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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[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-12
CHENIERE ENERGY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
<TABLE>
<CAPTION>
<S> <C>
1) Title of each class of securities to which transaction applies: ______________________________
2) Aggregate number of securities to which transaction applies: _________________________________
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
determined): _________________________________________________________________________________
4) Proposed maximum aggregate value of transaction: _____________________________________________
5) Total fee paid: ______________________________________________________________________________
[ ] 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: ______________________________________________________________________
2) Form, Schedule or Registration Statement No.: ________________________________________________
3) Filing Party: ________________________________________________________________________________
4) Date Filed: __________________________________________________________________________________
</TABLE>
<PAGE>
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 July 12, 2000
Notice is hereby given that the annual meeting of stockholders of Cheniere
Energy, Inc., a Delaware corporation (the "Company"), will be held on Wednesday,
July 12, 2000, 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 or until their successors are duly 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
1,950,000 to 6,000,000;
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 authorized capital stock would be increased from 65,000,000 to
125,000,000 and (b) the number of shares of the Company's authorized common
stock, par value $.003 per share, would be increased from 60,000,000 to
120,000,000;
4. To appoint PricewaterhouseCoopers LLP as independent accountants for the
Company for the fiscal year ending December 31, 2000; 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 May
26, 2000, 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
May 31, 2000
<PAGE>
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 June 15, 2000. 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 Wednesday, July 12, 2000 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 the Company's Amended and Restated
Certificate of Incorporation to increase total authorized capital stock and
common stock, and appointment of PricewaterhouseCoopers LLP as independent
accountants.
At the close of business on May 26, 2000, 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 42,989,572 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.
Two members of the Board are not standing for reelection. William D.
Forster, Chairman and Chief Executive Officer of Stonington Corporation in New
York, New York, and a co-founder of the Company, has served on the Board since
1996 and as a member of the Audit Committee, the Compensation Committee and the
Stock Option Committee. Efrem Zimbalist III, President and Chief Executive
Officer of Times Mirror Magazines, a division of Times Mirror Co., and a Vice
President of Times Mirror Co., has served on the Board since 1996 and as a
member of the Audit Committee, the Compensation Committee and the Stock Option
Committee. Mr. Zimbalist
<PAGE>
resigned from the Board effective September 10, 1999. The Company would like to
thank each of Messrs. Forster and Zimbalist for their years of dedicated service
to the Company.
Director Nominee Director Since Age Position
---------------- -------------- --- ----------
Emanuel Batler - 73 Nominee for Director
Nuno Brandolini - 46 Nominee for Director
Michael L. Harvey 1999 52 Director, President and
Chief Executive Officer
Kenneth R. Peak 1997 54 Director
Charles M. Reimer 1998 55 Director
Charif Souki 1996 47 Director and Chairman of
the Board of Directors
Walter L. Williams 1996 72 Director and Vice Chairman
of the Board of Directors
EMANUEL BATLER has been nominated for election to the Board of Directors.
Mr. Batler was Vice-President of Philips Electronics Industries Ltd., the
Canadian division of the Dutch-based Philips Company, with responsibility for
marketing as well as for corporate mergers and acquisitions. Subsequently, he
founded and was president of Glentech Investments, a venture capital company
active in both the United States and Canada. After negotiating the sale of this
business, Mr. Batler was active from 1974 to 1995 in the commodity futures
business, managing firms in Toronto, Hong Kong and Chicago. Since 1970, Mr.
Batler has also been chairman of the board of Eclectic Management Sciences,
Ltd., a private holding company that controls several operating businesses.
NUNO BRANDOLINI has been nominated for election to the Board of Directors.
Mr. Brandolini has served as Chairman and Chief Executive Officer of Scorpion
Holdings, Inc. since 1995. Prior to forming Scorpion Holdings, Mr. Brandolini
served as Managing Director of Rosecliff, Inc., a leveraged buyout fund co-
founded by Mr. Brandolini in 1993. Before joining Rosecliff, Mr. Brandolini was
a Vice President at Salomon Brothers, Inc. where he was an investment banker
involved in mergers and acquisitions in the Financial Entrepreneurial Group. Mr.
