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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CHENIERE ENERGY, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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CHENIERE ENERGY, INC.
Two Allen Center
1200 Smith Street, Suite 1740
Houston, Texas 77002-4312
713/659-1361
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 4, 1999
Notice is hereby given that the annual meeting of stockholders of Cheniere
Energy, Inc., a Delaware corporation (the "Company"), will be held on Friday,
June 4, 1999, at 10:00 a.m., at Two Allen Center, 1200 Smith Street, Suite 1740,
Houston, Texas, for the following purposes:
1. To elect a Board of seven directors to serve until the next annual meeting
of stockholders and until their successors are elected and qualified;
2. To approve a proposed amendment to the Company's 1997 Stock Option Plan to
increase the number of shares of common stock subject to the Plan from
950,000 to 1,950,000;
3. To approve an amendment to the Company's Amended and Restated Certificate of
Incorporation pursuant to which (a) the total number of shares of the
Company's capital stock would be increased to 65,000,000 and (b) the number
of shares of the Company's authorized common stock, par value $.003 per
share, would be increased to 60,000,000;
4. To appoint PricewaterhouseCoopers LLP as independent accountants for the
Company for the fiscal year ending December 31, 1999; and
5. To consider and act upon such other business as may properly be presented to
the meeting or any adjournment thereof.
A record of stockholders has been taken as of the close of business on April
15, 1999, and only those stockholders of record on that date will be entitled to
notice of and to vote at the meeting or any adjournment thereof. All
stockholders of the Company are invited to attend the meeting. The Board of
Directors, however, requests that you promptly sign, date and mail the enclosed
proxy, even if you plan to be present at the meeting. If you attend the
meeting, you can either vote in person or by your proxy. Please return your
proxy in the enclosed, postage-paid envelope.
By order of the Board of Directors,
_________________________
Don A. Turkleson
Secretary
April 30, 1999
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CHENIERE ENERGY, INC.
Two Allen Center
1200 Smith Street, Suite 1740
Houston, Texas 77002-4312
713/659-1361
PROXY STATEMENT
This Proxy Statement and the enclosed proxy are being mailed to stockholders
of Cheniere Energy, Inc., a Delaware corporation (the "Company"), commencing on
or about April 30, 1999. The Company's Board of Directors is soliciting proxies
to be voted at the Company's annual meeting of stockholders to be held in
Houston, Texas on Friday, June 4, 1999 and at any adjournment thereof, for the
purposes set forth in the accompanying notice. The shares covered by a proxy, if
such is properly executed and received prior to the meeting, will be voted in
accordance with the directions specified thereon regarding election of
directors, proposed amendment of the 1997 Stock Option Plan, proposed amendment
of the Company's Amended and Restated Certificate of Incorporation to increase
total authorized capital stock and common stock, appointment of
PricewaterhouseCoopers LLP as independent accountants, and with respect to any
other matters which may properly come before the meeting, in accordance with the
judgment of the persons designated as proxies. A proxy may be revoked at any
time before it is exercised by giving written notice to, or filing a duly
executed proxy bearing a later date with, the Secretary of the Company, or by
voting in person at the meeting. Management expects that the only matters to be
presented for action at the meeting will be the election of directors, amendment
of the 1997 Stock Option Plan, approval of the proposed amendment of Company's
Amended and Restated Certificate of Incorporation to increase total authorized
capital stock and common stock, and appointment PricewaterhouseCoopers LLP as
independent accountants.
At the close of business on April 15, 1999, the record date for determining
the stockholders entitled to notice of and to vote at the meeting (the "Record
Date"), there were outstanding and entitled to vote 22,670,752 shares of the
Company's common stock, par value $.003 per share ("Common Stock"). Each share
of Common Stock entitles the holder to one vote on all matters presented at the
meeting.
The Company will bear the costs of soliciting proxies in the accompanying
form. In addition to solicitations by mail, a number of regular employees of the
Company may solicit proxies in person or by telephone.
ELECTION OF DIRECTORS
Nominees
At the meeting, seven nominees are to be elected to the Company's Board of
Directors, each director to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. Unless your proxy
specifies otherwise or withholds authority to vote for one or more nominees
named thereon and described below, it is intended that the shares represented by
your proxy will be voted for the election of these seven nominees. Proxies
cannot be voted for a greater number of persons than the number of nominees
named. If any nominee should become unavailable for election, your proxy may be
voted for a substitute nominee selected by the Board, or the Board may be
reduced accordingly. The Board is unaware of any circumstances likely to render
any nominee unavailable.
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Director Nominee Director Since Age Position
---------------- -------------- --- --------
William D. Forster 1996 51 Director and Co-Chairman
of the Board of Directors
Michael L. Harvey 1999 51 Director
Kenneth R. Peak 1997 53 Director
Charles M. Reimer 1998 54 Director
Charif Souki 1996 46 Director and Co-Chairman
of the Board of Directors
Walter L. Williams 1996 71 Director and President and
Chief Executive Officer
Efrem Zimbalist, III 1996 51 Director
WILLIAM D. FORSTER, a co-founder of Cheniere, is currently Co-Chairman of
the Board of Directors of Cheniere and a member of the Stock Option Committee.
Mr. Forster is Chairman and CEO of Stonington Corporation in New York, NY. He
served as President and Chief Executive Officer of Cheniere from July 1996 to
September 1997. Mr. Forster was an investment banker with Lehman Brothers from
1975 to 1990, serving as a Managing Director for eleven years, initially in the
oil and gas department for seven years, and then in various other areas. In
1990, he founded his own private investment bank, W. Forster & Co. Inc. Mr.
Forster is a director of Equity Oil Company, a Nasdaq National Market company.
Mr. Forster holds a B.A. in economics from Harvard College and an M.B.A. from
Harvard Business School.
MICHAEL L. HARVEY is currently a director of Cheniere. He is Managing
Partner and Co-Founder of Vaquero Capital Partners, LLC, which provides
investment banking and capital formation for independent oil and gas companies.
Mr. Harvey began his career in 1973 with Shell Oil Company in Corporate Planning
and Economics. He served as Manager of Land Operations for General Crude Oil
Company from 1977 to 1979, when he joined Roy M. Huffington, Inc. as Vice
President. In 1987, Mr. Harvey founded Gulfstar Petroleum Corporation, Gulfstar
Operating Company and Gulfstar Energy, Inc. He served as President and CEO of
the companies until 1997, when Gulfstar Energy was merged into Domain Energy
Corporation (now Range Resources). He was Executive Vice President and a
Director for Domain in 1997 and 1998. In 1999, Mr. Harvey formed Vaquero
Capital Partners and presently serves as Managing Partner. He continues as
Chairman of Estrella del Golfo, LLC, which he co-founded in 1996 to conduct
exploration and production asset management in Venezuela.
KENNETH R. PEAK is currently a director of the Company and a member of the
Audit Committee and the Stock Option Committee. Mr. Peak has been the President
of Peak Enernomics, Incorporated, a company engaged in consulting activities in
the oil and gas industry, since forming the company in 1990. From 1989 to 1990
Mr. Peak served as a Managing Director and Co-Manager, Corporate Finance of
Howard Weil Incorporated, an investment banking firm. Prior to joining Howard
Weil Incorporated, Mr. Peak served as Vice President-Finance for Forest Oil
Corporation from 1988 to 1989. Mr. Peak received a B.S. in physics from Ohio
University and an M.B.A. from Columbia University. He currently serves as a
director of NL Industries, Inc. and EarthCare Company.
CHARLES M. REIMER is currently a director of Cheniere and a member of the
Stock Option Committee. He is also President of British-Borneo Exploration Inc.
in Houston. Prior to joining British Borneo in November 1998, Mr. Reimer served
as Chairman and CEO of Virginia Indonesia Company (VICO), the operator on behalf
of Union Texas Petroleum Holdings, Inc. and LASMO plc, of major gas and oil
reserves and production located in East Kalimantan, Indonesia. Mr. Reimer began
his career with Exxon Company USA in 1967 and held various professional and
management positions in Texas and
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Louisiana. After leaving Exxon, Mr. Reimer was named President of Phoenix
Resources Company in 1985 and relocated to Cairo, Egypt to begin eight years of
international assignments.
CHARIF SOUKI, a co-founder of Cheniere, is currently Co-Chairman of the
Board of Directors of the Company and is a member of the Audit Committee and the
Stock Option Committee. Mr. Souki is an independent investment banker with
twenty years of experience in the industry. In the past few years he has
specialized in providing financing for promising microcap and small
capitalization companies with an emphasis on the oil and gas industry. Mr.
Souki received his B.A. from Colgate University and his M.B.A. from Columbia
University.
WALTER L. WILLIAMS is currently President and Chief Executive Officer and a
director of the Company. Prior to joining the Company, Mr. Williams spent 32
years as a founder and later Chairman and Chief Executive Officer of Texoil,
Inc., a publicly held Gulf Coast exploration and production company. Prior to
that time he was an independent petroleum consultant. Mr. Williams received a
B.S. in petroleum engineering from Texas A&M University and is a Registered
Engineer in Louisiana and Texas. He serves on the board of directors of Texoil,
Inc. and has served as a Director and Member of the Executive Committee of the
Board of the Houston Museum of Natural Science.
EFREM ZIMBALIST, III is currently a director of the Company, Chairman of
the Audit Committee and a member of the Stock Option Committee. He is also
President and Chief Executive Officer of Times Mirror Magazines, a division of
Times Mirror Co., and a Vice President of Times Mirror Co. From 1993 to 1995 he
served Times Mirror Co. as Vice President, Strategic Development. Previously he
served as Chairman and Chief Executive Office of Correia Art Glass, Inc., a
family owned business. He also served five years as senior engagement manager
at the management consulting firm of McKinsey and Co., Inc. in Los Angeles. Mr.
Zimbalist holds a B.A. in economics from Harvard College and an M.B.A. from
Harvard Business School.
Board and Committee Activity, Structure and Compensation
The Company's operations are managed under the broad supervision and
direction of the Board of Directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain Board functions are discharged by the Board's standing Audit Committee.
