UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] 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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CHENIERE ENERGY, INC.
Three Allen Center
333 Clay Street, Suite 3400
Houston, Texas 77002-4102
713/659-1361
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 31, 2001
Notice is hereby given that the annual meeting of stockholders of Cheniere
Energy, Inc., a Delaware corporation (the "Company"), will be held on Thursday,
May 31, 2001, at 10:00 a.m., at Three Allen Center, 333 Clay Street, Suite 3400,
Houston, Texas, for the following purposes:
1. To elect a Board of six directors to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified;
2. 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 decreased from 125,000,000 to
45,000,000 shares and (b) the number of shares of the Company's authorized
common stock, par value $.003 per share, would be decreased from 120,000,000
to 40,000,000 shares;
3. To appoint PricewaterhouseCoopers LLP as independent accountants for the
Company for the fiscal year ending December 31, 2001; and
4. 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 18, 2001, 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,
/S/ DON A. TURKLESON
---------------------------------------
Don A. Turkleson
Secretary
April 30, 2001
CHENIERE ENERGY, INC.
Three Allen Center
333 Clay Street, Suite 3400
Houston, Texas 77002-4102
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, 2001. 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 Thursday, May 31, 2001 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 Company's
Amended and Restated Certificate of Incorporation to decrease 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, approval of the proposed amendment of
the Company's Amended and Restated Certificate of Incorporation to decrease
total authorized capital stock and common stock, and appointment of
PricewaterhouseCoopers LLP as independent accountants.
At the close of business on April 18, 2001, 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 12,797,393
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, six 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 six 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 directors elected at the annual meeting of stockholders held on
July 12, 2000 have since resigned from the Board of Directors. Kenneth R. Peak,
President and CEO of Contango Oil and Gas Company in Houston, Texas, served as a
director since September 1997 and as a member of the Audit Committee, the
Compensation Committee and the Stock Option Committee. Mr. Peak resigned from
the Board in September 2000 because Contango was interested in becoming active
in the Gulf of Mexico and that activity could create the potential for
competitive conflicts of interest with the Company.
Michael L. Harvey served as a director since March 1999 and as
President and CEO of the Company since June 1999. Mr. Harvey resigned as an
officer and a director of the Company in October 2000 to serve as President and
CEO of Gryphon Exploration Company, an affiliate of Cheniere. Cheniere would
like to thank each of Messers. Peak and Harvey for their service to the company.
Director Nominee Director Since Age Position
---------------- -------------- --- --------
Emanuel Batler 2000 75 Director
Nuno Brandolini 2000 47 Director
John K Howie 2000 42 Director
Charles M. Reimer 1998 56 Director
Charif Souki 1996 48 Director and Chairman of
the Board of Directors
Walter L. Williams 1996 73 Director and Vice Chairman
of the Board of Directors
EMANUEL BATLER is currently a director and a member of the Audit Committee
and the Compensation Committee. 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 is currently a director and a member of the Audit Committee
and the Compensation Committee. 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.
JOHN K. HOWIE is currently a director of the Company. Mr. Howie has served
as a Vice President of EnCap Investments, LLC, since July 1999. Prior to this
position he was a Senior Investment Associate at Range Resources Corporation
(previously Domain Energy Corporation), an Acquisition Coordinator with Domain
Energy Corporation (previously Tenneco Ventures), and Senior Petroleum Engineer
with Amoco Production Company and Apache Corporation. Mr. Howie received a
Bachelor of Science in Chemical Engineering from New Mexico State in December
1981.
CHARLES M. REIMER is currently President and Chief Executive Officer and a
director of Cheniere. Through 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. He
also serves on the board of directors of Gryphon Exploration Company, a
privately-held affiliate of Cheniere.
2
CHARIF SOUKI, a co-founder of Cheniere, is currently Chairman of the Board
of Directors of the Company 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. He also serves on the board of directors of Gryphon Exploration
Company, a privately-held affiliate of Cheniere.
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 and
Compensation Committees. Members of the Audit and Compensation Committees for a
given year are selected by the Board following the annual stockholders' meeting.
During the fiscal year ended December 31, 2000, the Company's Board of Directors
held fourteen meetings, and in addition there were four written consents in lieu
of 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 during his
period of service as a director in the year 2000.