Brandolini has also worked for Lazard Freres in New York and was President of
The Baltheus Group, a merchant banking firm, and Executive Vice President of
Logic Capital Corp., a venture capital firm. He currently serves on the Board of
private and public companies such as Arabella, Pac Pizza LLC, Sonex Research,
The Original San Francisco Toymakers and WalkAbout Computers. Mr. Brandolini was
awarded a law degree by the University of Paris, and received an M.B.A. from the
Wharton School.
MICHAEL L. HARVEY is currently President and Chief Executive Officer and a
director of Cheniere. Mr. Harvey was elected President and Chief Executive of
the Company in June 1999. 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 1998. Mr. Harvey resigned
from Domain Energy Corporation upon its merger into Range Resources. Mr. Harvey
is a graduate of Texas A&M University and serves on the Finance Advisory Board
of Texas A&M University School of Business.
KENNETH R. PEAK is currently a director of the Company and a member of the
Audit Committee, the Compensation Committee, and the Stock Option Committee.
Mr. Peak is also President and CEO of Contango Oil
2
<PAGE>
& Gas Company in Houston. Prior to joining Contango in 1999, Mr. Peak had 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 Contango Oil & Gas Company.
CHARLES M. REIMER is currently a director of Cheniere and a member of the
Audit Committee, the Compensation Committee, and the Stock Option Committee.
Through mid-May 2000, he served as President of British-Borneo USA, 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 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 Chairman of the Board
of Directors of the Company and a member of the Stock Option Committee. Mr.
Souki is an independent investment banker with 20 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 Vice Chairman 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 has served as a director and member of the Executive Committee of
the Board of the Houston Museum of Natural Science.
BOARD AND COMMITTEE ACTIVITY AND STRUCTURE
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, 1999, the Company's Board of Directors held seven 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, 1999. The committee's members during
1999 until September 10, 1999 were: Efrem Zimbalist III, Chairman, Kenneth R.
Peak and Charif Souki. As of December 31, 1999, the Audit Committee's members
were: Kenneth R. Peak, Chairman, William D. Forster and Charles M. Reimer.
The Compensation Committee reviews and approves the salaries and other
compensation for the executive officers of the Company. The Compensation
Committee held one meeting during 1999. At December 31, 1999, the members of
the Compensation Committee were: William D. Forster, Chairman, Kenneth R. Peak
and Charles M. Reimer.
3
<PAGE>
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, 1999.
The committee's members as of December 31, 1999 were: William D. Forster,
Kenneth R. Peak, Charles M. Reimer and Charif Souki. Efrem Zimbalist III served
on the committee until his resignation from the Board of Directors on September
10, 1999.
DIRECTOR COMPENSATION
During the fiscal year ended December 31, 1999, 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. In March
1999, prior to his election as President and Chief Executive Officer of the
Company, 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. The term
of these options was later extended to September 30, 2004.
In addition, in consideration of their contributions to Cheniere's
acquisition of 3-D seismic data covering 8,700 square miles in the Gulf of
Mexico, the Company granted to Mr. Harvey and Mr. Peak warrants to purchase
1,000,000 and 200,000 shares of Common Stock, respectively, each at an exercise
price of $1.50 per share on or before June 8, 2004.
In May 2000, the Board of Directors voted to grant options to purchase
50,000 shares of Common Stock to each of its outside directors, Messrs. Forster,
Peak, Reimer and Souki, in recognition of their service to the Company during
1999. These grants are contingent upon the stockholders' approval of the
proposed amendment to the 1997 Stock Option Plan. The options will be fully
vested on the date of grant and are not contingent upon the Company's
achievement of earnings goals. The exercise price per share will be the closing
market price on the NASDAQ Stock Market on July 12, 2000, the date of the
grants. The options will expire five years from the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE SEVEN
NOMINEES AS DIRECTORS OF THE COMPANY, TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
STOCKHOLDERS OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
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 (the "Plan") to increase the
total number of shares of Common Stock subject to the Plan from 1,950,000 to
6,000,000. 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 6,000,000."