Members of the Audit Committee for a given year are selected by the Board
following the annual stockholders' meeting. During the fiscal year ended
December 31, 1998, the Company's Board of Directors held six meetings and each
incumbent member of the Board attended or participated in at least 75% of the
aggregate number of (i) Board meetings and (ii) committee meetings held by all
committees of the Board on which he served.
The Audit Committee annually recommends independent accountants for
appointment by the Board of Directors, reviews the services to be performed by
the independent accountants, and receives and reviews the reports submitted by
them. The committee also determines the duties and responsibilities of the
Company for the conduct of its internal audit program and receives and reviews
reports submitted by the Chief Financial Officer. The Audit Committee held one
meeting during the year ended December 31, 1998. The committee's members for
the year ended December 31, 1998 and the committee's current members are Efrem
Zimbalist III, Chairman, Kenneth R. Peak and Charif Souki.
The Stock Option Committee determines the eligible persons to whom stock
options may be granted, the time or times at which options shall be granted, the
number of shares of common stock subject to each option, the exercise price for
the purchase of shares subject to each option, the time or times when each
option shall become exercisable and the duration of the exercise period. The
committee also has discretionary authority to interpret the stock option plan,
to prescribe, amend and rescind rules and regulations relating to it, to
determine the details and provisions of each stock option agreement, and to make
all determinations necessary or advisable in administration of the plan. The
Stock Option Committee held one meeting during the year ended December 31, 1998.
The committee's members for the year ended December 31, 1998 and the committee's
current members are: William D. Forster, Kenneth R. Peak, Charles M. Reimer,
Charif Souki and Efrem Zimbalist III.
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During the fiscal year ended December 31, 1998, directors received no cash
remuneration for serving on the Board of Directors of the Company, nor were they
compensated for attending Board or committee meetings. From time to time,
outside members of the Board of Directors (those who do not serve as executive
officers of the Company) are compensated for their services to the Company
through the grant of options to purchase common stock of the Company. During
the year ended December 31, 1998, Mr. Reimer received options to purchase 35,000
shares of common stock at an exercise price of $3.00 per share on or before
April 6, 2003. In March 1999, Mr. Harvey received options to purchase 35,000
shares of common stock at an exercise price of $3.00 per share on or before
March 17, 2004.
PROPOSED AMENDMENT TO 1997 STOCK OPTION PLAN
INCREASING NUMBER OF SHARES SUBJECT TO PLAN
The Company's Board of Directors has approved and declared the advisability
of amending the Company's 1997 Stock Option Plan to increase the total number of
shares subject to the Plan from 950,000 to 1,950,000. The amendment would
change the first sentence of Article V Section 5.1 to read:
"Subject to adjustment pursuant to the provisions of Section 5.2
hereof, the maximum number of shares of Common Stock which may be
issued and sold hereunder shall be 1,950,000."
The purpose of the Plan is to advance the interests of the Company and its
stockholders and subsidiaries by attracting, retaining and motivating the
performance of selected directors, officers, and employees of the Company of
high caliber and potential upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business, and to
encourage and enable such directors, officers, and employees to acquire and
retain a proprietary interest in the Company by ownership of its stock. The
purpose of the amendment is to provide the Company with maximum flexibility and
additional resources with which to achieve the objectives of the Plan.
General and Administration. The Plan provides for the grant of
Nonqualified Stock Options and Incentive Stock Options. It is administered by a
Committee comprised solely of directors each of whom is (i) an "outside
director" under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") and (ii) a "non-employee director" as defined in Rule 16b-3 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), as selected by the
Board of Directors; provided, however, with respect to any Nonqualified Stock
Options for directors who are Committee members, the Board of Directors shall
function in the capacity as the Committee under the Plan. The Committee will
select the persons who, from time to time, will receive Options, the number that
they are to receive, the Option price of the shares, the vesting date, and the
expiration date.
Shares of Stock Subject to Plan. Pursuant to the Plan, the Company may
grant Options exercisable for up to 950,000 shares of common stock, which is
proposed to be increased to 1,950,000. Those shares may be either authorized
but unissued shares or shares held in the Company's treasury. If any
outstanding Option terminates for any reason, the shares of common stock subject
to the unexercised portion of such Option become available for new Option
grants. The number of shares of common stock which may be issued under the Plan
and pursuant to then outstanding Stock Options are subject to adjustments to
prevent enlargement or dilution of rights resulting from stock dividends, stock
splits, recapitalizations, reorganizations or similar transactions.
Options. The two types of Options which the Committee may grant under the
Plan are Nonqualified Stock Options and Incentive Stock Options. Incentive
Options may only be granted to Eligible Persons who are considered employees of
the Company or any Subsidiary. An Option will be effective on the date it is
approved by the Committee unless the Committee specifies a later effective date.
The Company and the Optionee shall enter into a Stock Option Agreement which
details the terms and conditions of the Options granted. The Committee sets the
Option Price, however, the Option Price of an Incentive Stock Option shall not
be less than 100% (110% in the case of certain 10% shareholders) of the
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Fair Market Value of a share of common stock on the date of grant. A
Nonqualified Stock Option that is intended to qualify as performance based
compensation to an officer subject to Section 162(m) of the Code must be granted
with an exercise price equal to 100% of the fair market value of a share of
common stock on the grant date. An Option shall vest and become exercisable as
stated in the applicable Stock Option Agreement, provided that the Optionee is
an Eligible Person on the applicable vesting dates. The Committee has sole
discretion to accelerate any Option at any time. An Option must be exercised
within ten years from the date of grant unless a shorter period is specified in
the Stock Option Agreement.
An Option may be exercised wholly or in part, in whole share increments, at
any time within the period permitted for exercise. Only the Optionee may
exercise an Option during the Optionee's lifetime, except that in the case of an
Optionee who is legally incapacitated, the Option shall be exercisable by the
Optionee's guardian or legal representative. Optionees may not transfer Options
other than by will or the laws of descent and distribution.
Tax Consequences to the Company. An Optionee does not recognize any income
for federal tax purposes at the time a Nonqualified Stock Option is granted, and
the Company is not then entitled to a deduction. When any Nonqualified Stock
Option is exercised, the Optionee recognizes ordinary income in an amount equal
to the difference between the fair market value of the shares on the exercise
date and the exercise price of the Nonqualified Stock Option, and the Company
generally recognizes a tax deduction in the same amount.
The Company is not entitled to a tax deduction as the result of the grant
or qualified exercise of an Incentive Stock Option. If an Optionee disposes of
shares acquired upon exercise of an Incentive Stock Option within either two
years after the date of its grant or one year after its exercise, the
disposition is a disqualifying disposition and the Optionee will recognize
ordinary income in the year of such disposition. The Company generally is
entitled to a deduction in the year of the disqualifying disposition in an
amount equal to the ordinary income recognized by the Optionee as a result of
such disposition.
Taxable compensation earned by certain named executive officers subject to
Section 162(m) of the Code in respect of Stock Options is generally intended to
satisfy the requirements for "qualified performance-based compensation," but no
assurance can be provided that the Company will be able to satisfy these
requirements in all cases, and the Company may, in its sole discretion,
determine in one or more cases that it is in its best interest not to satisfy
these requirements even if it is able to do so.
Termination of Service. Unless otherwise provided in the Stock Option
Agreement, if an Optionee dies after the date of grant, the executor or
administrator of the Optionee's estate, or anyone to whom an outstanding Option
has been validly transferred by will or the laws of descent and distribution,
will have the right, within one year after the Optionee's death, to exercise any
portion of the Option which was exercisable but unexercised at the time of the
Optionee's death. If an Optionee's employment or other service with the Company
or any Subsidiary is terminated due to permanent and total disability at any
time after grant, the Optionee, or his legal guardian or representative, will
have the right, within one year of the date of the Optionee's disability, to
exercise any portion of the outstanding Option which was exercisable but
unexercised at the time of the Optionee's termination due to disability. The
period for exercise of an Option after the date of death or disability is
limited by the maximum term set for exercise in the Stock Option Agreement. The
Committee may determine at or after the grant to make any portion of an Option
that is not exercisable at the date of death or disability immediately vested
and exercisable. Unless otherwise provided in the Stock Option Agreement, if an
Optionee's employment or other service with the Company or any Subsidiary is
terminated for cause (as defined in the Plan), the Optionee's right to exercise
any unexercised portion of any Option will terminate and all rights under any
Option will cease. If an Optionee's employment or other service with the
Company is terminated for any reason other than death, permanent and total
disability, or for cause, the Optionee will have the right to exercise any
Option to the extent it was exercisable and unexercised on the date of
termination during the period which ends the earlier of 90 days after
termination or the date that the Option expires.
Change in Control. Upon a "Change in Control" (as defined in the Plan) of
the Company, the unvested portion of every outstanding Option will become fully
and immediately vested and an Optionee
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must surrender his or her Option and receive, for each share of Common Stock
issuable under the Option outstanding at such time, a cash payment equal to the
excess of the Fair Market Value of the Common Stock at the time of the Change in
Control over the Option Price of the Common Stock. The vesting and cash payment
described above will not occur if (i) the Change in Control was approved by at
least two-thirds of the Board who were serving as such immediately prior to the
transaction and (ii) provision has been made in connection with such transaction
for (a) the continuation of the Plan and/or the assumption of such Options by a
successor corporation (or a parent or subsidiary thereof) or (b) the
substitution for such Options of new Options covering the stock of a successor
corporation (or a parent or subsidiary thereof), with appropriate adjustments as
to the number and kinds of shares and exercise prices.
Termination and Amendment. The Plan terminates in April 2007. The Board
may, in its sole discretion and at any earlier date, terminate the Plan;
provided, however, no termination of the Plan shall in any manner affect any
Option already granted under the Plan without the consent of the Optionee or the
permitted transferee of the Option. The Board may at any time and from time to
time, amend or modify the Plan, however, no amendment or modification of the
Plan shall in any manner affect any Option already granted under the Plan
without the consent of the Optionee or the permitted transferee of the Option
and certain amendments may require stockholder approval.
Certain Securities Law Matters. The Company has registered under the
Securities Act of 1933 the common stock reserved for issuance under the Plan on
a registration statement on Form S-8 and intends to register the additional
shares in the same fashion if the amendment to the Plan is approved.
