stock for which Incentive Stock Options are exercisable for the
first time by any employee during any calendar year (under all such Plans of the
individual's Employer Corporation and its parent and subsidiary corporation)
shall not exceed $100,000. More than one option may be granted to any optionee.
Subject to the number of shares covered by the Plan, no further restrictions are
placed on the Board of Directors in determining eligibility or participation for
granting options or the amount of options which may be granted to, any director,
officer, consultant or employee.
All of the Company's and its subsidiaries' employees are eligible to
participate in the 1998 Plan at the discretion of the Board of Directors.
Plan Benefits
The table provided below contains information on the benefits provided
to certain persons and groups of persons under the 1998 Plan. As of July 14,
1998, the Company has granted under the 1998 Plan, non-statutory options to
purchase 615,000 shares at an exercise price of $2.625 per share. Except as
provided in the table below, no other benefits under the 1998 Plan are
determinable at the present time.
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<PAGE>
<TABLE>
<CAPTION>
PLAN BENEFITS
Number
Net of
Name and Position Realizable Shares
Value $ (1) Unexercised
<S> <C> <C>
Stuart French -0- 200,000
Michael Hurd -0- 200,000
Ronald Swallow -0- 73,000
Richard Swallow -0- 27,000
Board Nominees as a Group (five persons) -0- 473,000
All Executive Officers as a group (three persons) -0- 473,000
All Non-Executive directors as a group
(two persons) -0- -0-
Non-Executive Officer Employee Group (2)(3) -0- 40,000
================================================= ====================== ================
</TABLE>
(1) Based on the fair market value (approximately $1.875 per share) of the
Company's Common Stock on July 14, 1998 less the applicable exercise
price.
(2) Does not include value of options granted to consultants, directors or
other non- executive employees.
(3) Based upon a grant price of $2.625.
At the Company's Board meeting scheduled to occur on July 20, 1998, the
Board intends to cancel the aforesaid 615,000 options and to re-grant options
(other than those to Richard Swallow and Ronald Swallow) identical to those
being canceled except that the exercise price would be lowered to the fair
market value of its Common Stock at the close of business on that date. The
Board may also consider granting options to purchase an estimated total of
50,000 shares of the Company's Common Stock to its independent directors not
reflected in the table above.
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<PAGE>
Administration
The 1998 Plan is administered by the Company's Board of Directors (or a
stock option committee consisting of three members of the Board) which has the
authority to determine the persons to whom options shall be granted, whether any
particular option shall be an Incentive Option or a Non-Qualified Option, the
number of shares to be covered by each option, the time or times at which
options will be granted or may be exercised and the other terms and provisions
of the Options.
The Board's or Committee's determination on all matters shall be
conclusive and binding on the Company and on all Optionees and their legal
representatives. In the event that there is a Committee, the Committee's powers
are subject, however, to such resolutions as may from time to time be adopted by
the Board in exercise of the Board's final power to determine questions of
policy and expediency which arise in connection with the Plan. The Board at any
time by resolution may abolish the committee, revest the administration of the
Plan in the Board or grant options during the existence of the Committee.
All directors of the Company hold office until the next annual
stockholders' meeting and until the election and qualification of their
successors. Although the Board of Directors may elect to do so, it does not
presently contemplate providing periodic reports to employees as to the amount
and status of each option granted under the 1998 Plan.
Term of Plan
The Board of Directors may terminate the 1998 Plan at any time. Termination
of the Plan will not affect rights and obligations theretofore granted and then
in effect. No options may be granted later than March 2, 2008.
Option Price and Duration of Option
The 1998 Plan also provides that the Board of Directors or Committee
shall determine the exercise price of the Common Stock under each option. The
1998 Plan also provides that: (i) the exercise price of Incentive Stock Options
granted thereunder shall not be less than 100% (110% if the optionee owns 10% or
more of the outstanding voting securities of the Company) of the fair market
value of such shares on the date of grant, as determined by the Board or
Committee, and (ii) no option by its terms may be exercised more than ten years
(five years in the case of an Incentive Stock Option, where the optionee owns
10% or more of the outstanding voting securities of the Company) after the date
of grant. Any options which are canceled or not exercised within the option
period become available for future grants.
