CHENIERE ENERGY, INC. 2019 PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Cheniere Energy, Inc.
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Notes:
Reg. §240.14a-101.§240.14a-101.
SEC 1913(3-99)
CHENIERE ENERGY, INC. 2019 PROXY STATEMENT
April 15, 2019
To our Shareholders:
It is our pleasure to invite you to attend the Cheniere Energy, Inc. 2019 Annual Meeting of Shareholders. The meeting will be held at 9:00 a.m., Central Time on May 16, 2019 at our corporate headquarters located at 700 Milam Street, Suite 1900, Houston, Texas 77002.
The following Notice of Annual Meeting describes the business to be conducted at the 2019 Annual Meeting of Shareholders. We encourage you to review the materials and vote your shares.
You may vote via the Internet, by telephone, or by submitting your completed proxy card by mail. If you attend the 2019 Annual Meeting of Shareholders, you may vote your shares in person if you are a shareholder of record.
Thank you for your continued support as investors in Cheniere Energy, Inc.
Very Truly Yours,
 |  | |||
| G. Andrea Botta | Jack A. Fusco | |||
| Chairman of the Board | President and Chief Executive Officer | |||
CHENIERE ENERGY, INC.
700 Milam Street, Suite 1900
Houston, Texas 77002
(713)375-5000
Notice of Special Meeting of Shareholders
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS | ||||||
TIME AND DATE: | 9:00 a.m., Central Time on | |||||
| Cheniere Energy, Inc. | |||||
700 Milam Street, Suite 1900
Houston, Texas
700 Milam Street, Suite 1900
Houston, TX 77002
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ITEMS OF BUSINESS: | • To elect ten members of the Board of Directors to hold office for aone-year term expiring at the 2020 Annual Meeting of Shareholders. •To approve, on an advisory andnon-binding basis, the | |||||
2018.
• To transact such other business as may properly come before the meeting and any adjournment or postponement thereof. | ||||||
RECORD DATE: | You can vote if you were a shareholder of record on | |||||
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| PROXY VOTING: | It is important that your shares be represented and voted at the meeting. You can vote your shares by completing and returning your proxy card by mail or by voting on the Internet or by telephone. See details under the heading “How do I vote?” | |||||
| We are making this Proxy Statement, including the Notice of | |||||
http://www.cheniere.com/2017SpecialMeeting
By order of the Board of Directors
Sean N. Markowitz
Corporate Secretary
December 20, 2016April 15, 2019
December 20, 2016
To our Shareholders:
It is our pleasure to invite you to attend our 2017 Special Meeting of Shareholders. This past year has been a busy one for Cheniere. Under new leadership, Cheniere has implemented a focused and clarified strategy, adopted comprehensive governance enhancements, appointed a new executive leadership team, and in 2016 delivered significant operating and financial results. Beginning in early 2017, Cheniere intends to transition to a more consistent, competitive, and conventional total compensation philosophy, including equity-based long-term incentive opportunities tied to financial and growth objectives.
We believe that a new long-term incentive program that provides for equity-based awards is a required and critical element of the new compensation philosophy and strategy. Equity grants align our employees’ interests with the interests of shareholders by rewarding long-term value creation. They enable us to attract and retain highly qualified individuals for important positions throughout the Company.
As a result, we are seeking a shareholder vote to approve or not approve the issuance of awards with respect to the 7,845,630 shares of common stock comprising the Available Shares (as defined in Proposal 1). In order to further the Company’s transition and fully implement our new compensation strategy, we are seeking such shareholder approval. Proposal 1 sets forth the required steps and shareholder approval necessary to proceed with our transition. We expect these shares to last approximately 5 years and be used to grant awards to all of our approximately 900 employees.
We encourage you to review these materials and vote your shares. We are proud that you have chosen to invest in Cheniere. On behalf of our management and directors, thank you for your continued support and confidence.
Very truly yours,
Jack A. Fusco
President and Chief Executive Officer
Table of ContentsTABLE OF CONTENTS
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Code of Conduct and Ethics and Corporate Governance Guidelines | 26 | |||
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All Other Compensation included in the Summary Compensation Table | ||||
Narrative to the Summary Compensation & Grants of Plan-Based Awards Tables | ||||
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Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access) | ||||
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CHENIERE ENERGY, INC.
700 Milam Street, Suite 1900
Houston, Texas 77002
(713) 375-5000
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Why did I receive these proxy materials?
We are providing these proxy materials in connection with the solicitation by the Board of Directors (the “Board”) of Cheniere Energy, Inc. (“Cheniere,” the “Company,” “we,” “us” or “our”), a Delaware corporation, of proxies to be voted at our Special Meeting of Shareholders (the “Meeting”) and any adjournment or postponement thereof.
You are invited to attend the Meeting on January 31, 2017, beginning at 9:00 a.m., Central Time. The Meeting will be held at the Company’s headquarters at 700 Milam Street, Suite 1900, Houston, Texas 77002.
This Notice of Special Meeting, Proxy Statement and proxy card, are being mailed to shareholders on or about December 20, 2016.
Do I need a ticket to attend the Meeting?
You will need proof of ownership and valid government-issued picture identification to enter the Meeting.
If your shares are held beneficially in the name of a bank, broker or other holder of record and you plan to attend the Meeting, you must present proof of your ownership of Cheniere stock, as of December 14, 2016 (the “Record Date”), such as a bank or brokerage account statement, to be admitted to the Meeting.
If you have any questions about attending the Meeting, you may contact Investor Relations at info@cheniere.com or 713-375-5100.
No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the Meeting.
Who is entitled to vote at the Meeting?
Holders of Cheniere common stock at the close of business on the Record Date are entitled to receive this Notice and to vote their shares at the Meeting. As of the Record Date, there were 234,961,842 shares of common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote on each matter properly brought before the Meeting.
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What is the difference between holding shares as a shareholder of record and as a beneficial owner?
If your shares are registered directly in your name with Cheniere’s transfer agent, Computershare Trust Company, N.A., you are considered the “shareholder of record” of those shares. The Notice of Special Meeting, Proxy Statement and proxy card have been sent directly to you by Cheniere. If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of such shares held in street name. The Notice of Special Meeting, Proxy Statement and proxy card have been forwarded to you by your broker, bank or other holder of record, who is considered the shareholder of record of those shares. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or on the Internet.
How do I vote?
You may vote using any of the following methods:
By mail
You may submit your proxy vote by mail by signing a proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your broker, trustee or nominee, and mailing it in the enclosed envelope. If you provide specific voting instructions, your shares will be voted as you have instructed. If you do not indicate your voting preferences, your shares will be voted as recommended by the Board; provided, however, if you are a beneficial owner, your bank, broker or other holder of record is not permitted to vote your shares on the following proposal if your bank, broker or other holder of record does not receive voting instructions from you: Proposal 1 to approve the issuance of awards with respect to 7,845,630 shares of common stock available for issuance under the Cheniere Energy, Inc. 2011 Incentive Plan, as amended.
By telephone or on the Internet
If you have telephone or Internet access, you may submit your proxy vote by following the instructions provided on your proxy card or voting instruction form. If you are a beneficial owner, the availability of telephone and Internet voting will depend on the voting processes of your broker, bank or other holder of record. Therefore, we recommend that you follow the voting instructions in the materials you receive.
In person at the Meeting
If you are the shareholder of record, you have the right to vote in person at the Meeting. If you are the beneficial owner, you are also invited to attend the Meeting. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Meeting unless you obtain a “legal proxy” from your broker, bank or other holder of record that holds your shares, giving you the right to vote the shares at the Meeting.
Can I revoke my proxy?
If you are a shareholder of record, you can revoke your proxy before it is exercised by:
If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank, broker or other holder of record. You may also vote in person at the Meeting if you obtain a legal proxy as described in the answer to the preceding question.
Who will receive a proxy card?
If you are a shareholder of record, you will receive a proxy card for the shares you hold in certificate form or in book-entry form. If you are a beneficial owner, you will receive voting instructions from your bank, broker or other holder of record.
Is there a list of shareholders entitled to vote at the Meeting?
The names of shareholders of record entitled to vote at the Meeting will be available at the Meeting and for ten days prior to the Meeting for any purpose germane to the Meeting. The list will be available between the hours of 8:30 a.m. and 4:30 p.m., Central Time, at our offices at 700 Milam Street, Suite 1900, Houston, Texas 77002, by contacting the Corporate Secretary of the Company.
What are the voting requirements to approve the proposal discussed in this Proxy Statement?
The presence in person or by proxy of the holders of a majority in voting power of the outstanding shares of common stock entitled to vote at the Meeting is necessary to constitute a quorum. In the absence of a quorum at the Meeting, the Meeting may be adjourned from time to time without notice, other than an announcement at the Meeting, until a quorum shall be present. Abstentions and “broker non-votes” represented by submitted proxies will be included in the calculation of the number of the shares present at the Meeting for purposes of determining a quorum. “Broker non-votes” occur when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
Proposal 1—To be approved, Proposal 1 to approve the issuance of awards with respect to 7,845,630 shares of common stock available for issuance under the Cheniere Energy, Inc. 2011 Incentive Plan, as amended must receive the approval of a majority of the shares present and entitled to vote on the proposal, meaning that the number of votes “for” Proposal 1 must exceed the number of votes “against” it. Abstentions will be counted as the functional equivalent of “no” votes and broker non-votes will not be considered in determining the outcome of Proposal 1, but will be counted for purposes of establishing a quorum. If you are a beneficial owner, your bank, broker or other holder of record may not vote your shares with respect to Proposal 1 without specific instructions from you because Proposal 1 is not considered a “routine” matter.
Could other matters be decided at the Meeting?
As of the date of this Proxy Statement, we do not know of any matters to be raised at the Meeting other than those referred to in this Proxy Statement. If other matters are properly presented for consideration at the Meeting, the persons named in your proxy card will have the discretion to vote on those matters for you.
Who will pay for the cost of this proxy solicitation?
We will pay for the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by telephone, electronic transmission and facsimile transmission. We have hired D. F. King & Co., Inc., 48 Wall Street, 22nd Floor, New York, NY 10005, to solicit proxies. We will pay D.F. King a fee of $12,500 plus expenses for these services.
Who will count the vote?
Broadridge Financial Solutions, Inc., an independent third party, will tabulate the votes.
Important NoticeNote Regarding the Availability of Proxy Materials for the Special Meeting to be held on January 31, 2017
The Proxy Statement, including the Notice of Special Meeting, is available on our website athttp://www.cheniere.com/2017SpecialMeeting. Please note that the Notice of Special Meeting is not a form for voting, and presents only an overview of the more complete proxy materials, which contain important information and are available on the Internet or by mail. We encourage our shareholders to access and review the proxy materials before voting.
NOTE REGARDING FORWARD-LOOKING STATEMENTSForward-Looking Statements
This Proxy Statement contains forward-looking statements relating to, among other things, business strategy, performance and expectations for project development. The reader is cautioned not to place undue reliance on these statements and should review the sections captioned “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form10-K for important information about these statements, including the risks, uncertainties and other factors that could cause actual results to vary materially from the assumptions, expectations and projections expressed in any forward-looking statements. These forward-looking statements speak only as of the date made, and, other than as required by law, we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or developments or otherwise.
The following is an overview of information that you will find throughout this Proxy Statement, but does not contain all of the information that you should consider. For more complete information about these topics, please review the complete Proxy Statement prior to voting.
ANNUAL MEETING OF SHAREHOLDERS | ||||||||
| TIME AND DATE: | 9:00 a.m., Central Time on May 16, 2019 | ||||||
 | PLACE: | Cheniere Energy, Inc. 700 Milam Street, Suite 1900 Houston, TX 77002 | ||||||
 | RECORD DATE: | April 1, 2019 (the “Record Date”) | ||||||
 | VOTING: | Shareholders as of the close of business on the Record Date are entitled to vote. Each share of common stock is entitled to one vote for each matter to be voted upon. | ||||||
 | ADMISSION: | No admission card is required to enter the Cheniere Energy, Inc. (“Cheniere,” the “Company,” “we,” “us” or “our”) 2019 Annual Meeting of Shareholders (the “Meeting”), but you will need proof of your stock ownership and valid government-issued picture identification. Please see “Frequently Asked Questions” on page 73 of this Proxy Statement for more information. | ||||||
VOTING MATTERS AND BOARD RECOMMENDATIONS
PROPOSAL
| DESCRIPTION
| BOARD VOTE RECOMMENDATION
| PAGE REFERENCE (FOR MORE DETAILS) | |||
1 | Election of directors | FOR EACH NOMINEE | 8 | |||
2 | Advisory andnon-binding vote on the compensation of the Company’s named executive officers for 2018 |
FOR |
68 | |||
3 | Ratification of appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2019 |
FOR |
70 | |||
| 2019 PROXY STATEMENT | 1 | |||
PROXY SUMMARY
STRATEGIC ACCOMPLISHMENTS
The following items highlight our 2018 and recent accomplishments. For more information about these accomplishments and their relationship to our executive compensation program, please see “Compensation Discussion and Analysis” on page 34 of this Proxy Statement.
| Final investment decision with respect toCorpus Christi Train 3 | Signedlong-term SPAs for~7.5 MTPA of LNG | Record financial results:revenue of~$8 billion, net income ofover $470 million and Consolidated Adjusted EBITDA ofover $2.6 billion | Over270 cargoes exported in 2018 totaling~1 TCF of LNG | |||||||||
Strategic
In November 2018, we entered into an engineering, procurement and construction (“EPC”) contract with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for Train 6 of the natural gas liquefaction and export facilities at the Sabine Pass LNG terminal in Louisiana (the “SPL Project”). We also issued limited notices to proceed to Bechtel to commence early engineering, procurement and site works.
In May 2018, our Board made a positive final investment decision (“FID”) with respect to Train 3 of the natural gas liquefaction and export facility at the Corpus Christi LNG terminal (the “CCL Project”) and issued a full notice to proceed to Bechtel under the EPC contract for Train 3.
In June 2018, we filed an application with the Federal Energy Regulatory Commission with respect to Corpus Christi Stage 3, consisting of seven midscale liquefaction Trains with an expected aggregate nominal production capacity of approximately 9.5 million tonnes per annum (“mtpa”) and one liquefied natural gas (“LNG”) storage tank.
In 2018, we signed seven long-term sale and purchase agreements (“SPAs”) with six creditworthy counterparties totaling approximately 7.5 mtpa of LNG.
Operational
As of February 20, 2019, over 575 cumulative LNG cargoes have been produced, loaded and exported from the SPL Project and the CCL Project, with more than 270 cargoes in 2018 alone from the SPL Project, with deliveries to 32 countries and regions worldwide.
In November 2018 and December 2018, we commenced production and shipment of LNG commissioning cargoes from Train 5 of the SPL Project and Train 1 of the CCL Project, respectively, leading to the substantial completion of Train 1 of the CCL Project in February 2019 and Train 5 of the SPL Project in March 2019.
For full year 2018, over 23 million hours of labor were completed with a Lost Time Incident Rate of approximately 0.01. This achievement places us within the top quartile of benchmark metrics published by the Bureau of Labor Statistics for North American Industry Classification (NAICS) codes that align with our work activities.
For full year 2018, a total of approximately 975 TBtu of LNG was exported from the SPL Project and the CCL Project, which was approximately 87% of all LNG exported from the United States.
Financial
For full year 2018, we achieved record results in multiple key financial metrics, including net income attributable to common stockholders of over $470 million, consolidated revenues of approximately $8 billion and Consolidated Adjusted EBITDA of over $2.6 billion. For a definition of Consolidated Adjusted EBITDA and a reconciliation of thisnon-GAAP measure to net income, the most directly comparable GAAP financial measure, please see Appendix C.
During 2018, our stock price increased by approximately 10% and outperformed the S&P 500 Index by approximately 15%. Additionally, the total enterprise value of the Company increased by approximately 12%.
| 2 | CHENIERE | |||
2018 PERFORMANCE AND STRATEGIC ACCOMPLISHMENTS
In September 2018, we closed the previously announced merger of Cheniere Energy Partners LP Holdings, LLC (“Cheniere Holdings”) with our wholly owned subsidiary.
We reached the following contractual milestones:
| ○ | In June 2018, the date of first commercial delivery was reached under the20-year SPA with BG Gulf Coast LNG, LLC relating to Train 3 of the SPL Project. |
| ○ | In March 2018, the date of first commercial delivery was reached under the20-year SPA with GAIL (India) Limited relating to Train 4 of the SPL Project. |
| 2019 PROXY STATEMENT | 3 | |||
PROXY SUMMARY
We are committed to the values of effective corporate governance and high ethical standards. Our Board of Directors (the “Board”) believes that these values are conducive to strong performance and creating long-term shareholder value. Our governance framework gives our highly experienced directors the structure necessary to provide oversight, advice and counsel to Cheniere.
Since our 2017 Annual Meeting, we have taken the following governance actions:
engaged with more than 50% of our shareholders each year regarding governance matters;
added additional details regarding the experience of our directors to our proxy statements;
increased our director ownership guidelines; and
adoptednon-employee director equity compensation limits.
The “Governance Information” section of this Proxy Statement, beginning on page 17, describes our corporate governance structure and policies, which include the following:
Board Independence | • 8 out of 10 of our current directors and director nominees are independent. • Independent directors meet regularly without management present. • Our President and CEO is the only management director. | |
| Board Composition | • The Board consists of 10 directors, with an average age of 59 (as of May 16, 2019). • The Board values diversity and experience in assessing its composition. | |
| Board Performance | • The Board regularly assesses its performance through Board and committee self-evaluations. | |
| Board Committees | • We have three standing Board committees—Audit, Governance and Nominating and Compensation. • All of our Board committees are comprised of and chaired solely by independent directors. | |
| Leadership Structure | • Our Chairman of the Board and CEO roles were split in December 2015. • Our independentNon-Executive Chairman of the Board provides leadership to the Board and ensures that the Board operates independently of management. | |
| Risk Oversight | • The Board has oversight responsibility for assessing the primary risks (including liquidity, credit, operations and regulatory compliance) facing the Company, the relative magnitude of these risks and management’s plan for mitigating these risks. In addition to the Board’s oversight responsibility, the committees of the Board review the risks that are within their areas of responsibility. | |
| Open Communication | • We encourage open communication and strong working relationships among theNon-Executive Chairman of the Board and other directors. • Our directors have access to management and employees. | |
Director and Executive Stock Ownership | • We have had rigorous stock ownership guidelines for our directors and executive officers since 2008 and amended our stock ownership guidelines for our directors in February 2017 to make them more rigorous. | |
Director Compensation Limit | • We have capped the annual ordinary course equity award that may be granted to anon-employee director at $495,000 per calendar year. Please see "Director Compensation" on pages 27-28 of this Proxy Statement. | |
Accountability to Shareholders | • Directors are elected annually by a majority of the votes cast with respect to such director. • The Board maintains a process for shareholders to communicate with the Board. • We conduct an annual advisorysay-on-pay vote. • A shareholder, or a group of up to 20 shareholders, owning at least 3% of our common stock for at least the prior 3 consecutive years (and meeting certain other requirements) have the ability to nominate up to 20% of the number of directors serving on our Board (proxy access). | |
Management Succession Planning | • The Governance and Nominating Committee has oversight of succession planning, both planned and emergency. | |
| Governance Policies | • Directors are required to retire at age 75. • We maintain codes of conduct for directors, officers and employees. • We do not allow pledging of Company stock as collateral for a loan or holding Company stock in margin accounts. • We do not allow hedging or short sales of Company stock. • We do not have a shareholder rights plan, or “poison pill”. | |
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OUR DIRECTOR NOMINEES
OUR DIRECTOR NOMINEES
You are being asked to vote on the election of the 10 director nominees listed below. Each director is elected annually by a majority of the votes cast. Detailed information about each nominee, including background, skills and expertise, can be found in “Proposal 1 – Election of Directors” beginning on page 8.
| NAME
| AGE (AS OF MAY 16, 2019)
| DIRECTOR SINCE
| PRINCIPAL OCCUPATION
| |||
| G. Andrea Botta | 65 | 2010 | Chairman of the Board, Cheniere Energy, Inc.; President, Glenco LLC | |||
| Jack A. Fusco | 56 | 2016 | President and Chief Executive Officer, Cheniere Energy, Inc. | |||
| Vicky A. Bailey | 67 | 2006 | President, Anderson Stratton International, LLC | |||
| Nuno Brandolini | 65 | 2000 | Former General Partner, Scorpion Capital Partners, L.P. | |||
| David I. Foley | 51 | 2012 | Senior Managing Director, The Blackstone Group L.P.; Chief Executive Officer, Blackstone Energy Partners L.P. | |||
| David B. Kilpatrick | 69 | 2003 | President, Kilpatrick Energy Group | |||
| Andrew Langham | 46 | 2017 | General Counsel, Icahn Enterprises L.P. | |||
| Courtney R. Mather | 42 | 2018 | Portfolio Manager of Icahn Capital | |||
| Donald F. Robillard, Jr. | 67 | 2014 | Former Executive Vice President, Chief Financial Officer and Chief Risk Officer of Hunt Consolidated, Inc. and Former Chief Executive Officer and Chairman, ES Xplore, LLC | |||
Neal A. Shear | 64 | 2014 | Senior Advisor and Chair of the Advisory Committee of Onyxpoint Global Management LP |
Each director nominee attended or participated in at least 75% of the aggregate number of all meetings of the Board and of each committee on which he or she sits for which the director was eligible to attend in 2018.
EXECUTIVE COMPENSATION HIGHLIGHTS
In late 2016 and early 2017, our leadership team and Compensation Committee considered input from our shareholders regarding executive compensation. As a result, we implemented several fundamental changes to our executive compensation program to align with our peer group at the time, which focused on our national industry classification – natural gas storage and transportation – and included a number of regulated utilities and smaller pipeline companies. As a result of our growth from a development company into a top tier LNG operator and receipt of shareholder feedback, the Compensation Committee, together with Meridian Compensation Partners, its independent compensation consultant, has further refined the framework of our executive compensation program for 2019. Our achievements and success over the past several years led to a realignment with a new peer group for 2019, and we have reassessed our compensation framework to be consistent with our new peer group and more closely align with our share price performance. Our new program contemplates awarding all compensation within the designed framework of the approved plan, rather than featuringad-hoc grants that can lead to significant variation in year over year compensation. We believe these changes align our program with competitive ranges in our new peer group and take into account the shareholder feedback that we have received.
Compensation Governance Practices
Clear, direct link between pay and performance
Majority of incentive awards earned based on performance
No hedging or “short sales” of Company stock
No pledging of Company stock as collateral for a loan or holding Company stock in margin accounts
| 2019 PROXY STATEMENT | 5 | |||
PROXY SUMMARY
Robust stock ownership guidelines
No defined benefit retirement plan or supplemental executive retirement plan
Robust compensation risk management program
Non-employee director equity compensation limits
Minimum vesting schedule for long-term incentive awards of at least 12 months, subject to limited exceptions
No material perquisites
Solicit annual advisory vote on executive compensation
Annually review the independence of the compensation consultant retained by the Compensation Committee
Philosophy and Objectives
The Board and the Compensation Committee are committed to apay-for-performance compensation structure that aligns our executive compensation with the key drivers of long-term growth and creation of shareholder value, including:
Annual and long-term incentive awards are primarily performance-based
Annual incentive awards earned are based on achievement of specific financial, operating, construction, safety and strategic goals
A significant portion of long-term incentive awards earned is based on financial performance and growth metrics
Equity-based compensation delivers annual, market-competitive opportunities within common norms of shareholder dilution and value creation
Executive Compensation Components
The primary components of our executive compensation program, as applied to our 2018 Named Executive Officers, are as follows:
TYPE | PURPOSE | PAGE REFERENCE | ||
Base Salary | Provide a minimum, fixed level of | 42 | ||
Annual Incentive Program | Drive achievement of annual corporate goals including key financial, operating, construction, safety and strategic goals that create value for shareholders. | 43 | ||
LTI Program | Align executive officers’ interests with the interests of shareholders by rewarding sustained financial performance and growth through a multi-year performance period. | 45 | ||
Post-Employment Compensation | Assist executive officers and other eligible employees to prepare financially for retirement, to offer benefits that are competitive andtax-efficient and to provide a benefits structure that allows for reasonable certainty of future costs. Help retain executive officers and certain other qualified employees, maintain a stable work environment and provide financial security in the event of achange-in-control or in the event of an involuntary termination of employment. | 49-51 | ||
| 6 | CHENIERE | |||
RATIFICATION OF KPMG AS AUDITOR FOR 2019
RATIFICATION OF KPMG AS AUDITOR FOR 2019
As a matter of good corporate governance, we are asking our shareholders to ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2019. The following table sets forth the fees billed to us by KPMG for professional services for 2018 and 2017.
| 2018 | 2017 | |||||||
Audit Fees | $ | 6,663,332 | $ | 6,954,381 | ||||
Audit Related Fees | $ | — | $ | — | ||||
Tax Fees | $ | 196,480 | $ | 88,565 | ||||
All Other Fees | $ | 2,430 | $ | 80,570 | ||||
Total | $ | 6,862,242 | $ | 7,123,516 |
See “Report of the Audit Committee” on page 69 and the information provided in Proposal 3, beginning on page 70, for more details.
| 2019 PROXY STATEMENT | 7 | |||
PROPOSAL 1 – ELECTION OF DIRECTORS
This year, there are 10 nominees standing for election as directors at the Meeting. Below is a summary of our director nominees, including their committee memberships as of April 15, 2019. The Board, with assistance from the Governance and Nominating Committee, will evaluate and reassign committee memberships as needed following the Meeting and election of the director nominees. Detailed information about each director’s background, skills and expertise is provided below.
| NOMINEE COMMITTEE MEMBERSHIPS | ||||||||||||||||||
NAME CURRENT POSITION | AGE (AS OF MAY 16, 2019) | DIRECTOR SINCE | INDEPENDENT | AUDIT | GOVERNANCE AND NOMINATING | COMPENSATION | ||||||||||||
G. Andrea Botta Chairman of the Board, Cheniere Energy, Inc. President, Glenco LLC | 65 | 2010 | YES | Chair | ||||||||||||||
Jack A. Fusco President and Chief Executive Officer, Cheniere Energy, Inc. | 56 | 2016 | NO | |||||||||||||||
Vicky A. Bailey President, Anderson Stratton International, LLC | 67 | 2006 | YES | ● | ● | |||||||||||||
Nuno Brandolini Former General Partner, Scorpion Capital Partners, L.P. | 65 | 2000 | YES | ● | ● | |||||||||||||
David I. Foley Senior Managing Director, The Blackstone Group L.P. Chief Executive Officer, Blackstone Energy Partners L.P. | 51 | 2012 | NO | |||||||||||||||
David B. Kilpatrick President, Kilpatrick Energy Group | 69 | 2003 | YES | ● | ● | |||||||||||||
Andrew Langham General Counsel, Icahn Enterprises L.P. | 46 | 2017 | YES | ● | ● | |||||||||||||
Courtney R. Mather Portfolio Manager of Icahn Capital | 42 | 2018 | YES | ● F | ||||||||||||||
Donald F. Robillard, Jr. Former Executive Vice President, Chief Financial Officer and Chief Risk Officer of Hunt Consolidated, Inc. and Former Chief Executive Officer and Chairman, ES Xplore, LLC | 67 | 2014 | YES | Chair; F | ||||||||||||||
Neal A. Shear Senior Advisor and Chair of the Advisory Committee of Onyxpoint Global Management LP | 64 | 2014 | YES | Chair | ||||||||||||||
F Audit Committee Financial Expert
The Board has determined that each of Messrs. Mather and Robillard is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the Securities and Exchange Commission (“SEC”).
| 8 | CHENIERE | |||
DIRECTORS AND NOMINEES
Summary of Director Core Competencies
The following chart summarizes the core competencies of our director nominees.