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
4
<PAGE>
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 (collectively, "Options"). It is
administered by a committee (the "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 1,950,000 shares of Common Stock, which is
proposed to be increased to 6,000,000. 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 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
5
<PAGE>
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 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.
6
<PAGE>
New Plan Benefits. The Board of Directors has voted to grant stock options as
set forth in the following table, contingent upon the stockholders' approval of
the proposed amendment to the 1997 Stock Option Plan. Options to be granted to
employees of the Company will vest equally over four years and are not
contingent upon the Company's achievement of earnings goals. The options expire
after the earlier of five years or six months after the termination of the
optionholder's employment with, or service as a director of, the Company for any
reason other than retirement, death or disability. Options to be granted to
outside directors will vest fully on the date of grant and will expire five
years from that date.
Name and Position Number of Options (1)
----------------- -----------------
Charif Souki 50,000 (2)
Chairman of the Board
Walter L. Williams 150,000
Vice Chairman
Michael L. Harvey 250,000
President and Chief Executive Officer
Ron A. Krenzke 220,000
Executive Vice President - Exploration
Keith F. Carney 150,000
Executive Vice President - Business Development
Don A. Turkleson 150,000
Chief Financial Officer, Treasurer & Secretary
William D. Forster 50,000 (2)
Director
Charles M. Reimer 50,000 (2)
Director
Kenneth R. Peak 50,000 (2)
Director
Executive Group 920,000
Non-Executive Director Group 200,000
Non-Executive Officer Employee Group 546,000
-----------------------
(1) No dollar value is assigned to the stock options because the exercise price
per share will be the closing market price on the NASDAQ Stock Market on
July 12, 2000, the date of grant.
(2) The grants to these individuals are to be made in their capacities as
outside directors.
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 1,950,000 TO 6,000000.
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 65,000,000
to 125,000,000 and the number of authorized shares of Common Stock from
60,000,000 to 120,000,000. 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:
7
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"FOURTH: The total number of shares of stock that the Company shall
have authority to issue is 125,000,000 shares, consisting of:
(1) 120,000,000 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 projects in the Gulf of
Mexico, for acquisitions and for other corporate purposes. There remain only
5,703,214 shares of the Company's authorized Common Stock which are unissued and
not already reserved for issuance for a specific purpose. As of May 26, 2000,
the Record Date, there were 42,989,572 shares of Common Stock issued and
outstanding and no shares of Preferred Stock issued and outstanding. There are
2,144,445 shares of Common Stock reserved for issuance upon exercise of
outstanding options and 9,162,769 shares of Common Stock reserved for issuance
upon the exercise of outstanding warrants.
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 Corporation Law ("Section 203")
generally provides that a stockholder acquiring 15% or more 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
8
<PAGE>
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.
The Company has retained an investment banker to help it access additional
capital, and is currently in discussions with several institutions regarding a
private placement of debt and equity securities. Such discussions could result
in an equity offering of a substantial portion, or even substantially all, of
the additional shares of Common Stock authorized under this proposal. The
Company presently has no specific arrangements, commitments or understandings to
issue additional shares of Common Stock to any of such investors. The Board of
Directors will determine whether, when and on what terms the issuance of shares
of Common Stock to any of such investors may be appropriate in connection with
the aforementioned transaction.
If this proposal is approved, the Board of Directors does not intend to
seek further shareholder approval prior to the issuance of any additional shares
of Common Stock in any such future transaction unless required by law, the
Articles of Incorporation or the listing requirements of the Nasdaq Stock
Market.
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 FROM 65,000,000 TO 125,000,000 AND
THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK FROM 60,000,000 TO 120,000,000.
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, 2000.
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, 1999.