Exercise of Options
An Option granted under the Plan shall be exercisable at such time or
times, whether or not in installments, as the Board shall prescribe at the time
the Option is
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granted. An Option which has become exercisable may be exercised in accordance
with its terms as to any or all full shares purchasable under the provisions of
the Option, but not at any time as to less than 100 shares unless the remaining
shares which have become so purchasable are less than 100 shares. Except as
stated below, an Incentive Stock Option may not be exercised at any time unless
the holder thereof is then an employee of the Company or any subsidiaries and
shall have been continuously employed by the Company or any subsidiaries since
the date of grant. In the case of Optionee's death, the lawful heirs or
beneficiaries of a deceased Optionee may exercise Incentive Stock Options for a
maximum period of six months after the Optionee's death, so long as the Option
has otherwise not expired.
In the event of termination of employment of a person to whom an
Incentive Stock Option has been granted under the Plan by reason of the
disability of such person, the optionee may exercise his Incentive Stock Option
at any time within one year after such termination of employment but in no event
after the day in which the Incentive Stock Option would otherwise terminate, to
the extent of the number of shares covered by his Incentive Stock Option which
were purchasable by him at the date of the termination of employment.
In the case of Non-Statutory Stock Options, the disability or death of
optionee shall not terminate the options granted to an officer, director or
employee so long as such officer, director or employee was continuously
performing services for the Company up to the date of his disability or death,
as the case may be. The terms of all non-statutory stock options shall be fixed
by the Board subject to the specific provisions of the 1998 Plan.
Payment of Exercise Price
An exercisable option, or any exercisable portion thereof, may be
exercised solely by delivery to the Chief Accounting Officer of the Company or
his office of all of the following prior to the time when such option or such
portion becomes unexercisable under the Plan:
(i) Notice in writing signed by the optionee or other person
then entitled to exercise such option or portion, stating that such option or
portion is exercised, such notice complying with all applicable rules
established by the Board or Committee thereof.
(ii) (A) Full payment (in cash or by check) for the shares
with respect to which such option or portion is hereby exercised;
(B) With the consent by resolution of the Board or
Committee thereof, which consent may contain additional restrictions to
implement the provisions contained herein, shares of any class of the Company's
stock owned by the optionee duly endorsed for transfer to the Company with a
fair market value on the date of delivery equal to the aggregate option price of
the Shares with respect to which such option or portion is
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thereby exercised (which shares shall be owned by the optionee for more than six
months at the time they are delivered);
(C) With the consent of the Board or Committee
thereof, any other
form of cashless exercise permitted under the Plan; or
(D) Any combination of the consideration provided
in the foregoing
subsections (A), (B) and (C);
(iii) Such representations and documents as the Board or
Committee thereof, in its absolute discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act of 1933,
as amended, and any other federal or state securities laws or regulations. The
Board or Committee thereof may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance including,
without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars; and
(iv) In the event that the option or portion thereof shall be
exercised by any person or persons other than the optionee, appropriate proof of
the right of such person or persons to exercise the option or portion thereof.
The Board or a Committee thereof, in its sole discretion, may establish
procedures whereby an optionee, to the extent permitted by and subject to the
requirements of Rule 16B-3 under the Securities Exchange Act of 1934 (the
"Act"), Regulation T issued by the Board of Governors of the Federal Reserve
System pursuant to the Act, federal income tax laws, and other federal, state
and local tax and securities laws, can exercise an option or a portion thereof
without making a direct payment of the option price to the Company. If the
Company so elects to establish a cashless exercise program, the Company shall
determine, in its sole discretion and from time to time, such administrative
procedures and policies as it deems appropriate provided such procedures and
policies are consistent with those of any other cashless exercise program
established pursuant to any other plan established by the Company. Such
procedures and policies shall be binding on any optionee wishing to utilize the
cashless exercise program."
Transferability
All Incentive Stock Options are non-transferable. All Non-Qualified
Stock Options are non-transferable except by will or the laws of descent and
distribution.