SNAPSHOT OF 2019 DIRECTOR NOMINEES
Our director nominees complement each other to create
a well-rounded boardroom, and each adds:
A deep commitment to stewardship
A proven record of success
Unique and valuable insight
International industry experience
There are 10 nominees standing for election as directors at the Meeting. Each nominee, if elected, will hold office for aone-year term expiring at the 2020 Annual Meeting of Shareholders and will serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. Each of the director nominees has consented to serve as a director if elected orre-elected.
Each of the director nominees currently serves on the Board. Directors are elected by a majority of votes cast with respect to such director nominee. Unless your proxy specifies otherwise, it is intended that the shares represented by your proxy will be voted for the election of these 10 nominees. If you are a beneficial owner, your bank, broker or other holder of record is not permitted to vote your shares on Proposal 1 to elect directors if the bank, broker or other holder of record does not receive specific voting instructions from you. Proxies cannot be voted for a greater number of persons than the number of nominees named. The Board is unaware of any circumstances likely to render any nominee unavailable.
The Board recommends a voteFOR the election of the 10 nominees as directors of the Company to hold office for aone-year term expiring at the 2020 Annual Meeting of Shareholders or until their successors are duly elected and qualified.
| 2019 PROXY STATEMENT | 9 | |||
PROPOSAL 1 – ELECTION OF DIRECTORS
DIRECTOR NOMINATIONS AND QUALIFICATIONS
Director Nomination Policy and Procedures. Our Director Nomination Policy and Procedures is attached to the Governance and Nominating Committee’s written charter as Exhibit A, which is available on our website atwww.cheniere.com. The Governance and Nominating Committee considers suggestions for potential director nominees to the Board from any source, including current members of the Board and our management, advisors and shareholders. The Governance and Nominating Committee evaluates potential nominees by reviewing their qualifications and any other information deemed relevant. Director nominees are recommended to the Board by the Governance and Nominating Committee.
The full Board will select and recommend candidates for nomination as directors for shareholders to consider and vote upon at the annual shareholders’ meeting. The Governance and Nominating Committee reviews and considers any candidates submitted by a shareholder or shareholder group in the same manner as all other candidates.
Qualifications for consideration as a director nominee vary according to the particular areas of expertise being sought as a complement to the existing Board composition. However, minimum criteria for selection of members to serve on our Board include the following:
highest professional and personal ethical standards and integrity;
high level of education and/or business experience;
broad-based business acumen;
understanding of the Company’s business and industry;
sufficient time to effectively carry out their duties;
strategic thinking and willingness to share ideas;
loyalty and commitment to driving the success of the Company;
network of business and industry contacts; and
diversity of experiences, expertise and backgrounds among members of the Board.
Director Search. We have engaged an independent director search firm to help identify prospective director candidates, with the goal of adding one director to our Board in 2019. In addition to the minimum criteria described above, the Governance and Nominating Committee is evaluating the skill sets needed to maximize Board effectiveness and support the strategic direction of the Company. We will look at a diverse pool of candidates, considering each candidate’s business or professional experience, demonstrated leadership ability, integrity and judgment, record of public service, diversity, financial and technological acumen and international experience. We view and define diversity in a broad sense, which includes gender, ethnicity, age, education, experience and leadership qualities.
Practices for Considering Diversity. The minimum criteria for selection of members to serve on our Board are designed to ensure that the Governance and Nominating Committee selects director nominees taking into consideration that the Board will benefit from having directors that represent a diversity of experience and backgrounds. Director nominees are selected so that the Board represents a diversity of experience in areas needed to foster the Company’s business success, including experience in the energy industry, finance, consulting, international affairs, public service, governance and regulatory compliance. Each year the Board and each committee participates in a self-assessment or evaluation of the effectiveness of the Board and its committees. These evaluations assess the diversity of talents, expertise and occupational and personal backgrounds of the Board members.
Shareholder Nominations for Director. A shareholder of the Company may nominate a candidate or candidates for election to the Board if such shareholder (1) was a shareholder of record at the time the notice provided for below is delivered to the Corporate Secretary, (2) is entitled to vote at the meeting of shareholders called for the election of directors and is entitled to vote upon such election and (3) complies with the notice procedures set forth in our Bylaws. Nominations made by a shareholder must be made by giving timely notice in writing to the Corporate Secretary of the Company at the following address: Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, Texas 77002. To be timely, a shareholder’s notice must be delivered not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, prior to the first anniversary of the preceding year’s annual meeting. However, if (and only if) the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the shareholder must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting
| 10 | CHENIERE | |||
DIRECTOR NOMINATIONS AND QUALIFICATIONS
or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company. In no event will the public announcement of an adjournment or postponement of an annual meeting of shareholders commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above. A shareholder’s notice must include information about the shareholder and the nominee, as required by our Bylaws, which are available on our website atwww.cheniere.com.
Director Nominations for Inclusion in Proxy Statement (Proxy Access).A shareholder, or group of up to 20 shareholders, owning at least 3% of the Company’s common stock for at least the prior three consecutive years (and meeting the other requirements set forth in our Bylaws) may nominate for election to our Board and inclusion in our proxy statement for our annual meeting of shareholders up to 20% of the number of directors serving on our Board. In September 2016, the Board amended the Company’s proxy access bylaw to (i) expand the definition of Eligible Holder to specifically allow groups of funds under common management and funded primarily by the same employer to be treated as one Eligible Holder, (ii) clarify the timing required for a shareholder to propose a director nominee and (iii) eliminate the provision that allowed the Company to omit from its Proxy Statement a director nominee who receives a vote of less than 25% of the shares of common stock entitled to vote for such nominee at one of the two preceding annual meetings.
Notice must include all information formally stated in our Bylaws, which is available on our website atwww.cheniere.com. In addition to complying with the other requirements set forth in our Bylaws, an eligible shareholder must provide timely notice in writing to the Corporate Secretary of the Company at the following address: Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, Texas 77002. To be timely for purposes of proxy access, a shareholder’s notice must be delivered not later than the close of business on the 120th day, nor earlier than the close of business on the 150th day, prior to the first anniversary of the date that the Company first mailed its proxy statement to shareholders for the prior year’s annual meeting of shareholders. However, if (and only if) the annual meeting is not scheduled to be held within a period that commences 30 days before such anniversary date and ends 30 days after such anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), notice must be given in the manner provided in our Bylaws by the later of the close of business on the date that is 180 days prior to such Other Meeting Date and the 10th day following the date on which public announcement of such Other Meeting Date is first made.
Director Qualifications. The Board has concluded that, in light of our business and structure, each of our director nominees possesses relevant experience, qualifications, attributes and skills and should continue to serve on our Board as of the date of this Proxy Statement. The primary qualifications of our directors are further discussed under “Director Biographies” below.
Director Retirement Policy. The Board has adopted a mandatory director retirement policy that requires each director who has attained the age of 75 to retire from the Board at the annual meeting of shareholders of the Company held in the year in which his or her current term expires, unless the Board determines such mandate for a particular director is not at the time in the best interests of the Company. The Board believes this policy will ensure a healthy rotation of directors, which will promote the continued influx of new ideas and perspectives to the Board.
| 2019 PROXY STATEMENT | 11 | |||
PROPOSAL 1 – ELECTION OF DIRECTORS
JACK A . FUSCO PRESIDENT & CEO | AGE:56 DIRECTOR SINCE: JUNE 2016 | |||||
Jack A. Fusco is a director and the President and Chief Executive Officer of Cheniere. Mr. Fusco has served as President and Chief Executive Officer since May 2016 and as a director since June 2016. In addition, Mr. Fusco serves as Chairman, President and Chief Executive Officer of Cheniere Energy Partners GP, LLC, a wholly-owned subsidiary of Cheniere and the general partner of Cheniere Energy Partners, L.P. (”Cheniere Partners”) a publicly-traded limited partnership that is operating the Sabine Pass LNG terminal. Mr. Fusco served as Chairman, President and Chief Executive Officer of Cheniere Holdings from June 2016 to September 2018. Mr. Fusco is also a Manager, President and Chief Executive Officer of the general partner of Sabine Pass LNG, L.P. and Chief Executive Officer of Sabine Pass Liquefaction, LLC. Mr. Fusco received recognition as Best CEO in the electric industry by Institutional Investor in 2012 as ranked by all industry analysts and for Best Investor Relations by a CEO or Chairman among allmid-cap companies by IR Magazine in 2013.
Mr. Fusco served as Chief Executive Officer of Calpine Corporation (“Calpine”) from August 2008 to May 2014 and as Executive Chairman of Calpine from May 2014 through May 11, 2016. Mr. Fusco served as a member of the board of directors of Calpine from August 2008 until March 2018, when the sale of Calpine to an affiliate of Energy Capital Partners and a consortium of other investors was completed. Mr. Fusco was recruited by Calpine’s key shareholders in 2008, just as that company was emerging from bankruptcy. Calpine grew to become America’s largest generator of electricity from natural gas, safely and reliably meeting the needs of an economy that demands cleaner, more fuel-efficient and dependable sources of electricity. As Chief Executive Officer of
Calpine, Mr. Fusco managed a team of approximately 2,300 employees and led one of the largest purchasers of natural gas in America, a successful developer of newgas-fired power generation facilities and a company that prudently managed the inherent commodity trading and balance sheet risks associated with being a merchant power producer.
Mr. Fusco’s career of over 30 years in the energy industry began with his employment at Pacific Gas & Electric Company upon graduation from California State University, Sacramento with a Bachelor of Science in Mechanical Engineering in 1984. He joined Goldman Sachs 13 years later as a Vice President with responsibility for commodity trading and marketing of wholesale electricity, a role that led to the creation of Orion Power Holdings, an independent power producer that Mr. Fusco helped found with backing from Goldman Sachs, where he served as President and Chief Executive Officer from 1998-2002. In 2004, he was asked to serve as Chairman and Chief Executive Officer of Texas Genco LLC by a group of private institutional investors, and successfully managed the transition of that business from a subsidiary of a regulated utility to a strong and profitable independent company, generating a more than5-fold return for shareholders upon its merger with NRG in 2006.
Skills and Qualifications:
Mr. Fusco brings his prior experience leading successful energy industry companies and his perspective as President and Chief Executive Officer of Cheniere.
G . ANDREA BOTTA CHAIRMAN OF THE BOARD AND CHAIRMAN OF GOVERNANCE AND NOMINATING COMMITTEE | AGE:65 DIRECTOR SINCE: 2010 | |||||
G. Andrea Botta is the Chairman of the Board and Chairman of our Governance and Nominating Committee. Mr. Botta has served as President of Glenco LLC (“Glenco”), a private investment company, since February 2006. Prior to joining Glenco, Mr. Botta served as Managing Director of Morgan Stanley from 1999 to February 2006. Before joining Morgan Stanley, he was President of EXOR America, Inc. (formerlyIFINT-USA, Inc.) from 1993 until September 1999 and for more than five years prior thereto, Vice President of Acquisitions of
IFINT-USA, Inc. From March 2008 until February 2018, Mr. Botta served on the board of directors of Graphic Packaging Holding Company. Mr. Botta earned a degree in Economics and Business Administration from the University of Torino in 1976.
Skills and Qualifications:
Mr. Botta brings a unique international perspective to our Board and significant investing expertise. He has over 30 years of investing experience primarily in private equity investing.
| 12 | CHENIERE | |||
DIRECTOR BIOGRAPHIES
VICKY A . BAILEY MEMBER OF AUDIT COMMITTEE AND GOVERNANCE AND NOMINATING COMMITTEE | AGE:67 DIRECTOR SINCE: 2006 | |||||
Vicky A. Bailey is a member of our Audit Committee and Governance and Nominating Committee. Since November 2005, Ms. Bailey has been President of Anderson Stratton International, LLC, a strategic consulting and government relations company in Washington, D.C. She was a partner with Johnston & Associates, LLC, a public relations firm in Washington, D.C., from March 2004 through October 2006. Prior to joining Johnston & Associates, LLC, Ms. Bailey served as Assistant Secretary for the Office of Policy and International Affairs of the U.S. Department of Energy from 2001 through February 2004. From February 2000 until May 2001, she was President and a director of PSI Energy, Inc., the Indiana electric utility subsidiary of Cinergy Corp. Prior to joining PSI Energy, Ms. Bailey was a Commissioner on the Federal Energy Regulatory Commission beginning in 1993. Ms. Bailey currently serves on the board of directors of Equitrans Midstream Corporation, a publicly-traded natural gas midstream company, PNM Resources, Inc., an investor-owned energy holding company and Battelle Memorial Institute, a private nonprofit
applied science and technology development company in Columbus, Ohio. Ms. Bailey previously served on the board of directors of EQT Corporation, a publicly-traded petroleum and natural gas exploration and pipeline company, from July 2004 to November 2018. In January 2010, Ms. Bailey was appointed as a member of the Secretary of Energy’s Blue Ribbon Commission on America’s Nuclear Future. She received a B.S. in Industrial Management from Purdue University and completed the Advanced Management Program at the Wharton School in 2013.
Skills and Qualifications:
Ms. Bailey has extensive knowledge of the energy industry, including significant experience with the Federal Energy Regulatory Commission, and government and public relations. She brings a diverse perspective to our Board based on her experience as a strategic consultant, a former energy executive and having served as Assistant Secretary for the Office of Policy and International Affairs.
NUNO BRANDOLINI MEMBER OF COMPENSATION COMMITTEE AND GOVERNANCE AND NOMINATING COMMITTEE | AGE:65 DIRECTOR SINCE: 2000 | |||||
Nuno Brandolini is a member of our Compensation Committee and Governance and Nominating Committee. Mr. Brandolini was a general partner of Scorpion Capital Partners, L.P., a private equity firm organized as a small business investment company, until June 2014. Prior to forming Scorpion Capital and its predecessor firm, Scorpion Holding, Inc., in 1995, Mr. Brandolini served as Managing Director of Rosecliff, Inc., a leveraged buyout fundco-founded by Mr. Brandolini in 1993. Prior to 1993, Mr. Brandolini was a Vice President in the investment banking department of Salomon Brothers, Inc., and a Principal with the Batheus Group and Logic Capital, two venture capital firms. Mr. Brandolini began his career as an
investment banker with Lazard Freres & Co. Mr. Brandolini currently serves as a director of Lilis Energy, Inc., an oil and gas exploration and production company. Mr. Brandolini received a law degree from the University of Paris and an M.B.A. from the Wharton School.
Skills and Qualifications:
Mr. Brandolini brings a unique financial perspective to our Board based on his extensive experience as an investment banker and having actively managed private equity investments for approximately 20 years.
| 2019 PROXY STATEMENT | 13 | |||
PROPOSAL 1 – ELECTION OF DIRECTORS
DAVID I. FOLEY DIRECTOR | AGE:51 DIRECTOR SINCE: 2012 | |||||
David I. Foley is a director of the Company. Mr. Foley is a Senior Managing Director in the Private Equity Group of The Blackstone Group L.P., an investment and advisory firm (“Blackstone”), and Chief Executive Officer of Blackstone Energy Partners L.P. Prior to joining Blackstone in 1995, Mr. Foley was an employee of AEA Investors Inc., a private equity investment firm, from 1991 to 1993, and a consultant with The Monitor Company, a business management consulting firm, from 1989 to 1991. Mr. Foley previously served on the board of directors of PBF Energy, Inc., from 2008 to 2014, Kosmos Energy Ltd., from 2004 to 2018, and Falcon Minerals Corp., from 2011 to 2018. Mr. Foley received a B.A. and an M.A. in Economics from Northwestern University and an M.B.A. from Harvard Business School.
Skills and Qualifications:
Mr. Foley brings industry expertise and a unique financial perspective to our Board based on his extensive experience having actively managed private equity investments for over 20 years. Mr. Foley’s appointment to the Board of Cheniere was made pursuant to an Investors’ and Registration Rights Agreement that was entered into by the Company, Cheniere Energy Partners GP, LLC, Blackstone CQP Holdco, LP (“Blackstone Holdco”) and various other related parties in connection with Blackstone Holdco’s purchase of Class B units in Cheniere Partners.
DAVID B. KILPATRICK MEMBER OF AUDIT COMMITTEE AND COMPENSATION COMMITTEE | AGE:69 DIRECTOR SINCE: 2003 | |||||
David B. Kilpatrick is a member of our Audit Committee and Compensation Committee. Mr. Kilpatrick previously served as our Lead Director from June 2015 to January 2016. Mr. Kilpatrick has over 30 years of executive, management and operating experience in the oil and gas industry. He has been the President of Kilpatrick Energy Group, which invests in oil and gas ventures and provides executive management consulting services, since 1998. Mr. Kilpatrick served on the board of directors and as Chairman of the Compensation and Governance Committee of the general partner of Breitburn Energy Partners, L.P., a publicly traded MLP, from 2008 to 2018. Mr. Kilpatrick served on the board of managers of Woodbine Holdings, LLC, a privately held company engaged in the acquisition, development and production of oil and natural gas properties in Texas from 2011 to 2016. In May 2013, he was elected Chairman of the Board of Applied Natural Gas Fuels, Inc., a producer and distributor of liquefied natural gas fuel for the transportation and industrial markets, until the company was sold in 2018. He also served on the board of directors of
PYR Energy Corporation, a publicly-traded oil and gas exploration and production company, from 2001 to 2007, and of Whittier Energy Corporation, a publicly-traded oil and gas field exploration services company, from 2004 to 2007. He was the President and Chief Operating Officer for Monterey Resources, Inc., a publicly traded oil and gas company, from 1996 to 1998 and held various positions with Santa Fe Energy Resources, an independent oil and gas production company, from 1983 to 1996. Mr. Kilpatrick received a B.S. in Petroleum Engineering from the University of Southern California and a B.A. in Geology and Physics from Whittier College.
Skills and Qualifications:
Mr. Kilpatrick has over 30 years of executive, management and operating experience in the oil and gas industry and brings significant executive-level and consulting experience in the oil and gas industry to our Board.
| 14 | CHENIERE | |||
DIRECTOR BIOGRAPHIES
ANDREW LANGHAM MEMBER OF COMPENSATION COMMITTEE AND GOVERNANCE AND NOMINATING COMMITTEE | AGE:46 DIRECTOR SINCE: 2017 | |||||
Andrew Langham is a member of our Compensation Committee and Governance and Nominating Committee. Mr. Langham has been General Counsel of Icahn Enterprises L.P. (a diversified holding company engaged in a variety of businesses, including investment, automotive, energy, food packaging, metals, mining, real estate and home fashion) since 2014. From 2005 to 2014, Mr. Langham was Assistant General Counsel of Icahn Enterprises. Prior to joining Icahn Enterprises, Mr. Langham was an associate at Latham & Watkins LLP focusing on corporate finance, mergers and acquisitions, and general corporate matters. Mr. Langham has been a director of: Welbilt, Inc. (formerly Manitowoc Foodservice, Inc.), a commercial food service equipment manufacturer, since 2016; and CVR Partners LP, a nitrogen fertilizer company, since 2015. Mr. Langham was previously a director of CVR Energy, Inc., a diversified holding company primarily engaged in the petroleum refining and nitrogen
fertilizer manufacturing industries, from 2014 to 2017; CVR Refining, LP, an independent downstream energy limited partnership, from 2014 to 2019; Freeport-McMoRan Inc., the world’s largest publicly traded copper producer, from 2015 to 2018; and Newell Brands Inc., a global marketer of consumer and commercial products, in 2018. Mr. Langham received a B.A. from Whitman College and a J.D. from the University of Washington.
Skills and Qualifications:
Mr. Langham brings a unique perspective to our Board based on his significant corporate governance, compliance, regulatory, finance and mergers and acquisitions expertise. Mr. Langham was initially appointed to the Board of Cheniere in accordance with a Nomination and Standstill Agreement that was entered into on August 15, 2015 by the Company, Icahn Capital LP and certain affiliates of Icahn Capital LP.
COURTNEY R. MATHER, CAIA, CFA, FRM MEMBER OF AUDIT COMMITTEE | AGE:42 DIRECTOR SINCE: 2018 | |||||
Courtney R. Mather, CAIA, CFA, FRM is a member of our Audit Committee. Mr. Mather has served as Portfolio Manager of Icahn Capital, the entity through which Carl C. Icahn manages investment funds, since December 2016, and was previously Managing Director of Icahn Capital from April 2014 to November 2016. Mr. Mather is responsible for identifying, analyzing, and monitoring investment opportunities and portfolio companies for Icahn Capital. Prior to joining Icahn Capital, Mr. Mather was at Goldman Sachs & Co. from 1998 to 2012, most recently as Managing Director responsible for Private Distressed Trading and Investing, where he focused on identifying and analyzing investment opportunities for both Goldman Sachs and clients. Mr. Mather has served as a director of: Caesars Entertainment Corporation, a global casino-entertainment and hospitality services provider, since March 2019; Newell Brands Inc., a manufacturer and distributor of a broad range of consumer products, since March 2018; Conduent Inc., a provider of business process outsourcing services, since December 2016; Herc Holdings Inc., an international provider of equipment rental and services, since June 2016; TER Holdings I, Inc. (formerly known as Trump Entertainment Resorts, Inc.), a company engaged in real estate holdings, since February 2016; and Ferrous Resources Limited, an iron ore mining company with operations in Brazil, since June 2015. Mr. Mather was previously a director of: Freeport-McMoRan Inc., the world’s largest publicly traded copper producer, from October 2015 to March 2019; Federal-Mogul Holdings Corporation, a supplier of automotive powertrain and safety components, from May 2015 to January 2017; Viskase Companies Inc., a meat casing company, from
June 2015 to March 2016; American Railcar Industries, Inc., a railcar manufacturing company, from July 2014 to March 2016; CVR Refining, LP, an independent downstream energy limited partnership, from May 2014 to March 2016; and CVR Energy, Inc., a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries, from May 2014 to March 2016. TER Holdings, Ferrous Resources Limited, Federal-Mogul, American Railcar Industries, CVR Refining, CVR Energy, and Viskase are each indirectly controlled by Carl C. Icahn. Mr. Icahn also has anon-controlling interest in each of Caesars Entertainment, Cheniere, Newell Brands, Conduent, Herc Holdings, and Freeport-McMoRan through the ownership of securities. Mr. Mather received a B.A. from Rutgers College, and attended the United States Naval Academy. Mr. Mather holds the Chartered Alternative Investment Analyst (CAIA), Chartered Financial Analyst (CFA), and Certified Financial Risk Manager (FRM) professional designations.
Skills and Qualifications:
Mr. Mather brings significant experience in finance to our Board and experience providing strategic advice and guidance to companies through his service as a director on various public company boards. Mr. Mather was initially appointed to the Board of Cheniere in accordance with a Nomination and Standstill Agreement that was entered into on August 15, 2015 by the Company, Icahn Capital LP and certain affiliates of Icahn Capital LP.
| 2019 PROXY STATEMENT | 15 | |||
PROPOSAL 1 – ELECTION OF DIRECTORS
DONALD F. ROBILLARD, JR. CHAIRMAN OF AUDIT COMMITTEE | AGE:67 DIRECTOR SINCE: 2014 | |||||
Donald F. Robillard, Jr. is the Chairman of our Audit Committee. Mr. Robillard served as a director and the Executive Vice President, Chief Financial Officer and Chief Risk Officer of Hunt Consolidated, Inc. (“Hunt”), a private holding company with interests in oil and gas exploration and production, refining, real estate development, private equity investments and ranching, from July 2015 until his retirement on January 31, 2017. Mr. Robillard began his association with Hunt in 1983 as Manager of International Accounting for Hunt Oil Company, Inc., a wholly-owned subsidiary of Hunt. Serving nine of his 34 years of service to the Hunt organization in Yemen in various accounting, finance and management positions, Mr. Robillard returned to the United States to join Hunt’s executive team in 1992. Mr. Robillard was named Senior Vice President and Chief Financial Officer of Hunt in April 2007. Mr. Robillard also served, from February 2016 through August of 2017, as Chief Executive Officer and Chairman of ES Xplore, LLC, a direct hydrocarbon indicator technology company which in 2016 was spun out of
Hunt. He is currently President of Robillard Consulting, LLC, an oil and gas advisory firm. Mr. Robillard is currently on the board of directors of Helmerich & Payne, Inc., a publicly-traded oil and gas drilling company, and the Board of Directors of Avalon Exploration and Production, LLC, a private oil and gas company. He is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants, the Texas Society of Certified Public Accountants and the National Association of Corporate Directors. Mr. Robillard received a B.B.A. from the University of Texas, Austin.
Skills and Qualifications:
Mr. Robillard has over 40 years of experience in the oil and gas industry and over 25 years of senior management experience. Mr. Robillard brings significant executive-level experience in the oil and gas industry, including experience with project financing for LNG facilities.
NEAL A. SHEAR CHAIRMAN OF COMPENSATION COMMITTEE | AGE:64 DIRECTOR SINCE: 2014 | |||||
Neal A. Shear is the Chairman of our Compensation Committee. Mr. Shear is Senior Advisor and Chair of the Advisory Committee of Onyxpoint Global Management LP. Mr. Shear served as Interim Special Advisor to the Chief Executive Officer of Cheniere from May 2016 to November 2016 and as Interim Chief Executive Officer and President of Cheniere from December 2015 to May 2016. Mr. Shear was the Chief Executive Officer of Higgs Capital Management, a commodity focused hedge fund until September 2014. Prior to Higgs Capital Management, Mr. Shear served as Global Head of Securities at UBS Investment Bank from January 2010 to March of 2011. Previously, Mr. Shear was a Partner at Apollo Global Management, LLC, where he served as the Head of the Commodities Division. Prior to Apollo Global Management, Mr. Shear spent 26 years at Morgan Stanley serving in various roles including Head of the Commodities Division, Global Head of Fixed Income,Co-Head of Institutional Sales and Trading and Chair of the Commodities Business. He currently serves on the Advisory Board of Green Key Technologies, a financial Voice
over Internet Protocol (“VoIP”) technology company. Mr. Shear also serves as a director of Galileo Technologies S.A., a global provider of modular technologies for compressed natural gas and LNG production and transportation, since February 2017; Sable Permian Resources LLC, an independent oil and natural gas company focused on the acquisition, development and production of unconventional oil and natural gas reserves within the Permian Basin of West Texas, since May 2017; and Narl Refining Inc., the refining arm of North Atlantic Holdings St John’s Newfoundland, since November 2014. Mr. Shear received a B.S. from the University of Maryland, Robert H. Smith School of Business Management in 1976 and an M.B.A. from Cornell University, Johnson School of Business in 1978.