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 following table sets forth the names, ages and positions of each
executive officer of the Company, all of whom serve at the pleasure of the Board
of Directors and are subject to annual appointment by the Board:
Name Age Position
------------------ ----- ----------------------------------------------
Charif Souki 47 Chairman
Walter L. Williams 72 Vice Chairman
Michael L. Harvey 52 President and Chief Executive Officer
Ron A. Krenzke 47 Executive Vice President - Exploration
Keith F. Carney 43 Executive Vice President - Business Development
Don A. Turkleson 45 Chief Financial Officer, Secretary & Treasurer
9
<PAGE>
CHARIF SOUKI served as Co-Chairman of the Board of Directors until June 4,
1999, when he was elected Chairman. Mr. Souki also served as a director of the
Company throughout the fiscal year ended December 31, 1999. Further information
regarding Mr. Souki is provided above under "Election of Directors--Nominees."
WALTER L. WILLIAMS currently serves as Vice Chairman of the Board of
Directors. Mr. Williams served as President, Chief Executive Officer and a
director of the Company during the fiscal year ended December 31, 1999. Further
information regarding Mr. Williams is provided above under "Election of
Directors--Nominees."
MICHAEL L. HARVEY is currently President and Chief Executive Officer and a
director of Cheniere. Mr. Harvey served as a director of Cheniere throughout
the fiscal year ended December 31, 1999. Further information regarding Mr.
Harvey is provided above under "Election of Directors - Nominees."
RON A. KRENZKE is currently Executive Vice President - Exploration for
Cheniere. Prior to joining Cheniere, Mr. Krenzke was Executive Vice President
and Chief Operating Officer of XPLOR Energy, Inc. Mr. Krenzke started his
career as a geophysicist in 1974 and has since held various technical and
management positions at Mobil Oil, Texas Eastern, Monsanto Oil, and Amerada
Hess. In 1990, he founded South Coast Exploration Company and Interactive
Exploration Solutions, Inc. (INEXS), where he served as President and director,
respectively. In 1997, these companies were merged with XPLOR Energy.
KEITH F. CARNEY is currently Executive Vice President - Business
Development 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.
DON A. TURKLESON is currently Chief Financial Officer, Secretary and
Treasurer of Cheniere. Prior to joining Cheniere in 1997, 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 director, Treasurer and past
Chairman of the Board of Neighborhood Centers, Inc., a nonprofit organization.
EXECUTIVE COMPENSATION
The following table reflects all compensation received by the chief
executive officer and by each of the five other most highly compensated
executive officers of the Company during the three years ended December 31,
1999, 1998 and 1997 (collectively, the "Named Executives"). Mr. Forster did not
receive compensation sufficient to require that he be included in this table.
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
----------------------------- ---------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary Compensation Options/SARs (#)
------------------------------- ---- -------- ------------ ---------------------
<S> <C> <C> <C> <C>
Charif Souki 1999 $120,000 - -
Chairman 1998 $ 30,000 (1) - -
1997 - - -
Walter L. Williams 1999 $120,000 - 100,000
Vice Chairman (former President 1998 $120,000 - -
and Chief Executive Officer) 1997 $120,000 - 50,000
Michael L. Harvey 1999 $102,087 (2) - 1,035,000 (2)
President and 1998 - - -
Chief Executive Officer 1997 - - -
Ron A. Krenzke 1999 $ 96,250 (3) $37,500 (3) 600,000
Executive Vice President - 1998 - - -
Exploration 1997 - - -
Keith F. Carney 1999 $100,000 - 100,000
Executive Vice President - 1998 $100,000 - -
Business Development 1997 $ 90,833 (4) - 50,000
Don A. Turkleson 1999 $100,000 - 100,000
Chief Financial Officer, 1998 $100,000 - -
Secretary and Treasurer 1997 $ 8,333 (5) - 50,000
</TABLE>
(1) On October 1, 1998, Mr. Souki commenced providing consulting services to
the Company pursuant to a Services Agreement and is compensated at a rate
of $10,000 per month.
(2) Mr. Harvey's 1999 salary was payment for seven months of employment, based
on an annual salary of $175,000, beginning on his June 1, 1999 date of
hire. Mr. Harvey received stock options to purchase 35,000 shares of
Common Stock when he was elected to the Board of Directors in March 1999.