No Rights as Shareholder
The holder of an option granted under the 1998 Plan shall have none of
the rights of a shareholder with respect to the shares covered by the option
until certificates representing shares purchased upon exercise of the option
have been issued.
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Adjustments
The aggregate number and class of shares as to which Options may be
granted under the Plan, the number and class of shares covered by each
outstanding Option and the price per share thereof (but not the total price),
and each such Option, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Company resulting
from a split-up or consolidation of shares or any like capital adjustment, or
the payment of any stock dividends, or any other increase or decrease in the
number of issued shares of Common Stock of the Company without receipt of
consideration by the Company.
Subject to any required action by the stockholders, if the Company
shall be the surviving corporation in any merger or consolidation, any Option
granted hereunder shall be adjusted so as to pertain and apply to the securities
to which the holder of the number of shares of Common Stock of the Company
subject to the Option would have been entitled.
Tax Consequences
Incentive stock options granted under the 1998 Plan are designed to
qualify for the special tax treatment for incentive stock options provided for
in the Internal Revenue Code (the "Code"). Under the provisions of the Code, an
optionee who at all times from the date of grant until three months before the
date of exercise is an employee of the Company, and who holds the shares of
Common Stock obtained upon exercise of his incentive stock option for two years
after the date of grant and one year after exercise, will recognize no taxable
income on either the grant or exercise of such option and will recognize capital
gain or loss on the sale of the shares. If such shares are held by the optionee
for the required holding period, the Company will not be entitled to any tax
deduction with respect to the grant or exercise of the option. If such shares
are sold by the optionee prior to the expiration of the holding periods
described above, the optionee will recognize ordinary income upon such
disposition. Upon the exercise of an incentive stock option, the optionee will
incur an item of tax preference equal to the excess of the fair market value of
the shares at the time of exercise over the exercise price, which may subject
the optionee to the alternative minimum tax.
The grant of a non-qualified option pursuant to the 1998 Plan will
generally speaking result in neither taxable income to the optionee nor a tax
deduction to the Company; however, when an optionee exercises such an option, he
or she will realize, for Federal income tax purposes, ordinary income in the
amount of the difference between the option price and the then market value of
the share, and the Company will be entitled to a corresponding deduction. Any
such ordinary income may be subject to Federal income tax withholding at the
time of such exercise and will increase the optionee's tax basis for the purpose
of computing gain or loss on the later sale or exchange of the shares. Officers
and directors who are subject to Section 16(b) of the Securities Exchange Act of
1934 may be subject to different tax consequences upon exercise of their
options.
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FINANCIAL AND OTHER INFORMATION
Accompanying this Proxy Statement as Exhibit A is the Company's 1997
Annual Report on Form 10-KSB for its fiscal year ended December 31, 1997. The
Company incorporates by reference the information contained in Exhibit A as if
set forth herein in its entirety.
AUDITORS
The principal accountant who has been selected by the Company for the
current fiscal year is Miller, Ellin & Co. who served as the Company's
independent public accountant for the fiscal year ended December 31, 1997. It is
expected that a representative of Miller, Ellin & Co. will be present at the
Special Meeting in Lieu of Annual Meeting of Stockholders, will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other business which will be presented for consideration at
the Annual Meeting.
AVAILABILITY OF SECURITIES AND EXCHANGE
COMMISSION'S FORM 10-KSB
THE COMPANY'S REPORT FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1997 ON
FORM 10-KSB INCLUDES THE FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS THERETO,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION; SUCH REPORT IS AVAILABLE
WITHOUT CHARGE TO THE STOCKHOLDERS UPON WRITTEN REQUEST. SUCH MATERIAL CAN BE
OBTAINED BY WRITING TELLURIAN, INC., ATTENTION SHAREHOLDER RELATIONS, 300 K
ROUTE 17 SOUTH, MAHWAH, NEW JERSEY 07430.
Stockholders Proposals for the Next Annual Meeting
Proposals of security holders intended to be presented at the next
Annual Meeting must be received by the Company for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting as soon as possible
no later than March 31, 1999.
Tellurian, Inc.