Skills and Qualifications:
Mr. Shear brings a unique financial and trading perspective to our Board based on his more than 30 years of experience managing commodity activity and investments.
| 16 | CHENIERE | |||
BOARD COMMITTEE MEMBERSHIP AND ATTENDANCE
The following table shows the fiscal year 2018 membership and chairpersons of our Board committees, committee meetings held and committee member attendance as a percentage of meetings eligible to attend. The current Chair of each Board committee is indicated in the table.
NUMBER OF MEETINGS HELD | BOTTA | FUSCO | BAILEY | BRANDOLINI | FOLEY | KILPATRICK | LANGHAM(1) | LIPINSKI(1) | MATHER(1) | ROBILLARD | SHEAR | ZICHAL(3) | ||||||||||||||
Audit | 9 | — | — | 89% | — | — | 89% | — | 100% | 100% | 100% Chair | — | — | |||||||||||||
Governance and Nominating | 5 | 100%(2) Chair | — | 100% | 80% | — | 100% | — | — | — | — | 100% | ||||||||||||||
Compensation | 6 | — | — | — | 83% | — | 100% | 100% | 100% | — | 100% Chair | 100% | ||||||||||||||
| (1) | In May 2018, Mr. Mather replaced Mr. Lipinski on the Board. |
| (2) | In August 2018, Mr. Botta was appointed Chair of the Governance and Nominating Committee. |
| (3) | In July 2018, Ms. Zichal resigned from the Board. |
The Board determines the independence of each director and nominee for election as a director in accordance with the rules and regulations of the SEC and the NYSE American LLC (“NYSE American”) independence standards, which are listed below. The Board also considers relationships that a director may have:
as a partner, shareholder or officer of organizations that do business with or provide services to Cheniere;
as an executive officer of charitable organizations to which we have made or make contributions; and
that may interfere with the exercise of a director’s independent judgment.
The NYSE American independence standards state that the following list of persons will not be considered independent:
a director who is, or during the past three years was, employed by the Company or by any parent or subsidiary of the Company other than prior employment as an interim executive officer for less than one year;
a director who accepts, or has an immediate family member who accepts, any compensation from the Company or any parent or subsidiary of the Company in excess of $120,000 during any period of 12 consecutive months within the past three years, other than compensation for Board or committee services, compensation paid to an immediate family member who is anon-executive employee of the Company, compensation received for former service as an interim executive officer provided the interim service did not last longer than one year, benefits under atax-qualified retirement plan ornon-discretionary compensation;
a director who is an immediate family member of an individual who is, or has been in any of the past three years, employed by the Company or any parent or subsidiary of the Company as an executive officer;
a director who is, or has an immediate family member who is a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments (other than those arising solely from investments in the Company’s securities or payments undernon-discretionary charitable contribution matching programs) that exceed 5% of the organization’s consolidated gross revenues for that year, or $200,000, whichever is more, in any of the most recent three fiscal years;
| 2019 PROXY STATEMENT | 17 | |||
GOVERNANCE INFORMATION
a director who is, or has an immediate family member who is, employed as an executive officer of another entity where at any time during the most recent three fiscal years any of the Company’s executive officers serve on the compensation committee of such other entity; or
a director who is, or has an immediate family member who is, a current partner of the Company’s outside auditor, or was a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years.
As of February 2019, the Board determined that Messrs. Botta, Brandolini, Kilpatrick, Langham, Mather, Robillard and Shear and Ms. Bailey are independent, and none of them has a relationship that may interfere with the exercise of his or her independent judgment.
BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
Board Leadership Structure. Mr. Botta serves as theNon-Executive Chairman of the Board. Mr. Fusco serves as President and CEO.
The Company has in place strong governance mechanisms to ensure the continued accountability of the CEO to the Board and to provide strong independent leadership, including the following:
theNon-Executive Chairman of the Board provides independent leadership to the Board and ensures that the Board operates independently of management and that directors have an independent leadership contact;
each of the Board’s standing committees, consisting of the Audit, Compensation and Governance and Nominating Committees, are comprised of and chaired solely bynon-employee directors who meet the independence requirements under the NYSE American listing standards and the SEC;
the independent directors of the Board, along with the Compensation Committee, evaluate the CEO’s performance and determine his compensation;
the independent directors of the Board meet in executive sessions without management present and have the opportunity to discuss the effectiveness of the Company’s management, including the CEO, the quality of Board meetings and any other issues and concerns; and
the Governance and Nominating Committee has oversight of succession planning, both planned and emergency, and the Board has approved an emergency CEO succession process.
The Board believes that its leadership structure assists the Board’s role in risk oversight. See the discussion on the “Board’s Role in Risk Oversight” below.
Non-Executive Chairman of the Board. TheNon-Executive Chairman of the Board position is held by Mr. Botta, an independent director. The Board has appointed an independent Chairman of the Board to provide independent leadership to the Board. TheNon-Executive Chairman of the Board role allows the Board to operate independently of management with theNon-Executive Chairman of the Board providing an independent leadership contact to the other directors. The responsibilities of theNon-Executive Chairman of the Board are set out in aNon-Executive Chairman of the Board Charter. These responsibilities include the following:
preside at all meetings of the Board, including executive sessions of the independent directors;
call meetings of the Board and meetings of the independent directors, as may be determined in the discretion of theNon-Executive Chairman of the Board;
work with the CEO and the Corporate Secretary to prepare the schedule of Board meetings to assure that the directors have sufficient time to discuss all agenda items;
prepare the Board agendas in coordination with the CEO and the Corporate Secretary;
advise the CEO of any matters that theNon-Executive Chairman of the Board determines should be included in any Board meeting agenda;
advise the CEO as to the quality, quantity, appropriateness and timeliness of the flow of information from the Company’s management to the Board;
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SHAREHOLDER OUTREACH–GOVERNANCE
recommend to the Board the retention of consultants who report directly to the Board;
act as principal liaison between the directors and the CEO on all issues, including, but not limited to, related party transactions;
in the discretion of theNon-Executive Chairman of the Board, participate in meetings of the committees of the Board;
in the absence of the CEO or as requested by the Board, act as the spokesperson for the Company; and
be available, if requested, for consultation and direct communication with major shareholders of the Company.
Board’s Role in Risk Oversight. Risks that could affect the Company are an integral part of Board and committee deliberations throughout the year. The Board has oversight responsibility for assessing the primary risks (including liquidity, credit, operations and regulatory compliance) facing the Company, the relative magnitude of these risks and management’s plan for mitigating these risks. In addition to the Board’s oversight responsibility, the committees of the Board consider the risks within their areas of responsibility. The Board and its committees receive regular reports directly from members of management who are responsible for managing particular risks within the Company. The Audit Committee discusses with management the Company’s major financial and risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. For a discussion of the Compensation Committee’s risk oversight, please see “Review of Compensation Risk” on page 26 of this Proxy Statement. The Board and its committees regularly discuss the risks related to the Company’s business strategy at their meetings.
SHAREHOLDER OUTREACH–GOVERNANCE
The Company proactively engages with shareholders on governance topics as a matter of strategic priority, and the continuous evolution of our governance framework is a product of the Board’s responsiveness to shareholder input.
Ahead of our 2018 Annual Meeting of Shareholders (the “2018 Annual Meeting”), members of our Board and management reached out to, and had extensive dialogue with, shareholders representing more than 50% of our outstanding common stock, through bothin-person and telephonic meetings.
Following our 2018 Annual Meeting, we engaged with shareholders holding more than 50% of our outstanding common stock, as well as proxy advisory firms, and we intend to continue our proactive shareholder outreach efforts going forward and to consider any shareholder concerns that are raised with respect to our governance framework.
The Board believes that its current system of corporate governance oversight enables the directors to be prudent stewards of shareholder capital and the long-term interests of the Company and our shareholders. In addition, the Board is responsive to evolution in the general corporate governance environment.
Key Themes from Our Shareholder Outreach
Many of our shareholders have different methodologies and processes for evaluating governance programs. However, a number of common themes emerged during our engagements with shareholders, which included:
Additional disclosure regarding the Company’s prioritization and efforts regarding Environmental, Social, and Governance (“ESG”) issues. An increasing number of our shareholders have expressed a desire for improved disclosure regarding the Company’s efforts to addressESG-related issues and opportunities. AddressingESG-related issues and opportunities is a focus of the Company’s executive management, with oversight from the Governance and Nominating Committee of the Board, and we have made significant progress with respect to addressing these issues. We have included added disclosure regarding ESG and the Company’s progress below in “—Corporate Social Responsibility and Political Advocacy and Oversight.” We will continue to address these important issues and evolve our related disclosure in the future.
Continued monitoring and implementation of best governance practices. Several of our shareholders have expressed a desire that our Board continue to monitor changes in the general corporate governance environment and consider any appropriate changes to our governance practices. Our Board is responsive to changes in the general corporate governance environment and strives to implement best governance practices in a timely manner.
Please see pages 38-39 of this Proxy Statement for a discussion regarding actions taken by our Board with respect to compensation matters as a result of shareholder outreach.
| 2019 PROXY STATEMENT | 19 | |||
GOVERNANCE INFORMATION
CORPORATE SOCIAL RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT
Climate and Sustainability
Climate Change Strategy
There is a growing need to manage climate risks globally and transition away from coal and oil to cleaner, less carbon intensive energy sources such as natural gas. Cheniere helps address this need.
Our focus on clean energy sources is so central to our operations that it comprises our vision statement: “We provide clean, secure, and affordable energy to the world”. The International Energy Agency concludes that even under a 2 degree carbon-constrained scenario, that natural gas may provide a quarter of the global energy demand by 2040 and that LNG facilities will remain critical to meet this future demand1.
To help us realize our vision and our opportunity to help address climate change, Cheniere has adopted a set of climate and sustainability principles which have been reviewed by the Board (https://www.cheniere.com/corporate-responsibility/climate-sustainability/) as part of its oversight of our sustainability program:
| �� | 1. | Science: Cheniere will promote and follow peer-reviewed science to assess our impacts, anchor our engagements, and determine our actions |
| 2. | Operational Excellence: Cheniere will design and operate our facilities to reduce environmental impacts |
| 3. | Supply Chain: Cheniere will work with our partners to reduce environmental impacts throughout our supply chain |
| 4. | Transparency: We will communicate openly and proactively with our stakeholders |
Sustainability Governance
The Governance and Nominating Committee of the Board provides oversight of climate and sustainability policies and strategies.
Cheniere’s sustainability initiatives are managed by the Policy, Government, and Public Affairs organization, led by the Senior Vice President, Policy, Government and Public Affairs (a member of Cheniere’s senior management team, reporting to our Chief Executive Officer). Cheniere’s dedicated climate and sustainability team is responsible for advising the executive leadership and the Board on climate and sustainability programs and for their implementation. An enterprise-level steering committee and working group supports the development of the Corporate Social Responsibility (“CSR”) report, and we plan to issue our inaugural CSR report in late 2019 or early 2020.
Sustainability Engagement
Cheniere engages on ESG issues including climate science and policy in the US and internationally:
In June 2018, we announced the formation of the Collaboratory to Advance Methane Science to improve the scientific understanding of methane emissions across the entire natural gas value chain
Cheniere staff have published and/or submitted peer-reviewed papers on climate- related science
Cheniere staff presented the consensus study report by the National Academy of Sciences’ Committee on Anthropogenic Methane Emissions in the United States at the World Gas Conference in Washington D.C. in June 2018.
Cheniere employees engage on climate and sustainability matters on the Sustainability Accounting Standards Board’s Standards Advisory Group, Center for Climate & Energy Solutions, and International Petroleum Industry Environmental Conservation Association
Key engagements carried out during the past year with local communities include:
| ○ | community open houses |
| ○ | a community advisory panel |
| ○ | tribal outreach |
| ○ | public presentations and events |
| ○ | public safety briefings and workshops |
| 1 | World Energy Outlook 2018 and 2017 |
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CORPORATE SOCIAL RESPONSIBILITY AND POLITICAL ADVOCACY AND OVERSIGHT
Cheniere has initiated engagements with our natural gas partners to better understand the GHG emissions of Cheniere’s supply chain lifecycle
Cheniere has engaged with several environmental, social and governance rating agencies and external stakeholders regarding sustainability issues
Health and Safety
Cheniere is committed to conducting its business in a way that protects the safety and well-being of our workforce, customers, and otherson-site or who may be affected by our operations.
Cheniere facilitates this commitment through the Health and Safety Policy that is aligned with the Company’s vision, mission, and core values. This policy is an integral part of the Company’s culture which promotes:
A Generative Safety Culture where no job is so important that it cannot be done safely
Performance measurement to drive continual improvement towards eliminating injuries andill-health
Proactive identification and management of risk
Compliance with applicable legal and regulatory requirements
Conformance with industry standards
Proactive committed leadership and individual accountability for health and safety
Employee engagement
Training and competence in safe work practices and procedures
Assurance assessments and reviews
Investigation of health and safety incidents and the implementation of lessons learned
Integration of health and safety into all aspects of the business
Cheniere’s commitment to a robust Safety Culture and Committed Leadership is supported through the following key programs:
An Executive Safety Committee that sets the strategic health and safety direction for Cheniere. It is chaired by a member of our senior leadership with attendance of other senior leaders, including the Chief Executive Officer. Representatives from our assets and office locations serve on the Committee.
Asset location and Office Safety Committees that are chaired by and include Company employees. These Committees seek to deliver on safety practices and promote safety culture through locally established programs.
Cheniere utilizes a risk-based approach that establishes the processes through which health and safety excellence is delivered, and it defines the standards and procedures to enable delivery of critical processes, in a consistent approach.
To ensure that our employees can effectively implement safety processes relevant to their roles at Cheniere, we maintain a robust training program. It ensures compliance with all safety regulatory requirements while establishing the competency and training needs to deliver on the health and safety processes.
Governance and assurance programs are also in place which define the safety performance metrics and verification processes that are used to assess the effectiveness of the health and safety programs. In addition, these programs enable a proactive approach to safety through the collation and analysis of the safety performance metrics and determination of health and safety trends. An assurance process verifies that implemented programs are value-added, effective and meeting or exceeding the health and safety requirements.
Cheniere has established processes to share lessons learned and promote continuous improvement in systems and processes in meeting our commitment to our core value of safety.
The Health and Safety Policy is reviewed annually to ensure relevance, sustainability, and to adopt any changes to further enhance our commitments.
| 2019 PROXY STATEMENT | 21 | |||
GOVERNANCE INFORMATION
Community Investments
We are committed to being a responsible corporate leader in the communities where we operate and our employees live. We deliver on this promise by engaging in philanthropic activities that support Cheniere’s values, fostering strong community relationships and enhancing employee satisfaction and engagement, and we strategically prioritize our investments by aligning with our business and community needs.
We offer several programs through which we can impact our communities, such as volunteer efforts, financial contributions andin-kind donations. We established the Cheniere Cares Foundation in late 2017, which is anon-profit dedicated to giving back to the communities in which we live and work. In 2018, we implemented several other enhancements, including a formal Volunteer Hours Policy, an Employee Matching Gifts Program and a Global Day of Giving for all employees. On our inaugural Global Day of Giving, we teamed up world-wide to volunteer at local food facilities. For the Houston Food Bank, we sponsored a mobile food pantry and provided healthy groceries to 368 families in need; prepared 5,998 meals for an after school program through Keegan’s Kitchen, and packed 10,800 meals through the Backpack Buddy Bags program. Our Sabine Pass team supported The Giving Field by tending gardens and planting vegetables to be used to produce healthy meals, preparing and serving meals at Abraham’s Tent for over 200 underserved individuals, and delivering 100 meals to the elderly. In Corpus Christi, we assisted the Coastal Bend Food Bank by sorting and boxing almost 16,000 pounds of food for those in need. Our London office packed food and delivered parcels to 12 locations in the area through Fareshare.
2018 Community Investments Updates and Highlights
In 2018, we invested approximately $2.4 million in support of localnon-profit organizations. For us, education is key to stronger communities. In 2018, we presented a $250,000 donation to both Sowela Technical Community College and Del Mar Community College in support of the Cheniere Apprenticeship program, and a $180,000 donation to the Barbara Bush Houston Literacy Foundation towards its My Home Library Program. Cheniere’s $100,000 contribution to the National Guard Youth ChalleNGe Post Graduate Program provided scholarships forat-risk youth to continue their education in college, vocational programs, or technical schools. Additionally, many of our local communities continue to struggle in the aftermath of Hurricane Harvey. To help with rebuilding efforts, Cheniere donated $250,000 to Coastal Bend Disaster Recovery Group to repair and reconstruct homes in South Texas for individuals who have yet to fully recover. Cheniere also participates in several other initiatives, including volunteer efforts, in kind donations and donation collection drives for military, education and underserved youth.
In 2018, we received recognition from the BP MS150, a two-day fundraising cycling ride organized by the National MS Society and which is the largest event of its kind in North America, for being a top 10 fundraising team, and also received the Chairman’s Circle Award for cumulatively raising over $500,000 in recent years. We were recognized as a member of the Pink Power League for the Susan G. Komen Foundation and received the Eagle Ford Excellence Award for Community and Social Investment.
Invested over$2.4M | Provided nearly3,000 volunteer hours | Received Chairman’s Award from the BP MS150 for cumulatively raising over$500,000 | Donation drives for themilitary, education, and underserved youth | |||||||||
Political Advocacy and Oversight
It is Cheniere’s policy that Company funds or assets will not be used to make a political contribution to any political party or candidate, unless approval has been given by a compliance officer. The Cheniere Energy, Inc. Political Action Committee (the “Cheniere PAC”) is a forum for employees to voluntarily contribute to a fund that supports the election of candidates to Congress who support the principles of free enterprise, good government, a fair and reasonable business environment for the energy industry and who share the Company’s philosophy that energy diversity advances overall energy security. Decisions about contributions to specific federal candidates are made by members of the Cheniere PAC, with input from the Company’s government affairs staff in Washington, D.C.
In total, Cheniere and Cheniere employees, through the Cheniere PAC and direct corporate funds, contributed less than $1 million in 2018 to political parties and candidates.
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MEETINGS AND COMMITTEES OF THE BOARD
MEETINGS AND COMMITTEES OF THE BOARD
Our operations are managed under the broad supervision and direction of the Board, which has the ultimate responsibility for the oversight of the Company’s general operating philosophy, objectives, goals and policies. Pursuant to authority delegated by the Board, certain Board functions are discharged by the Board’s standing Audit, Governance and Nominating and Compensation Committees. Members of the Audit, Governance and Nominating and Compensation Committees for a given year are selected by the Board following the annual shareholders’ meeting. During the fiscal year ended December 31, 2018, our Board held 10 meetings. 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 each committee of the Board on which the director served during the period for which each director served. Although directors are not required to attend annual shareholders’ meetings, they are encouraged to attend such meetings. At the 2018 Annual Meeting of Shareholders, 11 of the 11 members of the Board then serving were present.
Committee Membership as of April 15, 2019:
| AUDIT COMMITTEE | GOVERNANCE AND NOMINATINGCOMMITTEE | COMPENSATION COMMITTEE | ||
| Donald F. Robillard, Jr.* | G. Andrea Botta* | Neal A. Shear* | ||
| Vicky A. Bailey | Vicky A. Bailey | Nuno Brandolini | ||
| David B. Kilpatrick | Nuno Brandolini | David B. Kilpatrick | ||
| Courtney R. Mather | Andrew Langham | Andrew Langham | ||
| * | Chair of Committee |
Each member of the Audit Committee has been determined by the Board to be “independent” as defined by the NYSE American listing standards and by the SEC, and the Board determined that each of Messrs. Robillard and Mather is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of RegulationS-K promulgated by the SEC. The Audit Committee held 9 meetings during the fiscal year ended December 31, 2018.
The Audit Committee has a written charter, which is available on our website atwww.cheniere.com. The Audit Committee is appointed by the Board to oversee the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. The Audit Committee assists the Board in overseeing:
the integrity of the Company’s financial statements;
the qualifications, independence and performance of our independent auditor;
our internal audit function and systems of internal controls over financial reporting and disclosure controls and procedures; and
compliance by the Company with legal and regulatory requirements.
The Audit Committee maintains a channel of communication among the independent auditor, principal financial and accounting officers,VP-internal audit, compliance officer and the Board concerning our financial and compliance position and affairs. The Audit Committee has and may exercise all powers and authority of the Board in connection with carrying out its functions and responsibilities and has sole authority to select and retain the independent auditor and authority to engage and determine funding for independent legal, accounting or other advisers. The Audit 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.
| 2019 PROXY STATEMENT | 23 | |||
GOVERNANCE INFORMATION
GOVERNANCE AND NOMINATING COMMITTEE
Each member of the Governance and Nominating Committee has been determined by the Board to be “independent” as defined by the NYSE American listing standards and by the SEC. The Governance and Nominating Committee held 5 meetings during the fiscal year ended December 31, 2018.
The Governance and Nominating Committee has a written charter, which is available on our website atwww.cheniere.com. The Governance and Nominating Committee is appointed by the Board to develop and maintain the Company’s corporate governance policies. The Governance and Nominating Committee also oversees our Director Nomination Policy and Procedures. The Governance and Nominating Committee has the following duties and responsibilities, among others:
develop a process, subject to approval by the Board, for an annual evaluation of the Board and its committees and oversee this evaluation;
identify, recruit and evaluate individuals qualified to serve on the Board in accordance with the Company’s Director Nomination Policy and Procedures and recommend to the Board such director nominees to be considered for election at the Company’s annual meeting of shareholders or to be appointed by the Board to fill an existing or newly created vacancy on the Board;
identify, at least annually, members of the Board to serve on each Board committee and as chairman of each Board committee and recommend each such member and chairman to the Board for approval;
assist the Board in evaluating and determining director independence under applicable laws, rules and regulations, including the rules and regulations of the NYSE American;
develop and maintain policies and procedures with respect to the evaluation of the performance of the CEO;
review periodically the size of the Board and the structure, composition and responsibilities of the committees of the Board to enhance continued effectiveness;
review, at least annually, director compensation for service on the Board and Board committees, including committee chairmen compensation, and recommend any changes to the Board;
review, at least annually, the Company’s policies and practices relating to corporate governance and, when necessary or appropriate, recommend any proposed changes to the Board for approval;
provide oversight of a process by each committee of the Board to review, at least annually, the applicable charter of such committee and, when necessary or appropriate, recommend changes in such charters to the Board for approval;
along with the independent directors of the Board, develop and maintain policies and principles with respect to the search for and evaluation of potential successors to the CEO, and maintain a succession plan in accordance with such policies;
develop and oversee a continuing education program for directors;
review with management the current and emerging environmental, sustainability and social responsibility issues impacting the Company; and
review, at least annually, the Company’s climate change and sustainability policies and strategies.
Each member of the Compensation Committee has been determined by the Board to be “independent” as defined by the NYSE American listing standards and by the SEC. The Compensation Committee held 6 meetings during the fiscal year ended December 31, 2018. The Compensation Committee reviews and approves the compensation policies, practices and plans of the Company pursuant to a written charter, which is available on our website atwww.cheniere.com. The Chairman of the Compensation Committee, in consultation with other Compensation Committee members, members of management and the independent compensation consultant, determines the agenda and dates of Compensation Committee meetings.
The Compensation Committee’s charter is reviewed annually. Changes to the charter must be approved by the Board on the recommendation of the Compensation Committee. The charter provides that the Compensation Committee has the sole authority
| 24 | CHENIERE | |||
GOVERNANCE AND NOMINATING COMMITTEE
to retain, oversee and terminate any compensation consultant, independent legal counsel or other adviser engaged to assist in the evaluation of compensation of directors and executive officers of the Company, including the sole authority to approve such adviser’s fees and other retention terms. Pursuant to the charter, the Compensation Committee has the following duties and responsibilities, among others:
review and approve corporate goals and objectives, after consultation with the Board and management and consistent with stockholder-approved compensation plans, for performance-based compensation for the CEO and other executive officers for the defined performance period;
review and recommend to the Board for approval the maximum amount of performance-based compensation for the CEO and other executive officers for the defined performance period;
review and certify, in writing, whether established goals and objectives of any performance-based compensation plans for the CEO and other executive officers have been met for the completed performance period;
review and recommend to the Board for approval performance-based compensation, if any, for the CEO and other executive officers based on the established corporate goals and objectives for the completed performance period;
review and recommend to the Board for approval the compensation level for the CEO and other executive officers based on the Compensation Committee’s evaluations;
report to the Board on the performance of the CEO and other executive officers in light of the established corporate goals and objectives for the performance period;
assess the ongoing competitiveness of the total executive compensation package;
review and approve budgets and guidelines for performance-based compensation;
review existing cash-based and equity-based compensation plans;
review and recommend to the Board for approval all new cash-based, equity-based and performance-based compensation plans and all material modifications to existing compensation plans, provided that any equity-based inducement plans shall be approved by the Compensation Committee;
review and discuss the Company’s Compensation Discussion and Analysis (“CD&A”) and the related executive compensation information and recommend that the CD&A and related executive compensation information be included in the Company’s proxy statement and annual report on Form10-K, as required by the rules and regulations of the SEC;
approve the Compensation Committee Report on executive officer compensation included in the Company’s proxy statement or annual report on Form10-K, as required by the rules and regulations of the SEC;
review and recommend to the Board for approval the frequency with which the Company will conductsay-on-pay votes, taking into account the results of the most recent shareholder advisory vote on frequency ofsay-on-pay votes required by the rules and regulations of the SEC, and review and approve the proposals regarding thesay-on-pay vote and the frequency of thesay-on-pay vote to be included in the Company’s proxy statement;
review and recommend to the Board for approval any employment agreements, severance arrangements,change-in-control arrangements or special or supplemental employee benefits, and any material amendments to the foregoing, applicable to executive officers, provided that any awards granted under an equity-based inducement plan shall be approved by the Compensation Committee;
review and recommend to the Board for approval new hire and promotion compensation arrangements for executive officers, provided that any awards granted under an equity-based inducement plan shall be approved by the Compensation Committee;
administer the Company’s stock plans;
grant awards under the stock plans or delegate that responsibility to the Equity Grant Committee or a committee of the Board, provided that any awards granted under an equity-based inducement plan shall be approved by the Compensation Committee;
conduct and review an annual Committee performance evaluation; and
review the Company’s executive compensation arrangements to determine whether they encourage excessive risk-taking, review and discuss, at least annually, the relationship between risk management policies and practices and executive compensation and evaluate executive compensation policies and practices that may mitigate any such risk.
| 2019 PROXY STATEMENT | 25 | |||
GOVERNANCE INFORMATION
The Compensation Committee considered the risks associated with our compensation policies and practices in 2018. The Compensation Committee concluded that our compensation policies and practices were not reasonably likely to have a material adverse effect on the Company and did not include risk-taking incentives or encourage our employees, including our executive officers, to take excessive risks in order to receive larger awards. As part of this analysis, the Compensation Committee considered the individual components of our executive officers’ compensation, the performance measures required to be achieved to earn cash bonus and equity awards and the vesting schedule of the equity awards. In concluding that our incentive plans do not promote excessive risk, the Compensation Committee considered the following factors, among others:
A significant portion of our executive officers’ compensation is tied to developmental, operating and corporate performance goals, and the achievement of the performance goals is conducted in accordance with the Company’s risk framework approved by the Board.