New Plan Benefits. The board has not made any conditional grants or
otherwise allocated additional Stock Options to be granted to any named
executive officers, and thus no tabular disclosure is applicable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE 1997 STOCK OPTION PLAN INCREASING THE TOTAL NUMBER OF SHARES
SUBJECT TO THE PLAN FROM 950,000 TO 1,950,000.
PROPOSED AMENDMENT TO INCREASE NUMBER OF TOTAL AUTHORIZED
CAPITAL SHARES AND NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Board of Directors has approved and declared the advisability
of amending the Company's Amended and Restated Certificate of Incorporation to
increase the total number of authorized shares of Capital Stock from 45,000,000
to 65,000,000 and the number of authorized shares of common stock from
40,000,000 to 60,000,000. The amendment would change the first sentence and
items (1) and (2) of Article Fourth of the Company's Amended and Restated
Certificate of Incorporation to be and read in their entirety as follows:
FOURTH: The total number of shares of stock that the Company shall
have authority to issue is 65,000,000 shares, consisting of:
(1) 60,000,000 shares of Common Stock, having a par value of $.003
per share;
and
(2) 5,000,000 shares of Preferred Stock with a par value of $.0001
per share.
The purpose of the amendment is to provide the Company with maximum
flexibility in arranging future funding for anticipated leasing and drilling
activities related to its 3-D seismic exploration project in Cameron Parish,
Louisiana, and for other corporate purposes. There remain only 16,385,968 and
2/3 shares of the Company's authorized common stock which are unissued and not
already reserved for issuance for a specific purpose. As of April 15, 1999, the
Record Date, there were 22,670,752 shares of common stock issued and outstanding
and no shares of Preferred Stock issued and outstanding. There are 939,944 and
2/3 shares of common stock reserved for issuance upon exercise of outstanding
options and 5,003,334 and 2/3 shares of common stock reserved for issuance upon
the exercise of outstanding warrants.
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Except as mentioned above, the Company currently has no specific plans or
proposals for issuing the additional shares which are the subject of the
proposed amendment. If the Company's stockholders approve the proposed
amendment, the Company does not anticipate seeking stockholder approval in
connection with specific issuances of additional authorized shares except to the
extent required by law, and rules and regulations of exchanges or other markets
upon which the Company's common stock may trade.
The proposed amendment will not affect the existing rights of holders of
common stock. Under Delaware law, since the Company's Amended and Restated
Certificate of Incorporation does not expressly grant preemptive rights, holders
of common stock do not have preemptive rights to acquire unissued shares,
treasury shares or securities convertible into such shares. The issuance of
additional shares of common stock may have a dilutive effect on earnings per
share and on the voting power of existing holders of common stock. It also may
adversely affect the market price of the common stock. However, the Company's
financial performance and market price of the common stock may benefit from the
issuance of additional shares in transactions which yield the Company additional
assets, favorable business opportunities or additional working capital to pursue
its business plans.
Section 203 of the Delaware General Corporations Law ("Section 203")
generally provides that a stockholder acquiring more than 15% of the outstanding
voting stock of a corporation subject to the statute (an "Interested
Stockholder") may not engage in certain Business Combinations (as defined in
Section 203) with the corporation for a period of three years after the date on
which the stockholder became an Interested Stockholder unless (i) prior to such
date, the corporation's board of directors approved either the Business
Combination or the transaction in which the stockholder became an Interested
Stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an Interested Stockholder, the interested stockholder owned
at least 85% of the voting stock of the Company outstanding (not counting shares
owned by officers and directors or certain employee stock plans), or (iii) the
Business Combination is approved by the corporation's board of directors and
authorized at a stockholders' meeting by a vote of at least two-thirds of the
corporation's outstanding voting stock not owned by the Interested Stockholder.
Under Section 203, these restrictions will not apply to certain Business
Combinations proposed by an Interested Stockholder following the earlier of the
announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who was not an Interested Stockholder
during the previous three years or who became an Interested Stockholder with the
approval of the corporation's board of directors, if such extraordinary
transaction is approved or not opposed by a majority of the directors who were
directors prior to such person becoming an Interested Stockholder during the
previous three years or were recommended for election or elected to succeed such
directors by a majority of such directors.
Section 203 defines the term Business Combination to encompass a wide
variety of transactions with or caused by an Interested Stockholder, including
transactions in which the Interested Stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, such as mergers,
certain asset sales, certain issuances of additional shares to the Interested
Stockholder, transactions with the corporation which increase the proportionate
interest in the corporation directly or indirectly owned by the Interested
Stockholder, or transactions in which the Interested Stockholder receives
certain other benefits.
The provisions of Section 203, coupled with the Board of Director's
authority to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in control of
the Company. The provisions could also discourage, impede or prevent a merger,
tender offer or proxy contest, even if such event would be favorable to the
interests of stockholders. The Company's stockholders, by adopting an amendment
to the Amended and Restated Certificate of Incorporation or the Bylaws, may
elect not to be governed by Section 203 effective 12 months after such adoption.
Neither the Certificate nor the Bylaws currently exclude the Company from the
restrictions imposed by Section 203.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION INCREASING THE TOTAL
NUMBER OF SHARES OF AUTHORIZED CAPITAL STOCK TO 65,000,000 AND THE NUMBER OF
SHARES OF AUTHORIZED COMMON STOCK TO 60,000,000.
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT ACCOUNTANTS
The Board of Directors recommends to stockholders that the certified public
accounting firm of PricewaterhouseCoopers LLP serve as the Company's independent
accountants for the fiscal year ending December 31, 1999.
PricewaterhouseCoopers LLP has served as the Company's independent auditors
since May 1998 and has audited the financial statements of the Company from the
date of its inception (February 21, 1996) through December 31, 1998.
The Company anticipates that representatives of PricewaterhouseCoopers LLP
will participate in the annual meeting of stockholders, may make a statement if
they desire to do so, and will be available to respond to appropriate questions
concerning the Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS.
MANAGEMENT
Executive Officers
The executive officers of the Company serve at the pleasure of the Board of
Directors and are subject to annual appointment by the Board. The Company had
the following five executive officers during the fiscal year ended December 31,
1998 (collectively the "Named Executives"):
KEITH F. CARNEY is currently Executive Vice President of Cheniere. He
served as Chief Financial Officer and Treasurer of the Company from July 1996
through November 1997. Prior to joining Cheniere, Mr. Carney was a securities
analyst in the oil and gas exploration/production sector with Smith Barney, Inc.
from 1992-1996. From 1982-1990 he was employed by Shell Oil as an exploration
geologist, with assignments in the Gulf of Mexico, the Middle East and other
areas. He received an M.S. in geology from Lehigh University in 1982 and an
M.B.A.-Finance from the University of Denver in 1992. Mr. Carney currently
serves as a Director for Pyr Energy.
WILLIAM D. FORSTER served as Co-Chairman of the Board of Directors and a
director of the Company during the fiscal year ended December 31, 1998. Further
information regarding Mr. Forster is provided above under "Election of
Directors--Nominees."
CHARIF SOUKI served as Co-Chairman of the Board of Directors and a director
of the Company during the fiscal year ended December 31, 1998. Further
information regarding Mr. Souki is provided above under "Election of Directors--
Nominees."
DON A. TURKLESON is currently Chief Financial Officer, Secretary and
Treasurer of Cheniere. Prior to joining Cheniere, Mr. Turkleson was employed by
PetroCorp Incorporated from 1983 to 1996, as Controller until 1986, then as Vice
President-Finance, Secretary and Treasurer. From 1975 to 1983 he worked as a
Certified Public Accountant in the natural resources division of Arthur Andersen
& Co. in Houston. Mr. Turkleson received a B.S. in accounting from Louisiana
State University in 1975. He is a member of the American Institute of Certified
Public Accountants. He is a Director, Treasurer and past Chairman of the Board
of Neighborhood Centers, Inc.
9
<PAGE>
WALTER L. WILLIAMS served as President, Chief Executive Officer and a
director of the Company during the fiscal year ended December 31, 1998. Further
information regarding Mr. Williams is provided above under "Election of
Directors--Nominees."
Executive Compensation
The following table reflects all forms of compensation for the executive
officers for services to the Company during the years ended December 31, 1998
and 1997, the year ended August 31, 1997, and the period from inception
(February 21, 1996) through August 31, 1996. Neither Mr. Forster nor Mr. Souki
received compensation sufficient to require that they be included in this table.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
---------------------------- Compensation Awards
-------------------
Other Annual Securities Underlying
Name and Principal Position Year(1) Salary Compensation Options/SARs(#)
- --------------------------- ------- ------ ------------ ---------------
Walter L. Williams 1998 $120,000 - -
President and 1997c $120,000 - 50,000
Chief Executive Officer 1997 $120,000 - -
1996 - $30,000 (2) 150,000
Keith F. Carney 1998 $100,000 - -
Executive Vice President 1997c $ 90,833 - 50,000
1997 $ 90,000 - -
1996 $ 11,250 (3) - 150,000
Don A. Turkleson 1998 $100,000 - -
Chief Financial Officer, 1997c $ 8,333 (4) - 50,000
Secretary and Treasurer 1997 - - -
1996 - - -
(1) The Company's first period of operations was from inception (February 21,
1996) to August 31, 1996. The next period reported is the year ended August
31, 1997. The one-year period ending December 31, 1997 is indicated in the
table above with the caption "1997c", and is included due to a change in the
Company's fiscal year-end. The most recent fiscal period presented is the
year ended December 31, 1998.
(2) Mr. Williams' Other Annual Compensation for 1996 represents 30,000 shares of
common stock, valued at $1.00 per share, received in lieu of cash
compensation for three months of employment from his inception date of
June 1, 1996 through August 31, 1996 based on an annual salary of $120,000.
(3) Mr. Carney's 1996 salary was payment for six weeks of employment from his
inception date of July 16, 1996 through August 31, 1996 based on an annual
salary of $90,000. Effective December 1, 1997, Mr. Carney's annual salary
was increased to $100,000.
(4) Mr. Turkleson's salary for the one-year period ended December 31, 1997 was
payment for one month of employment from his inception date of December 1,
1997 based on an annual salary of $100,000.