Stuart French, President
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EXHIBIT "A"
Tellurian's Form 10-KSB for its fiscal year ended December 31, 1997
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PROXY
TELLURIAN, INC. - SPECIAL MEETING
In Lieu of an Annual Meeting of Stockholders
To be held on July 15, 1998 at 10:00 A.M.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of Tellurian, Inc., a Delaware corporation (the
"Company"), acknowledges receipt of the Notice of Special Meeting of
Shareholders in lieu of an Annual Meeting of Stockholders, dated July 17, 1998
and hereby constitutes and appoints Stuart French and Michael Hurd or either of
them acting singularly in the absence of the other, with a power of substitution
in either of them, the proxies of the undersigned to vote with the same force
and effect as the undersigned all shares of Common Stock of the Company held by
the undersigned at the Special Meeting of Shareholders of the Company to be held
at the offices of Tellurian, Inc. at 300 K Route 17 South, Mahwah, NJ 07430 on
August 31, 1998, at 10:00 A.M. local time and at any adjournment or adjournments
thereof, hereby revoking any proxy or proxies heretofore given and ratifying and
confirming all that said proxies may do or cause to be done by virtue thereof
with respect to the following matters:
1. The election of the three directors nominated by the Board of Directors
FOR all nominees listed below (except WITHHOLD AUTHORITY to vote
as indicated below), for all nominees listed below,
please check here [ ] please check here [ ]
Stuart French James G.H. Lin
Peter Colgan
To withhold authority to vote for any individual nominee or nominees write such
nominee's or nominees' name(s) in the space provided
2. Consider and vote upon the approval of an amendment to the Company's
Certificate of Incorporation to authorize 5,000,000 shares of Preferred Stock.
FOR AGAINST ABSTAIN
please check here [ ] please check here [ ] please check here [ ]
3. To ratify, adopt and approve the Company's 1998 Incentive and Non-Statutory
Stock Option Plan.
FOR AGAINST ABSTAIN
please check here [ ] please check here [ ] please check here [ ]
4. In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the meeting or any adjournment or adjournments
thereof.
The Board of Directors favors a "FOR" designation for proposals 1, 2 and 3. This
proxy when properly executed will be voted as directed. If no direction is
indicated, the proxy will be voted in favor of the three directors named in
proposal no. 1 and in favor of proposals no. 2 and 3.
Dated __________________________1998 ___________________________________(L.S.)
___________________________________(L.S.)
Please sign your name exactly as it appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as it
appears hereon. When signing as joint tenants, all parties in the joint tenancy
must sign. When a proxy is given by a corporation, it should be signed by an
authorized officer and the corporate seal affixed. No postage is required if
returned in the enclosed envelope and mailed in the United States.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
<PAGE>
Lester Morse P.C.
111 Great Neck Road
Great Neck, NY 11021
(516) 487-1446
Securities & Exchange Commission July 17, 1998
450 Fifth Street NW
Washington, DC 20549
Re: Tellurian, Inc.
File No. 0-21645
Gentlemen:
Pursuant to Regulation 14a-6(b), enclosed please find the definitive
Proxy Statement, Proxy and Proxy Cover for the above captioned corporation which
are being electronically filed with your office today. The Registrant intends to
attach its Form 10-KSB (without exhibits) for its fiscal year ended December 31,
1997 as an exhibit to the Proxy Statement in satisfaction of the requirement of
delivering an annual report to stockholders in accordance with Regulation
14A-3(b). Since the above referenced Form 10-KSB, which is an exhibit to the
Proxy Statement, has been previously filed with the Commission, Tellurian is not
electronically refiling such document as an exhibit to the Proxy Statement.
Further the Form 10-K shall serve as the Definitive Annual Report required
pursuant to Regulation 14A-6(c).
The Annual Meeting relates solely to the election of directors, an
authorization to file an amendment to the Registrant's Certificate of
Incorporation to authorize 5,000,000 shares of Preferred Stock and to ratify a
Stock Option Plan. Definitive copies of the Proxy Statement with the annual
report attached as an exhibit thereto and Proxy Card will be mailed to
stockholders on or about July 17, 1998.
Very truly yours,
LESTER MORSE P.C.
/s/ Steven Morse
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SM:ag
Enclosures