He received warrants to purchase 1,000,000 shares of Common Stock in June
1999.
(3) Mr. Krenzke's 1999 salary was payment for seven months of employment, based
on an annual salary of $165,000, beginning on his June 1, 1999 date of
hire. Mr. Krenzke's Other Annual Compensation represents 150,000 shares of
Common Stock, valued at $0.25 per share, received in conjunction with Mr.
Krenzke's employment by Cheniere.
(4) Effective December 1, 1997, Mr. Carney's annual salary was increased from
$90,000 to $100,000.
(5) Mr. Turkleson's salary for the year 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.
11
<PAGE>
OPTION GRANTS
Stock options granted to Named Executives during the year ended December
31, 1999 are summarized in the following table:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
-------------------------------------------------------------------------------------------- at Assumed Annual Rates
Number of Securities % of Total of Stock Price Appreciation
Underlying Options/SARs Exercise or for Option Term
Options/SARs Granted to Employees Base Price Expiration --------------------------
Name Granted in Fiscal Period Per Share Date 5% 10%
------------------ -------------------- -------------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Charif Souki - - - - - -
Walter L. Williams 100,000 4.0% $1.50 09/30/04 $ 11,108 $ 50,407
Michael L. Harvey 1,000,000 39.9% $1.50 06/08/04 $294,452 $764,377
35,000 1.4% $3.00 09/30/04 $ - $ -
Ron A. Krenzke 600,000 23.9% $1.50 09/30/04 $ 62,325 $291,904
Keith F. Carney 100,000 4.0% $1.50 09/30/04 $ 11,108 $ 50,407
Don A. Turkleson 100,000 4.0% $1.50 09/30/04 $ 11,108 $ 50,407
</TABLE>
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.
In March 1999, prior to his election as President and Chief Executive Officer of
the Company, 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. The
term of these options was later extended to September 30, 2004. In addition, in
consideration of their contributions to Cheniere's acquisition of 3-D seismic
data covering 8,700 square miles in the Gulf of Mexico, the Company granted to
Mr. Harvey and Mr. Peak warrants to purchase 1,000,000 and 200,000 shares of
Common Stock, respectively, each at an exercise price of $1.50 per share on or
before June 8, 2004. No other grants of stock options or warrants were made to
directors during 1999.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information regarding unexercised options or
warrants 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, 1999.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at December 31, 1999 Options/SARs at December 31, 1999 (1)
--------------------------------------------- ----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charif Souki - - - -
Walter L. Williams 175,000 125,000 - -
Michael L. Harvey 1,000,000 35,000 - -
Ron A. Krenzke 300,000 300,000 - -
Keith F. Carney 137,500 162,500 - -
Don A. Turkleson 25,000 125,000 - -
</TABLE>
(1) The value of unexercised options and warrants to purchase Common Stock at
December 31, 1999 is nil since the $.72 per share market value of the
underlying securities at December 31, 1999 was less than the exercise
prices.
12
<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 May 26, 2000 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, nominee for director and
Named Executive, and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
------------------------------------------------------------ -------------------- --------
<S> <C> <C>
Arabella SA 4,445,000 (1) 10.1%
Azure Energy Fund, Inc. 3,000,030 (2) 7.0%
BSR Investments, Ltd. 4,124,645 (3) 9.5%
Emanuel Batler 81,000 (4) *
Nuno Brandolini 4,445,000 (5) 10.1%
Keith F. Carney 162,500 (6) *
William D Forster 2,846,211 (7) 6.6%
Michael L. Harvey 1,022,500 (8) 2.3%
Ron A. Krenzke 525,000 (9) 1.2%
Kenneth R. Peak 235,000 (10) *
Charles M. Reimer 63,571 (11) *
Charif Souki - (12) *
Don A. Turkleson 75,000 (13) *
Walter L. Williams 250,000 (14) *
All directors and executive officers as a group (10 persons) 9,705,782 (15) 21.1%
</TABLE>
* - 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) The address of Azure Energy Fund, Inc. is: c/o Azure Capital Management
Ltd., c/o Scotia McLeod, Suite 1800, 700 2nd Street S.W., Calgary Alberta,
T2P-2W1, Canada.