Options Grants
The Company did not grant any stock options to executive officers during
the year ended December 31, 1998. On December 11, 1998, the Company adjusted
the exercise price from $3.00 per share to $1.50 per share for all options
previously granted and then outstanding to its executive officers. See
"Repricing of Options."
10
<PAGE>
Option Exercises and Year-End Values
The following table sets forth information regarding unexercised options to
purchase shares of common stock granted by the Company to Named Executives. No
Named Executives exercised any common stock options during the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at December 31, 1998 Options/SARs at December 31, 1998 (1)
--------------------------------------------- -------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Walter L. Williams 162,500 37,500 - -
Keith F. Carney 87,500 112,500 - -
Don A. Turkleson 12,500 37,500 - -
</TABLE>
(1) The value of unexercised options to purchase common stock at December 31,
1998 is nil since the $1.00 per share market value of the underlying
securities at December 31, 1998 was less than the $1.50 exercise price.
Repricing of Options
The following table sets forth information regarding the repricing of
options to purchase shares of common stock granted by the Company to Named
Executives. For a report on the repricing, see the discussion under "Board
Report on Executive Compensation."
<TABLE>
<CAPTION>
Ten-Year Option/SAR Repricings
Number of Length of
Securities Market Price Exercise Original
Underlying of Stock at Price at Option Term
Options/ Time of Time of Remaining at
SARs Repricing or Repricing or New Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended (#) ($) ($) Price ($) Amendment
- ------------------------------ --------- -------------- ---------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Walter L. Williams 12/11/98 150,000 $1.06 $3.00 $1.50 29.5 months
President and CEO 12/11/98 50,000 $1.06 $3.00 $1.50 48.0 months
Keith F. Carney 12/11/98 150,000 $1.06 $3.00 $1.50 31.0 months
Executive Vice President 12/11/98 50,000 $1.06 $3.00 $1.50 48.0 months
Don A. Turkleson 12/11/98 50,000 $1.06 $3.00 $1.50 48.0 months
Chief Financial Officer,
Secretary & Treasurer
</TABLE>
(1) New exercise prices were set at $1.50 per share, which was approximately
140% of the market value of the common stock at the time of the repricing.
Other Compensation Arrangements
Effective October 1, 1998, the Board of Directors engaged Charif Souki,
under a Services Agreement, to provide certain consulting services related to
the financing and management of Cheniere. The Services Agreement provides for
compensation in the amount of $10,000 per month over a term of six months, which
ceased on March 31, 1999.
11
<PAGE>
Indemnification of Officers and Directors
The Company's Certificate of Incorporation provides that the liability of
directors for monetary damages shall be limited to the fullest extent
permissible under Delaware law. This limitation of liability does not affect
the availability of injunctive relief or other equitable remedies.
The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify its directors and officers to the fullest extent
possible under Delaware law. These indemnification provisions require the
Company to indemnify such persons against certain liabilities and expenses to
which they may become subject by reason of their service as a director or
officer of the Company or any of its affiliated enterprises. The provisions also
set forth certain procedures, including the advancement of expenses, that apply
in the event of a claim for indemnification.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the shares of
common stock owned of record and beneficially as of April 15, 1999 by all
persons who own of record or are known by the Company to own beneficially more
than 5% of the outstanding common stock by each director and executive officer,
and by all directors and executive officers as a group:
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ------------------------------------------------ -------------------- --------
Arabella S.A. 2,755,000 (1) 11.7%
BSR Investments, Ltd. 3,946,445 (2) 17.0%
Keith F. Carney 87,500 (3) *
William D. Forster 2,846,211 (4) 12.6%
Michael L. Harvey - (5) *
MM&B Holdings, L.L.C. 1,195,833 (6) 5.0%
Kenneth R. Peak 22,500 (7) *
Charles M. Reimer 51,071 (8) *
Charif Souki - (9) *
Don A. Turkleson 37,500 (10) *
Walter L. Williams 192,500 (11) *
Efrem Zimbalist, III 32,000 (12) *
All Directors and Officers as a group (9 persons) 3,269,282 (13) 14.2%
* - Less than 1%
(1) Includes warrants to purchase 855,000 shares of the Company's common stock
held by Arabella S.A. Arabella's address is: 35, rue Glesener, L-1621,
Luxembourg.
(2) BSR Investments, Ltd. is controlled by Nicole Souki, the President of BSR
and the mother of Charif Souki. Charif Souki disclaims beneficial ownership
of the shares. Includes warrants to purchase 566,667 shares of the
Company's common stock. BSR's address is c/o Harney, Westwood & Riegels,
Box 71, Craigmuir Chambers, Road Town, Tortola, B.V.I.
(3) Includes 87,500 shares issuable upon exercise of presently exercisable
options. Excludes 162,500 shares issuable upon the exercise of options held
by Mr. Carney but not exercisable within 60 days of the filing of this
proxy statement.
12
<PAGE>
(4) Does not include 100,000 shares held by a trust for the benefit of Mr.
Forster's mother of which Mr. Forster is a 20% remainderman and of which
shares he disclaims beneficial ownership. Mr. Forster's address is c/o
Cheniere Energy, Inc., 1200 Smith Street, Suite 1740, Houston, TX
77002-4312.
(5) Excludes 35,000 shares issuable upon the exercise of options held by Mr.
Harvey but not exercisable within 60 days of the filing of this proxy
statement.
(6) Includes warrants to purchase 1,120,833 shares of the Company's common
stock held by MM&B Holdings, L.L.C., whose address is: 23622 Calabasas
Road, Suite 100, Calabasas, CA 91302-1549. Does not include: 40,000 shares
held by Ezralow Family Trust; 13,917 shares held by Bryan Ezralow 1994
Trust; 13,917 shares held by Marc Ezralow 1997 Trust; nor 10,666 shares
held by Colony Partners, of which MM&B Holdings, L.L.C. disclaims
beneficial ownership.
(7) Includes 22,500 shares issuable upon exercise of presently exercisable
options. Excludes 12,500 shares issuable upon the exercise of options held
by Mr. Peak but not exercisable within 60 days of the filing of this proxy
statement.
(8) Includes 22,500 shares issuable upon exercise of presently exercisable
options. Excludes 12,500 shares issuable upon the exercise of options held
by Mr. Reimer but not exercisable within 60 days of the filing of this
proxy statement.
(9) Does not include 3,379,778 shares nor warrants to purchase 566,667 shares
of Cheniere common stock held by BSR Investments, Ltd. of which Charif
Souki disclaims beneficial ownership. BSR Investments, Ltd. is controlled
by Nicole Souki, the President of BSR Investments, Ltd. and the mother of
Charif Souki.
(10) Includes 12,500 shares issuable upon exercise of presently exercisable
options. Excludes 87,500 shares issuable upon the exercise of options held
by Mr. Turkleson but not exercisable within 60 days of the filing of this
proxy statement.
(11) Includes 162,500 shares issuable upon exercise of presently exercisable
options. Excludes 87,500 shares issuable upon the exercise of options held
by Mr. Williams but not exercisable within 60 days of the filing of this
proxy statement.
(12) Includes 10,000 shares issuable upon the exercise of presently exercisable
options held by Mr. Zimbalist.
(13) Includes an aggregate of 317,500 shares issuable upon exercise of presently
exercisable options. Excludes an aggregate of 397,500 shares issuable upon
the exercise of options not exercisable within 60 days of the filing of
this proxy statement.
Board Report on Executive Compensation
The Board of Directors has furnished the following report on executive
compensation for the fiscal year ended December 31, 1998:
Because Cheniere is a development stage company, the Company has no
employment agreements with any of its executive officers and one of its
executive officers served with no compensation for the fiscal year ended
December 31, 1998. William D. Forster and Charif Souki, Co-Chairman of the Board
of Directors and for the year ended December 31, 1998, did not receive any
compensation in the form of salary or options and the Company does not currently
intend to pay any such compensation to such officers until the Company has
generated revenues at a level adequate to sustain the operating costs of the
Company. Effective October 1, 1998, the Board of Directors engaged Charif Souki,
under a Services Agreement, to provide certain consulting services related to
the financing and management of Cheniere. The Services Agreement provides for
compensation in the amount of $10,000 per month over a term of six months, which
ceased on March 31, 1999.
For those executive officers receiving compensation, the Company seeks to
relate a significant portion of the potential total executive compensation to
the Company's financial performance. In general,
13
<PAGE>
executive financial rewards may be segregated into the following components:
salary and stock-based benefits. The Board has not awarded any bonus
compensation.
Base compensation for senior executive officers is intended to afford a
reasonable degree of financial security and flexibility to those individuals who
are regarded by the board as acceptably discharging the levels and types of
responsibility implicit in the various executive positions. The board also
takes into consideration industry and non-industry compensation levels for
professional peer groups. Based on these factors, Walter L. Williams received
salary at a rate of $120,000 per year beginning September 1, 1996; Keith F.
Carney received salary at a rate of $90,000 per year beginning July 16, 1996,
which was increased to $100,000 per year effective December 1, 1997. Don A.
Turkleson received salary at a rate of $100,000 per year beginning December 1,
1997.
The board of directors is of the view that properly designed and
administered stock-based incentives for senior executives closely align the
executives' economic interests with those of stockholders and provide a direct
continuing focus upon the goal of constantly striving to increase long-term
stockholder value. Toward that goal, the Company: (i) on June 1, 1996, granted
Mr. Williams options to purchase 150,000 shares of the common stock and on
July 3, 1996, granted Mr. Williams 30,000 shares of common stock in lieu of cash
compensation for three months of employment from his inception date of June 1,
1996 until the end of the fiscal year on August 31, 1996, (ii) on July 16, 1996,
granted Mr. Carney options to purchase 150,000 shares of common stock, (iii) on
December 15, 1997, granted options to purchase 50,000 shares of common stock to
each of Messrs. Williams, Carney and Turkleson and (iv) on December 11, 1998,
adjusted the exercise price from $3.00 per share to $1.50 per share on such
options. See "Executive Compensation--Summary Compensation Table, --Option
Grants and --Repricing of Options" for details.
Chief Executive Officer's Compensation. The board determines the
compensation of the Chief Executive Officer in substantially the same manner as
the compensation of the other officers. In establishing the base salary for Mr.