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 operation of its internal control system and receives and
reviews reports submitted by the Chief Financial Officer. The Audit Committee
held four meetings during the year ended December 31, 2000. The committee's
members during 2000 from January 1 until July 2000 were: Kenneth R. Peak,
Chairman, William D. Forster and Charles Reimer. From July 2000 through
September 1, 2000, when Mr. Reimer became a Cheniere employee, the Audit
Committee's members were: Nuno Brandolini, Chairman, Emanuel Batler and Charles
Reimer. From November through December 31, 2000, the members of the Audit
Committee were: Nuno Brandolini, Chairman, Emanuel Batler, and John Howie.
The Compensation Committee reviews and approves the salaries and other
compensation for the executive officers of the Company. The Compensation
Committee also 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
Compensation Committee held two meetings and there was one unanimous consent in
lieu of a meeting during 2000. The committee's members during 2000 from January
1 until July 2000 were: William D. Forster, Chairman, Kenneth R. Peak and
Charles M. Reimer. From July 2000 through September 1, 2000, when Mr. Reimer
became a Cheniere employee, the Compensation Committee members were: Emanuel
Batler, Chairman, Nuno Brandolini and Charles Reimer. From November through
December 31, 2000, the members of the Compensation Committee were: Emanuel
Batler, Chairman, Nuno Brandolini, and John Howie.
3
DIRECTOR COMPENSATION
During the fiscal year ended December 31, 2000, 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 July 2000, the Board of Directors granted options to purchase 12,500
shares of Common Stock to each of its outside directors, Messrs. Batler,
Brandolini, Peak and Reimer, in recognition of their service to the Company.
The options vested fully on the date of grant and are not contingent upon the
Company's achievement of earnings goals. The exercise price was $2.75 per
share, the closing market price on the NASDAQ Stock Market on the date of the
grants. The options expire five years from the date of grant. In November
2000, the Board of Directors granted options to purchase 12,500 shares of Common
Stock to Messrs. Batler, Brandolini and Howie. The options vested fully on the
date of grant, are exercisable at a price of $1.938 per share, the closing
market price on the NASDAQ Stock Market on the date of the grants and expire
five years from the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE SIX
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 DECREASE 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
decrease the total number of authorized shares of capital stock from 125,000,000
to 45,000,000 shares and the number of authorized shares of Common Stock from
120,000,000 to 40,000,000 shares. 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 45,000,000 shares, consisting of:
(1) 40,000,000 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 decrease the number of authorized shares
to a number more consistent with the planned activities of the Company and,
accordingly, to create a savings in Delaware franchise taxes which derive from
authorized shares rather than issued and outstanding shares. At the
stockholders' meeting held on July 12, 2000, the stockholders approved an
increase in the number of authorized shares of Common Stock from 60,000,000 to
120,000,000 shares in order to provide maximum flexibility with respect to
future financing transactions. The Company completed the financing transactions
without issuing shares of its Common Stock, and as a result, the Company's need
for a large number of authorized but unissued shares has diminished.
Additionally, at a meeting held on October 16, 2000, the stockholders approved a
one-for-four reverse stock split of Cheniere's Common Stock. The effect of
this reverse stock split further decreases the number of shares which might be
needed for future capital requirements. There remain 103,559,750 shares of the
Company's authorized Common Stock unissued and not already reserved for issuance
for a specific purpose. As of April 18, 2001, the Record Date, there were
12,797,393 shares of Common Stock issued and outstanding and no shares of
Preferred Stock issued and outstanding. There are 884,236 shares of Common
Stock reserved for issuance upon exercise of outstanding options and 2,758,621
shares of Common Stock reserved for issuance upon the exercise of outstanding
warrants. By reducing the number of shares of its capital stock, the Company
will retain flexibility in arranging future funding for anticipated leasing and
drilling activities, for acquisitions and for other purposes while reducing
expenses related to Delaware franchise taxes.
4
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 BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION DECREASING THE TOTAL
NUMBER OF SHARES OF AUTHORIZED CAPITAL STOCK FROM 125,000,000 TO 45,000,000
SHARES AND THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK FROM 120,000,000 TO
40,000,000 SHARES.