(3) 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 626,067 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.
(4) Mr. Batler has been nominated for election to the Board of Directors.
Includes 27,000 shares issuable upon exercise of presently exercisable
warrants.
13
<PAGE>
(5) Includes 3,590,000 shares and warrants to purchase 855,000 shares of Common
Stock held by Arabella SA, of which Mr. Brandolini disclaims beneficial
ownership. Mr. Brandolini serves as Chairman and Chief Executive Officer
of Scorpion Holdings, Inc, which manages investments for Arabella SA. Mr.
Brandolini also serves as a director of Arabella SA.
(6) Includes 150,000 shares issuable upon exercise of presently exercisable
options and 12,500 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement. Excludes
137,500 shares issuable upon the exercise of options held by Mr. Carney but
not exercisable within 60 days of the filing of this proxy statement.
(7) 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.
(8) Includes 22,500 shares issuable upon exercise of presently exercisable
options and 1,000,000 shares issuable upon exercise of presently
exercisable warrants. Excludes 12,500 shares issuable upon the exercise of
options held by Mr. Harvey but not exercisable within 60 days of the filing
of this proxy statement.
(9) Includes 300,000 shares issuable upon exercise of presently exercisable
options and 75,000 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement. Excludes
225,000 shares issuable upon the exercise of options held by Mr. Krenzke
but not exercisable within 60 days of the filing of this proxy statement.
(10) Includes 35,000 shares issuable upon exercise of presently exercisable
options and 200,000 shares issuable upon exercise of presently exercisable
warrants held by Mr. Peak.
(11) Includes 35,000 shares issuable upon exercise of presently exercisable
options held by Mr. Reimer.
(12) Does not include 3,498,578 shares nor warrants to purchase 626,067 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.
(13) Includes 37,500 shares issuable upon exercise of presently exercisable
options and 12,500 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement. Excludes
100,000 shares issuable upon the exercise of options held by Mr. Turkleson
but not exercisable within 60 days of the filing of this proxy statement.
(14) Includes 187,500 shares issuable upon exercise of presently exercisable
options, 12,500 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement and 20,000
shares owned by Mr. Williams' wife. Excludes 100,000 shares issuable upon
the exercise of options held by Mr. Williams but not exercisable within 60
days of the filing of this proxy statement.
(15) Includes an aggregate of 767,500 shares issuable upon exercise of presently
exercisable options, 112,500 shares issuable upon exercise of options which
become exercisable within 60 days of the filing of this proxy statement,
and 2,082,000 shares issuable upon exercise of presently exercisable
warrants. Excludes an aggregate of 575,000 shares issuable upon the
exercise of options not exercisable within 60 days of the filing of this
proxy statement. Includes 3,590,000 shares and warrants to purchase
855,000 shares of Common Stock, of which beneficial ownership is
disclaimed, as described in note (5).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for the fiscal year ended December
31, 1999:
The Compensation Committee, which is comprised of non-employee directors of
the Company, establishes the general compensation policies of the Company,
establishes the compensation plans and compensation levels for officers and
certain other key employees and administers the Company's stock option plan.
The Committee also establishes salary ranges for officers and certain key
employees, and generally approves specific amounts within those ranges on the
recommendation of management.
14
<PAGE>
In establishing compensation policies, the Committee believes that cash
compensation of executive officers, as well as other key employees, should be
competitive with other similar oil and gas companies or other business
opportunities available to such executive officers and key employees while,
within the Company, being fair and discriminating on the basis of personal
performance. Periodic awards of stock options are intended to both retain
executives and to motivate them to accomplish long-term growth objectives and
improve long-term market performance.
The Committee has from time to time retained outside compensation
consultants to conduct compensation surveys and advise the Committee concerning
compensation matters, and the Committee has surveyed the executive compensation
levels of companies in the oil and gas industry that are similar to the Company.