Williams for the 1998 fiscal year, the board assessed (i) the performance of the
Company, (ii) total return to shareholders and (iii) progress toward
implementation of the Company's strategic business plan. Mr. Williams' total
compensation package also includes a large portion in the form of stock options
that were awarded in 1996 and in 1997.
Omnibus Budget Reconciliation Act of 1993. Section 162(m) of the Omnibus
Budget Reconciliation Act of 1993 limits the deductibility to the Company of
cash compensation in excess of $1 million paid to the Company's chief executive
officer and the next four highest paid officers during any fiscal year, unless
such compensation meets certain requirements. During 1998, the Committee
reviewed compensation programs in light of the requirements of this law. The
Committee does not expect the new law to impact the Company in 1999 or for the
foreseeable future in any significant way, if at all.
Repricing of Options. On December 11, 1998, the Board of Directors approved
reducing the exercise price of all options granted prior to such date to
management and employees of the Company to a price more in line with the current
market price of the common stock. The Board's philosophy in granting stock
options is to align the Company's officers' and employees' interests with those
of the stockholders and to provide an incentive to achieve long-term
appreciation in stockholder value. By December 1998, due primarily to the
significant decline in oil and gas prices and the resulting decline in the stock
market valuation of energy companies, the price of the Company's common stock
had fallen below the exercise prices for a number of options that were granted
by the Company during 1996, 1997 and 1998. As a result, the Board believed that
the value of the options previously granted to key employees (including three
executive officers) under the Company's stock option plan had eroded to such an
extent that the intended incentive for such employees was no longer meaningful,
and it was therefore in the best interest of the Company and the stockholders to
amend the exercise price of such options. The Board believes that by repricing
the options previously granted, the Company has restored the incentive for those
employees. In each case, the options granted in replacement of previously
granted options were made with an exercise price of $1.50 per share,
approximately 140% of the fair market value of the common stock on December 10,
1998 of $1.06. The number of shares subject to exercise, the vesting periods and
the terms
14
<PAGE>
remain unchanged by the repricing of the options. The Company did
not reprice any options held by non-management directors.
Since the Company has no compensation committee, the foregoing report was
given by the entire incumbent Board of Directors as of December 31, 1998.
THE BOARD OF DIRECTORS
William D. Forster, Co-Chairman
Charif Souki, Co-Chairman
Kenneth R. Peak
Charles M. Reimer
Walter L. Williams
Efrem Zimbalist, III
Pursuant to SEC rules, this section of this Proxy Statement is not deemed
"filed" with the SEC and is not incorporated by reference into the Company's
Annual Report on Form 10-K.
Compensation Committee Interlocks and Insider Participation
Because the Company has no compensation committee, all incumbent members of
the Board of Directors, as of December 31, 1998, participated in deliberations
concerning executive officer compensation. In addition to serving as a director
of the Company, several directors held positions as executive officers during
the fiscal year ended December 31, 1998. Mr. Forster served as Co-Chairman of
the Board, Mr. Souki served as Co-Chairman of the Board, and Mr. Williams served
as President and Chief Executive Officer.
Common Stock Performance Graph
The following graph compares the cumulative total shareholder return on the
Company's common stock against, the S&P Oil and Gas (Exploration & Production)
Index, and the Russell 1000 Index for the period beginning on July 3, 1996 and
ending at fiscal year-end December 31, 1998. The Company's common stock began
trading on the OTC Bulletin Board on July 3, 1996 and moved to the NASDAQ
SmallCap Market on April 11, 1997. The graph was constructed on the assumption
that $100 was invested in the Company's common stock, the S&P Oil and Gas
(Exploration & Production) Index, and the Russell 1000 Index on July 3, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CHENIERE ENERGY, INC., S&P OIL & GAS (EXPLORATION & PRODUCTION) INDEX,
AND RUSSELL 1000 INDEX
[GRAPH]
August 31, December 31,
July 3, ------------ ------------
1996 1996 1997 1997 1998
---- ---- ---- ---- ----
Cheniere Energy, Inc. $100 $119 $119 $ 69 $ 33
S&P Oil & Gas (Exploration &
Production) Index $100 $ 99 $116 $106 $ 73
Russell 1000 Index $100 $ 98 $136 $148 $188
15
<PAGE>
Certain Relationships and Transactions
BSR Investments, Ltd. ("BSR"), an entity holding approximately 17.0% of the
outstanding shares of the Company's common stock, is under the control of Nicole
Souki, the mother of Charif Souki, Co-Chairman of the Board of Directors for the
year ended December 31, 1998. Charif Souki has been engaged, from time to time,
as a consultant to BSR. Charif Souki disclaims beneficial ownership of all
shares held by BSR.
BSR purchased $2,000,000 of the notes issued in connection with Cheniere's
$4,000,000 December 1997 Bridge Financing. BSR pledged a portion of its
investment in Cheniere common stock to fund its purchase of the notes. The
Company paid $195,003 in interest on the notes during 1998. In conjunction with
the financing, BSR received warrants to purchase 566,667 shares of the Company's
common stock at an exercise price of $1.50 per share. In March 1999, BSR
exchanged the $2,000,000 of Cheniere notes payable which it held for 2,777,778
shares of Cheniere common stock.
In conjunction with certain of the Company's private placements of equity,
placement fees have been paid to Investors Administration Services, Limited
("IAS"), a company in which the brother of Charif Souki, Cheniere's Co-Chairman,
is a principal. Placement fees paid to IAS totaled $138,000 for the year ended
December 31, 1998.
During June 1998, the Company received and repaid short-term advances from
Co-Chairman of the Board, William D. Forster, and members of his family or
entities under their control, totaling $592,000. Interest was paid at LIBOR plus
4% and totaled $1,622. In addition, non-interest bearing, short-term advances
totaling $105,000 were made to the Company by Co-Chairman Forster ($75,000) and
BSR ($30,000) in October and November 1998. Such advances were repaid by the
Company in October and November 1998.
All such transactions were approved by the Board of Directors of the
Company, and the Company believes that each such transaction was on terms that
were comparable to, or more favorable to the Company than, those that might have
been obtained by the Company on an arm's length basis from unaffiliated parties.
OTHER MATTERS
Required Vote
Only holders of common stock as of the Record Date will be entitled to vote
in person or by proxy at the meeting. A majority of issued and outstanding
shares of common stock as of the Record Date represented at the meeting in
person or by proxy will constitute a quorum for the transaction of business.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum. Provided that a quorum is present at the
meeting, (i) the seven director nominees who receive the greatest number of
votes cast for election by stockholders entitled to vote therefor will be
elected directors, (ii) the proposed amendment to the Company's 1997 Stock
Option Plan will require approval by a majority of shares entitled to vote
thereon, (iii) the proposed amendment to the Company's Amended and Restated
Certificate of Incorporation will require approval by a majority of shares
entitled to vote thereon and (iv) approval of PricewaterhouseCoopers LLP as
independent accountants will require approval by a majority of shares entitled
to vote thereon. Abstentions and broker non-votes with respect to the proposed
amendment to the Company's Amended and Restated Certificate of Incorporation
will have the same effect as a vote against approval thereof, but will have no
effect with respect to the other matters.
16
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, directors, certain officers, and
beneficial owners of 10% or more of any class of the Company's stock ("Reporting
Persons") are required from time to time to file with the Securities and
Exchange Commission and the NASDAQ SmallCap Market reports of ownership and
changes of ownership. Reporting Persons are required to furnish the Company with
copies of all Section 16(a) reports they file. Based solely on its review of
forms and written representations received from Reporting Persons by it with
respect to the fiscal year ended December 31, 1998, the Company believes that
all filing requirements applicable to the Company's officers, directors and
greater than 10% stockholders have been met, with the exception that BSR
reported six monthly installments of warrants issued to it late on a Form 5.
Stockholder Proposals
Management anticipates that the Company's 2000 annual stockholders meeting
will be held during May 2000. Any stockholder who wishes to submit a proposal
for action to be included in the proxy statement and form of proxy relating to
the Company's 2000 annual stockholders meeting must submit the proposal to the
Company on or before January 15, 2000. Any such proposals should be timely sent
to the Secretary of the Company, 1200 Smith Street, Suite 1740, Houston, Texas
77002-4312.
Availability of Annual Report
The Company is including herewith a copy of its annual report on Form 10-K
for the fiscal year ended December 31, 1998, which has been filed with the
Securities and Exchange Commission in Washington, D.C.
The Company will furnish to any person any exhibits described in the list
accompanying such report upon payment of reasonable fees relating to the
Company's furnishing such exhibits. Requests for copies should be directed to
the Company at 1200 Smith Street, Suite 1740, Houston, Texas 77002-4312.
By order of the Board of Directors,
____________________________________
Don A. Turkleson
Secretary and Chief Financial Officer
April 30, 1999
17
<PAGE>
April 30, 1999
APPENDIX A
CHENIERE ENERGY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 4, 1999
The undersigned hereby appoints Charif Souki and William D. Forster, and each of
them, either one of whom may act without joinder of the other, each with full
power of substitution and ratification, attorneys and proxies of the undersigned
to vote all shares of Cheniere Energy, Inc. which the undersigned is entitled to
vote at the annual meeting of stockholders to be held at Cheniere's offices at
Two Allen Center, 1200 Smith Street, Suite 1740, Houston, Texas on Friday, June
4, 1999 at 10:00 a.m., Houston, Texas time, and at any adjournment thereof.
(TO BE VOTED AND SIGNED ON REVERSE SIDE)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
CHENIERE ENERGY, INC.
June 4, 1999
Please Detach and Mail in the Envelope Provided
<TABLE>
<CAPTION>
<S> <C> <C>
A PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR election (except as indicated below) WITHHOLD authority to NOMINEES: William D. Forster
1. ELECTION OF vote for all nominees Michael L. Harvey
DIRECTORS listed at right Kenneth R. Peak
Charles M. Reimer
Charif Souki
Walter L. Williams
Efrem Zimbalist III
INSTRUCTION: To withhold authority to vote for any individual nominee, print that nominee's name on the line below.
______________________________________________
2. Approval of the proposed amendment to Company's 1997 Stock Option Plan to FOR AGAINST ABSTAIN
increase the number of shares subject to the Plan from 950,000 to 1,950,000.