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, 2001.
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, 2000.
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 48 Chairman
Walter L. Williams 73 Vice Chairman
Charles M. Reimer 56 President and Chief Executive Officer
Keith F. Carney 44 Executive Vice President - Business Development
Don A. Turkleson 46 Vice President & Chief Financial Officer, Secretary & Treasurer
Jonathan S. Gross 42 Vice President - Exploration
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 year ended December 31, 2000. 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 a director of the Company throughout the year
ended December 31, 2000. Further information regarding Mr. Williams is provided
above under "Election of Directors--Nominees."
5
CHARLES M. REIMER currently serves as President and Chief Executive Officer
of Cheniere. Mr. Reimer served as a director of the Company throughout the year
ended December 31, 2000. Further information regarding Mr. Reimer is provided
above under "Election of Directors--Nominees."
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 Corporation.
DON A. TURKLESON is currently Vice President and 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.
JONATHAN S. GROSS is currently Vice President-Exploration of Cheniere. He
served as Technology Manager of the Company from June 1999 through October 2000.
Mr. Gross began his career in 1981 with Amoco Production Company as an
exploration geophysicist. While at Amoco he held senior technical positions in
both domestic and international basins. In 1998 he joined Zydeco Energy, Inc.,
where he served as economist, exploration risk specialist, and project manager.
Mr. Gross received a Bachelor of Arts degree in geology from the University of
Chicago, and he is a member of the American Association of Petroleum Geologists
(Certified Petroleum Geologist #5513), the Society of Exploration Geophysicists,
and the Houston Geological Society.
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,
2000, 1999 and 1998 (collectively, the "Named Executives"). Also included in
this table are two individuals who served as executive officers during the
three-year period ended December 31, 2000, but who were no longer serving as
executive officers at December 31, 2000.
6
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
------------------------------------- --------------------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary Compensation Options/SARs (#)
------------------------------ ------ ----------- -------------------- --------------------------------
Charif Souki (1) 2000 $120,000 $100,000 112,500
Chairman 1999 $120,000 - -
1998 $30,000 _ _
Walter L. Williams (2) 2000 $127,500 - 67,500
Vice Chairman 1999 $120,000 - 25,000
1998 $120,000 - -
Charles M. Reimer (3) 2000 $60,000 - 362,500
President and 1999 - - -
Chief Executive Officer 1998 - - -
Keith F. Carney (4) 2000 $112,500 - 67,500
Executive Vice President - 1999 $100,000 - 25,000
Business Development 1998 $100,000 - -
Don A. Turkleson (5) 2000 $112,500 - 67,500
Vice President, 1999 $100,000 - 25,000
Chief Financial Officer, 1998 $100,000 - -
Secretary & Treasurer
Jonathan S. Gross (6) 2000 $120,000 - 86,250
Vice President - Exploration 1999 $64,167 - 18,750
1998 - - -
Michael L. Harvey (7) 2000 $131,256 - 62,500
Former President and 1999 $102,087 - 258,750
Chief Executive Officer 1998 - - -
Ron A. Krenzke (8) 2000 $123,074 37,500 55,000
Former Executive 1999 $96,250 - 150,000
Vice President - Exploration 1998 - - -
(1) In October 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. Mr. Souki was awarded a bonus of $100,000 in December
2000.
(2) Effective in October 2000, Mr. Williams' salary was increased from $120,000
to $150,000 per year.
(3) Mr. Reimer became an employee of the Company in September 2000. His salary
is $180,000 per year.
(4) Effective in October 2000, Mr. Carney's salary was increased from $100,000
to $150,000 per year.
(5) Effective in October 2000, Mr. Turkleson's salary was increased from
$100,000 to $150,000 per year.
(6) Mr. Gross was hired by Cheniere in June 1999. He became an executive
officer of the Company in November 2000. Effective in October 2000, Mr.
Gross' salary was increased from $110,000 to $150,000 per year.
(7) Mr. Harvey's salary was paid at a rate of $175,000 per year, beginning on
his hire date in June 1999 and continuing until October 2000 when he
resigned from Cheniere to become President and Chief Executive Officer of
Gryphon Exploration Company, an affiliate of Cheniere. Mr. Harvey received
stock options to
7
purchase 8,750 shares of Common Stock when he was elected to the Board of
Directors in March 1999. He received warrants to purchase 250,000 shares of
Common Stock in June 1999.