A significant portion of our executive officers’ compensation is provided in equity and is tied to the stock value of the Company, and our executive officer stock ownership guidelines subject our executive officers to minimum share ownership and retention requirements, further aligning their interests with those of our shareholders.
Our compensation program design provides a mix of annual and longer-term incentives and performance measures.
Our compensation mix is not overly weighted toward annual incentives.
We do not maintain highly leveraged payout curves for incentive compensation opportunities, nor do we maintain steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds.
We currently do not grant stock options.
The Compensation Committee has discretion over incentive award payouts, and compliance and ethical behavior are integral factors considered in all performance assessments.
The Company’s Policy on Insider Trading and Compliance prohibits executive officers from hedging and effecting short sales of the Company’s stock and prohibits pledging of the Company’s stock.
CODE OF CONDUCT AND ETHICS AND CORPORATE GOVERNANCE GUIDELINES
Our Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees of the Company, is available on the Company’s website at www.cheniere.com.
Our Corporate Governance Guidelines set out the material corporate practices that the Board has implemented which serve the best interests of the Company and its shareholders. Our Corporate Governance Guidelines are available on the Company’s website at www.cheniere.com.
Continuing education opportunities are provided to keep directors updated with information about our industry, corporate governance developments and critical strategic issues facing the Company, and other matters relevant to Board service. To enhance the Board’s understanding of some of the unique issues facing our business, directors are invited to visit our operating locations, tour our facilities and directly interact with the personnel responsible for our day-to-day operations. Directors also participate in the National Association of Corporate Directors (NACD) of which the Company is a member.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1, 2018 through the 2018 Annual Meeting, the Compensation Committee consisted of Ms. Zichal and Messrs. Brandolini, Kilpatrick and Lipinski. From the 2018 Annual Meeting through the end of 2018, the Compensation Committee consisted of Messrs. Brandolini, Kilpatrick, Langham and Shear. During 2018, none of our executive officers served as a member of the compensation committee of any other company that had an executive officer who served as a member of our Board. During 2018, none of our executive officers served as a member of the board of directors of any other company that had an executive officer who served as a member of our Compensation Committee. Mr. Shear served as the Interim Chief Executive Officer and President of Cheniere from December 2015 to May 2016.
Our Corporate Governance Guidelines provide for compensation for our directors’ services, in recognition of their time and skills. Directors who are also our officers or employees do not receive additional compensation for serving on the Board.
Maintaining a market-based compensation program for our directors enables the Company to attract qualified members to serve on the Board. The Governance and Nominating Committee, with the assistance of our independent compensation consultant, periodically reviews our director compensation levels and practices and compares them to that of comparable companies to ensure they are aligned with market practices. Specifically, comparisons are made to the companies included in our peer group used for benchmarking the compensation of our executive officers, which is discussed under “Peer Group and Benchmarking” below, as well as to data presented in the annual NACD Director Compensation Report. Based on the results of such competitive reviews, the Governance and Nominating Committee may recommend changes to our director compensation program to the Board for approval.
During the fiscal year ended December 31, 2017, the Board approved an increase to the annual compensation for eachnon-employee director for his or her service from $180,000 to $210,000 and did not increase annual director compensation in 2018. Mr. Fusco did not receive any compensation for his service as a director. Directors may elect to receive the annual compensation either (i) 100% in restricted stock or (ii) $90,000 in cash and $120,000 in restricted stock. Additional compensation is also paid for Board leadership positions, to recognize the additional time required to perform their responsibilities. These additional fees are as follows: $20,000 each for the Chairs of the Audit Committee and Compensation Committee; $10,000 for the Chair of the Governance and Nominating Committee; and $150,000 for theNon-Executive Chairman. Cash payments are made quarterly. The directors’ restricted stock equity retainer of $120,000 and 50% of all Chair fees awarded in 2018 vest on the earlier of: (i) the day immediately prior to the date of the Company’s regular annual meeting of shareholders in the calendar year following the calendar year in which the date of the grant occurs; and (ii) the first anniversary of the date of grant. If a director elects to receive their remaining compensation in restricted stock in lieu of cash, such restricted stock vests quarterly.
The Governance and Nominating Committee continues to evaluate our total director compensation package to ensure competitiveness with market practices, as well as fairness and appropriateness in light of the responsibilities and obligations of our non-employee directors.
| 2019 PROXY STATEMENT | 27 | |||
GOVERNANCE INFORMATION
The compensation earned by or paid to ournon-employee directors for the year ended December 31, 2018, is set forth in the following table:
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2018 | ||||||||||||||||||||||||||||
NAME | FEES EARNED OR PAID IN CASH ($) | STOCK AWARDS ($)(1) | OPTION AWARDS ($) | NON-EQUITY INCENTIVE PLAN COMPENSATION | CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS ($) | ALL OTHER COMPENSATION ($) | TOTAL ($) | |||||||||||||||||||||
Vicky A. Bailey(2) | $ | 92,500 | $ | 120,059 | — | — | — | — | $ | 212,559 | ||||||||||||||||||
G. Andrea Botta(3) | $ | 167,500 | $ | 195,025 | — | — | — | — | $ | 362,525 | ||||||||||||||||||
Nuno Brandolini(4) | $ | 95,000 | $ | 120,059 | — | — | — | — | $ | 215,059 | ||||||||||||||||||
David I. Foley(5) | $ | 90,000 | $ | 120,059 | — | — | — | — | $ | 210,059 | ||||||||||||||||||
David B. Kilpatrick(6) | $ | 90,000 | $ | 120,059 | — | — | — | — | $ | 210,059 | ||||||||||||||||||
Andrew Langham(7) | $ | 45,000 | $ | 210,118 | — | — | — | — | $ | 255,118 | ||||||||||||||||||
John J. Lipinski(8) | $ | 45,000 | $ | — | — | — | — | — | $ | 45,000 | ||||||||||||||||||
Courtney Mather(9) | $ | — | $ | 210,118 | — | — | — | — | $ | 210,118 | ||||||||||||||||||
Donald A. Robillard, Jr.(10) | $ | 5,000 | $ | 230,118 | — | — | — | — | $ | 235,118 | ||||||||||||||||||
Neal A. Shear(11) | $ | — | $ | 230,118 | — | — | — | — | $ | 230,118 | ||||||||||||||||||
Heather R. Zichal(12) | $ | 60,747 | $ | — | — | — | — | — | $ | 60,747 | ||||||||||||||||||
| (1) | For Ms. Bailey and Messrs. Botta, Brandolini, Foley, Kilpatrick, Langham, Mather, Robillard and Shear, the amounts in this column reflect the grant date fair values (at $62.11 per share on May 17, 2018) of awards made on May 17, 2018. |
| (2) | Ms. Bailey was granted 1,933 shares of restricted stock on May 17, 2018, with a grant date fair value of $120,059. As of December 31, 2018, she had a total 1,933 shares of restricted stock outstanding. |
| (3) | Mr. Botta was granted 3,140 shares of restricted stock on May 17, 2018, with a grant date fair value of $195,025. Mr. Botta receives $150,000 for his service asNon-Executive Chairman of the Board of Directors. Mr. Botta receives $10,000 for his service as Chairman of the Governance and Nominating Committee. As of December 31, 2018, he had a total of 3,140 shares of restricted stock outstanding. |
| (4) | Mr. Brandolini was granted 1,933 shares of restricted stock on May 17, 2018, with a grant date fair value of $120,059. As of December 31, 2018, he had a total of 1,933 shares of restricted stock outstanding. |
| (5) | Mr. Foley was granted 1,933 shares of restricted stock on May 17, 2018, with a grant date fair value of $120,059. Mr. Foley is an employee of Blackstone and, pursuant to arrangements between Mr. Foley and Blackstone, we pay directly to Blackstone any and all compensation due to Mr. Foley in connection with his directorship of the Company. |
| (6) | Mr. Kilpatrick was granted 1,933 shares of restricted stock on May 17, 2018, with a grant date fair value of $120,059. As of December 31, 2018, he had a total of 1,933 shares of restricted stock outstanding. |
| (7) | Mr. Langham was granted 3,383 shares of restricted stock on May 17, 2018, with a grant date fair value of $210,118. As of December 31, 2018, he had a total of 2,658 shares of restricted stock outstanding. |
| (8) | On May 17, 2018, Mr. Lipinski resigned from the Board, and all of the outstanding shares of restricted stock of Mr. Lipinski were forfeited upon his departure. As of December 31, 2018, Mr. Lipinski had a total of 0 shares of restricted stock outstanding. |
| (9) | Mr. Mather was granted 3,383 shares of restricted stock on May 17, 2018, with a grant date fair value of $210,118. As of December 31, 2018, he had a total of 2,658 shares of restricted stock outstanding. |
| (10) | Mr. Robillard was granted 3,705 shares of restricted stock on May 17, 2018, with a grant date fair value of $230,118. Mr. Robillard receives $20,000 for his service as Chairman of the Audit Committee. As of December 31, 2018, he had a total of 2,900 shares of restricted stock outstanding. |
| (11) | Mr. Shear was granted 3,705 shares of restricted stock on May 17, 2018, with a grant date fair value of $230,118. Mr. Shear receives $20,000 for his service as Chairman of the Compensation Committee. As of December 31, 2018, he had a total of 2,900 shares of restricted stock outstanding. |
| (12) | On July 16, 2018, Ms. Zichal resigned from the Board, and all of the outstanding shares of restricted stock of Ms. Zichal were forfeited upon her departure from the Board. As of December 31, 2018, Ms. Zichal had a total of 0 shares of restricted stock outstanding. |
| 28 | CHENIERE | |||
The following table sets forth the names, ages and positions of each of our executive officers (for purposes of Rule 3b-7 under the Securities Exchange Act of 1934 and this Proxy Statement), as of the Record Date, all of whom serve at the request of the Board:
| NAME | AGE | POSITION | ||
Jack A. Fusco | 56 | Director, President and Chief Executive Officer | ||
Michael J. Wortley | 42 | Executive Vice President and Chief Financial Officer | ||
Anatol Feygin | 50 | Executive Vice President and Chief Commercial Officer | ||
Sean N. Markowitz | 45 | General Counsel and Corporate Secretary | ||
Douglas D. Shanda | 49 | Senior Vice President, Operations |
Jack A. Fusco
President and Chief Executive Officer
Mr. Fusco has served as Chief Executive Officer since May 2016. Further information regarding Mr. Fusco is provided above under “Director Biographies.”
Michael J. Wortley
Executive Vice President and Chief Financial Officer
Mr. Wortley has served as Chief Financial Officer since January 2014 and as Executive Vice President since September 2016 (Senior Vice President from January 2014 to September 2016). Mr. Wortley joined Cheniere in February 2005. He served as Vice President, Strategy and Risk of Cheniere from January 2013 to January 2014 and as Vice President-Business Development of Cheniere and President of Corpus Christi Liquefaction, LLC, a wholly-owned subsidiary of Cheniere, from September 2011 to January 2013. He served as Vice President-Strategic Planning from January 2009 to September 2011 and Manager-Strategic New Business from August 2007 to January 2009. Mr. Wortley serves as a director and Executive Vice President and Chief Financial Officer of Cheniere Energy Partners GP, LLC, a wholly-owned subsidiary of Cheniere and the general partner of Cheniere Partners. He also served as a director and Chief Financial Officer of Cheniere Holdings from January 2014 to September 2018 and Executive Vice President from August 2017 to September 2018 (Senior Vice President from January 2014 to August 2017). Prior to joining Cheniere in February 2005, Mr. Wortley spent five years in oil and gas corporate development, mergers, acquisitions and divestitures with Anadarko Petroleum Corporation (“Anadarko”), a publicly-traded oil and gas exploration and production company. Mr. Wortley began his career with Union Pacific Resources Corporation, a publicly-traded oil and gas exploration and production company subsequently acquired by Anadarko. Mr. Wortley received a B.B.A. in Finance from Southern Methodist University.
Anatol Feygin
Executive Vice President and Chief Commercial Officer
Mr. Feygin has served as Executive Vice President and Chief Commercial Officer since September 2016. Mr. Feygin joined Cheniere in March 2014 as Senior Vice President, Strategy and Corporate Development. Mr. Feygin also currently serves as Executive Vice President and Chief Commercial Officer of Cheniere Partners GP, LLC, and previously served as a director and Executive Vice President and Chief Commercial Officer of Cheniere Holdings from September 2016 and August 2017, respectively, to September 2018. Prior to joining Cheniere, Mr. Feygin worked with Loews Corporation from November 2007 to March 2014, most recently as its Vice President, Energy Strategist and Senior Portfolio Manager. Prior to joining Loews, Mr. Feygin spent three years at Bank of America, most recently as Head of Global Commodity Strategy. Mr. Feygin began his banking career at J.P. Morgan Securities Inc. as Senior Analyst, Natural Gas Pipelines and Distributors. Mr. Feygin earned a B.S. in Electrical Engineering from Rutgers University and an M.B.A. in Finance from the Leonard N. Stern School of Business at New York University.
Sean N. Markowitz
General Counsel and Corporate Secretary
Mr. Markowitz has served as General Counsel and Corporate Secretary since September 2016. Mr. Markowitz joined Cheniere in October 2015 as Assistant General Counsel and Corporate Secretary. Mr. Markowitz served as Interim General Counsel and Corporate Secretary from June 2016 to September 2016. Mr. Markowitz also currently serves as General Counsel and Corporate Secretary of Cheniere Energy Partners GP, LLC and previously served as General Counsel and Corporate Secretary of Cheniere Holdings from
| 2019 PROXY STATEMENT | 29 | |||
MANAGEMENT
November 2016 and December 2015, respectively, to September 2018. Prior to joining Cheniere, Mr. Markowitz served as General Counsel and Corporate Secretary for Sizmek, Inc. (and its predecessor company, Digital Generation, Inc.) from August 2012 to May 2015. Prior to joining Digital Generation, Inc., Mr. Markowitz served as Chief Legal Counsel—Commercial for Alon USA Energy, Inc. from August 2010 to August 2012 (and as Assistant General Counsel from December 2008 to July 2010). From January 2006 to December 2008, Mr. Markowitz served as Counsel—Corporate Acquisitions and Finance for Electronic Data Systems Corporation which was acquired by Hewlett-Packard Company in August 2008. Mr. Markowitz’s earlier career experience includes service with the law firms of Fulbright & Jaworski L.L.P. (now a part of Norton Rose Fulbright), Hughes & Luce L.L.P. (now a part of K&L Gates LLP) and Andrews Kurth LLP (now a part of Hunton Andrews Kurth LLP). Mr. Markowitz earned his J.D., with honors, from The University of Texas School of Law and graduated magna cum laude with a B.S. in Economics from the Wharton School of the University of Pennsylvania.
Douglas D. Shanda
Senior Vice President, Operations
Mr. Shanda has served as Senior Vice President of Operations since September 2016. Mr. Shanda joined Cheniere in October 2012 as Vice President, Sabine Pass Operations leading the effort to prepare for liquefaction operations. His role was expanded to include Corpus Christi Operations in 2015. Mr. Shanda currently serves as a director and Senior Vice President, Operations of Cheniere Energy Partners GP, LLC and previously served as director and Senior Vice President, Operations of Cheniere Holdings from September 2016 and August 2017, respectively, to September 2018. Mr. Shanda serves as President of Sabine Pass Liquefaction, LLC and Senior Vice President, Terminal Operations of Corpus Christi Liquefaction, LLC. Mr. Shanda is responsible for safe, reliable operations at Cheniere’s LNG terminals. Mr. Shanda has been professionally involved in the power, chemical, petrochemical, refining and LNG industries for over 25 years. Prior to joining Cheniere, Mr. Shanda served as the Senior Project Engineer, Technical Manager and Plant Manager of the PERU LNG liquefaction plant in Melchorita, Peru where he was responsible for the overall management of the facility including production, marine, maintenance, technical services, EHS, security and administration. Mr. Shanda has over 25 years of experience in project management and operations management. Mr. Shanda also serves as a director for The Alley Theatre and The Interstate Natural Gas Association of America (INGAA). He has a B.S. degree in Electrical Engineering from Iowa State University.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Restated Certificate of Incorporation, as amended, and Bylaws provide that the Company will indemnify its directors and officers to the fullest extent permissible 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.
We have also entered into an Indemnification Agreement with members of our Board and certain officers of the Company. The Indemnification Agreement provides for indemnification for all expenses and claims that a director or officer incurs as a result of actions taken, or not taken, on behalf of the Company while serving as a director, officer, employee, controlling person, agent or fiduciary (the “Indemnitee”) of the Company, or any subsidiary of the Company, with such indemnification to be paid within 25 days after written demand. The Indemnification Agreement provides that no indemnification will generally be provided: (1) for claims brought by the Indemnitee, except for a claim of indemnity under the Indemnification Agreement, if the Company approves the bringing of such claim, or as otherwise required under Section 145 of the General Corporation Law of the State of Delaware, regardless of whether the Indemnitee ultimately is determined to be entitled to indemnification; (2) for claims under Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (3) if the Indemnitee did not act in good faith or in a manner reasonably believed by the Indemnitee to be in or not opposed to the best interests of the Company; (4) if the Indemnitee had reasonable cause to believe that his or her conduct was unlawful in a criminal proceeding; or (5) if the Indemnitee is adjudged liable to the Company. Indemnification will be provided to the extent permitted by law, the Company’s Restated Certificate of Incorporation, as amended, and Bylaws, and to a greater extent if, by law, the scope of coverage is expanded after the date of the Indemnification Agreement. In all events, the scope of coverage will not be less than what is in existence on the date of the Indemnification Agreement.
| 30 | CHENIERE | |||
PLAN INFORMATION
The following table provides information about our compensation plansplan as of December 31, 2015.2018. The equity compensation plans approved by our shareholders include the Cheniere Energy, Inc. Amended and Restated 2003 Stock Incentive Plan (the “2003 Plan”) andconsist of the Cheniere Energy, Inc. 2011 Incentive Plan, as amended (the “2011 Plan”).
| Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted- average exercise price of outstanding options, warrants and rights | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column (a)) | |||||||||||||||||||||
| PLAN CATEGORY | (a) NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS | (b) WEIGHTED- AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS | (c) NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN THE FIRST COLUMN (a)) | |||||||||||||||||||||
Equity compensation plans approved by security holders | 26,500 | $ | 39.88 | 256,718 | (1) | 3,872,765 | (1) | — | 4,280,325 | (2) | ||||||||||||||
Equity compensation plans not approved by security holders | — | — | 1,000,000 | (2) | — | — | — | |||||||||||||||||
Total | 26,500 | 1,256,718 | 3,872,765 | — | 4,280,325 | |||||||||||||||||||
| (1) | The number in this column represents the number of shares issuable under outstanding RSU awards and PSU awards based on the maximum award level. For more information regarding these awards, please see “LTI Program” on page 45 of this Proxy Statement. The weighted-average exercise price of outstanding options, warrants and rights does not take these awards into account. |
| (2) | In |
Vesting of |
In 2011, the Company established the 2011 Plan. The 2011 Plan is a broad-based incentive plan, which allows for the issuance of stock options, stock appreciation rights and awards of bonus stock, phantom stock, restricted stock and performance awards and other stock-based awards to employees, consultants and non-employee directors. The following awards have been granted under the 2011 Plan and remain outstanding as of December 31, 2015: 7,131,437 shares of restricted stock. Vesting of restricted stock under the 2011 Plan depends on whether the restricted stock was granted as a new hire award, the equity portion of the long-term bonus award for construction of Trains 1 and 2 at the Sabine Pass LNG terminal, or a Milestone Award or Stock Price Hurdle Award for construction of Trains 3 and 4 at the Sabine Pass LNG terminal. New hire awards typically vest in four equal annual installments. The vesting schedules for the equity portion of the long-term bonus award for construction of Trains 1 and 2 at the Sabine Pass LNG terminal and the Milestone Awards and Stock Price Hurdle Awards are described in the CD&A of this Proxy Statement. The term of any award under the 2011 Plan may not exceed a period of ten years.
Restricted Stock Units (“RSUs”) under the 2011 Plan generally vest in equal annual installments over a three-year period on each anniversary of the grant date or cliff vest upon the third anniversary of the grant date. |
Performance Share Units (“PSUs”) under the |
| 2019 PROXY STATEMENT | 31 | |||
As of the Record Date, there were 234,961,842257,390,300 shares of common stock outstanding. The information provided below summarizes the beneficial ownership of directors, andnominees for director, named executive officers set forth in the “Summary“Summary Compensation Table”Table”, and all of our directors and executive officers as a group, as well as owners of more than 5% of our outstanding common stock. “Beneficial Ownership” generally includes those shares of Company common stock that a person has the power to vote, sell or acquire within 60 days. It includes shares of Company common stock that are held directly and also shares held indirectly through a relationship, a position as a trustee or under a contract or understanding.
Directors and Executive OfficersDIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to shares of common stock of the Company owned of record and beneficially as of the Record Date by each director, nominee for director and named executive officer set forth in the “Summary“Summary Compensation Table”Table” and by all current directors and executive officers of the Company as a group. OnAs of the Record Date, the current directors and executive officers of the Company beneficially owned an aggregate of 1,780,7841,491,413 shares of common stock (approximately 1% of the outstanding shares entitled to vote at the time).
The table also presents the ownership of common units of Cheniere Partners and common shares of Cheniere Holdings owned of record or beneficially as of the Record Date by each director, nominee for director and named executive officer set forth in the“Summary Compensation Table” and by all current directors and executive officers of the Company as a group. The Company owns a majority100% of the general partner interest in Cheniere Holdings, and Cheniere Holdings owns a majority48.6% of the limited partner interest in Cheniere Partners. As of the Record Date, there were 57,108,848348,625,292 common units, 135,383,831 subordinated units 145,333,334 Class B units and 6,893,9959,877,232 general partner units of Cheniere Partners outstanding and 231,700,000 common shares of Cheniere Holdings outstanding.
| Cheniere Energy, Inc. | Cheniere Energy Partners, L.P. | Cheniere Energy Partners LP Holdings, LLC | ||||||||||||||||||||||
| Name of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||||||||
Vicky A. Bailey | 46,173 | * | — | — | — | — | ||||||||||||||||||
G. Andrea Botta | 39,530 | * | — | — | — | — | ||||||||||||||||||
Nuno Brandolini | 255,602 | (2) | * | 600 | (3) | * | 300 | (3) | * | |||||||||||||||
Jonathan Christodoro | 3,963 | * | — | — | ||||||||||||||||||||
David I. Foley | 31,207 | (4) | * | — | — | — | — | |||||||||||||||||
David B. Kilpatrick | 118,765 | (5) | * | — | — | — | — | |||||||||||||||||
Samuel Merksamer | 18,634 | * | — | — | ||||||||||||||||||||
Donald F. Robillard, Jr. | 14,901 | * | — | — | — | — | ||||||||||||||||||
Heather R. Zichal | 8,887 | * | — | — | — | — | ||||||||||||||||||
Neal A. Shear | 8,697 | * | — | — | — | — | ||||||||||||||||||
Charif Souki | 2,983,026 | (6) | 1.3 | % | 400,100 | (7) | * | — | — | |||||||||||||||
Michael J. Wortley | 412,115 | * | 5,000 | * | — | — | ||||||||||||||||||
Meg A. Gentle | 819,469 | (8) | * | 8,035 | (8) | * | — | — | ||||||||||||||||
Greg W. Rayford | 456,586 | (9) | * | — | — | — | — | |||||||||||||||||
R. Keith Teague | 571,208 | (10) | * | — | — | — | — | |||||||||||||||||
All current directors and executive officers as a group (16 persons) | 1,780,784 | * | 8,450 | * | 300 | * | ||||||||||||||||||
| CHENIERE ENERGY, INC. | CHENIERE ENERGY PARTNERS, L.P. | |||||||||||||||
NAME OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP | PERCENT OF CLASS | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP | PERCENT OF CLASS | ||||||||||||
Jack A. Fusco | 501,630 | (1) | * | — | — | |||||||||||
Vicky A. Bailey | 34,706 | * | — | — | ||||||||||||
G. Andrea Botta | 46,674 | * | — | — | ||||||||||||
Nuno Brandolini | 220,204 | (2) | * | — | ||||||||||||
David I. Foley | 35,604 | (3) | * | — | — | |||||||||||
David B. Kilpatrick | 80,662 | (4) | * | — | — | |||||||||||
Andrew Langham | 5,523 | * | — | — | ||||||||||||
Courtney R. Mather | 3,383 | * | — | — | ||||||||||||
Donald F. Robillard, Jr. | 23,328 | * | — | — | ||||||||||||
Neal A. Shear | 16,714 | * | — | — | ||||||||||||
Michael J. Wortley | 381,231 | (5) | * | — | — | |||||||||||
Anatol Feygin | 59,728 | (6) | * | — | — | |||||||||||
Sean N. Markowitz | 9,566 | (7) | * | — | — | |||||||||||
Douglas D. Shanda | 72,960 | (8) | * | 2,850 | * | |||||||||||
All directors and executive officers as a group (16 persons) | 1,491,413 | * | 2,850 | * | ||||||||||||
| * | Less than 1% |
| (1) | Includes 35,457 RSUs that vest in May 2019. Does not include 301,677 unvested RSUs awarded to Mr. Fusco. Of the total shares reported, 169,378 shares are owned by Fusco Energy Investment LLP and may be deemed to be beneficially owned by Mr. Fusco as |
| (2) | Includes 6,000 shares held by Mr. Brandolini’s wife. |
| (3) |
| Includes 8,542 shares of restricted stock granted on October 1, 2012, 6,429 shares of restricted stock granted on June 6, 2013, 6,000 shares of restricted stock granted on March 5, 2014, 2,162 shares of restricted stock granted on September 11, 2014, 2,490 shares of restricted stock granted on June 11, 2015, |
| 32 | CHENIERE | |||
OWNERS OF MORE THAN FIVE PERCENT OF OUTSTANDING STOCK
| (4) | Includes 76,265 shares held by trust. |
| (5) | Does not include 153,780 unvested RSUs awarded to Mr. Wortley. |
| (6) | Does not include 134,264 unvested RSUs awarded to |
| (7) | Does not include 60,485 unvested RSUs awarded to |
| (8) | Does not include 75,485 unvested RSUs awarded to |
Owners of More than Five Percent of Outstanding StockOWNERS OF MORE THAN FIVE PERCENT OF OUTSTANDING STOCK
The following table shows the beneficial owners known by us to own more than five percent of our voting stock as of the Record Date.