3. Approval of the amendment to the Amended and Restated Certificate of FOR AGAINST ABSTAIN
Incorporation increasing the total number of shares of authorized
Capital Stock to 65,000,000 and the number of shares of authorized
Common Stock to 60,000,000.
4. Appointment of PricewaterhouseCoopers LLP as independent accountants FOR AGAINST ABSTAIN
for the year ended December 31, 1999.
5. In their discretion, upon such other matters (including procedural and
other matters relating to the conduct of the meeting) which may properly
come before the meeting and any adjournment thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON.
IF NO CONTRARY SPECIFICATION IS MADE, THEN THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE SEVEN DIRECTOR NOMINEES NAMED IN ITEM 1 AND FOR EACH OF THE
PROPOSALS IDENTIFIED IN ITEMS 2, 3, 4 AND 5.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement furnished herewith. PLEASE DATE,
SIGN AND RETURN THIS PROXY PROMPTLY in the enclosed, pre-addressed stamped
envelope.
Signature(s) of Stockholder ________________________________________________________ Dated this ____ day of
_____________, 1999
Note: Please sign exactly as your name appears on your stock certificate. When signing as executor, administrator, trustee
or other representative, please give your full title. All joint owners should sign.
</TABLE>
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APPENDIX
[FOR SEC USE ONLY]
CHENIERE ENERGY, INC.
1997 STOCK OPTION PLAN
ARTICLE I
PURPOSE
1.1 This Cheniere Energy, Inc. 1997 Stock Option Plan is intended to
advance the interests of the Company and its stockholders and subsidiaries by
attracting, retaining and motivating the performance of selected directors,
officers and employees of the Company of high caliber and potential upon whose
judgment, initiative and effort the Company is largely dependent for the
successful conduct of its business, and to encourage and enable such directors,
officers and employees to acquire and retain a proprietary interest in the
Company by ownership of its stock.
ARTICLE II
DEFINITIONS
2.1 "Board" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "Common Stock" means the Company's Common Stock, par value $.003 per
share.
2.4 "Committee" means a committee appointed by the Board consisting of not
less than two directors who fulfill the "non-employee director" requirements of
Rule 16b-3 under the Exchange Act and the "outside director" requirements of
Section 162(m) of the Code. Without limitation, the Committee may be the
Compensation Committee, if any, of the Board, or any subcommittee of the
Compensation Committee or the Board, provided that the members of the Committee
satisfy the requirements of the previous sentence. The Board shall have the
power to fill vacancies on the Committee arising by resignation, death, removal
or otherwise. The Board, in its sole discretion, may bifurcate the powers and
duties of the Committee among one or more separate committees, or retain all
powers and duties of the Committee in a single Committee. The members of the
Committee shall serve at the discretion of the Board.
Notwithstanding the preceding paragraph, the term "Committee" as used in
the Plan with respect to any Nonqualified Stock Option for a Committee member
shall refer to the Board. In the case of a Nonqualified Stock Option for a
Committee member, the Board shall have all the powers and responsibilities of
the Committee hereunder as to such Option, and any actions as to such Option may
be acted upon only by the Board (unless it otherwise designates in its
discretion). When the Board exercises its authority to act in the capacity as
the Committee hereunder with respect to a Nonqualified Stock Option for a
Committee member, it shall so designate with respect to any action that it
undertakes in its capacity as the Committee.
2.5 "Company" means Cheniere Energy, Inc., a Delaware corporation.
2.6 "Covered Employee" means a named executive officer who is one of the
group of covered employees as defined in Section 162(m) of the Code and Treasury
Regulation (S) 1.162-27(c) (or its successor).
2.7 "Date of Grant" means the date on which an Option becomes effective in
accordance with Section 6.1 hereof.
2.8 "Eligible Person" means any person who is a director, officer or
employee of the Company or any Subsidiary.
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2.9 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.10 "Fair Market Value" means the last reported sales price of the Common
Stock on the principal trading market on which the Common Stock is listed or
traded on the date as of which fair market value is to be determined or, in the
absence of any reported sales of Common Stock on such date, on the first
preceding date on which any such sale shall have been reported. If Common Stock
is not listed or traded on the date as of which fair market value is to be
determined, the Committee shall determine in good faith the fair market value in
whatever manner it considers appropriate.
2.11 "Incentive Stock Option" means a stock option granted under the Plan
that is intended to meet the requirements of Section 422 of the Code and
regulations promulgated thereunder.
2.12 "Insider" means an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.13 "Nonqualified Stock Option" means a stock option granted under the
Plan that is not an Incentive Stock Option.
2.14 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted under the Plan.
2.15 "Optionee" means an Eligible Person to whom an Option has been
granted, which Option has not expired, under the Plan.
2.16 "Option Price" means the price at which each share of Common Stock
subject to an Option may be purchased, determined in accordance with Section 6.2
hereof.
2.17 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Section 162(m) of the Code, as
prescribed in Section 162(m) of the Code and Treasury Regulation (S) 1.162-27(e)
(or its successor).
2.18 "Plan" means this Cheniere Energy, Inc. 1997 Stock Option Plan, as it
may be amended from time to time.
2.19 "Stock Option Agreement" means an agreement between the Company and an
Optionee under which the Optionee may purchase Common Stock under the Plan.
2.20 "Subsidiary" means a subsidiary corporation of the Company, within the
meaning of Section 424(f) of the Code.
ARTICLE III
ELIGIBILITY
All Eligible Persons are eligible to receive a grant of an Option under the
Plan. The Committee shall, in its sole discretion, determine and designate from
time to time those Eligible Persons who are to be granted an Option.
ARTICLE IV
ADMINISTRATION
4.1 Committee Members. The Plan shall be administered by the Committee
appointed by the Board.
4.2 Committee Authority. Subject to the express provisions of the Plan,
the Committee shall have the authority, in its discretion, to determine the
Eligible Persons to whom an Option shall be granted, the time or times at which
an Option shall be granted, the number of shares of Common Stock subject to each
Option, the Option Price of
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the shares subject to each Option, and the time or times when each Option shall
become exercisable and the duration of the exercise period.
Subject to the express provisions of the Plan, the Committee shall also
have discretionary authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the details and
provisions of each Stock Option Agreement, and to make all the determinations
necessary or advisable in the administration of the Plan. All such actions and
determinations by the Committee shall be conclusively binding for all purposes
and upon all persons. No Committee member shall be liable for any action or
determination made in good faith with respect to the Plan, any option or any
Stock Option Agreement entered into hereunder.
4.3 Majority Rule. A majority of the members of the Committee (or, if
less than three, all of the members) shall constitute a quorum, and any action
taken by a majority present at a meeting at which a quorum is present or any
action taken without a meeting evidenced by a writing executed by a majority of
the whole Committee shall constitute the action of the Committee.
4.4 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Eligible Persons, their
employment or other service to the Company, their death, disability or other
termination of service, and such other pertinent facts as the Committee may
require. The Company shall furnish the Committee with such clerical and other
assistance as is necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Number of Shares. Subject to adjustment pursuant to the provisions of
Section 5.2 hereof, the maximum number of shares of Common Stock which may be
issued and sold hereunder shall be 950,000 shares. Shares of Common Stock
issued and sold under the Plan may be either authorized but unissued shares or
shares held in the Company's treasury. Shares of Common Stock covered by an
Option that shall have been exercised shall not again be available for an Option
grant. If an Option shall terminate for any reason (including, without
limitation, the cancellation of an Option pursuant to Section 6.6 hereof)
without being wholly exercised, the number of shares to which such Option
termination relates shall again be available for grant hereunder. Unless and
until the Committee determines that a particular Option granted to a Covered
Employee is not intended to comply with the Performance-Based Exception, the
following rules shall apply to grants of Options to Covered Employees:
(a) Subject to adjustment as provided in Section 5.2, the maximum
aggregate number of Options for shares of Common Stock that may be granted
in any calendar year to any Covered Employee shall be five hundred thousand
(500,000) shares.
(b) With respect to any Option granted to a Covered Employee that is
canceled or repriced, the number of shares of Common Stock subject to such
Option shall continue to count against the maximum number of shares that
may be the subject of Options granted to such Covered Employee under
subsection (a) above and, in this regard, such maximum number shall be
determined in accordance with Section 162(m) of the Code.
(c) The limitations of subsections (a) and (b) above shall be
construed and administered so as to comply with the Performance-Based
Exception.
5.2 Antidilution. Subject to Article IX hereof, in the event of a
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger or consolidation, or the sale, conveyance, or other transfer by
the Company of all or substantially all of its property, or any other change in
the corporate structure or shares of the Company, pursuant to any of which
events the then outstanding shares of Common Stock are split up or combined, or
are changed into, become exchangeable at the holder's election for or entitle
the holder thereof to, other shares of stock, or in the case of any other
transaction described in Section 424(a) of the Code, the Committee may change
the number and kind of shares (including by substitution of shares of another
corporation) subject to the Options and/or the Option Price of such shares in
the manner that it shall deem to be equitable and appropriate. In no event may
any such change
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be made to an Incentive Stock Option which would constitute a "modification"
within the meaning of Section 424(h)(3) of the Code.
ARTICLE VI
OPTIONS
6.1 Grant of Option. An Option may be granted to any Eligible Person
selected by the Committee. The grant of an Option shall first be effective upon
the date it is approved by the Committee, except to the extent the Committee
shall specify a later date upon which the grant of an Option shall first be
effective. Each Option shall be designated, at the discretion of the Committee,
as an Incentive Stock Option or a Nonqualified Stock Option, provided that
Incentive Stock Options may only be granted to Eligible Persons who are
considered employees of the Company or any Subsidiary for purposes of Section
422 of the Code. The Company and the Optionee shall execute a Stock Option
Agreement which shall set forth such terms and conditions of the Option as may
be determined by the Committee to be consistent with the Plan, and which may
include additional provisions and restrictions that are not inconsistent with
the Plan.
6.2 Option Price. The Option Price shall be determined by the Committee;
provided, however, the Option Price of an Incentive Stock Option shall not be
less than 100 percent of the Fair Market Value of a share of Common Stock on the
Date of Grant. To the extent that a Nonqualified Stock Option is intended to
qualify for the Performance-Based Exception, the Option Price shall not be less
than 100% of the Fair Market Value per share of Common Stock on the Date of
Grant.