Cheniere has no employment agreements with any of its executive officers.
The Company seeks to relate a significant portion of the potential total
executive compensation to the Company's financial performance. In general,
executive financial rewards at Cheniere 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 Committee as acceptably discharging the levels and types of
responsibility implicit in their respective executive positions.
The Committee 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 established the Cheniere Energy, Inc. 1997 Stock Option
Plan and has made periodic grants of stock options to its officers and other key
employees. See "Proposed Amendment to 1997 Stock Option Plan Increasing Number
of Shares Subject to Plan;" "Management - Executive Compensation;" and
"Management - Option Grants."
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 and for Mr. Harvey for the 1999 fiscal year, the Board assessed (i) the
performance of the Company, (ii) total return to stockholders, (iii) progress
toward implementation of the Company's strategic business plan and (iv)
compensation levels of chief executive officers of similar companies in the oil
and gas industry.
Mr. Williams served as President and Chief Executive Officer of the Company
until June 4, 1999, when he was elected Vice Chairman. Mr. Williams received a
base salary at the rate of $120,000 per year and was awarded 100,000 stock
options at an exercise price of $1.50 per share. In consideration of his
performance in 1999, the Committee has awarded Mr. Williams 150,000 stock
options, contingent upon stockholder approval of the proposed increase in the
number of shares of Common Stock subject to the 1997 Stock Option Plan. If
stockholder approval of the proposal is received at the annual stockholders'
meeting on July 12, 2000, the effective date of this grant will be July 12,
2000, and the exercise price for these stock options will be the closing market
price of the Common Stock on that date.
In March 1999, prior to his election as President and Chief Executive
Officer of the Company, 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. The term of these options was later extended to September 30, 2004. In
addition, in consideration of his contribution to Cheniere's acquisition of 3-D
seismic data covering 8,700 square miles in the Gulf of Mexico, the Company
granted to Mr. Harvey warrants to purchase 1,000,000 shares of Common Stock, at
an exercise price of $1.50 per share on or before June 8, 2004. Mr. Harvey was
elected President and Chief Executive Officer of the Company on June 4, 1999.
Mr. Harvey received a base salary at the rate of $175,000 per year beginning on
the date of his employment. In consideration of his performance in 1999, the
Committee has awarded Mr. Harvey 250,000 stock options, contingent upon
stockholder approval of the proposed increase in the number of shares of Common
Stock subject to the 1997 Stock Option Plan. If stockholder approval of the
proposal is received at the annual stockholders' meeting on July 12, 2000, the
effective date of this grant will be July 12, 2000, and the exercise price for
these stock options will be the closing market price of the Common Stock on that
date.
15
<PAGE>
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 1999, 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 2000 or for the
foreseeable future in any significant way, if at all.
THE COMPENSATION COMMITTEE
William D. Forster, Chairman
Kenneth R. Peak
Charles M. Reimer
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
In addition to serving as a director of the Company, several directors held
positions as executive officers during the fiscal year ended December 31, 1999.
Mr. Forster served as Co-Chairman of the Board until June 4, 1999. Mr. Souki
served as Co-Chairman of the Board until June 4, 1999 and then as Chairman of
the Board; Mr. Williams served as President and Chief Executive Officer until
June 4, 1999 and then as Vice Chairman of the Board. Mr. Harvey served as
President and Chief Executive Officer, commencing on June 4, 1999.
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, 1999. 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 2000 Index on July 3, 1996.