(8) Mr. Krenzke's salary was paid at a rate of $165,000 per year, beginning on
his hire date in June 1999 and continuing until October 2000 when he
resigned from Cheniere to become Vice President - Exploration of Gryphon
Exploration Company, an affiliate of Cheniere. Mr. Krenzke's Other Annual
Compensation in 1999 represents 37,500 shares of Common Stock, valued at
$1.00 per share, received in conjunction with Mr. Krenzke's employment by
Cheniere.
OPTION GRANTS
Stock options granted to Named Executives during the year ended
December 31, 2000 are summarized in the following table:
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%
------------------- -------------------- --------------------- ------------ ---------- ----------- -----------
Charif Souki 12,500 1.1% $2.75 07/12/05 $ 9,497 $ 20,986
100,000 8.6% $1.94 11/15/05 $ 53,543 $ 118,986
Walter L. Williams 37,000 3.2% $2.75 07/15/05 $ 28,492 $ 62,959
30,000 2.6% $1.94 11/15/05 $ 16,063 $ 35,495
Charles M. Reimer 12,000 1.1% $2.75 07/12/05 $ 9,497 $ 20,986
250,000 21.5% $1.75 11/12/05 $ 120,873 $ 267,098
100,000 8.6% $1.94 11/15/05 $ 53,543 $ 118,317
Keith F. Carney 37,500 3.2% $2.75 07/12/05 $ 28,492 $ 62,959
30,000 2.6% $1.94 11/12/05 $ 16,063 $ 35,495
Don A. Turkleson 37,500 3.2% $2.75 07/12/05 $ 28,492 $ 62,959
30,000 2.6% $1.94 11/12/05 $ 16,063 $ 35,495
Jonathan S. Gross 37,700 3.2% $2.75 07/12/05 $ 28,492 $ 62,959
43,750 3.8% $2.75 10/01/05 $ 33,240 $ 73,452
30,000 2.6% $1.94 11/15/05 $ 16,063 $ 35,495
Michael L. Harvey 62,500 5.4% $1.94 10/12/00 $ - $ -
Ron Krenzke 55,000 4.7% $1.94 10/12/00 $ - $ -
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.
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, 2000.
8
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at December 31, 2000 Options/SARs at December 31, 2000 (1)
--------------------------------------------- -------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Charif Souki 12,500 100,000 $ - $ 46,800
Walter L. Williams 40,625 101,875 - 14,040
Charles M. Reimer 271,250 100,000 - 46,800
Keith F. Carney 40,625 101,875 - 14,040
Don A. Turkleson 12,500 92,500 - 14,040
Jonathan S. Gross 4,688 100,312 - 14,040
Michael L. Harvey (2) - - - -
Ron A. Krenzke (2) - - - -
(1) The value of unexercised options and warrants to purchase Common Stock at
December 31, 2000 is calculated based upon the OTC Bulletin Board closing
market price of $2.406 per share on December 29, 2000.
(2) Options or warrants held by Messrs. Harvey and Krenzke were cancelled in
October 2000, when they resigned from Cheniere to be employed by Gryphon
Exploration Company, a Cheniere affiliate.
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 18, 2001 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:
9
Amount and Nature of Percent
Name Beneficial Ownership of Class
------------------------------------------------- ------------------------------- ----------------
Azure Energy Fund, Inc. 949,283 (1) 7.4%
BSR Investments, Ltd. 1,454,495 (2) 11.2%
Emanuel Batler 45,250 (3) *
Numo Brandolini 238,750 (4) 1.8*
Keith F. Sarney 85,417 (5) *
Johnathan S. Gross 11,896 (6) *
John K. Howie 12,500 (7) *
Charles M. Reimer 336,726 (8) 2.6%
Charif Souki 112,250 (9) *
Don A Turkleson 54,167 (10) *
Walter L. Williams 68,750 (11) *
All Directors and Officers as a group (9 persons) 965,706 (12) 7.1%
* - Less than 1%
(1) 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.