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| COMMON STOCK | ||||||||
NAME AND ADDRESS OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP | PERCENT OF CLASS | ||||||
Icahn Capital LP 767 Fifth Avenue, 47th Floor New York, NY 10153 | 23,680,490 | (1) | 9.2 | % | ||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 20,388,634 | (2) | 7.9 | % | ||||
FMR LLC 245 Summer Street Boston, MA 02210 | 14,982,530 | (3) | 5.8 | % | ||||
The Baupost Group, L.L.C. 10 St. James Avenue, Suite 1700 Boston, MA 02116 | 14,196,135 | (4) | 5.5 | % | ||||
| (1) |
| Information is based on a Schedule 13D/A filed with the SEC on |
| (2) | Information is based on a Schedule 13G/A filed with the SEC on February |
| (3) | ||
Information is based on a Schedule 13G filed with the SEC on February 13, 2019 by FMR LLC. FMR LLC has sole voting power over 1,056,364 shares of common stock and |
| (4) | Information is based on a Schedule 13G/A filed with the SEC on February |
COMPENSATION DISCUSSION AND ANALYSIS
Due toAll information provided in the fact that Proposal 1 relates to a compensation plan in which executive officers and directors“Owners of Cheniere Energy, Inc. (“Cheniere,” the “Company,” “we,” “us” or “our”) will participate, the Company is required under Item 8More than Five Percent of Schedule 14A to furnish executive compensation information required by Item 402 of Regulation S-K and certain paragraphs of Item 407 of Regulation S-K related to our last completed fiscal year, 2015. As such, below is the Compensation Discussion and Analysis section and related compensation tables that were included in our Proxy Statement dated April 21, 2016. In addition, we have furnished certain informationOutstanding Stock” table with respect to the Company’s 2016 compensation programabove entities is based solely on information set forth in their respective Schedule 13D/A, Schedule 13G/A and the intended program for 2017, which will be described in more detail in our Proxy Statement in respect of the Company’s 2017 annual meeting of shareholders.
The following discussion and analysis of compensation arrangements of our named executive officers should be read togetherSchedule 13G filings with the compensation tablesSEC, as applicable. This information may not be accurate or complete, and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plans,Cheniere takes no responsibility therefor and makes no representation as well as considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned compensation programs as summarized in this discussion.
Under new leadership, Cheniere has implemented a focused and clarified strategy, adopted comprehensive governance enhancements, appointed a new management team, and in 2016 delivered significant operating and financial results. Specific compensation program changes include:
The basic framework of the Company’s compensation programs on a going forward basis, including the Annual LTIP, was developed with input from our independent compensation consultant, Meridian Compensation Partners (“Meridian”), and has been approved by the Compensation Committee. Additional information regarding these changes to the compensation programs are provided in this document insupport of Proposal 1, which is seeking approval of the issuance of awards with respect to 7,845,630 shares of common stock availablefor issuance under the Cheniere Energy, Inc. 2011 Incentive Plan, as amended (the “2011 Plan”). The Compensation Committee believes that the Annual LTIP is a critical element of the new compensation philosophy and strategy and that equity grants under the Annual LTIP would align our NEOs’ interests with the interests of shareholders by rewarding long-term value creation.
In connection with an Order and Final Judgment of the Court of Chancery of the State of Delaware dated March 16, 2015 (the “Order”), and a Stipulation and Agreement of Compromise, Settlement and Release dated December 12, 2014 (the “Stipulation”), resolving disputes with certain shareholders, we are subject to certain conditions relating to stock-based compensation and awards under the 2011 Plan. Among the provisions of the Order and Stipulation is a requirement that, prior to use, we hold a shareholder vote to approveits accuracy or not approve the issuance of awards with respect to the 7,845,630 shares of common stock comprising the Available Shares (as defined in Proposal 1). In order to further the Company’s transition and fully implement our new compensation strategy, we are seeking such shareholder approval. Proposal 1 sets forth the required steps and shareholder approval necessary to proceed with our transition.
Index to CD&A
This CD&A is organized as follows:completeness.
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Named Executive OfficersCOMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes the material elements of the compensation of our Named Executive Officers (“NEOs”), including our former Chief Executive Officer (“CEO”) and our former Interim CEO, and factors considered in making compensation decisions. Our NEOs for fiscal year 2015 (“2015 NEOs”)2018 were the following individuals:
DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER | ||||||||
WORTLEY EXECUTIVE VICE PRESIDENT AND CHIEF | ||||||||
EXECUTIVE VICE CHIEF COMMERCIAL | ||||||||
MARKOWITZ GENERAL COUNSEL AND CORPORATE SECRETARY | DOUGLAS D. SHANDA SENIOR VICE PRESIDENT, OPERATIONS | |||||||
This CD&A is organized as follows:
| 1 |
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In 2016, Messrs. Rayford and Teague and Ms. Gentle ceased to be employed by the Company. In addition, in May 2016, Jack A. Fusco was appointed President and CEO of the Company, and Mr. Shear was appointed Interim Special Advisor to the CEO through November 12, 2016. As a result, this CD&A provides select information for 2016 and 2017 for the executives listed below whom we expect to be our named executive officers for 2016 under SEC rules (our “2016 NEOs”). However, our actual NEOs for 2016 will not be finalized until the Proxy Statement for our 2017 annual meeting of shareholders.
Philosophy & Objectives | ||||
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Compensation Program | PAGE 42 |
| 4 | Compensation Process | PAGE 51 |
| 5 | PAGE 54 |
Executive SummaryEXECUTIVE SUMMARY
Business OverviewABOUT OUR BUSINESS
Cheniere Energy, Inc. (“Cheniere”) is a market leader in the developmentleading producer and commercializationexporter of liquefied natural gas (“LNG”) facilitiesLNG in the United States. Our vision is to be recognized asprovide clean, secure and affordable energy to the premier global LNG company and provideworld, while responsibly delivering a reliable, competitive and integrated source of LNG, to our customers while creatingin a safe productive and rewarding work environment for our employees.environment. Our primary business strategy is to be a full service LNG provider to worldwideend-use customers.
We own and operate the Sabine Pass LNG terminal in Louisiana which includes operational regasification facilities with existing infrastructure of five LNG storage tanks with capacity of approximately 16.9 Bcfe, two docks that can accommodate vessels with nominal capacity of up to 266,000 cubic meters and vaporizers with regasification capacity of approximately 4.0 Bcf/d.
Wewhere we are currentlydeveloping, constructing developing and operating natural gas liquefaction and export facilities at the Sabine Pass LNG terminal(the “SPL Project”) adjacent to the existing regasification facilities (the “SPL Project”).facilities. We are also developing, constructing and developingoperating a second natural gas liquefaction and export facility in Texas at the Corpus Christi LNG terminal (the “CCL Project”). We continue to evaluate additional development opportunities.
Each terminal includes a number of planned liquefaction trains (“Trains”), which convert natural gas into LNG so that it can be transported more economically across long distances. We expectEach Train is expected to investhave a nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, potential overdesign and debottlenecking opportunities, of approximately $30 billion in the aggregate for the construction4.5 mtpa of LNG, and developmentaverage run rate adjusted nominal production capacity of the seven Trains we currently have under construction or completed. These projects are being constructed under lump-sum turnkey contracts, and financing has been obtainedapproximately 4.4 to fund construction.4.9 mtpa of LNG
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EXECUTIVE SUMMARY
per Train. For the SPL Project, we are developingconstructing up to six Trains, each with an expected nominal production capacity of approximately 4.5 million tonnes per annum (“mtpa”) of LNG, adjacent to our existing regasification facilities. The Trainswhich are in various stages of development.development, construction and operations. Trains 1 and 2 have commenced commercial operations; Train 3 is undergoing commissioning; Trains 4 andthrough 5 are under construction;operational and Train 6 is fully permitted. Trains 1being commercialized and 2 achieved substantial completionhas all necessary regulatory approvals in May 2016 and September 2016, respectively. Train 3 is expected to achieve substantial completion during the summer of 2017, and the remaining Trains under construction are expected to achieve substantial completion on a staggered basis thereafter.
place. For the CCL Project, we are currently developing up to three Trains, each with an expected nominal production capacity of approximately 4.5 mtpa of LNG, near Corpus Christi, Texas. The Trains are in various stages of development with the first two Trains under construction and the third Train permitted. Commissioning forTrains. Train 1 is expected to commence as early as late 2018.
In addition, we have begun the permitting process for a fourthoperational; Train 2 is undergoing commissioning; and fifth Train at3 is under construction. We are also developing an expansion of the Corpus Christi LNG terminal adjacent to the CCL Project and filed an application with FERC in June 2018 for seven midscale Trains with an expected aggregate nominal production capacity of approximately 9.5 mtpa and one LNG storage tank.
The following table summarizes the current overall project status of the SPL Project and CCL Project:
| SPL PROJECT | CCL PROJECT | |||||||||
| LIQUEFACTION TRAIN | TRAINS1-5 | TRAIN 6 | TRAIN 1 | TRAIN 2 | TRAIN 3 | |||||
| Project Status | Operational | Limited Notices to Proceed Issued | Operational | Commissioning | Under Construction | |||||
| Expected Substantial Completion | Complete | — | Complete | 2H 2019 | 2H 2021 | |||||
A final investment decision for Train 6 of the SPL Project is expected in 2019 upon commercialization and obtaining financing.
First Mover in U.S. LNG Exports
Trains 1 through 5 of the SPL Project were the first liquefaction facilities to have been constructed and placed in service in the U.S. in over 40 years, and Train 1 of the CCL Project is the first liquefaction train constructed and placed in service at a greenfield liquefaction facility in the lower 48 states. We are currently the largest LNG exporter in the U.S. and expect to be one of the top five LNG sellers in the world by 2020, representing approximately 8% of the global LNG market by 2020. As of the end of 2018, there were three LNG projects under construction and one project in operation in North America, other than Cheniere’s SPL Project and CCL Project. Additionally, there are over 20 LNG projects in the region that have started the regulatory process for LNG exports. Outside of North America, we estimate that over 30 LNG production projects are under various stages of development.
Liquefaction Projects Underpinned with Long-Term20-Year Contracts
We have entered into long-term sale and purchase agreements (“SPAs”) between each respective project level subsidiary and third parties with fixed fees aggregating approximately $4.7 billion annually to make available an aggregate amount of LNG that is between approximately 75% to 95% of the expected aggregate adjusted nominal production capacity of the eight Trains under construction or completed. All of these SPAs have been entered into with investment grade parent companies as counterparties or guarantors and do not have price reopeners. Revenue generally will commence under these SPAs as each applicable Train reaches the date of first commercial delivery (“DFCD”).
Under these SPAs, the customers will purchase LNG for a price consisting of a fixed fee per MMBtu of LNG (a portion of which is subject to annual adjustment for inflation) plus a variable fee per MMBtu of LNG equal to approximately 115% of Henry Hub. In certain circumstances, the customers may elect to cancel or suspend deliveries of LNG cargoes, in which case the customers would still be required to pay the fixed fee with respect to the contracted volumes that are not delivered as a result of such cancellation or suspension. As a result, we expect to generate a significant amount of predictable, stable cash flows annually, over the lives of the contracts.
For the volumes not contracted by our project level subsidiaries under long-term SPAs, we have an integrated marketing function that is expected to have access to the excess LNG available from the eight Trains under construction or completed at the SPL and CCL Projects, and is developing a portfolio of long-, medium- and short-term SPAs. Cheniere Marketing, LLC (together with its subsidiaries, “Cheniere Marketing”) has purchased LNG from the Sabine Pass terminal and other locations worldwide, transported and unloaded commercial LNG cargoes and has capitalized on opportunities to optimize its portfolio of assets with the intention of maximizing margins on these cargoes.
Our management team creates value for our shareholders through diligent development (including commercialization), construction and operation of these facilities, the achievement of ambitious key milestones and disciplined capital allocation. The Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company considers progress against these goals when it designs Cheniere’s executive compensation program for theour NEOs.
Cheniere’s Business Model—First Mover in U.S. LNG Exports
In 2008, Cheniere completed construction of the regasification facilities at the Sabine Pass LNG terminal in order to import natural gas. This timing coincided with a seismic shift in the U.S. energy sector, where innovation in drilling technologies enabled large supplies of unconventional gas—particularly shale gas—to be developed at low costs. As a result of this new supply, the price of domestic natural gas declined precipitously, largely displacing the need to source natural gas globally for import to the U.S. Due to these unfavorable market conditions for U.S. LNG imports, Cheniere began assessing other strategic options in order to optimize shareholder value.
In 2010, Cheniere was the first to announce plans to pursue the development of an LNG export facility in the contiguous U.S., the SPL Project. Historically the U.S. has not been a meaningful exporter of natural gas. However, Cheniere decided to pursue the development of an LNG export facility in response to the vast transformation of the U.S. natural gas markets and the abundance of natural gas supply expected for years to come. Trains 1 and 2 of the SPL Project are the first liquefaction facilities to have been constructed and placed in service in the U.S. in over 40 years.
We are the first mover in this sector, and construction of, and operations at, the SPL Project is nearly two years ahead of any other U.S. liquefaction project. We are currently the largest LNG exporter in the U.S. and expect to be one of the three largest LNG exporters in the world by 2020, representing approximately nine percent of the global LNG market.
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COMPENSATION DISCUSSION AND ANALYSIS
2018 PERFORMANCE AND DEVELOPMENTS
2018 was a breakthrough year for Cheniere. We achieved significant milestones throughout the organization, including financially, operationally and commercially:
| Signedlong-term SPAs for~7.5 MTPA of | Record financial results:revenue of | Over270 cargoes exported in 2018 totaling~1 TCF of LNG | ||||||||||
Liquefaction Projects Underpinned
Approximately 87%
a full notice to proceed to Bechtel under the EPC contract for Train 3. |
For the volumes not contracted under long-term SPAs, we have developed a marketing business that is expected to have access to approximately 4.1 mtpa of the excess LNG available from the seven Trains under construction or completed at the SPL and CCL Projects, which we will sell on a shorter-term, more opportunistic basis. Operational
We believe our contracting efforts were successful primarily as a result of Cheniere differentiating itself in the LNG market by offering global LNG buyers more attractive features and contract terms, including (1) an alternative pricing mechanism, basing LNG prices on a natural gas index as opposed to a traditional crude-based index, (2) destination flexibility, allowing customers to determine delivery points, as opposed to the traditionally restricted delivery locations and (3) customers have the ability to cancel or suspend deliveries ofFebruary 20, 2019, over 575 cumulative LNG cargoes with notice, subject to payment of the fixed fees.
All of the SPAs have been entered into with investment grade parent companies as counterparties or guarantors. The SPAs are “take-or-pay” style agreements, meaning that the fixed fee component of the LNG price would still be required to be paid whether or not the customer elects to purchase the LNG. The SPAs have initial terms of twenty yearsproduced, loaded and do not have price reopeners. A portion of the fixed fee component escalates with inflation as specified in each SPA. Revenue generally will commence under the SPAs as each applicable Train reaches the date of first commercial delivery (“DFCD”).
2015 and 2016 Performance and Developments
2015 marked the start of a transition for Cheniereexported from a development company to an LNG operator. Amidst a challenging macroeconomic environment, we made significant progress on our development and construction goals for our SPL and CCL Projects. In February 2016, the first of our Trains at the SPL Project began producing LNG, and the firstCCL Project, with more than 270 cargoes in 2018 alone from the SPL Project, with deliveries to 32 countries and regions worldwide.
On the governance front, the Board decided to replace our Chairman, CEO and President, Charif Souki, who had served at Cheniere for 19 years. The Board split the roles of Chairman and CEO with G. Andrea Botta serving as Non-Executive ChairmanTrain 1 of the BoardCCL Project in February 2019 and Neal Shear serving as Interim CEO and President. In May 2016,Train 5 of the Board appointed Jack A. Fusco to serve as President and CEO. The changesSPL Project in March 2019.
Financial
Operating Developments
2015 and 2016 were challenging years for the oil and gas industry worldwide, primarily as a result of significant and sustained commodity price volatility and oil and gas price declines from prior multi-year highs, as well as weaker than anticipated economic growth in certain major global markets. We believe Cheniere’s stock price was impacted by these global factors. Our SPL and CCL Projects, however, continue to progress. We believe that the excellent progress we have made in the development and construction of our LNG facilities is one of the primary reasons
| ○ | In June 2018, the date of first commercial delivery was reached under the20-year SPA with BG Gulf Coast LNG, LLC relating to Train 3 of the SPL Project. |
| ○ | In March 2018, the date of first commercial delivery was reached under the20-year SPA with GAIL (India) Limited relating to Train 4 of the SPL Project. |
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EXECUTIVE SUMMARY
The development and construction of the SPL and CCL Projects advanced as planned and remained ahead of schedule in 2015 and 2016.2018. As we continue to develop these projects and increase LNG production, Cheniere will complete its transition into an LNG operator with expected stable and growing positive cash flow underpinned by long-term SPAs with investment grade energy and commodity companies worldwide.
CEO and Board Changes
In December 2015, the Board terminated the employment of our former Chairman, CEO and President, Charif Souki. Neal Shear, an independent director who joined the Board in 2014, was named Interim CEO and President. The Board formed a Special Committee made up of four independent directors to facilitate an orderly leadership transition. Concurrently, independent director G. Andrea Botta was appointed as our new Non-Executive Chairman of the Board and has assumed the responsibilities of the Lead Director position in addition to the functions of the Chairman of the Board. In May 2016, the Board appointed Jack A. Fusco to serve as President and CEO, and in June 2016, the Board appointed Jack A. Fusco as a member of the Board. In connection with the appointment of Mr. Fusco as President and CEO, Mr. Shear was appointed Interim Special Advisor to the CEO through November 12, 2016.
The CEO transition followed a number of changes to the composition of our Board. At our 2015 annual meeting of shareholders (the “2015 Annual Meeting”), four directors did not stand for reelection. Our Board size was reduced from 13 to 9 members immediately following the 2015 Annual Meeting. In August 2015, we increased the board size to 11 and added two directors to the Board—Jonathan Christodoro and Samuel Merksamer—as part of a Nomination and Standstill Agreement with Icahn Capital LP and certain of its affiliates.
Executive Officer Changes
In 2016, Messrs. Rayford and Teague and Ms. Gentle ceased to be employed by the Company. In addition, in May 2016, Jack A. Fusco was appointed President and CEO of the Company, and Mr. Shear was appointed Interim Special Advisor to the CEO through November 12, 2016. In September 2016, the Company announced its new “executive officers” (as defined by Rule 3b-7 of the Exchange Act), as follows:
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As Cheniere continues its evolution from a development company into an LNG operator, we intend to create and sustain shareholder value by continuing to leverage our significant competitive advantages to execute on our growth initiatives. Cheniere has established itself as a first mover in the domestic LNG export market, which provides us with advantages on multiple fronts, including project development, gas procurement, commercial and terminal operations and LNG origination, and is becoming a significant player in the global LNG market.
We believe that the world-class execution we have delivered in the development, construction and operation of our LNG facilities, and the subsequent transformation of our financial results are some of the primary reasons our stock price has outperformed the S&P 500 Index by approximately 15% in 2018.
Shareholder Outreach—Compensation Committee Changes
The Compensation Committee was reconstituted followingCompany proactively engages with shareholders regarding compensation as a matter of strategic priority, and the departureevolution of directors and Compensation Committee members Messrs. Carney and Foutch. Samuel Merksamer, who joined the Board in August 2015, was appointed to the Compensation Committee in August 2015. Heather Zichal was appointed to the Compensation Committee in September 2015. In December 2015, the Board appointed Nuno Brandolini as Chairman of the Compensation Committee, and David Kilpatrick was reappointed to the Compensation Committee in January 2016.
Development and Construction Milestones
Timely construction of the SPL and CCL Projects remains critical to our success, and we have met the key construction goals for 2015 and 2016. The following table shows the key milestones for these projects and our progress toward achieving them.
Building Liquefaction Facilities
Key Milestones for the
Sabine Pass and Corpus Christi Projects
SABINE PASS (SPL) | CORPUS CHRISTI (CCL) | |||||||
| Trains 1-2 | Trains 3-4 | Train 5 | Trains 1-2 | |||||
Initiate Permitting Process | ✓ | ✓ | ✓ | ✓ | ||||
Commercial Agreements | ✓ | ✓ | ✓ | ✓ | ||||
Engineering, Procurement & Construction Contract | ✓ | ✓ | ✓ | ✓ | ||||
Financing Commitments | ✓ | ✓ | ✓ | ✓ | ||||
Regulatory Approvals | ✓ | ✓ | ✓ | ✓ | ||||
Issue Notice to Proceed | ✓ | ✓ | ✓ | ✓ | ||||
Commence Commercial Operations | ✓ | 2017 | 2019 | 2019 | ||||
As of November 30, 2016, development of our liquefaction facilities was as follows:
SPL Project:
CCL Project:
2015 and 2016 Shareholder Outreach
Key Compensation Themes from Our Shareholder Outreach
At our 2015 Annual Meeting, our say-on-pay proposal received support from shareholders owning approximately 63% of the shares represented at the meeting and entitled to vote on the matter. Though this was a significant increase in support from our say-on-pay results at our 2014 annual meeting, the Board recognizes the need to continually engage with our shareholders and modify our compensation program design is a product of the Board’s responsiveness to address any significant shareholder concerns.input.
Following the resultsAhead of our 20152018 Annual Meeting, the Board embarked on a broad-based shareholder outreach program to directly seek feedback from our shareholders regarding what they would like to see in our compensation program. The significant changes made to our compensation program in 2015 resulted in large part from the discussions and feedback we received in these meetings, which the Board believes was reflected in the meaningful year over year increase in support for our say-on-pay proposal. In the months leading up to our 2015 Annual Meeting, we engaged with shareholders representing approximately 53% of our outstanding common stock. In the fourth quarter of 2015 and the first quarter of 2016, members of our Board and management reached out to, and had extensive dialogue with, shareholders representing approximately 60%more than 50% of our outstanding common stock, through both in person and telephonic meetings.
These meetingsAt our 2018 Annual Meeting, oursay-on-pay proposal received support from shareholders owning approximately 72% of the shares represented at the meeting and entitled to vote on the matter. Although there has been significant improvement in the results of the Company’ssay-on-pay votes since 2016 as our total compensation philosophy has evolved incorporating shareholder feedback, the Board recognizes the need to continually engage with our shareholders were immensely valuableand consider shareholder concerns with our compensation program and governance framework.
Following our 2018 Annual Meeting, members of our Board and management engaged with shareholders holding more than 50% of our outstanding common stock, as well as proxy advisory firms, and we intend to continue our shareholder outreach efforts going forward and to consider shareholder concerns or recommendations with respect to our compensation program design or practices.
In our shareholder engagement following the 2018 Annual Meeting, shareholders appreciated the Company’s significant strategic, operational and financial accomplishments in a very competitive marketplace against rigorous performance targets and objectives, and for positive steps taken on compensation program design in response to shareholder feedback. Shareholders noted particular improvement in implementing a performance scorecard and a performance-based long term incentive plan. Shareholders encouraged the continued evolution of our executive compensation practices, focused on a more conventional compensation program which appropriately incentivizes management, in line with an appropriate peer group, with enhanced disclosure on compensation committee discretion and milestone awards.
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COMPENSATION DISCUSSION AND ANALYSIS
The Board has demonstrated its commitment to a compensation program design that is aligned with our business strategy and our shareholders. The Company has significantly evolved its compensation program in recent years, taking into consideration input and feedback from shareholders. Our new program contemplates awarding compensation within the designed framework of the approved plan, rather than featuringad-hoc grants that can lead to significant variation in year over year compensation. We believe these changes align our program with competitive ranges in our new peer group and take into account the shareholder feedback that we have received.
Actions Taken as a Result of Shareholder Outreach
Management, the Board and the Compensation Committee initiated several changes stemming from the recent shareholder engagement discussions and the Company’s shareholder voting history regarding compensation:
ACTION TAKEN | DESCRIPTION | |
Terminated the Cheniere Energy, Inc. 2014-2018 Long-Term Cash | On October 31, 2016, the Board terminated the 2014-2018 Long-Term Cash Incentive Program (the “2014-2018 LTIP”) in order to implement a new long-term incentive award program beginning in 2017. | |
Implemented a performance scorecard to determine annual cash bonuses | In December 2016, the Compensation Committee approved a performance scorecard for the 2017 fiscal year that ties individual bonus targets to competitive benchmarks. The scorecard provides that 80% of the bonus opportunity will be determined based on quantitative performance measures using multiple financial, operating, construction, safety and strategic performance measures, and 20% will be determined based on achievement of strategic goals and organizational accomplishments. | |
Replaced prior change of control plan and agreements | At the end of 2016, Cheniere replaced the Company’s 2008 Change of Control Cash Payment Plan and individual Change of Control Agreements with new, market-competitive plans that provide balanced and equitable terms and provisions. | |
Approved new LTI program | In February 2017, the Compensation Committee recommended and the Board approved the parameters of an annual long-term incentive plan (the “LTI program”) that features annual equity grants to all employees with multi-year vesting. Cheniere’s LTI program aligns our NEOs’ interests with the interests of shareholders by rewarding long-term value creation and incentivizes management with long-term performance goals tied to multi-year financial and growth objectives. | |
Adopted new peer group reflecting continued evolution of business | In light of our achievements in 2018 and our transformation into an LNG operating company of considerable size relative to our peers in the LNG industry, we reevaluated our peer group for 2019 to reflect a more appropriate risk profile, capital intensity, enterprise valuation, commercial focus and global scope. | |
Enhanced disclosure for ad-hoc long-term incentive awards | Provided additional discussion of the rationale behind the Train 3 Milestone Awards and the February 2018 Special Retention Awards. See pages 47-48 of this Proxy Statement. | |
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EXECUTIVE SUMMARY
As a result of these actions, the Company has implemented a more consistent, competitive and conventional total compensation philosophy.
Shareholder engagement is critical to the Board and management, and we have acted on many of the governance and compensation changes discussed at these meetings. For example, in responseWe will continue to the governance discussions, since our 2015 Annual Meeting, the Board implemented proxy access, eliminated a third party director disqualification provision in our Bylaws, and split our CEO and Chairman of the Board roles. The specific changes toevaluate our compensation program that further align it to our business strategyprograms and shareholders’ interests are detailed below. The process is ongoing, and we will continue to
incorporate shareholder outreach as a standard business practice in the future. We are committed to maintaining an open dialogue with our shareholders to ensure the successful evolution of our executive compensation program going forward.