16
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CHENIERE ENERGY, INC., S&P OIL & GAS (EXPLORATION & PRODUCTION) INDEX,
AND RUSSELL 2000 INDEX
[STOCK PERFORMANCE CHART]
August 31, December 31,
July 3, -------------- ---------------------
1996 1996 1997 1997 1998 1999
------ ------ ------ ------ ------ ------
Cheniere Energy, Inc. $100 $117 $119 $ 69 $ 33 $ 24
S&P Oi & Gas (Exploration &
Production) Index $100 $ 99 $116 $106 $ 73 $ 87
Russell 2000 Index $100 $ 97 $123 $127 $122 $146
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BSR Investments, Ltd. ("BSR"), an entity holding approximately 9.5% of the
outstanding shares of the Company's Common Stock, is under the control of Nicole
Souki, the mother of Charif Souki, Chairman of the Board of Directors. 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. 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 May 1999, BSR purchased an
additional $240,000 in Cheniere notes payable from another note holder. In July
1999, the Company repaid $120,000 to BSR at the time it repaid 50% of the
outstanding balances on all of its notes issued in the December 1997 Bridge
Financing. On September 30, 1999, BSR exchanged its remaining $120,000 note
payable and $1,000 in accrued interest for 110,000 units ($1.10 per unit), each
unit representing one share of Common Stock and one half warrant to purchase a
share of Common Stock at an exercise price of $1.50 per share on or before
September 30, 2002. In April 2000, the Company issued an additional 4,400
units, representing 4,400 shares of Common Stock and warrants to purchase 4,400
shares of Common Stock, to BSR pursuant to a price adjustment provision included
in the September 1999 offering. During 1999, the Company paid BSR $22,640 in
interest related to notes held by BSR.
17
<PAGE>
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 Chairman, is
a principal. Placement fees paid to IAS totaled $562,372 for the year ended
December 31, 1999. In addition, in connection with the sale of 10,483,031 units
(of Common Stock and warrants), Cheniere granted to IAS, or its assigns,
warrants to purchase 645,000 shares of Cheniere Common Stock at an exercise
price of $1.00 per share on or before December 30, 2002.
In March 1999, Arabella SA acquired 2,000,000 shares of the Company's
Common Stock from BSR in connection with the cancellation of a $2,000,000 note
payable by BSR to Arabella. In December 1999, Arabella acquired 1,500,000
shares of the Company's Common Stock in a private placement at a price of $0.33
1/3 per share.
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 represented in person
or by proxy at the annual meeting, (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 represented in person or by proxy at the annual meeting.
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.
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, 1999, the Company believes that
all filing requirements applicable to the Company's officers, directors and
greater than 10% stockholders have been met except that an initial report on
Form 3 for Arabella SA and a change in beneficial ownership report on Form 4 for
BSR Investments, Ltd were filed late.
STOCKHOLDER PROPOSALS
Management anticipates that the Company's 2001 annual stockholders meeting
will be held during May 2001. 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 2001 annual stockholders meeting must submit the proposal to the
Company on or before December 30, 2000. Any such proposals should be timely
sent to the Secretary of the Company, 1200 Smith Street, Suite 1740, Houston,
Texas 77002-4312.
18
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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, 1999, which has been filed with the
Securities and Exchange Commission in Washington, D.C. and is incorporated in
this Proxy Statement by reference.
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
May 31, 2000
19
<PAGE>
CHENIERE ENERGY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 12, 2000
The undersigned hereby appoints Keith F. Carney and Don A. Turkleson, 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
Wednesday, July 12, 2000 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.
JULY 12, 2000
Please Detach and Mail in the Envelope Provided
A PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C>
FOR election (except as indicated below) WITHHOLD authority to NOMINEES: Emanuel Batler
1. ELECTION OF vote for all nominees Nuno Brandolini
DIRECTORS listed at right Michael L. Harvey
Kenneth R. Peak
Charles M. Reimer
Charif Souki
Walter L. Williams
INSTRUCTION: To withhold authority to vote for any individual nominee, print that nominee's name on the line below.
______________________________________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2. Approval of the proposed amendment to Company's 1997 Stock Option Plan FOR AGAINST ABSTAIN
to increase the number of shares subject to the Plan from 1,950,000 to
6,000,000.
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 from 65,000,000 to 125,000,000and the number of shares of authorized
Common Stock from 60,000,000 to 120,000,000.
4. Appointment of PricewaterhouseCoopers LLP as independent accountants FOR AGAINST ABSTAIN
for the year ended December 31, 2000.
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 AND 4.
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 _____________, 2000
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>