(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 164,851 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 25,000 shares issuable upon exercise of currently exercisable
warrants held by Mr. Batler.
(4) Includes 25,000 shares issuable upon exercise of currently exercisable
options held by Mr. Brandolini. Also includes warrants to purchase
213,750 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.
(5) Includes 4,167 shares issuable upon exercise of currently exercisable
warrants and 56,250 shares issuable upon exercise of presently exercisable
options. Excludes 86,250 shares issuable upon the exercise of options held
by Mr. Carney but not exercisable within 60 days of the filing of this
proxy statement.
(6) Includes 334 shares issuable upon exercise of currently exercisable
warrants, 4,687 shares issuable upon exercise of presently exercisable
options and 4,688 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement. Excludes
95,625 shares issuable upon the exercise of options held by Mr. Gross but
not exercisable within 60 days of the filing of this proxy statement.
(7) Includes 12,500 shares issuable upon exercise of currently exercisable
options held by Mr. Howie.
(8) Includes 258,334 shares issuable upon exercise of currently exercisable
warrants and 21,250 shares issuable upon exercise of presently exercisable
options. Excludes 100,000 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) Includes 14,250 shares issuable upon exercise of currently exercisable
warrants and 85,500 shares owned by Mr. Souki's wife. Also includes 12,500
shares issuable upon exercise of presently exercisable options. Excludes
100,000 shares issuable upon the exercise of options held by Mr. Souki but
not exercisable within 60 days of the filing of this proxy statement. Does
not include 1,289,644 shares nor warrants to purchase 164,851 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
(10) Includes 4,167 shares issuable upon exercise of currently exercisable
warrants and 18,750 shares issuable upon exercise of presently exercisable
options. Excludes 86,250 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 46,875 shares issuable upon exercise of currently exercisable
options, 9,375 shares issuable upon exercise of options which become
exercisable within 60 days of the filing of this proxy statement and 5,000
shares owned by Mr. Williams' wife. Excludes 86,250 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 an aggregate of 222,812 shares issuable upon exercise of currently
exercisable options, 14,063 shares issuable upon exercise of options which
become exercisable within 60 days of the filing of this proxy statement and
501,752 shares issuable upon exercise of presently exercisable warrants.
Excludes an aggregate of 554,375 shares issuable upon the exercise of
options not exercisable within 60 days of the filing of this proxy
statement.
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
Report by reference therein.
During fiscal 2000, the Committee of the Board of Directors developed a
written charter for the Committee, which was approved by the full Board. The
complete text of the charter, which reflects standards set forth in new SEC
regulations, and The American Stock Exchange rules, is reproduced in the
appendix to this proxy statement.
The function of the Committee is to assist the Board in fulfilling its
oversight responsibilities through regular or special meetings with management
and the independent accountants on matters relating to
- the Company's financial reporting in the Quarterly Reports on Form 10-Q and
the Annual Report on Form 10-K,
- the Company's system of internal controls,
- the Company's relationship with its independent accountants,
- the Company's audit and accounting processes generally, and
- the Company's systems and policies to comply with applicable laws and
regulations.
In carrying out this function, the Committee provides independent and
objective oversight of the performance of the Company's financial reporting
process, system of internal controls and legal and regulatory compliance system.
The Committee provides for open, ongoing communication among the independent
accountants, financial and senior management and the Board concerning the
Company's financial and compliance position and affairs. The Committee has the
power to conduct or authorize investigations into any matters within its scope
of responsibilities and shall be empowered to retain independent counsel,
accountants, or others to assist it in the conduct of any investigation. The
Committee's responsibility is oversight, and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
complying with applicable laws and regulations.
The Committee met four times during 2000. In overseeing the preparation of
the Company's financial statements, the Committee met with both management and
the Company's outside auditors to review and discuss all financial statements
prior to their issuance and to discuss significant accounting issues.
Management advised the Committee that all financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee
discussed the statements with both management and the outside auditors. The
Committee's review included discussion with the outside auditors of matters
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Communication With Audit Committees). With respect to the Company's outside
auditors, the Committee, among other things, discussed with
PricewaterhouseCoopers LLP matters relating to its independence, including the
disclosures made to the Committee as required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees). Finally,
the Committee continued to monitor the scope and adequacy of the Company's
internal control system. On the basis of these reviews and discussions,
11
the Committee recommended to the Board of Directors that the Board approve the
inclusion of the Company's audited financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000 for filing with the
Securities and Exchange Commission.