No employee shall be eligible for the grant of any Incentive Stock Option
who owns, or would own immediately before the grant of such Incentive Stock
Option, directly or indirectly, stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company, or any
parent or Subsidiary of the Company. This restriction does not apply if, at the
time such Incentive Stock Option is granted, the Option exercise price is at
least one hundred and ten percent (110%) of the Fair Market Value on the date of
grant and the Incentive Stock Option by its terms is not exercisable after the
expiration of five (5) years from the date of grant. For the purpose of the
immediately preceding sentence, the attribution rules of Section 424(d) of the
Code shall apply for the purpose of determining an employee's percentage
ownership in the Company or any parent or Subsidiary. This paragraph shall be
construed consistent with the requirements of Section 422 of the Code.
6.3 Vesting; Term of Option. Unless otherwise specified by the Committee
in the Stock Option Agreement for an Optionee, an Option shall vest and become
exercisable in cumulative annual installments, each of which shall relate to one
quarter of the number of shares of Common Stock originally covered thereby
(adjusted in accordance with Section 5.2 hereof), on the second, third, fourth
and fifth anniversaries of the Date of Grant, respectively, provided that the
Optionee is an Eligible Person on such anniversary. Notwithstanding the
foregoing, the Committee, in its sole discretion, may accelerate the
exercisability of any Option at any time. An Option may become 100 percent
vested and exercisable upon an Optionee's death or disability to the extent
provided in Article VIII hereof. The period during which a vested Option may be
exercised shall be ten years from the Date of Grant, unless a shorter exercise
period is specified by the Committee in the Stock Option Agreement for an
Optionee.
6.4 Option Exercise; Withholding. An Option may be exercised in whole or
in part at any time, with respect to whole shares only, within the period
permitted for the exercise thereof, and shall be exercised by written notice of
intent to exercise the Option with respect to a specified number of shares
delivered to the Company at its principal office, and payment in full to the
Company at said office of the amount of the Option Price for the number of
shares of the Common Stock with respect to which the Option is then being
exercised. Payment of the Option Price shall be made (i) in cash or by cash
equivalent, (ii) at the discretion of the Committee, in Common Stock (not
subject to limitations on transfer) valued at the Fair Market Value of such
shares on the trading date immediately preceding the date of exercise or (iii)
at the discretion of the Committee, by a combination of such cash and such
Common Stock. In addition to and at the time of payment of the Option Price,
the Optionee shall pay to the Company in cash or, at the discretion of the
Committee, in Common Stock the full amount of all federal and state withholding
and other employment taxes applicable to the taxable income of such Optionee
resulting from such exercise.
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6.5 Nontransferability of Option. No Option shall be transferred by an
Optionee other than by will or the laws of descent and distribution. No
transfer of an Option by the Optionee by will or by laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and an authenticated copy of the
will and/or such other evidence as the Committee may deem necessary to establish
the validity of the transfer. During the lifetime of an Optionee, the Option
shall be exercisable only by him, except that, in the case of an Optionee who is
legally incapacitated, the Option shall be exercisable by his guardian or legal
representative.
6.6 Cancellation, Substitution and Amendment of Options. The Committee
shall have the authority to effect, at any time and from time to time, with the
consent of the affected Optionees, (i) the cancellation of any or all
outstanding Options and the grant in substitution therefor of new Options
covering the same or different numbers of shares of Common Stock and having an
Option Price which may be the same as or different than the Option Price of the
canceled Options or (ii) the amendment of the terms of any and all outstanding
Options.
ARTICLE VII
INCENTIVE STOCK OPTIONS
7.1 Annual Limits. No Incentive Stock Option shall be granted to an
Optionee as a result of which the aggregate Fair Market Value (determined as at
the date of grant) of the stock with respect to which Incentive Stock Options
are exercisable for the first time in any calendar year under the Plan (and any
other stock option plans of the Company, any Subsidiary or any parent
corporation) would exceed $100,000, as determined in accordance with Section
422(d) of the Code. This limitation shall be applied by taking Options into
account in the order in which granted.
Notwithstanding any contrary provision in the Plan, to the extent that the
aggregate Fair Market Value (determined as of the time the Incentive Stock
Option is granted) of the shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any Grantee during any
single calendar year (under the Plan and any other stock option plans of the
Company and its Subsidiaries or parent) exceeds the sum of $100,000, such
Incentive Stock Option shall be treated as a Nonqualified Stock Option and not
an Incentive Stock Option, but all other terms and provisions of such Stock
Option shall remain unchanged. This paragraph shall be applied by taking
Incentive Stock Options into account in the order in which they are granted.
7.2 Disqualifying Dispositions. If shares of Common Stock acquired by
exercise of an Incentive Stock Option are disposed of within two years following
the Date of Grant or one year following the transfer of such shares to the
Optionee upon exercise, the Optionee shall, within 10 days after such
disposition, notify the Company in writing of the date and terms of such
disposition and provide such other information regarding the disposition as the
Committee may reasonably require. With respect to any disqualifying disposition
of shares of Common Stock received by an Optionee pursuant to the exercise of an
Incentive Stock Option, the Company shall have the right to withhold from any
salary, wages or other compensation payable by the Company to the Optionee an
amount sufficient to satisfy federal, state and local tax withholding
requirements attributable to such disqualifying disposition.
7.3 Other Terms and Conditions. Any Incentive Stock Option granted
hereunder shall contain such additional terms and conditions, not inconsistent
with the terms of this Plan, as are deemed necessary, or desirable by the
Committee, which terms, together with the terms of this Plan, shall be intended
and interpreted to cause such Incentive Stock Option to qualify as an "incentive
stock option" under Section 422 of the Code.
ARTICLE VIII
TERMINATION OF SERVICE
8.1 Death. Except if otherwise provided in the Stock Option Agreement, if
an Optionee shall die at any time after the Date of Grant and while he is an
Eligible Person, the executor or administrator of the estate of the decedent, or
the person or persons to whom an Option shall have been validly transferred in
accordance with Section 6.5 hereof pursuant to will or the laws of descent and
distribution, shall have the right, during the period ending one year after the
date of the Optionee's death (subject to Section 6.3 hereof concerning the
maximum term of an Option), to exercise the Optionee's Option to the extent that
it was exercisable at the date of the Optionee's death and shall not have
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been previously exercised. The Committee may determine at or after grant to make
any portion of his Option that is not exercisable at the date of death
immediately vested and exercisable. No Incentive Stock Option may be exercised
more than one year after the Optionee's termination of employment due to death.
8.2 Disability. Except if otherwise provided in the Stock Option
Agreement, if an Optionee's employment or other service with the Company or any
Subsidiary shall be terminated as a result of his permanent and total disability
(within the meaning of Section 22(e)(3) of the Code) at any time after the Date
of Grant and while he is an Eligible Person, the Optionee (or in the case of an
Optionee who is legally incapacitated, his guardian or legal representative)
shall have the right, during a period ending one year after the date of his
termination due to disability (subject to Section 6.3 hereof concerning the
maximum term of an Option), to exercise such Option to the extent that it was
exercisable at the date of such termination of employment or other service and
shall not have been exercised. The Committee may determine at or after grant to
make any portion of his Option that is not exercisable at the date of
termination of employment or other service due to disability immediately vested
and exercisable. No Incentive Stock Option may be exercised more than one year
after the Optionee's termination of employment due to disability.
8.3 Termination for Cause. If an Optionee's employment or other service
with the Company or any Subsidiary shall be terminated for cause, the Optionee's
right to exercise any unexercised portion of his Option shall immediately
terminate and all rights thereunder shall cease. For purposes of this Section
8.3, termination for "cause" shall include, but not be limited to, embezzlement
or misappropriation of corporate funds, any acts of dishonesty resulting in
conviction for a felony, misconduct resulting in material injury to the Company
or any Subsidiary, significant activities harmful to the reputation of the
Company or any Subsidiary, a significant violation of Company or Subsidiary
policy, willful refusal to perform, or substantial disregard of, the duties
properly assigned to the Optionee, or a significant violation of any contractual
statutory or common law duty of loyalty to the Company or any Subsidiary. The
Committee shall have the power to determine whether the Optionee has been
terminated for cause and the date upon which such termination for cause occurs.
Any such determination shall be final, conclusive and binding upon the Optionee.
8.4 Other Termination of Service. Except if otherwise provided in the
Stock Option Agreement, if an Optionee's employment or other service with the
Company or any Subsidiary shall be terminated for any reason other than death,
permanent and total disability or termination for cause, the Optionee shall have
the right, during the period ending 90 days after such termination (subject to
Section 6.3 hereof concerning the maximum term of an Option), to exercise such
Option to the extent that it was exercisable at the date of such termination and
shall not have been exercised. For purposes of this Section 8.4, an Optionee
shall not be considered to have terminated employment or other service with the
Company or any Subsidiary until the expiration of the period of any military,
sick leave or other bona fide leave of absence, up to a maximum period of 90
days (or such greater period during which the Optionee is guaranteed
reemployment either by statute or contract).
ARTICLE IX
CHANGE IN CONTROL
9.1 Change in Control. Upon a "change in control" of the Company (as
defined in Section 9.2), each outstanding Option, to the extent that it shall
not otherwise have become vested, shall become fully and immediately vested
(without regard to any otherwise applicable vesting requirement under Section
6.3 or in the Stock Option Agreement) and an Optionee shall surrender his Option
and receive with respect to each share of Common Stock issuable under such
Option outstanding at such time, a payment in cash equal to the excess of the
Fair Market Value of the Common Stock at the time of the change in control over
the Option Price of the Common Stock; provided, however, that no such vesting
and cash payment shall occur if (i) the change in control has been approved by
at least two-thirds of the members of the Board who were serving as such
immediately prior to such transaction and (ii) provision has been made in
connection with such transaction for (a) the continuation of the Plan and/or the
assumption of such Options by a successor corporation (or a parent or subsidiary
thereof) or (b) the substitution for such Options of new options covering the
stock of a successor corporation (or a parent or subsidiary thereof), with
appropriate adjustments as to the number and kinds of shares and exercise
prices. In the event of any such continuation, assumption or substitution, the
Plan and/or such Options shall continue in the manner and under the terms so
provided.