At our 2016 annual meeting of shareholders (the “2016 Annual Meeting”), our say-on-pay proposal received support from shareholders owning approximately 83% of the shares represented at the meeting and entitled to vote on the matter.
Compensation Actions Taken as a Result of Shareholder Outreach
Following our shareholder outreach, the Compensation Committee and the Board approved the following changes, many of which are directly responsive to the feedback we received from our shareholders:
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Key Governance Themes from Our Shareholder Outreach
Many of our shareholders have different methodologies and processes for evaluating compensation and governance programs. However, a number of common themes emerged during our discussions with shareholders, including the following:
Additional Actions Taken as a Result of Shareholder Outreach
We have continued to engage with our shareholders to ensure shareholder views are considered for incorporation into our compensation program design and governance framework. The Board has evaluated the design of the compensation program going forward after discussions and engagement with our shareholders. Additional changes to our executive compensation program and our governance practices that have been implemented are included below:
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2015 Compensation Design (Prior Approach)
The Compensation Committee is committed to creating a performance-based compensation structure that is strongly aligned with the interests of our shareholders and incentivizes management with long-term performance goals. Historically, both our short-term and long-term performance awards have been 100% performance-based.
2015 compensation operated under the Company’s prior compensation programs and was comprised of the following components:
Base Salary
In 2015, our former Chairman, CEO and President received a base salary of $1. His entire compensation package was provided under the 2014-2018 LTIP and was 100% performance based. The base salaries of our NEOs were generally targeted to the median of the market, other than the former CEO whose base salary was below the median.
Annual Cash Bonus
For 2015, our 2015 NEOs’ annual cash bonuses were based on rigorous, near-term developmental, operating and corporate goals that coincided with our key milestones and spanned eight strategic areas: (1) operations; (2) construction; (3) development projects; (4) marketing; (5) financial/budget; (6) human resources; (7) risk management; and (8) critical business systems. The achievement of these goals resulted in cash bonuses in 2015 with payments at 100% of target for our NEOs. Our former CEO did not participate in the program in 2015. Mr. Shear assumed the role of Interim CEO and President effective December 12, 2015 and did not receive a cash bonus in 2015.
These goals are discussed in greater detail beginning on page 23 of this Proxy Statement.
Long-Term Performance Incentive Award: 2014-2018 LTIP
The Board believes long-term incentive awards establish strong long-term alignment between NEOs and shareholders and, as such, are an important component of a strong compensation structure.
On April 21, 2015, the Compensation Committee recommended and the Board approved the 2014-2018 LTIP. The 2014-2018 LTIP reflected feedback we received from our shareholder outreach program and provided for the grant of phantom units settled in cash. The 2014-2018 LTIP was 100% performance-based.
The 2014-2018 LTIP rewarded growth in our market capitalization, measured by growth in total shareholder value, above certain thresholds. There were two pools from which phantom units were granted: a senior executive pool and a general pool. The maximum percentage of growth in total shareholder value that could be used to fund the senior executive pool for each performance period was 2%, and 4% for the general pool. Our former CEO’s compensation was targeted at 50% of the senior executive pool. The amount of phantom units granted from the senior executive pool for each performance period was capped at an annual maximum amount equal to 1.5% of our common shares outstanding.
The phantom units that were granted for the first performance period are subject to a three-year vesting schedule, with one-third of the phantom units vesting and becoming payable on each of February 1, 2016, February 1, 2017 and February 1, 2018. The phantom units will be settled in cash at the end of each vesting period. The 2014-2018 LTIP is described in further detail beginning on page 26 of this Proxy Statement.
2015 Results under the 2014-2018 LTIP
In 2015, we did not meet our annual TSR hurdle under the 2014-2018 LTIP for the 2015 performance period which began November 1, 2014 and ended October 31, 2015. As such, no phantom units were awarded for the 2015 performance period.
Compensatory Arrangement with Former Interim CEO and President
In connection with the termination of Mr. Souki as Chairman, CEO and President, the Board asked Mr. Shear, an independent director of our Board, to serve as Interim CEO and President. The Company and Mr. Shear entered into a letter agreement dated December 18, 2015 which includes the terms of his arrangement. In appointing Mr. Shear as Interim CEO and President, among other things, the Board determined that Mr. Shear was best positioned to effectively identify and execute on strategic priorities.
The Compensation Committee, in consultation with Pearl Meyer, the compensation consultant to the Compensation Committee prior to June 2016, determined to pay Mr. Shear an annualized base salary of $1,000,000 for his service as Interim CEO and President. Mr. Shear received a bonus of $1,500,000 on June 15, 2016. In addition, Mr. Shear was granted 36,330 phantom units that vested in full on June 15, 2016. While serving as Interim CEO and President, Mr. Shear did not receive director fees for his service as a member of the Board.
2016 and Future Compensation Design2018 AND FUTURE COMPENSATION DESIGN
As we continue to transitionour evolution from a development company intoto an LNG operator, the Compensation Committee is focused on evaluating the components of our executive compensation program and ensuring that we continue to implement a performance-based compensation structure that is strongly aligned with the interests of our shareholders and incentivizes management withto achieve long-term performance goals.
In 2016, Cheniere re-evaluated its prevailingOur compensation philosophy and programs, with the intent to transition the programs to a more consistent, competitive, and conventional structure. Beginning in 2017, the compensation programs will feature:program features:
Market-competitive base compensation opportunities tied to companyCompany and individual performance
Annual cash bonus incentive compensation opportunities tied to specific financial, operating, construction, safety and strategic performance objectives
Annual long-term incentive opportunities with portions tied to specific three-year financial performance and growth objectives
Equity-based compensation that delivers annual, market-competitive opportunities within common norms of shareholder dilution and required value creation
The Compensation Committee approved this new framework with input from Meridian.Meridian Compensation Partners, its independent compensation consultant. As a result of our growth from a development company into a top tier LNG operator and receipt of shareholder feedback, the Compensation Committee, together with Meridian, has further refined the framework of our executive compensation program for 2019. Our achievements and success over the past several years led to a realignment with a new peer group for 2019 discussed under “Peer Group and Benchmarking” below, and we have reassessed our compensation framework to be consistent with our new peer group and more closely align with our share price performance. Our new program contemplates awarding compensation within the designed framework of the approved program, rather than featuringad-hoc grants that can lead to significant variation in year over year compensation. We believe these changes align our program with competitive ranges in our new peer group and take into account the shareholder feedback that we have received. The Compensation Committee continuesbelieves that the pool of talent with the set of skills needed to evaluate further refinementrun a first mover LNG company with a global scope is quite limited and that, accordingly, the market for executive talent to the compensation programs.lead Cheniere is highly competitive.
In 2016, the Company operated a similar2018, direct compensation structure as described above with respect to 2015. Compensation was comprised of the following components:
Base SalarySalary;
Annual Cash BonusIncentive Award; and
Long-Term Incentive AwardsAwards.
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COMPENSATION DISCUSSION AND ANALYSIS
The following pie charts illustrate the pay mix of our CEO and the average pay mix of our other NEOs for 2018 assuming target performance.
| * | Pay Mix does not add to 100% due to rounding. |
| ** | Excludes ad-hoc awards that are not components of our LTI program. |
Base Salary
The Compensation Committee referenced the mediancompetitive ranges of the marketbase salary across midstream natural gas companies and companies of comparable enterprise value in determining the2018 base salaries offor our 2016 NEOs who were employed by the Company in 2015.NEOs. Our employment agreement with Mr. Fusco provides for an annual base salary of $1,250,000, subject to increase at the discretion of the Compensation Committee.
Annual Cash Bonus
For 2016, In reviewing our 2016 NEOs’ annual cash bonuses were based on a subjective review and consideration of achievements related to our key milestones and spanned five strategic areas: (1) financial; (2) construction; (3) operations; (4) organizational; and (5) commercial. In December 2016,new peer group for 2019, the Compensation Committee approved the payment of individual NEO bonusesrecommended an increase in Mr. Fusco’s base salary to $1,500,000 for 2016 that were above the target annual bonuses. These bonuses primarily related to the achievements of key development milestones, operating efficiencies2019, as well as appropriate increases for our other NEOs. See “Peer Group and the successful completion of important company transitions. See “2016 Annual Incentive Program”Benchmarking” on page 2552 of this Proxy Statement for additional details regarding the 2016 bonuses, including our achievementsexternal market data referenced by the Compensation Committee in these strategic areas.making decisions regarding base salaries and other compensation elements.
ForAnnual Incentive Award
Beginning in 2017, the Compensation Committee has implemented a scorecard approach to determine annual cash bonuses, whichbonuses. The 2018 scorecard provides that 80% of the bonus opportunity will be 100% performance-based. The scorecard will consist of 80%determined based on quantitative performance measures using multiple financial, operating, construction, safety and strategic performance measures, and a 20% subjective componentwill be determined based upon achievement of strategic goals and organizational accomplishments.
The following key features are included in the scorecard:
Individual bonus targets based on competitive benchmarks;
Quantitative performance goals in the following areas of performance: financial, operating, construction, safety and strategic; and
Limited qualitative component based on identified strategic goals and organizational accomplishments.
In February 2019, the Compensation Committee approved the payment of individual NEO bonuses for 2018. See “Annual Incentive Program” on page 43 of this Proxy Statement for additional details regarding the 2018 bonuses, including our performance relative to our quantitative performance measures and our achievement of strategic goals and organizational accomplishments.
Long-Term Incentive Awards
2016 Results under the 2014-2018 LTIP
In 2016, we did not meet our annual TSR hurdle under the 2014-2018 LTIP for the 2016 performance period which began November 1, 2015 and ended October 31, 2016. As such, no phantom units were awarded for the 2016 performance period. On October 31, 2016, the Board terminated the 2014-2018 LTIP in order to implement a new long-term performance incentive award program that better incentivizes management with long-term performance goals.
2016 Phantom Unit Awards
In connection with the promotions announced as part of our new leadership team, the Compensation Committee recommended and the Board approved phantom unit awards for several of our 2016 NEOs. Specifically, awards of 25,000 phantom units were granted to each of Messrs. Wortley, Feygin, Lehotsky and Shanda. The phantom units were granted on October 1, 2016 and vest in two equal installments on the anniversary dateComponents of the grant and will be settled in cash.
Annual LTIP Objectives Beginning in 2017LTI Program
The Compensation Committee believes that a new long-term incentivethe LTI program that was implemented in 2017, which provides for annual equity-based awards, is a required and critical element of the Company’s new compensation philosophy and strategy. Equity grants align our NEOs’ interests with the interests of shareholders by rewarding long-term value creation. Theycreation and enable us to attract and retain highly qualified individuals for important positions throughout the Company. In 2019, we revised our metrics under our LTI program for NEOs to introduce an additional metric, total shareholder return, in order to further align our LTI opportunities with our shareholders and reflect the practices of our new peer group.
Beginning in 2017, the Compensation Committee intends to approve annual equity grants to the NEOs in the first quarter of each year. Equity awards will include a minimum of a 1-year vesting period. Equity award vesting is generally subject to continued employment, with exceptions in some cases, including for a change in control or termination due to death or retirement.
| 40 | CHENIERE | |||
EXECUTIVE SUMMARY
The Compensation Committee plans to implement the following key attributes in the Annual LTIP beginning in 2017:of our NEO LTI program include:
• Grants |
• Grants
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• PSUs ○ PSUs will vest upon certification by the Compensation Committee of the level of achievement of the performance conditions during the performance period |
• Grants will be settled in Cheniere shares |
• Equity award grants to executives will include clawback provisions |
Train 3 Milestone Achievement Award under the Annual LTIPAwards
The Annual LTIP awardsIn addition, in 2017 will havethe Compensation Committee approved an additional performance-based compensation component intended to motivate and reward the timely achievement of significant growth milestones. Specifically, an additional grantmilestones as further described under “Long-term Incentive Awards—Train 3 Milestone Awards” on page 47 of shares may be made if pre-established milestones are achieved within a defined period of time.this Proxy Statement. These awards were approved and granted by the Board in May 2018. The Compensation Committee believes that the timely achievement of such milestones areis critical to Cheniere’s strategic plan and would resultresults in the creation of significant additional value for shareholders. The achievement of any such growth milestone awards will be subject to approval by the Board of Directors or the Compensation Committee.
Compensatory Arrangement with President and CEO and Former InterimFebruary 2018 Special Advisor to the CEORetention Award
In connection withaddition, in February 2018, the appointment of Jack A. Fusco as President and CEO, the Company and Mr. Fusco entered into an employment agreement dated as of May 12, 2016.
The Compensation Committee, in consultation with Pearl Meyer, determined to pay Mr. Fusco an annual base salary of $1,250,000, and Mr. Fusco is eligible to receive an annual bonus with a target equal to 125% of his annual base salary and a maximum equal to 250% of his annual base salary. For 2016, Mr. Fusco’s annual bonus was prorated. The Compensation Committee approved an annual bonus for Mr. Fusco for 2016 of $2,303,938. For each fiscal year beginning with 2017, Mr. Fusco will be eligible to receive aadditional long-term incentive award with a grant date value of 500% of his annual base salary. In addition, Mr. Fusco was granted 236,381 shares of restricted stock on May 12, 2016 that vest 25% on December 31, 2016 and 75% in equal installments every six months throughfor the third anniversary of the grant date, in each case, subject to Mr. Fusco’s continued employment. Additionally, pursuant to the Employment Agreement, Mr. Fusco has purchased $10,000,000 worth of common shares of the Company.
Upon a termination of Mr. Fusco’s employment by the Company without cause, or by Mr. Fusco for good reason, Mr. Fusco will be entitled to receive, subject to his execution of a release of claims, (1) a cash severance payment equal to the sum of two times (or, if the termination of employment is within 12 months following a change in control, three times) the sum of Mr. Fusco’s annual base salary and annual target bonus, (2) a pro-rata annual bonus based on actual performance of the Company, (3) any earned but unpaid bonus for a preceding fiscal year, (4) reimbursement of COBRA premiums for up to 18 months and (5) continued vesting of any outstanding long-term incentive awards that are scheduled to vest within one year following termination.
In connection with the appointment of Jack A. Fusco as President and CEO, the Board asked Mr. Shear to serve as Interim Special Advisor toNEOs other than the CEO from May 12, 2016 through November 12, 2016. The Company(the “Special Retention Award”) intended to reward the demonstrated success of our leadership team and Mr. Shear entered intotheir expertise in a letter agreement dated May 12, 2016 which includes the termsrelatively rare but quickly growing industry as further described under “Long-term Incentive Awards—February 2018 Special Retention Award” on page 48 of his arrangement.
this Proxy Statement. The Compensation Committee believes that retention of these executives in consultation with Pearl Meyer, determined to pay Mr. Shear a monthly base salary equal to $100,000 for his service as Interim Special Advisorthe face of fierce competition from new entrants to the CEO. While serving as Interim Special AdvisorLNG market is integral to the CEO, Mr. Shear did not receive director fees for his service as a membercontinued success of the Board.Cheniere.
Compensation Governance PracticesCOMPENSATION GOVERNANCE PRACTICES
The Board and the Compensation Committee are committed to implementing best practice compensation governance best practices that further strengthen the alignment of our compensation program with our shareholders’ interests, which include the following:
Clear, direct link between pay and performance
Majority of incentive awards earned based on performance
No hedging or “short sales” of Company stock
No pledging of Company stock as collateral for a loan or holding Company stock in margin accounts
Robust stock ownership guidelines
No defined benefit retirement plan or supplemental executive retirement plan
Robust compensation risk management program
Executive Compensation Philosophy & Objectives
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Philosophy and Objectives
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION PHILOSOPHY & OBJECTIVES
PHILOSOPHY AND OBJECTIVES
We are committed to maintaining a compensation philosophy that is consistent, competitive and conventional when reviewed against our peers. The Board and the Compensation Committee areremain committed to apay-for-performance compensation structure that aligns our executive compensation with the key drivers of long-term growth and creation of shareholder value. Our executive compensation programs and objectives are designed to ensure that we attract, retain and motivate executives with the talent and experience necessary for us to achieve our strategic business plan.plan, while still remaining commensurate with our peers.
As the first mover in our industry, we face fierce competition for our executive officers business leaders and engineers,key employees throughout the organization, and we seek to hire the highest caliber executives available in the global LNG marketplace. We remain focused on retaining our talent, and our incentive program reflects our need to retain key leaders.
Our compensation structure is performance-based, long-term oriented and currently aligns with our operational and event-driven business objectives to build and operate liquefaction facilities. This structure ensures our executive officers are motivated and incentivized to create long-term value for our shareholders.
Annual and long-term incentive awards are primarily performance-based. We believe such an incentive structure creates appropriate motivation for our executive officers and aligns their compensation with the performance of our Company and value created for shareholders. We will continue to reviewbalance our LTI program to address performance accountability, long-term incentive plan with a focus onstock ownership and talent retention issues in the current environment.
IncentiveAnnual cash bonus incentive metrics are tied to our operational,specific financial, operating, safety and strategic goals. We believe close alignment between our compensation goals and our business strategy is critical to driving performance to be measured against our key milestones and metrics.
Significant long-term compensation is linked to financial performance and growth metrics. We believe our executive officers’ compensation should be tightlyclosely linked to the creation of value for our shareholders over the long run. As such, the majority of their compensation is and should be at risk and directly tied to corporate outperformance over longer time horizons.
COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Components of Our Executive Compensation Program
Base SalaryBASE SALARY
Base salaries provide the fixed compensation necessary to attract and retain key executives. The base salaries of our NEOs are designed to be comparable to positions in the marketplace from which we recruit executive talent. The Compensation Committee referenced competitive ranges of base salary across midstream natural gas companies and companies of comparable enterprise value in determining 2018 base salaries for our NEOs.
In February 2019, in light of our NEOs in 2015 were generally considered in line with the median of the market, with the exception of our former CEO, Mr. Souki, whose base salary was considered below the median of the market.
On December 17, 2014, the Compensation Committee recommendedgrowth and the Board approved a change in the annual base salary for our former Chairman, CEO and President, Mr. Souki. Effective December 15, 2014, Mr. Souki’s base salary was reduced to $1, and he agreed to forego his annual cash bonus beginning in 2015 and through the rest of the term of the 2014-2018 LTIP. In 2015, Mr. Souki’s compensation was based on long-term incentive awards that were 100% performance-based.
The Compensation Committee also reviewed the 2016 base salaries of our other 2015 NEOs. On December 18, 2015, the Compensation Committee recommended and the Board approved 3% base salary adjustments effective January 11, 2016 for our other 2015 NEOs. The increases were considered in line with planned increases by other energy companies based on market data. The following table provides the 2015 and 2016 base salaries of our 2015 NEOs.
| 2015 NEOs Base Salaries | ||||||||||
| 2015 NEOs | 2016 Annual Base Salary | 2015 Annual Base Salary | ||||||||
Neal A. Shear | Director, Former Interim Chief Executive Officer and President | $ | 1,000,000 | $ | 1,000,000 | (1) | ||||
Charif Souki | Former Chairman, Chief Executive Officer and President | $ | — | $ | 1 | (2) | ||||
Michael J. Wortley | Senior Vice President and Chief Financial Officer | $ | 562,380 | $ | 546,000 | |||||
Meg A. Gentle | Former Executive Vice President—Marketing | $ | 626,652 | $ | 608,400 | |||||
Greg W. Rayford | Former Senior Vice President and General Counsel | $ | 562,380 | $ | 546,000 | |||||
R. Keith Teague | Former Executive Vice President—Asset Group | $ | 562,380 | $ | 546,000 | |||||
In December 2016,new peer group determination, the Compensation Committee reviewed the base salaries of our executive officers,NEOs and the Compensation Committee recommended and the Board approved changes in the annual base salaries of our executive officers,NEOs, effective January 9, 2017.March 4, 2019. The following table provides the base salaries for 20162018 and 20172019 of our 2016 NEOs.
| 2016 NEOs Base Salaries | ||||||||||
| 2016 NEOs | 2017 Annual Base Salary | 2016 Annual Base Salary | ||||||||
Jack A. Fusco | Director, President and Chief Executive Officer | $ | 1,250,000 | $ | 1,250,000 | (1) | ||||
Neal A. Shear | Director, Former Interim Chief Executive Officer and President | $ | — | (1) | $ | 1,000,000 | (1) | |||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | $ | 600,000 | (2) | $ | 562,380 | ||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | $ | 500,000 | (3) | $ | 482,040 | ||||
Ed Lehotsky | Senior Vice President, Engineering and Construction | $ | 450,000 | (4) | $ | 385,000 | ||||
Doug Shanda | Senior Vice President, Operations | $ | 450,000 | (5) | $ | 385,000 | ||||
2018 and 2019 Base Salaries
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2018 ANNUAL BASE SALARY | 2019 ANNUAL BASE SALARY | |||||||||
Jack A. Fusco | Director, President and Chief Executive Officer | $ | 1,250,000 | $ | 1,500,000 | |||||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | $ | 630,000 | $ | 715,000 | |||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | $ | 515,000 | $ | 640,000 | |||||
Sean N. Markowitz | General Counsel and Corporate Secretary | $ | 475,000 | $ | 524,300 | |||||
Douglas D. Shanda | Senior Vice President, Operations | $ | 475,000 | $ | 524,300 | |||||
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Annual Incentive ProgramCOMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Our annual incentive program for 2015 was 100% performance-based and was delivered as a cash bonus. This performance-based structure incentivizes our NEOs to achieve near-term developmental, operating and corporate goals that support the creation of long-term shareholder value.ANNUAL INCENTIVE PROGRAM
2015
Annual Incentive ProgramAward
In 2015,As discussed above, the Board and the Compensation Committee reviewed several near-term developmental, operatingare committed to apay-for-performance compensation structure that aligns our executive compensation with the key drivers of long-term growth and corporatecreation of shareholder value. We believe that close alignment between our compensation goals and achievementsour business strategy is critical to determinedriving performance to be measured against our key milestones and metrics. Consistent with our compensation philosophy and in response to feedback from our shareholders, beginning in 2017, the Compensation Committee implemented a scorecard approach to determining annual incentive program fundingcash bonuses. The 2018 scorecard provided that 80% of the bonus opportunity was determined based on quantitative performance measures using multiple financial, operating, construction, safety and awards, includingstrategic performance measures, and 20% was determined based upon achievement of strategic goals and organizational accomplishments, as shown below:
QUANTITATIVE METRICS (80% WEIGHTING) | ||||||||||||
METRIC | THRESHOLD (50% OF TARGET) | TARGET | STRETCH (200% OF TARGET) | WEIGHTING | 2018 ACTUAL | % ACHIEVEMENT | ||||||
Adjusted EBITDA ($ millions)1 | $2,000 | $2,200 | $2,400 | 35% | $2,641 | 200% | ||||||
Budget Management: | ||||||||||||
• Adjusted SG&A Expense ($ millions) | $232 | $221 | $210 | 10% | $212 | 182% | ||||||
• Forecasting Accuracy (%) | Within ± 20% | Within ± 10% | Within ± 5% | 10% | 8% | 138% | ||||||
Safety: | ||||||||||||
• Cheniere (TRIR & LTIR)2 | 1.20 / 0.57 | 0.85 / 0.44 | 0.55 / 0.19 | 10% | 0.31 / 0.01 | 200% | ||||||
Operational Effectiveness: | ||||||||||||
• SPL Production (TBtu) | 865 | 895 | 938 | 10% | 948 | 200% | ||||||
• SPL Availability Index3 | 0.95 | 1.00 | 1.05 | 5% | 1.06 | 200% | ||||||
• Adjusted O&M Expense ($ millions) | $617 | $574 | $545 | 5% | $530 | 200% | ||||||
Construction Management: | ||||||||||||
• SPL Project
• CCL Project | Both projects on track to meet the guaranteed schedule | One project within 2% of 99% completion | Both projects within 2% of 99% completion | 15% | 100%
97% | 200% | ||||||
Weighted Average | 100% | 192% | ||||||||||
STRATEGIC METRICS (20% WEIGHTING) | ||||||||||||
Development of executable plan for next stage of growth | ||||||||||||
Compliance with all applicable laws and regulations | ||||||||||||
Manage CMI cargoes for 2019 & 2020 supply to stabilize cash flows during forecast supply surge | ||||||||||||
Average | 150% | |||||||||||
Total Weighted Average | 184% | |||||||||||
| 1 | For a definition of Adjusted EBITDA and a reconciliation of thisnon-GAAP measure to net income, the most directly comparable GAAP financial measure, please see Appendix C. |
| 2 | “TRIR” is the “Total Recordable Incident Rate,” which is calculated as the number of recordable injuriesmultiplied by 200,000 and thendivided by the number of hours worked. “LTIR” is the “Lost Time Incident Rate,” which is calculated as the number of lost time incidentsmultiplied by 200,000 and thendivided by the number of hours worked. |
| 3 | SPL Availability Index is a measure of LNG production capacity less losses associated with planned and unplanned downtime. |
Performance Goals.The Compensation Committee determined to include metrics in each area of the following items highlighted below:Company’s performance shown above (financial achievement, budget management, safety, operational effectiveness, construction management and strategic objectives) because the Compensation Committee believes that each of those areas is a key driver of the Company’s annual performance and, ultimately, long-term success.
For the quantitative metrics for 2018, the Compensation Committee set the target performance goals in February 2018. The Company set the target for Adjusted EBITDA to align with the base case forecast and selected the threshold and stretch goals by
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COMPENSATION DISCUSSION AND ANALYSIS
primarily adjusting for LNG production, management of costs related to budget and the market price of LNG. The Company set the target for budget management to meet the approved budget for 2018. For each category in the safety performance goals, the TRIR and LTIR threshold, target and stretch goals were chosen based on the Bureau of Labor Statistics 2014 and 2015 values of our NAICS categories and equate to the 3rd quartile, mean and median, respectively. The Company set the target for operational effectiveness based on the expected aggregate nominal production capacity increased by overdesign and decreased by planned and unplanned maintenance and other operational factors for production. For the construction management performance goal, the target completion percentages for Train 5 of the SPL Project and Trains 1 and 2 of the CCL Project were set based on Bechtel’s projected completion percentages at the time the scorecard was approved.
The strategic metrics were selected to emphasize our commitment to a culture of compliance with laws and regulations while developing an executable plan for our next stage of growth and for managing CMI cargoes for 2019 and 2020 supply in order to stabilize cash flows during forecasted supply surges.
Target Incentive Opportunities.In December 2016, the Compensation Committee established target annual incentive opportunities for each of our NEOs, which are reflected in the table below. Mr. Fusco’s target annual incentive was established in accordance with the terms of his employment agreement, which is described in more detail under “Compensatory Arrangements.” For the other NEOs, the targets were set based on a review of competitive market data and internal equity considerations.