Members of the Audit Committee
Nuno Brandolini, Chairman
Emanuel Batler
John K. Howie
INDEPENDENT ACCOUNTANTS' FEES
AUDIT FEES
Aggregate fees for professional services rendered by PricewaterhouseCoopers
LLP in connection with the audit of the Company's financial statements and
reviews of interim reports for the fiscal year ended December 31, 2000 were
$61,950.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the fiscal year ended December 2000, PricewaterhouseCoopers LLP
rendered no professional services in connection with the design and
implementation of financial information systems.
ALL OTHER FEES
In addition to the fees described above, aggregate fees of $24,500 were
paid to PricewaterhouseCoopers LLP during the fiscal year ended December 31,
2000 for other professional services such as tax return preparation ($13,500),
review of a registration statement ($4,000) and consultation concerning
accounting issues related to the spin-off of an affiliated company ($7,000).
The Audit Committee has discussed the non-audit services provided by
PricewaterhouseCoopers LLP and the related fees and has considered whether those
services and fees are compatible with maintaining auditor independence.
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, 2000:
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.
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.
12
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.
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, except for a December 2000 award of $100,000 to its
Chairman.
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 "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.
Harvey and for Mr. Reimer for the 2000 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. Harvey served as President and Chief Executive Officer of the Company
until October 12, 2000, when he resigned to serve as President and Chief
Executive Officer of Gryphon Exploration Company, an affiliated company of
Cheniere. Mr. Harvey received a base salary at the rate of $175,000 per year
and in July 2000 was awarded 62,500 stock options at an exercise price of $2.75
per share.
In October 2000, prior to his election as President and Chief Executive
Officer of the Company, Mr. Reimer received warrants to purchase 250,000 shares
of Common Stock at an exercise price of $2.75 per share on or before October 12,
2005. Mr. Reimer received a base salary at the rate of $180,000 per year
beginning on the date of his employment. On November 15, 2000, when Mr. Reimer
was elected President and Chief Executive Officer of the Company, the Committee
awarded him 100,000 stock options at an exercise price of $1.938 per share, the
closing market price of the Common Stock on that date.
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 2000, 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 2001 or for the
foreseeable future in any significant way, if at all.
Members of the Compensation Committee
Emanuel Batler, Chairman
Nuno Brandolini
John K. Howie
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.
13
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, 2000.
Mr. Souki served as Chairman of the Board; Mr. Williams served as Vice Chairman
of the Board. Mr. Harvey served as President and Chief Executive Officer,
through October 12, 2000. Mr. Reimer served as President and Chief Executive
Officer commencing on November 15, 2000.
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 2000 Index for the period beginning on August 31, 1996
and ending at fiscal year-end December 31, 2000. The Company's common stock
began trading on the OTC Bulletin Board on July 3, 1996, moved to the NASDAQ
SmallCap Market on April 11, 1997, again traded on the OTC Bulletin Board
beginning December 14, 2000, and began trading on The American Stock Exchange on
March 5, 2001. 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 August 31, 1996.
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
---------------------- ---------------------------------------------
1996 1997 1997 1998 1999 2000
-------- -------- -------- -------- -------- --------
Cheniere Energy, Inc. $100 $117 $ 69 $33 $24 $23
S & P Oil & Gas (Exploration &
Production) Index $100 $117 $107 $73 $87 $139
Russell 2000 Index $100 $129 $134 $130 $155 $149
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BSR Investments, Ltd. ("BSR"), an entity holding approximately 11.2% 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 the Company's $4,000,000
December 1997 Bridge Financing and pledged a portion of its investment in
Cheniere common stock to fund its participation. In conjunction with the
financing, BSR received warrants to purchase 41,667 shares of the Company's
common stock. On September 15, 1998, BSR received warrants to purchase an
additional 100,000 shares of common stock as consideration for extending the
maturity of the notes to that date. Also in September 1998, the exercise price
of the warrants held by BSR was reduced from $9.50 to $6.00 per share as
consideration to extend the maturity date of the notes to January 15, 1999. In
March 1999, BSR exchanged notes payable of $2,000,000 for 694,445 shares of
Cheniere common stock ($2.88 per share). In May 1999, BSR purchased from
another note holder $240,000 in short-term notes payable by Cheniere. In July
1999, the Company repaid $120,000 to BSR at the time it repaid 50% of the
outstanding balances on all of the 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 27,500 units ($4.40 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 $6.00 per share on or before
September 30, 2002. In April 2000, the Company issued an additional 1,100
units, representing 1,100 shares of Common Stock and warrants to purchase 1,100
shares of Common Stock, to BSR pursuant to a price adjustment provision included
in the September 1999 offering.