9.2 Definition. For purposes of Section 9.1 hereof, a "change in control"
of the Company shall mean:
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(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of fifty percent (50%) or more of the total voting power
of all the Company's then outstanding securities entitled to vote generally
in the election of directors to the Board; provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a change in control: (i) any acquisition by the Company or its
parent or Subsidiaries, (ii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or its parent or
Subsidiaries, or (iii) any acquisition consummated with the prior approval
of the Board; or
(b) During the period of two consecutive calendar years, individuals
who at the beginning of such period constitute the Board, and any new
director(s) whose (i) election by the Board or (ii) nomination for election
by the Company's shareholders, was approved by a vote of at least two-
thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for
election was previously so approved, should cease for any reason to
constitute a majority of the Board; or
(c) The Company becomes a party to a merger, plan of reorganization,
consolidation or share exchange in which either (i) the Company will not be
the surviving corporation or (ii) the Company will be the surviving
corporation and any outstanding shares of the Company's common stock will
be converted into shares of any other company (other than a reincorporation
or the establishment of a holding company involving no change of ownership
of the Company) or other securities, cash or other property (excluding
payments made solely for fractional shares); or
(d) The shareholders of the Company approve a merger, plan of
reorganization, consolidation or share exchange with any other corporation,
and immediately following such merger, plan of reorganization,
consolidation or share exchange the holders of the voting securities of the
Company outstanding immediately prior thereto hold securities representing
fifty percent (50%) or less of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger, plan of reorganization, consolidation or share exchange;
provided, however, that notwithstanding the foregoing, no change in control
shall be deemed to have occurred if one-half (1/2) or more of the members
of the Board of the Company or such surviving entity immediately after such
merger, plan of reorganization, consolidation or share exchange is
comprised of persons who served as directors of the Company immediately
prior to such merger, plan of reorganization, consolidation or share
exchange or who are otherwise designees of the Company; or
(e) Upon approval by the Company's stockholders of a complete
liquidation and dissolution of the Company or the sale or other disposition
of all or substantially all of the assets of the Company other than to a
parent or Subsidiary; or
(f) Any other event that a majority of the Board, in its sole
discretion, shall determine constitutes a change in control for purposes of
Section 9.1.
Notwithstanding the occurrence of any of the foregoing events of this
Section 9.2 which would otherwise result in a change in control, the Board
may determine in its sole discretion, if it deems it to be in the best
interest of the Company, that an event or events otherwise constituting a
change in control shall not be considered a change in control. Such
determination shall be effective only if it is made by the Board as it is
constituted prior to the occurrence of an event that otherwise would be or
probably would lead to a change in control; or after such event if made by
the Board a majority of which is composed of directors who were members of
the Board immediately prior to the event that otherwise would be or
probably would lead to a change in control.
9.3 Exchange of Options. The Committee may, in its discretion, permit any
Optionee to surrender outstanding Options in order to exercise or realize his
rights under other Options or in exchange for the grant of new Options, or
require holders of Options to surrender outstanding Options as a condition
precedent to the grant of new Options.
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ARTICLE X
STOCK CERTIFICATES
10.1 Issuance of Certificates. Subject to Section 10.2 hereof, the Company
shall issue a stock certificate in the name of the Optionee (or other person
exercising the Option in accordance with the provisions of the Plan) for the
shares of Common Stock purchased by exercise of an Option as soon as practicable
after due exercise and payment of the aggregate Option Price for such shares. A
separate stock certificate or separate stock certificates shall be issued for
any shares of Common Stock purchased pursuant to the exercise of an Option that
is an Incentive Stock Option, which certificate or certificates shall not
include any shares of Common Stock that were purchased pursuant to the exercise
of an Option that is a Nonqualified Stock Option.
10.2 Conditions. The Company shall not be required to issue or deliver any
certificate for shares of Common Stock purchased upon the exercise of any Option
granted hereunder or any portion thereof prior to fulfillment of all of the
following conditions:
(a) The completion of any registration or other qualification of such
shares, under any federal or state law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, that the Committee shall in its sole discretion deem
necessary or advisable;
(b) The obtaining of any approval or other clearance from any federal
or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable;
(c) The lapse of such reasonable period of time following the exercise
of the Option as the Committee from time to time may establish for reasons
of administrative convenience;
(d) Satisfaction by the Optionee of all applicable withholding taxes
or other withholding liabilities; and
(e) If required by the Committee, in its sole discretion, the receipt
by the Company from an Optionee of (i) a representation in writing that the
shares of Common Stock received upon exercise of an Option are being
acquired for investment and not with a view to distribution and (ii) such
other representations and warranties as are deemed necessary by counsel to
the Company.
10.3 Legends. The Company reserves the right to legend any certificate for
shares of Common Stock, conditioning sales of such shares upon compliance with
applicable federal and state securities laws and regulations.
ARTICLE XI
EFFECTIVE DATE, TERMINATION AND AMENDMENT
11.1 Effective Date. The Plan shall become effective on the date of its
adoption by the Board; provided, however that no Option shall be exercisable by
an Optionee unless and until the Plan shall have been approved by the
stockholders of the Company, which approval shall be obtained within 12 months
before or after the adoption of the Plan by the Board. If the stockholders fail
to approve the Plan within one year from the Effective Date, any Options granted
hereunder shall be null and void and of no effect.
11.2 Termination and Amendment. The Plan shall terminate on the date
immediately preceding the tenth anniversary of the earlier of the date the Plan
is adopted by the Board or the date the Plan is approved by the Company's
stockholders. Notwithstanding the foregoing, the Board shall have complete
power and authority to terminate the Plan at an earlier date or to amend the
Plan; provided, however, the Board shall not, without the approval of the
stockholders of the Company within the time period required by applicable law,
(a) increase the maximum number of shares which may be issued under the Plan
pursuant to Section 5.1, (b) amend the requirements as to the class of employees
eligible to receive Options for Common Stock under the Plan, (c) extend the term
of the Plan, or (d) decrease the authority granted to the Committee under the
Plan in contravention of (i) Rule 16b-3 under the Exchange Act or (ii) Section
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162(m) of the Code to the extent that the Committee seeks compliance with
Section 162(m). No termination or amendment of the Plan shall adversely affect
the rights of an Optionee (or his permitted transferee) under a previously
granted or transferred Option without his written consent.
In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Common Stock is then listed or quoted, or (b) the
Code (or regulations promulgated thereunder), require stockholder approval in
order to maintain compliance with such listing requirements or to maintain any
favorable tax advantages or qualifications, then the Plan shall not be amended
in such respect without obtaining the approval of the Company's stockholders
within the prescribed time period.
With respect to Insiders, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the Exchange Act. Any
ambiguities or inconsistencies in the construction of any Stock Option Agreement
or the Plan shall be interpreted to give effect to such intention.
Unless otherwise determined by the Committee with respect to any particular
Option grant, it is intended that the Plan comply fully with and meet all the
requirements of Section 162(m) of the Code so that any Stock Options that are
granted to Covered Employees shall qualify for the Performance-Based Exception.
If any provision of the Plan or a Stock Option Agreement would not permit the
Plan or Stock Option to comply with the Performance-Based Exception as so
intended, such provision shall be construed or deemed amended to conform to the
requirements of the Performance-Based Exception to the extent permitted by
applicable law and deemed advisable by the Committee; provided, however, no such
construction or amendment shall have an adverse effect on the prior grant of any
Stock Option or on the economic value to an Optionee (or his permitted
transferee) of any outstanding Stock Option.
ARTICLE XII
MISCELLANEOUS
12.1 Employment or other Service. Nothing in the Plan, in the grant of any
Option or in any Stock Option Agreement shall confer upon any Eligible Person
the right to continue in the capacity in which he is employed by or otherwise
provides services to the Company or any Subsidiary. Notwithstanding anything
contained in the Plan to the contrary, unless otherwise provided in a Stock
Option Agreement, no Option shall be affected by any change of duties or
position of the Optionee (including a transfer to or from the Company or any
Subsidiary), so long as such Optionee continues to be an Eligible Person.
12.2 Rights as Shareholder. An Optionee or the permitted transferee of an
Option shall have no rights as a shareholder with respect to any shares subject
to such Option prior to the purchase of such shares by exercise of such Option
as provided herein. Nothing contained herein or in the Stock Option Agreement
relating to any Option shall create an obligation on the part of the Company to
repurchase any shares of Common Stock purchased hereunder.
12.3 Compensation and Benefit Plans. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in effect
for the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees of
the Company or any Subsidiary. The amount of any compensation deemed to be
received by an Optionee as a result of the exercise of an Option or the sale of
shares received upon such exercise shall not constitute compensation with
respect to which any other employee benefits of such Optionee are determined,
including, without limitation, benefits under any bonus, pension, profit
sharing, life insurance or salary continuation plan, except as otherwise
specifically determined by the Board or the Committee or provided by the terms
of such plan.
12.4 Plan Binding on Successors. The Plan shall be binding upon the
Company, its successors and assigns, and the Optionee, his executor,
administrator and permitted transferees.
12.5 Construction and Interpretation. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender. Headings of Articles and Sections hereof are inserted for
convenience and reference and constitute no part of the plan.
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12.6 Severability. If any provision of the Plan or any Stock Option
Agreement shall be determined to be illegal or unenforceable by any court of law
in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
12.7 Governing Law. The validity and Construction of this Plan and of the
Stock Option Agreements shall be governed by the laws of the State of Texas,
without regard to its conflicts of law provisions.
This Cheniere Energy, Inc. 1997 Stock Option Plan was originally adopted
and approved by the Board of Directors of Cheniere Energy, Inc., on April 22,
1997. By unanimous written consent of the Board of Directors dated October 2,
1997, the Plan was amended and restated effective as of April 22, 1997.
/s/ CHARIF SOUKI
----------------------------------
Secretary of Cheniere Energy, Inc.
This Cheniere Energy, Inc. 1997 Stock Option Plan was duly approved by the
stockholders of Cheniere Energy, Inc. on the _______ day of _____________, 1997.
----------------------------------
Secretary of Cheniere Energy, Inc.
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