Process for Measuring Performance.Performance below the “threshold” level results in no payout earned for the applicable performance goal. If performance falls between the “threshold” and “target” or “target” and “stretch” levels, then the achievement level under the scorecard is determined using straight line interpolation. Once the achievement level under the scorecard is calculated based on actual performance as compared to the goals set forth above, the Compensation Committee has the discretion to reduce or increase the payouts to the extent it determined appropriate to reflect each NEO’s performance during the year.
Actual payout | = | Base salary | x | Target bonus (%) | x | Performance score (%) | +/- |
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2018 Performance Results.The Compensation Committee discussed with management its performance againstscorecard table above shows the near-term developmental, operating and corporate goals that were approvedlevel of achievement in March 2015. Each2018 for each of the goals had been achieved.
As a result of our performance in December 2015, the Compensation Committee recommendedgoals and the Board determined the Company had met performance targets, and it should pay annual cash bonuses at 100%resulting weighted percentage of target payout for executives. The following annual cash bonuses under our Annual Cash Bonus Plan were approved for 2015.
2015 NEOs Annual Cash Bonuses for 2015 | ||||||
Neal A. Shear | Director, Former Interim Chief Executive Officer and President | — | (1) | |||
Charif Souki | Former Chairman, Chief Executive Officer and President | — | (2) | |||
Michael J. Wortley | Senior Vice President and Chief Financial Officer | $ | 436,800 | |||
Meg A. Gentle | Former Executive Vice President—Marketing | $ | 486,720 | |||
Greg W. Rayford | Former Senior Vice President and General Counsel | $ | 436,800 | |||
R. Keith Teague | Former Executive Vice President—Asset Group | $ | 436,800 | |||
2016 Annual Incentive Program
In 2016, the Compensation Committee reviewed achievements related to our key milestones spanning five strategic areas: (1) financial; (2) construction; (3) operations; (4) organizational; and (5) commercial, to determine annual incentive program funding and awards, including the following items highlighted below:
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The Compensation Committee discussed with management its performance related to the financial, construction, operations, organizational and commercial strategic areas. As a result of our performance amidst a challenging macroeconomic environment, in December 2016, the Compensation Committee recommended and the Board determined the Company had exceeded performance targets, and it approved paying annual cash bonuses above the target payout for our 2016 NEOs. The following annual cash bonuses under our Annual Cash Bonus Plan were approved for 2016 for our 2016 NEOs.
2016 NEOs Annual Cash Bonuses for 2016 | ||||||
Jack A. Fusco | Director, President and Chief Executive Officer | $ | 2,303,938 | |||
Neal A. Shear | Director, Former Interim Chief Executive Officer and President | $ | — | (1) | ||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | $ | 1,000,000 | |||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | $ | 700,000 | |||
Ed Lehotsky | Senior Vice President, Engineering and Construction | $ | 525,000 | |||
Doug Shanda | Senior Vice President, Operations | $ | 525,000 | |||
Long-Term Performance Incentive Program (“LTIP”)
Our LTIP incentivizes our NEOs to perform at their highest levels to achieve our long-term strategic business plan and to align management’s interests with our shareholders’ interests.
2014, 2015 and 2016 Awards
During 2014, prior to implementing the 2014-2018 LTIP, no long-term incentive awards were granted other than new hire award grants. The Compensation Committee and the Board used 2014 to solicit feedback from shareholders and designed the 2014-2018 LTIP to appropriately incentivize our executive officers while taking shareholder views into account.
For the 2014 performance period under the 2014-2018 LTIP (beginning November 1, 2013 and ending October 31, 2014), our NEOs, including our former CEO, were granted phantom units on April 21, 2015that was earned as a result of achieving stock price performance hurdles during the initial performance period.
For the 2015 performance period under the 2014-2018 LTIP (beginning November 1, 2014 and ending October 31, 2015), our NEOs, including our former CEO, did not receive an award of phantom units because the stock price performance hurdles were not achieved.
For the 2016 performance period under the 2014-2018 LTIP (beginning November 1, 2015 and ending October 31, 2016), our NEOs, including our former CEO, did not receive an award of phantom units because the stock price performance hurdles were not achieved.
2014-2018 LTIP Design
On April 21, 2015, the Board approved the 2014-2018 LTIP.2018 performance. The plan replaced the long-term incentive plan originally proposed in 2014 and reflected feedback we received from our shareholder outreach.
The 2014-2018 LTIP was 100% performance-based and was intended to reward long-term performance measured against growth in the Company’s market capitalization, referred to in the plan documents as total shareholder value (“TSV”).
The Compensation Committee viewed the 2014-2018 LTIP as a “bridge” program to attract, reward, and incentivize our executive officers and employees while we transitioned from a development-focused company to an LNG operator. As we transition to an operating company, the Compensation Committee re-evaluated our long-term incentive plan and considered more traditional financial metrics.
Summary of Plan Design
For each performance period for the 2014-2018 LTIP, a senior executive pool and a general pool would be funded up to a certain percentage of the growth in TSV provided that certain performance hurdles were met. Each pool would then be converted into
phantom units based on the average 30-day stock price at the end of the performance period, which would be granted to our executive officers and employees. The 2014-2018 LTIP was administered by the Compensation Committee.
Performance Periods
The term of the 2014-2018 LTIP commenced November 1, 2013 and consisted of five consecutive annual performance periods ending October 31, 2018; however, the 2014-2018 LTIP was terminated as of October 31, 2016. Each performance period began on November 1 and ended on October 31.
The Compensation Committee and the Board included 2014 performance as part of the 2014-2018 LTIP. The Compensation Committee and the Board considered goals and expectations discussed in 2013 during the initial design of the plan. As discussed below, based on the terms of the 2014-2018 LTIP, the Company granted an award for the 2014 performance period in order to recognizescorecard reflects the Company’s strong performance in 2014. With respect to2018, achieving above the secondtarget level in nearly all of the quantitative measures of performance and third performance periods, the performance hurdles were not met, resulting in no grant of phantom unit awards in 2016 or 2017 for those periods.
Performance Hurdles
In each performance perioda weighted average for the 2014-2018 LTIP,quantitative metrics of 192% of target. For the strategic metrics, the Compensation Committee determined that the Company measured its annual total shareholder return (“TSR”) and annualized cumulative TSR sincedemonstrated exceptional development of an executable plan for our next stage growth. In addition, the beginningCompany met expectations regarding compliance in all segments of the performance period.
A minimum annual TSR2019 and annualized cumulative TSR performance hurdle of 8% had to be achieved each performance period for the pools to be funded. The maximum annual TSR and annualized cumulative TSR performance hurdles were set at 9%. The annual TSR and annualized cumulative TSR performance hurdles were set based on the expected average annual growth rate of similar companies2020 supply in order to incentivize outperformance relativestabilize cash flows during forecasted supply surges. These assessments earned an average of 150% of target for the strategic metrics as shown in the table above. Overall, the total weighted average under the scorecard was 184% of target.
Based in part on the recommendations of Mr. Fusco, the Compensation Committee approved and recommended to the market.Board for approval the final annual incentive award payouts for each of the NEOs other than Mr. Fusco. The definition of TSV Growth acted as a ‘high water mark’ that ensured awards were not granted on the same appreciation repeatedly. In additionCompensation Committee approved and recommended to the Board for approval the final annual incentive award payout to Mr. Fusco. In evaluating our NEOs’ performance during 2018, the Compensation Committee considered each NEO’s specific contribution to our Company’s key achievements, including those discussed under “Compensation Discussion and cumulative performance hurdles mentioned above, this ensuredAnalysis—2018 Performance and Developments” and towards achieving the funding of the phantom unit pool for any annual performance period was based only on appreciation over the highest TSV achieved in any prior performance period for which awards were paid.
The initial TSV that was used to calculate the annualized cumulative TSR was $8,362,445,350. For the first performance period that ended October 31, 2014 the TSV was $16,881,586,848 ($71.29 per share). Thus, the annualquantitative and annualized cumulative TSRsstrategic measures in the first performance period were 101.9%.
For the second performance period that ended October 31, 2015, the TSV was $11,591,367,296 ($49.11 per share). While the annualized cumulative TSR for the second period was met with growth of 17.7%, the annual TSR growth was not met, resulting in no phantom unit pool awarded for the 2015 performance period.
For the third performance period that ended October 31, 2016, the TSV was $9,674,123,219 ($41.20 per share). The annualized cumulative TSR and the annual TSR growth was not met, resulting in no phantom unit pool awarded for the 2016 performance period.
Maximum Compensation Capsscorecard.
In order to respond to shareholder feedback about pay magnitude and concerns with incentive caps, the amount of the total senior executive pool potential was reduced, capped and was subject to downward adjustment at the discretionlight of the Compensation Committee.
The total percentages of growth in TSV that could be awarded were 2% of TSV growthCommittee’s renewed focus on rewarding our NEOs for exceptional performance within the senior executive pool and generally between 2% and 4% for the general pool. Our former CEO’s compensation was targeted at 50% of the senior executive pool. Additionally, the senior executive pool for each performance period was capped at an annual maximum amount equal to 1.5%bounds of our common shares outstanding.
| Percentage of TSV Growth Awarded | ||||
| TSR Performance Hurdle | Senior Executive Pool | General Pool | ||
Annual TSR or Cumulative TSR < 8% | 0% | 0% | ||
Annual TSR and Cumulative TSR³ 8%, but one is < 9% | adjusted below max | adjusted below max | ||
Annual TSR and Cumulative TSR³ 9% | 2% | 2% - 4% | ||
Funding of Pool
For each performance period,stated compensation framework, withoutad-hoc awards or adjustments, the plan would fund an aggregate phantom unit pool allocableCompensation Committee did not increase the bonuses earned by NEOs in 2018 to plan participants, if applicable. Subject to the maximum caps described above this pool would be denominated in a number of phantom units equal to:
TSVis defined as:
TSV Growth is the difference between the TSV for a performance period plus any TSV Growth carried over from a prior performance period as a result of the cap, if any, minus the highest TSV achieved in any prior performance period.
Average Closing Stock Price is the average of the closing stock prices on each day of trading that occurs during a period of 30 consecutive calendar days that ends on and includes the day immediately prior to the last day of the applicable performance period (October 30). It does not include any prices for weekends or holidays.
Vesting Schedule
For the awards granted for the 2014 performance period, one-third of the phantom units vested and became payable on February 1, 2016; one-third will vest and become payable on February 1, 2017, and the remaining one-third will vest and become payable on February 1, 2018. No phantom units will be granted under the 2014-2018 LTIP in 2016 or 2017 with respect to the 2015 and 2016 performance periods, respectively, since all of the performance hurdles were not achieved.
Except as described below, plan participants will forfeit any unvested phantom units if the participant’s employment with the Company terminates for any reason prior to the applicable vesting dates. Any unvested phantom units will immediately vest and be payable to participants if (i) the Company terminates the participant’s employment without Cause or, in the case of executive officers, the executive officer terminates his or her employment with Good Reason (as defined under “Narrative to the Potential Payments upon Termination or Change-in-Control—Cash and Restricted Stock Awards”), (ii) the participant dies or incurs a Disability before such awards are fully vested, (iii) except in the case of a participant in the United Kingdom, the participant retires after age 65, or (iv) a Change of Control occurs (with each of these terms other than “Good Reason” as defined in the 2015 Long-Term Cash Incentive Plan). The following table shows the measurement periods and vesting schedule of the phantom units.
2016 Long-Term Performance Awards
A minimum annual TSR and annualized cumulative TSR performance hurdle of 8% must be achieved each performance period for the pools to be funded. Our Annualized Cumulative TSR growth was 5.0% and our Annual TSR was negative for the third performance period ending October 31, 2016. Due to the fact that these performance hurdles were not met as of October 31, 2016, there were no awards made in 2017 with respect to the third performance period.
2015 Long-Term Performance Awards
A minimum annual TSR and annualized cumulative TSR performance hurdle of 8% must be achieved each performance period for the pools to be funded. While our Annualized Cumulative TSR growth was 17.7%, our Annual TSR was negative for the second performance period ending October 31, 2015. Due to the fact that all of these performance hurdles were not met as of October 31, 2015, there were no awards made in 2016 with respect to the second performance period.
2014 Long-Term Performance Awards (granted in April 2015)
scorecard results. Based on our TSR of 101.9%2018 Company and TSV Growth of $8.519 billion for the firstindividual performance period ending October 31, 2014,results, the Compensation Committee recommended and the Board approved annual incentive awards to the following awardsNEOs for 2014 performance. The phantom units were granted on April 21, 2015, and vest in three installments, with one-third of the phantom units having vested and been paid on February 1, 2016, one-third vesting and becoming payable on February 1, 2017 and the remaining one-third vesting and becoming payable on February 1, 2018.2018 as follows:
NEOs Annual Incentive Award for 2018
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| NAMED EXECUTIVE | TITLE | TARGET ANNUAL INCENTIVE (% OF BASE SALARY) | TARGET ANNUAL INCENTIVE | SCORECARD DETERMINED ANNUAL INCENTIVE (184% OF TARGET) | EARNED ANNUAL INCENTIVE | |||||||||||||
Jack A. Fusco | Director, President and Chief Executive Officer | 125 | % | $ | 1,562,500 | $ | 2,875,000 | $ | 2,875,000 | |||||||||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | 90 | % | $ | 567,000 | $ | 1,043,280 | $ | 1,043,280 | |||||||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | 90 | % | $ | 463,500 | $ | 852,840 | $ | 852,840 | |||||||||
Sean N. Markowitz | General Counsel and Corporate Secretary | 80 | % | $ | 380,000 | $ | 699,200 | $ | 699,200 | |||||||||
Douglas D. Shanda | Senior Vice President, Operations | 80 | % | $ | 380,000 | $ | 699,200 | $ | 699,200 | |||||||||
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COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Retention Bonus
On August 12, 2013, Mr. Shanda received a retention award that provides for an annual cash bonus payment of 25% of his annual base salary through 2019 and 50% of his base salary in 2020.
LONG-TERM INCENTIVE AWARDS
LTI program awards accomplish several important objectives: (i) they motivate sustained performance against our long-term objectives; (ii) they align executives with shareholder interests; and (iii) they help retain employees who are in high demand elsewhere.
Termination of 2014-2018 LTIPLTI Program
As of October 31, 2016, the Board terminated the 2014-2018 LTIP in order to implement a new long-term performance incentive award program that better incentivizes management with long-term performance goals as we continue to transition from a development-focused company to an LNG operator.
Annual LTIP Beginning in 2017
The Compensation Committee believes that the LTI program delivers a newconsistent, competitive and conventional approach to delivering long-term incentive program that provides for equity-based awards is a required and critical element of the new compensation philosophy and strategy.incentives. Equity grants align our NEOs’ interests with the interests of shareholders by rewarding sustained long-term value creation. Theycreation and enable us to attract and retain highly qualified individuals for important positions throughout the Company.
Beginning In connection with our evolution into an LNG operator and the adoption of our new peer group in 2017,2019, the Compensation Committee intendsadded total shareholder return as an additional metric under the LTI program for PSU grants. We believe that this feature further aligns our LTI program with that of our peers and enables us to approve annual equitycontinue our progression away fromad-hoc grants to the NEOs in the first quarter of each year. Equity awards will include a minimum of a 1-year vesting period. Equity award vesting is generally subject to continued employment, with exceptions in some cases, including for a change in control or termination due to death or retirement.
Under Mr. Fusco’s employment agreement, for each fiscal year beginning with 2017, Mr. Fusco will be eligible to receive a long-term incentive award with a grant date value of 500% of his annual base salary.our NEOs.
The Compensation Committee plans to implement the following key attributes in the Annual LTIP beginning in 2017:Company’s NEO LTI program are described below:
• Grants |
• Grants ○ PSUs:3-year cliff vesting (performance and service-based) ○ RSUs:3-year ratable vesting (service-based) • |
• PSUs will include one or more performance metrics, with the actual number of shares earned to be between 50% and 200% of the target number if the threshold performance is met, and, beginning in ○ PSUs will vest upon certification by the Compensation Committee of the level of achievement of the performance conditions during the performance period • |
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• Grants will be settled in Cheniere shares |
• Equity award grants to executives will include clawback provisions |
RSU Grants
RSU awards will vest ratably over a three-year3-year service period on each of the first, second and third anniversaries of the grant date subject to forfeiture upon termination except in certain events, and acceleration upon certain events including death or disability.
PSU Grants
PSU awards will provide for3-year cliff vesting and will include one or more performance metrics, with the actual number of shares earned to be between 25% and 300% of the target number if the threshold performance is met, providing for a cap on payouts. For 2018 LTI Awards, the actual number of share that could be earned was between 50% and 200% of the target number if the threshold performance was met. PSUs will vest upon certification by the Compensation Committee of the level of achievement of the performance conditions during the performance measurement period.
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PSU GrantsCOMPENSATION DISCUSSION AND ANALYSIS
An important aspect
2018 LTI Awards
In February 2018, the Compensation Committee recommended and the Board approved long-term incentive awards as part of the Company’s equityLTI program for each of the executive officers of the Company.
2018 LTI Awards (approved in February 2018) for NEOs
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| NAME | TITLE | RSUs | TARGET PSUs | |||||||
Jack A. Fusco | Director, President and Chief Executive Officer | 57,678 | 69,214 | |||||||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | 14,535 | 14,535 | |||||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | 11,882 | 11,882 | |||||||
Sean N. Markowitz | General Counsel and Corporate Secretary | 6,576 | 6,576 | |||||||
Douglas D. Shanda | Senior Vice President, Operations | 6,576 | 6,576 | |||||||
The number of RSUs and Target PSUs awarded to Mr. Fusco was determined based on a target of 550% of his base salary, which was above the target of 500% specified in his employment agreement. The incremental amount, consisting solely of PSUs, was awarded by the Board in order to increase the alignment to performance in Mr. Fusco’s compensation strategy featuresopportunity for 2018. The number of RSUs and Target PSUs awarded to Messrs. Wortley and Feygin were determined based on a target of 250% of base salary. The number of RSUs and Target PSUs awarded to Messrs. Markowitz and Shanda were determined based on a target of 150% of base salary.
Key Terms of the RSUs and PSUs under the 2018 LTI Awards
The RSU awards will vest in three equal installments. One third of the RSU awards vested on February 14, 2019, and one third will vest on each of February 14, 2020 and February 14, 2021. Each PSU award is expressed in terms of a target number of shares. The actual number of shares earned under the PSUs, between 50% and 200% of the target if the threshold performance is met, will be determined based on the Company’s cumulative distributable cash flow per share from January 1, 2018 through December 31, 2020 compared to apre-established performance target. For a definition of cumulative distributable cash flow per share in connection with the 2018 PSU awards, please see Appendix A. The PSU awards will vest upon certification by the Compensation Committee of the level of achievement of the performance conditions during the performance period.
Vesting is also subject to continued employment, with exceptions in some cases, including for a change- in-control or termination due to death or disability or retirement. Upon a “Change in Control” or a termination by the Company without “Cause” or by the award recipient for “Good Reason”, in each instance as defined in the PSU agreement and RSU agreement, the RSU and PSU awards will be treated in accordance with the Severance Plan (as described below). Upon a termination due to death or disability, all of the RSUs and the target number of PSUs which further strengthenswill vest in full immediately. Upon retirement, the link between executive officer payRSU and performance. Specifically, the PSU awards help to closely alignwill be treated in accordance with the interestsCheniere Energy, Inc. Retirement Policy (as described below). Each vested RSU and PSU will be settled for one share of the Company’s executivescommon stock.
2019 LTI Awards
In February 2019, the Compensation Committee recommended and the Board approved long-term incentive awards as part of the Company’s LTI program for each of the executive officers of the Company.
2019 LTI Awards (approved in February 2019) for NEOs
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| NAME | TITLE | RSUs | TARGET PSUs | |||||||
Jack A. Fusco | Director, President and Chief Executive Officer | 83,759 | 83,759 | |||||||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | 28,518 | 28,518 | |||||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | 21,698 | 21,698 | |||||||
Sean N. Markowitz | General Counsel and Corporate Secretary | 13,593 | 13,593 | |||||||
Douglas D. Shanda | Senior Vice President, Operations | 13,593 | 13,593 | |||||||
The number of RSUs and Target PSUs awarded to Mr. Fusco was determined based on a target of 700% of his base salary. The number of RSUs and Target PSUs awarded to Mr. Wortley was determined based on a target of 500% of his base salary. The number of RSUs and Target PSUs awarded to Mr. Feygin was determined based on a target of 425% of his base salary. The number of RSUs and Target PSUs awarded to Messrs. Markowitz and Shanda were determined based on a target of 325% of base salary.
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COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Key Terms of the RSUs and PSUs under the 2019 LTI Awards
The RSU awards vest in three equal installments. One third of the RSU awards will vest on each of February 13, 2020, February 13, 2021, and February 13, 2022. Each PSU award is expressed in terms of a target number of shares. The actual number of shares earned under the PSUs, between 25% and 300% of the target if the threshold performance is met, will be determined based on the Company’s cumulative distributable cash flow per share and total shareholder return from January 1, 2019 through December 31, 2021 compared topre-established performance targets. For a definition of cumulative distributable cash flow per share and total shareholder return in connection with those of our shareholders.
the 2019 PSU awards, please see Appendix B. The PSU awards will provide for 3-year cliff vesting and are expected to be based on one performance metric (Distributable Cash Flow) with a payout opportunity of 0-200% of the target award providing for a more customary cap on payouts. The final definition of Distributable Cash Flow for purposes of the PSU awards is expected to be established in February 2017 and is subject to approvalvest upon certification by the Compensation Committee.
Milestone Achievement Award underCommittee of the Annual LTIPlevel of achievement of the performance conditions during the performance period.
The Annual LTIP awards intreatment of unvested 2019 LTI Awards on a termination of employment are the same as discussed above with respect to the 2018 LTI Awards.
Train 3 Milestone Awards
In February 2017, will havethe Compensation Committee approved an additional long-term incentive component intended to motivate and reward the achievement of significant growth milestones. Specifically, an additional grant of shares may be made if pre-established milestones are achieved within a defined period of time. The Compensation Committee believes such milestones are critical to Cheniere’sthe Company’s strategic plan and would resultresulted in the creation of significant additional value for shareholders. In February 2017, the Compensation Committee recommended and the Board approved a milestone award letter for each NEO. The achievementmilestone award letters communicated an award of any such growth milestone awards willRSUs to be granted, subject to the approval of the Compensation Committee, upon a final investment decision being made on or prior to December 31, 2018 with respect to Train 3 of the CCL Project (the “Train 3 Milestone Award”). At the time this incentive was established, there had been no FIDs on new liquefaction capacity in the United States since 2015. We made a positive FID on Train 3 of the CCL project in May 2018. We estimate that Train 3 of the CCL Project increases our run rate annual Consolidated Adjusted EBITDA by approximately $500 million and results in a 14% increase to our expected aggregate nominal production capacity. The Train 3 Milestone Award was approved and granted by the Board in May 2018 and will vest and be payable on February 1, 2020, subject to the award recipient’s continued employment and the terms of Directors orthe applicable award agreement. In determining the amount of the Train 3 Milestone Award for each NEO, the Compensation Committee.Committee considered annual long-term incentive targets for each role, internal equity across executive positions and the individual NEO’s potential impact to create significant additional value for shareholders in connection with the Train 3 Milestone Award. In determining the amount of the Train 3 Milestone Award for each recipient, the Compensation Committee considered the relative contributions of each NEO towards the achievement of the milestone.
2017 LTI Awards—Train 3 Milestone Awards for NEOs | ||||||
| NAME | TITLE | RSUs | ||||
Jack A. Fusco | Director, President and Chief Executive Officer | 156,250 | ||||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | 70,000 | ||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | 70,000 | ||||
Sean N. Markowitz | General Counsel and Corporate Secretary | 25,000 | ||||
Douglas D. Shanda | Senior Vice President, Operations | 25,000 | ||||
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COMPENSATION DISCUSSION AND ANALYSIS
February 2018 Special Retention Award
In February 2018, the Compensation Committee recommended and Benefitsthe Board approved the Special Retention Award, intended to reward the demonstrated success of our leadership team and their expertise in a relatively rare but quickly growing industry, and to retain these NEOs in the face of fierce interest from our growing number of competitors. As of the end of 2017, there were four LNG projects under construction in North America other than Cheniere’s SPL Project and CCL Project. Additionally, there were approximately 20 LNG projects in the region that had started the regulatory process for LNG exports. Outside of North America, we estimate that over 30 LNG production projects are under various stages of development. Cheniere is a leader in the U.S. LNG industry, but the number of competitors continues to grow. One competing project is operational, two projects are expected to be operational by the end of 2019, and four projects have completed the regulatory process. This award is intended to ensure that the Company remains well positioned for future growth. The Special Retention Award provides for3-year cliff vesting and will vest and be payable on February 14, 2021, subject to the award recipient’s continued employment. In determining the amount of the Special Retention Award for each recipient, the Compensation Committee considered the competitive market environment and internal equity considerations.
2018 Special Retention Award | ||||||
| NAME | TITLE | RSUs | ||||
Jack A. Fusco | Director, President and Chief Executive Officer | — | ||||
Michael J. Wortley | Executive Vice President and Chief Financial Officer | 40,000 | ||||
Anatol Feygin | Executive Vice President and Chief Commercial Officer | 30,000 | ||||
Sean N. Markowitz | General Counsel and Corporate Secretary | 15,000 | ||||
Douglas D. Shanda | Senior Vice President, Operations | 30,000 | ||||
COMPENSATORY ARRANGEMENTS
Compensatory Arrangement with President and CEO
In connection with the appointment of Jack A. Fusco as President and CEO, the Company and Mr. Fusco entered into an employment agreement dated as of May 12, 2016.
The Compensation Committee, in consultation with Pearl Meyer (its independent compensation consultant prior to June 2016), determined the following compensation levels set forth in the employment agreement with Mr. Fusco: a minimum annual base salary of $1,250,000; an annual bonus with a target equal to 125% of his annual base salary and a maximum equal to 250% of his annual base salary; and, for each fiscal year beginning with 2017, a long-term incentive award with a grant date value of 500% of his annual base salary. In addition, in connection with his commencement of employment, Mr. Fusco was granted 236,381 shares of restricted stock on May 12, 2016, 25% of which vested on December 31, 2016 and 75% of which will vest in five equal installments every six months beginning May 12, 2017 through May 12, 2019, subject to Mr. Fusco’s continued employment. As of April 15, 2019, 200,924 shares of this award had vested. Additionally, pursuant to his employment agreement, Mr. Fusco has purchased $10,000,000 worth of common shares of the Company.