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 $99,000 for the year ended
December 31, 2000.
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 six 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 Amended and Restated
Certificate of Incorporation will require approval by a majority of shares
entitled to vote thereon and (iii) 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.
15
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 American Stock Exchange 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, 2000, the Company believes that
all filing requirements applicable to the Company's officers, directors and
greater than 10% stockholders have been met.
STOCKHOLDER PROPOSALS
Management anticipates that the Company's 2002 annual stockholders meeting
will be held during May 2002. 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 2002 annual stockholders meeting must submit the proposal to the
Company on or before December 30, 2001. Any such proposals should be timely
sent to the Secretary of the Company, 333 Clay Street, Suite 3400, Houston,
Texas 77002-4102. Such proposal must meet all of the requirements of the
Securities and Exchange Commission to be eligible for inclusion in the Company's
2002 proxy materials. Furthermore, proposals by stockholders may be considered
untimely if the Company has not received notice of the proposal at least forty-
five days prior to the mailing of the proxy materials.
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, 2000, 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 333 Clay Street, Suite 3400, Houston, Texas 77002-4102.
By order of the Board of Directors,
/S/ DON A. TURKLESON
--------------------------------------
Don A. Turkleson
Secretary and Chief Financial Officer
April 30, 2001
16
APPENDIX A
Cheniere Energy, Inc.
Audit Committee Charter
The Audit Committee ("the Committee"), of the Board of Directors ("the Board")
of Cheniere Energy, Inc. ("the Company"), will have the oversight
responsibility, authority and specific duties as described below.
COMPOSITION
The Committee will be comprised of three or more directors as determined by the
Board. The members of the Committee will meet the NASD/AMEX independence and
experience requirements. The members of the Committee will be elected annually
at the organizational meeting of the full Board held immediately following the
annual stockholders' meeting and will be listed in the annual report to
shareholders. One of the members of the Committee will be elected Committee
Chair by the Board.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the Securities
and Exchange Commission (SEC); (ii) the system of internal controls that
management has established; and (iii) the audit process. In addition, the
Committee provides an avenue for communication between the independent
accountants, financial management and the Board. The Committee should have a
clear understanding with the independent accountants that they must maintain an
open and transparent relationship with the Committee, and that the ultimate
accountability of the independent accountants is to the Board and the Committee.
The Committee will make regular reports to the Board concerning its activities.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's business conduct
guidelines. These are the responsibility of management and the independent
auditor.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter or activity involving financial accounting
and financial reporting, as well as the internal controls of the Company. In
that regard, the Committee will have the authority to approve the retention of
external professionals to render advice and counsel in such matters. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
MEETINGS
The Committee is to meet at least four times annually and as many additional
times as the Committee deems necessary. Content of the agenda for each meeting
should be cleared by the Committee Chair. The Committee is to meet in separate
executive sessions with the chief financial officer and independent accountants
at least once each year and at other times when considered appropriate.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chair may request that members of management and
representative of the independent accountants be present at Committee meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
A-1
1. Review and reassess the adequacy of the charter annually and recommend any
proposed changes to the Board for approval. This should be done in
compliance with applicable NASD/AMEX Audit Committee Requirements.
2. Review with the Company's management and independent accountants the
Company's accounting and financial reporting controls. Obtain annually in
writing from the independent accountants their letter as to the adequacy of
such controls.
3. Review with the Company's management, internal audit and independent
accountants significant accounting and reporting principles, practices and
procedures applied by the Company in preparing its financial statements.
Discuss with the independent accountants their judgments about the quality,
not just the acceptability, of the Company's accounting principles used in
financial reporting.
4. Review the scope and general extent of the independent accountants' annual
audit. The Committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The
independent accountants should confirm to the Committee that no limitations
have been placed on the scope or nature of their audit procedures. The
Committee will review annually with management the fee arrangement with the
independent accountants.
5. Inquire as to the independence of the independent accountants and obtain
from the independent accountants, at least annually, a formal written
statement delineating all relationships between the independent accountants
and the Company as contemplated by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees.
6. Have a predetermined arrangement with the independent accountants that they
will advise the Committee through its Chair and management of the Company of
any matters identified through procedures followed for interim quarterly
financial statements, and that such notification as required under standards
for communication with Audit Committees is to be made prior to the related
press release and prior to filing Forms 10-Q. Also receive a confirmation
provided by the independent accountants at the end of each of the first
three quarters of the year that they have nothing to report to the
Committee, if that is the case, or the written enumeration of required
reporting issues.
7. At the completion of the annual audit, review with management and the
independent accountants the following:
- The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to shareholders
and on Form 10-K.
- Results of the audit of the financial statements and the related report
thereon and, if applicable a report on changes during the year in
accounting principles and their application.
- Significant changes to the audit plan, if any, and any serious disputes
or difficulties with management encountered during the audit. Inquire
about the cooperation received by the independent accountants during
their audit, including access to all requested records, data and
information. Inquire of the independent accountants whether there have
been any disagreements with management, which, if not satisfactorily
resolved, would have caused them to issue a nonstandard report on the
Company's financial statements.
- Other communications as required to be communicated by the independent
accountants by Statement of Auditing Standards (SAS) 61 as amended by SAS
90 relating to the conduct of the audit. Further, receive a written
communication provided by the independent accountants concerning their
judgment about the quality of the Company's accounting principles, as
outlined in SAS 61 as amended by SAS 90, and that they concur with
management's representation concerning audit adjustments, if any.
A-2
If deemed appropriate after such review and discussion, recommend to the
Board that the financial statements be included in the Company's annual
report of Form 10-K.
8. After preparation by management and review by independent accountants,
approve the report required under SEC rules to be included in the Company's
annual proxy statement. The charter is to be published as an appendix to
the proxy statement every three years.
9. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also elicit the comments of management
regarding the responsiveness of the independent accountants to the
Company's needs.
10. Meet with management and the independent accountants to discuss any
relevant significant recommendations that the independent accountants may
have, particularly those characterized as "material" or "serious".
Typically, such recommendations will be presented by the independent
accountants in the form of a Letter of Comments and Recommendations to the
Committee. The Committee should review responses of management to the
Letter of Comments and Recommendations from the independent accountants and
receive follow-up reports on action taken concerning the aforementioned
recommendations.
11. Recommend to the Board the selection, retention or termination of the
Company's independent accountants.
12. Review with management and the independent accountants the methods used to
establish and monitor the Company's policies with respect to unethical or
illegal activities by Company employees that may have a material impact on
the financial statements.
13. Generally as part of the review of the annual financial statements, receive
an oral report(s), at least annually, from the Company's legal counsel
concerning legal and regulatory matters that may have a material impact on
the financial statements.
14. As the Committee may deem appropriate, obtain, weigh and consider expert
advice as to Audit Committee related rules of the NASD/AMEX, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.
A-3
APPENDIX B
CHENIERE ENERGY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 31, 2001
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 Three Allen Center, 333 Clay Street, Suite 3400, Houston, Texas on
Thursday, May 31, 2001 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.
May 31, 2001
Please Detach and Mail in the Envelope Provided
A PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
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 John K. Howie
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.
______________________________________________
2. Approval of the amendment to the Amended and Restated Certificate of Incorporation FOR AGAINST ABSTAIN
decreasing the total number of shares of authorized Capital Stock to 45,000,000
shares and the number of shares of authorized Common Stock to 40,000,000 shares.
3. Appointment of PricewaterhouseCoopers LLP as independent accountants for the FOR AGAINST ABSTAIN
year ended December 31, 2001.
4. 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 SIX 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 _____________, 2001
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.
B-1