Upon a termination of Mr. Fusco’s employment by the Company without cause, or by Mr. Fusco for good reason, Mr. Fusco will be entitled to receive, subject to his execution of a release of claims, (i) a cash severance payment equal to the sum of two times (or, if the termination of employment is within 12 months following achange-in-control, three times) the sum of Mr. Fusco’s annual base salary and annual target bonus; (ii) apro-rata annual bonus for the year of termination based on actual performance of the Company; (iii) any earned but unpaid bonus for the preceding fiscal year; (iv) reimbursement of COBRA premiums for up to 18 months; and (v) continued vesting of any outstanding long-term incentive awards that are scheduled to vest within one year following termination. For a description of additional severance compensation benefits to Mr. Fusco upon a termination of his employment, please see “Severance Plan” below.
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COMPENSATION AND BENEFITS
COMPENSATION AND BENEFITS
We provide a limited number of other benefits to our NEOs that make our total compensation program competitive with the market.
Benefits
We offer the same benefits packagehealth, welfare and retirement plans to all of our U.S. employees and executive officers.
The Cheniere Retirement Plan is atax-qualified 401(k) savings plan pursuant to which we match 100% up to the lesser of 6% of salary and bonus deferrals or the maximum deferrals permitted by law.
We also offer all employees medical, dental and vision benefits and health and dependent care reimbursement arrangements.
In addition, employees are covered by short-term and long-term disability, basic life insurance equal to two times base salary and voluntary life (elective) insurance and accidental death and dismemberment insurance.
We do not offer a defined benefit pension plan or nonqualified deferred compensation plan to any of our employees or executive officers.
Our international employees have a similar benefits package, adjusted for the customary practices in each location.
Perquisites
Perquisites are not a significant part of our compensation program and are provided to the executive officers on a limited basis. Because our executive officers’ duties require them to spend a significant amount of time traveling, the Company occasionally pays for charter flights for business purposes. Our executive officers’ personal guests wereare permitted to fly with them on these flights on limited occasions in 2015 at nominal or no incremental cost to the Company. In addition, Mr. Souki occasionally used the corporate plane for2018, we did not have any personal reasons. We pay for the costs of overseas assignments for allguests of our employees, including Ms. Gentle who had been assigned to our London office.NEOs on charter flights paid for by the Company.
Compensation Arrangements for OverseasTermination and Foreign NEOsChange-in-Control Benefits
Given the nature of our business, it is important to have key leaders working outside of the U.S.,In late 2016 and these positions require certain compensation arrangements.
Outside of arrangements with overseas or foreign employees and letter agreements with our President and CEO and former Interim Special Advisor to the CEO, we do not have employment agreements with our NEOs.
Ms. Gentle served as Executive Vice President-Marketing of the Company and President of Cheniere Marketing through August 26, 2016. She began serving as Senior Vice President-Marketing of the Company and President of Cheniere Marketing in June 2013. On July 24, 2013,early 2017, the Compensation Committee and Board reviewed and approved an Assignment Letter for Ms. Gentle to assign her to the London office, effective August 19, 2013 with an end date of August 15, 2015. On June 10, 2015, the Compensation Committee approved an extension to her assignment to the London office, to extend the term until August 18, 2016. Ms. Gentle remained an at-will
employee of the Company at all times during her assignment, subject to the existing terms and conditions of her employment. Ms. Gentle also continued to be eligible to participate in the Company’s annual cash bonus program and long-term incentive plan. We agreed to a tax equalization arrangement so that Ms. Gentle received the same amount of compensation, after taxes, while on assignment as she would have received had she remained a resident in the U.S. Ms. Gentle also received certain allowances in connection with her assignment. Additional information about Ms. Gentle’s Assignment Letter is provided below in the “Narrative to the Summary Compensation & Grants of Plan-Based Awards Tables.”
Change of Control Agreements
In 2008, the Compensation Committee approved Change of Control Agreements for certain employees of the Company, including the NEOs, which provide for a potential cash payment payable upon a change-in-control of the Company.
The Change of Control Agreements were adopted in recognition that the possibility of a change-in-control existed and that such possibility, and the uncertainty it may create, may result in the distraction or departure of employees to the detriment of the Company and its shareholders. The Change of Control Agreements were designed to ensure that certain employees designated by management and confirmed by the Compensation Committee were not unduly distracted by the circumstances attendant to the possibility of a change-in-control and to encourage their continued attention and dedication to our necessary operations.
The Change of Control Agreements provide for the same formula for all participating employees. Specifically, upon a change-in-control, a cash payment in an amount equal to one times (1x) the employees’ base salaries in effect at or immediately prior to the change-in-control will be payable to participating employees.
The cash payments are payable within 30 days of the effective date of the change-in-control. A cessation of an employee’s employment at the previously designated level (including as a result of death or disability) for any reason, a termination of an employee other than for Cause (as defined in the Change of Control Agreements) and a termination by the employee for good reason that occurs not more than three months prior to a change-in-control will be deemed to be a termination of employment pursuant to a change-in-control, provided the employee demonstrates that such cessation or termination of employment was at the request of a third party who has taken steps reasonably calculated to effect a change-in-control or the employee’s termination otherwise arose in connection with or in anticipation of a change-in-control.
The Change of Control Agreements expire on December 31 of each calendar year, but are automatically extended for an additional year each January 1 unless the Compensation Committee determines, and the Company provides notice to employees, that the Change of Control Agreements will not be extended.
In September 2016, the Board terminated the Company’s 2008 Change of Control Cash PaymentKey Executive Severance Pay Plan and provided noticeRetirement Policy to employees that the Change of Control Agreements will not be extended beyond December 31, 2016.provide certain severance and retirement benefit protections, including those associated with achange-in-control.
Severance Plan
In December 2016, the Compensation Committee recommended and the Board approved the Cheniere Energy, Inc. Key Executive Severance Pay Plan (the “Severance Plan”) for certain employees of the Company, including the NEOs, with effect beginning on January 1, 2017. Additionally, in February 2017, the Compensation Committee recommended and the Board approved the Amended and Restated Cheniere Energy, Inc. Key Executive Severance Pay Plan, which was further amended in January 2018 (as amended, the “Severance Plan”), to incorporate certain changes to the Severance Plan as reflected in the description below.
The Severance Plan is intended to provide severance compensation benefits to the executive officers and other officers of the Company and its affiliates in the event of the termination of their employment under certain circumstances. Under the Severance Plan, our officers, including our Chief Executive OfficerCEO and other executive officers, are eligible for certain post-employment compensation and benefits, which vary depending upon whether a change in controlchange-in-control or termination of employment occurs. The Severance Plan also provides certain compensation and benefits in the event of a change in controlchange-in-control of the Company, even absent a termination of employment. To the extent of any overlap, severance benefits for which an officer may be eligible would be providedto receive under any employment agreement, and any amounts to which the officer would be eligible to receive under the Severance Plan would be reduced.reduced so that no officer receives duplicative benefits. Please see “Compensatory Arrangement with President and CEO and Former Interim Special Advisor to the CEO” on page 2048 of this Proxy Statement.Statement for details regarding the severance entitlements set forth in our CEO’s employment agreement.
Severance and Benefits in Connection with a Change in Control.Change-in-Control. With respect to each executive officer, upon the occurrence of a change in control,change-in-control, even absent a termination of employment, generally notwithstanding the provisions of any other benefit plan or agreement, and subject to certain conditions outlined in the Severance Plan:
all of the executive officer’s outstanding unvested equity awards, equity-based awards, annual awards and retention awards (collectively, “Incentive Awards”) which are time-based will automatically vest in full as of the date of the change in control;change-in-control;
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COMPENSATION DISCUSSION AND ANALYSIS
the executive officer’s outstanding unvested performance-based Incentive Awards that vest based on performance metrics other than TSRtotal shareholder return (“TSR”) will vest at the target level for such Incentive Award; and
In the event that an executive officer’s employment is terminated within three months prior to or 24 months following a change in controlchange-in-control and upon the occurrence of the executive’s termination of employment by us without cause, or by such executive for good reason, then such officer is entitled to receive, in addition to, but not duplicationduplicative of, benefits resulting from apre-termination change in control,change-in-control, and subject to certain conditions outlined in the Severance Plan:
a lump sum payment within 60 days following termination in an amount equal to three times (in the case of the Chief Executive Officer)CEO) or two times (in the case of other executive officers) the sum of (a) the officer’s annual base salary in effect when the termination occurs and (b) the officer’s target annual cash bonus for the year of termination; plus
a lump sum payment within 60 days following termination in an amount equal to the officer’spro-rated target annual cash bonus for the year of termination; plus
the officer’s unpaid annual cash bonus, if any, earned for the year prior to the year of termination; plus
acceleration of vesting of all of the executive officer’s outstanding unvested time-based Incentive Awards; and the executive officer’s outstanding unvested performance-based Incentive Awards (A)(a) that vest based on TSR will vest based on actual TSR as of the date of the change in controlchange-in-control and (B)(b) that vest based on performance metrics other than TSR will vest at the target level for such Incentive Award.
Severance and Benefits Not in Connection with a Change in Control.Change-in-Control. In the event that an executive officer’s employment is terminated by the officer for good reason or by us without cause, and not in connection with a change in control,change-in-control, as described above, then such officer is entitled to receive, subject to certain conditions outlined in the Severance Plan:
a lump sum payment within 60 days following termination in an amount equal to two times (in the case of the Chief Executive Officer)CEO) or 1.5 times (in the case of other executive officers) the sum of (a) the officer’s annual base salary in effect when the termination occurs and (b) the officer’s target annual cash bonus for the year of termination; plus
a lump sum payment within 60 days following termination in an amount equal to the officer’spro-rated target annual cash bonus for the year of termination; plus
the officer’s unpaid annual cash bonus, if any, earned for the year prior to the year of termination; plus
acceleration of vesting of the executive officer’s outstanding unvested time-based Incentive Awards that were granted more than threesix months prior to the termination and that otherwise would have vested within one year following such termination; and vesting of apro-rated portion of the executive officer’s outstanding unvested performance-based Incentive Awards that were granted more than six months prior to the termination based on actual performance levels achieved at the end of the applicable performance period.
Provisions Applicable Whether or Not Termination is in Connection with a Change in Control.Change-in-Control. In addition to the above, for a period of 24 months following the termination date, subject to certain conditions outlined in the Severance Plan, the executive officer shallwill receive continued subsidized health care benefits, to be provided concurrently with any health care benefit required under COBRA. At the discretion of the Company, the executive officers also may receive outplacement benefits at our expense.
As a condition to receiving benefits under the Severance Plan, participants will be subject to certain conditions, including entering intonon-competition,non-solicitation,non-disclosure,non-disparagement and release agreements with us.
If any amounts will become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or otherwisenon-deductible under Section 280G of the Code, then such amounts will be reduced so as not to become subject to such excise tax, but only if the net amount of such payments as so reduced is greater than or equal to the net amount of such payments without such reduction. If any participant is a “specified employee” under Section 409A of the Code, any compensation or benefits to be paid or received under the Severance Plan as a result of termination of employment and that constitute “non-qualified“non-qualified deferred compensation” are towill be delayed in accordance with the Code.
Retirement Policy
In February 2017, the Board approved an amended and restated Cheniere Energy, Inc. Retirement Policy (the “Retirement Policy”), effective February 17, 2017 (“the Effective Date”). The Retirement Policy amended and restated the previous policy that was in effect as of June 11, 2015. The Retirement Policy is limited to employees located in the United States. The Retirement Policy is not applicable in the United Kingdom or any jurisdictions in which it would be a violation of applicable laws. The Retirement Policy also does not apply to the Company’s Chief Executive Officer.
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EXECUTIVE COMPENSATION PROCESS
Under the Retirement Policy, an employee is eligible for a “Qualifying Retirement” upon resigning from the Company if he or she is at least 60 years old, has at least four years of service with the Company or its affiliates (or a combination of both), and the combined sum of the employee’s age and full years of service with the Company or its affiliates (or a combination of both) is equal to at least 72 years. Following an eligible employee’s Qualifying Retirement, the continuous employment requirement for all of such employee’s long-term incentive awards granted prior to the Effective Date will be waived, and all such awards will continue to vest in accordance with their terms. In addition, for awards granted under the Company’s LTI program after the Effective Date, following a Qualifying Retirement, an employee’s outstanding unvested time-based incentive awards will immediately vest, and the employee’s outstanding unvested performance-based incentive awards will vestpro-rata, based on the number of months served by the employee in the performance period prior to his or her retirement, on the normal schedule applicable to such awards and based on actual performance results at the end of the relevant period. Only such time-based incentive awards and performance-based incentive awards granted at least six months prior to the Qualifying Retirement will be eligible under the Retirement Policy.
The determination of whether an employee satisfies the criteria for a Qualifying Retirement will be determined by the Company in its sole discretion. The Retirement Policy will not apply to new hire awards, special retention awards, other awards not part of any annual long-term incentive compensation program or awards under any annual cash bonus program, except as otherwise determined by the Company on acase-by-case basis. The treatment of an employee’s outstanding awards under the Retirement Policy as described above is subject to the employee’s execution of a release of claims against the Company and compliance with restrictive covenants as set forth in the Retirement Policy.
Compensation ProcessEXECUTIVE COMPENSATION PROCESS
The Compensation Committee, with the support of an independent compensation consultant and management, handles the development and implementation of our executive compensation program. The Compensation Committee makes recommendations to the Board regarding our executive officers’ compensation for the Board’s final approval.
Role of the Compensation Committee and BoardROLE OF THE COMPENSATION COMMITTEE AND BOARD
The Compensation Committee reviews and approves the performance goals establishedrecommended by management which are required to be achieved in order for our executive officers to earn performance-based compensation.compensation, and determines actual performance against the goals. The performance goals are consistent with the strategic business plan of the Company. The Compensation Committee also reviews and recommends to the Board for approval the total target annual compensation, including the competitiveness of each component of the total compensation package, for our CEO and each executive officer. Key components of this process include:
Establishing performance goals for long-term and short-term incentive awards for executive officers.
Evaluating the achievement of annual developmental, operating and corporate goals for the year to determine the total amount of the bonus pool for the annual cash bonus awards.incentive awards and evaluating the achievement of our executive officers.
Reviewing, discussing and modifying, as appropriate, recommendations from the CEO on the base salaries and annual cash bonusincentive awards for our executive officers. The Compensation Committee makes its recommendations for the Board’s final approval.
Meeting in executive session to discuss and determine the amount of our CEO’s compensation. The Compensation Committee makes its recommendations for the Board’s final approval.
Reviewing and recommending to the Board for approval long-term incentive awards for the CEO and executive officers.
Evaluating the amountachievement of our CEO’s compensation.performance goals under long-term incentive awards.
Role of ManagementROLE OF MANAGEMENT
Management and the Human Resources department support the Compensation Committee’s process.
All compensation recommendations for our executive officers reflect input from our Human Resources department and independent compensation consultant.department. Their recommendations are based on the Company’s performance and their review of external market data.
At the end of the year, the CEO proposes base salaries and annual cash bonus awards for our executive officers (other than the CEO) to the Compensation Committee which then reviews, discusses and modifies, as appropriate, these recommendations.
Role of the Independent Compensation Consultant
| 2019 PROXY STATEMENT | 51 | |||
COMPENSATION DISCUSSION AND ANALYSIS
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
The independent compensation consultant reports to the Compensation Committee Chairman and has direct access to Compensation Committee members. The independent compensation consultant attends Compensation Committee meetings on request and also meets with the Compensation Committee in executive session without management present.
In 2013, weJune 2016, the Compensation Committee engaged Pearl MeyerMeridian as ourits independent compensation consultant, and theyMeridian served as ourits independent compensation consultant during 2014for the remainder of 2016 and 2015for 2017 and through May 2016.2018.
With respect to engaging Pearl Meyer during 2015, weMeridian for 2018, the Compensation Committee considered whether any conflict of interest existed under the SEC rules and NYSE MKTAmerican listing standards. WeThe Compensation Committee reviewed the following related to Pearl Meyer’sMeridian’s independence: (1)(i) other services provided to us by Pearl Meyer; (2)Meridian; (ii) fees paid by us as a percentage of Pearl Meyer’sMeridian’s total revenue; (3)(iii) policies or procedures maintained by Pearl MeyerMeridian that are designed to prevent a conflict of interest; (4)(iv) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee; (5)(v) any Company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and Pearl Meyer or the individual consultants involved in the engagement. We concluded that there were no conflicts of interest that prevented Pearl Meyer from serving as an independent consultant to the Compensation Committee on executive compensation matters.
In June 2016, we engaged Meridian as our independent compensation consultant, and they served as our independent compensation consultant for the remainder of 2016.
With respect to engaging Meridian in June 2016, we considered whether any conflict of interest existed under the SEC rules and NYSE MKT listing standards. We reviewed the following related to Meridian’s independence: (1) other services provided to us by Meridian; (2) fees paid by us as a percentage of Meridian’s total revenue; (3) policies or procedures maintained by Meridian that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee; (5) any Company stock owned by the individual consultants involved in the engagement; and (6)(vi) any business or personal relationships between our executive officers and Meridian or the individual consultants involved in the engagement. Weengagement and concluded that there were no conflicts of interest that prevented Meridian from serving as an independent consultant to the Compensation Committee on executive compensation matters.
Peer Group and BenchmarkingPEER GROUP AND BENCHMARKING
Each year, the Compensation Committee, with the assistance of management and our independent compensation consultant, reviews external market data to determine the competitiveness of the total compensation package of our executive officers. The market data selected isincludes information representative of the energy industry within which we operate and also includes compensation information from a diversified list of U.S. companies with similar business activities and with which we compete for executive talent.of comparable size.
The Compensation Committee reviews the following components of each executive officer’s compensation relative to the amount paid to executives in similar positions within the market data: base salaries, annual cash bonuses and long-term incentive awards. The market data serves as a point of reference for measuring the compensation of each of our executive officers, but individual compensation decisions are made based on a combination of considerations, including the Company’s overall performance; the individual roles, responsibilities and performance of each of our executive officers and market competitiveness. The Compensation Committee does not adhere to a rigid benchmarking process in setting compensation; rather, information is used as a market reference for the Compensation Committee.
Peer Group & Survey Data & Peer Group
With assistance from management and our compensation consultant, the Compensation Committee reviews our executive officers’ compensation against both nationally recognized published survey data, as well as proxy data from our peer group.
TheAs the first mover in U.S. LNG exports, Cheniere currently has few directly comparable peers. For external comparisons, the Compensation Committee referenced the following peer group was used as a market reference to our executive officers’of companies focused on the transportation, storage or purchase of natural gas in determining compensation for 2018. Cheniere ranked near the 60th percentile in 2015.enterprise value among these companies.
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In the fourth quarter of 2015, the Compensation Committee reviewed the Company’s peer group with Pearl Meyer and management and determined to make adjustments to the peer group. Several factors were considered in making changes to the peer group, including market capitalization, enterprise value, public versus privately- held, industry focus, operating characteristics and stock price correlation.
AES Corp., AGL Resources Inc., Enbridge Energy Partners, L.P., EQT Corporation, NRG Energy Inc., Questar Corporation and Regency Energy Partners LP were removed from the peer group due to the size, industry, performance and/or acquisition activity. Ameren Corporation, Dominion Resources, Inc., DTE Energy Company, Enbridge Inc., Energy Transfer Equity, L.P., Enterprise Products Partners L.P., Kinder Morgan, Inc., Magellan Midstream Partners, L.P., PG&E Corporation, Public Service Enterprise Group Inc., Targa Resources Corp. and TransCanada Corporation were added to the peer group due to their similarities to the Company compared to the companies removed from the peer group.
The following peer group was used as a market reference to our executive officers’ compensation in 2016 with the Company near the 50th percentile in terms of market capitalization and enterprise value of the companies included therein.
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• DTE Energy Company | • Targa Resources Corp. | |
• Dynegy Inc. | •TransCanada Corporation | |
• Enterprise Products Partners L.P. | • The Williams Companies | |
• Magellan Midstream Partners, L.P. | ||
| 52 | CHENIERE | |||
EXECUTIVE COMPENSATION PROCESS
As a supplement to the peer group, the Compensation Committee also considered a broad sample of companies from multiple segments of the energy industry with comparable enterprise values to the enterprise value of the Company and its publicly traded subsidiaries in determining our executive officers’ compensation. Enterprise value served as the basis for selecting these companies as it best reflects the cumulative invested capital in the combined entities over which our executive officers have oversight. At the time of the benchmarking study, Cheniere’s enterprise value was greater than the median enterprise value of the companies listed below.
2018 Supplemental Survey Companies | ||||
• Air Products & Chemicals, Inc. | • Enterprise Products Partners L.P. | • ONEOK, Inc. | ||
• Ameren Corporation | • Eversource Energy | • Phillips 66 | ||
• American Electric Power Company | • Exelon Corporation | • PPG Industries, Inc. | ||
• Anadarko Petroleum Corporation | • FirstEnergy Corp. | • PPL Corporation | ||
• Baker Hughes Inc. | • Freeport-McMoRan Inc. | • Praxair, Inc. | ||
• Calpine Corp. | • Halliburton Company | • Sempra Energy | ||
• CenterPoint Energy, Inc. | • Hess Corporation | • Suncor Energy Inc. | ||
• CMS Energy Corp. | • LyondellBasell Industries N.V. | • Valero Energy Corporation | ||
• Dominion Resources, Inc. | • Magellan Midstream Partners, L.P. | • WEC Energy Group, Inc. | ||
• Du Pont (E I) De Nemours | • Marathon Oil Corporation | • Williams Companies, Inc. | ||
• Edison International | • Marathon Petroleum Corporation | • XCEL Energy Inc. | ||
• Encana Corporation | • NRG Energy, Inc. | |||
• EnLink Midstream, LLC | • Occidental Petroleum Corporation | |||
2019 Peer Group
In light of our achievements in 2018 and our transformation into an LNG operating company of considerable size relative to our peers in the LNG industry, we reevaluated our peer group for 2019 to reflect a more appropriate risk profile, capital intensity, enterprise valuation, commercial focus and global scope indicative of a broader segment of the oil and gas industry, focusing on companies of comparable size (as measured by the value of invested capital). In considering shareholder feedback and management performance, we believe that this new peer group, listed below, is an appropriate reflection of our maturation and our NEOs’ target compensation for 2019 aligns with competitive ranges in the new peer group.
The following table summarizes our 2019 peer group enterprise value compared to Cheniere. Our enterprise value includes the value of the non-controlling interest in Cheniere Partners, our publicly traded subsidiary, in order to more appropriately reflect our integrated business and operations, which are managed on a consolidated basis, and the total value of our business for which management is responsible.
| (Dollars in millions) | Enterprise Value (on 12/31/18) | |||
Cheniere | $ | 54,466 | ||
Cheniere Percentile Rank | 75 | % | ||
75th Percentile | $ | 54,394 | ||
50th Percentile | $ | 36,389 | ||
25th Percentile | $ | 22,062 | ||
| 2019 PROXY STATEMENT | 53 | |||
COMPENSATION DISCUSSION AND ANALYSIS
2019 Peer Group | ||
• Air Products and Chemicals, Inc. | • Kinder Morgan, Inc. | |
• Anadarko Petroleum Corporation | • LyondellBasell Industries N.V. | |
• Apache Corporation | • Marathon Oil Corporation | |
• Baker Hughes, a GE company | • Marathon Petroleum Corporation | |
• Concho Resources Inc. | • Noble Energy, Inc. | |
| • Occidental Petroleum Corporation | |
• Continental Resources, Inc. | • ONEOK, Inc. | |
• Devon Energy Corporation | • Phillips 66 | |
• Enterprise Products Partners L.P. | • Pioneer Natural Resources Company | |
• EOG Resources, Inc. | • Schlumberger Limited | |
• EQT Corporation | • Suncor Energy Inc. | |
• Freeport-McMoRan Inc. | • Valero Energy Corporation | |
• Halliburton Company | • The Williams Companies | |
• Hess Corporation | ||
In September 2016, the Compensation Committee reviewed the Company’sNote: Andeavor and Praxair, Inc. were previously included in our 2019 peer group with Meridian and management and determined to make adjustmentsbut were acquired subsequent to the peer group. Energy Transfer Equity, L.P., Kinder Morgan, Inc. and Plains All American Pipeline, L.P. were removed from the peer group due to a lack of comparability in compensation program design and disclosure.determination.
Review of Compensation RiskOTHER CONSIDERATIONS
The Compensation Committee considered the risks associated with our compensation policies and practices in 2015 and 2016. The Compensation Committee concluded that our compensation policies and practices were not reasonably likely to have a material adverse effect on the Company and did not include risk-taking incentives or encourage our employees, including our executive officers, to take excessive risks in order to receive larger awards. As part of this analysis, the Compensation Committee considered the individual components of our executive officers’ compensation, the performance measures required to be achieved to earn cash bonus and equity awards and the vesting schedule of the equity awards. In concluding that our incentive plans do not promote excessive risk, the Compensation Committee considered the following factors, among others:
Stock Ownership GuidelinesSTOCK OWNERSHIP GUIDELINES
Our Board believes that significant stock ownership by our executive officers strengthens their alignment with shareholders and demonstrates the executive officers’ commitment to the Company. We have implemented rigorous stock ownership guidelines as detailed below.
Stock Ownership Guidelines for Non-Employee Directors and Executive Officers | ||
POSITION | ||
Non-Employee Directors | ||
| 5x base salary | |
Executive Vice Presidents and Senior Vice Presidents | 2x base salary | |
Furthermore, pursuant to Mr. Fusco’s employment agreement, Mr. Fusco has purchased $10,000,000 worth of common shares of the Company.
Allnon-employee directors and executive officers are expected to be in full compliance with the guidelines within five years of initial appointment to a position subject to the guidelines, with certain ownership thresholds that must be met in the interim
period. If anon-employee director or executive officer is not in compliance with the guidelines, he or she is required to retain the entireafter-tax value of Company stock received upon the vesting of stock awards and the exercise of stock options until the interim threshold requirements or compliance with the guidelines is achieved. The Board recognizes that there may be occasions in which the guidelines place a severe hardship on the individual and has delegated discretion to the Governance and Nominating Committee to determine whether an exemption should be granted to the individual in such instances. All of ournon-employee directors and executive officers are in compliance with the guidelines.
Additional Considerations
| 54 | CHENIERE | |||
OTHER CONSIDERATIONS
ADDITIONAL CONSIDERATIONS
The Compensation Committee will continue to evaluate further changes to its compensation policies and practices. We will at all times comply with SEC and NYSE MKTAmerican required compensation recoupment policies and practices,practices. We also included clawback provisions in our 2017, 2018 and 2019 equity awards and intend to evaluate our current clawback practices and update our related policies and practices in the future. We also plancontinue to include clawback provisions in our future equity awards to executives. Mr. Fusco’s employment agreement provides that he shallwill be subject to and shallwill abide by any policy the Company adopts regarding the recoveryclawback of incentive compensation (sometimes referred to as “clawback”) and any additional clawback provisions as required by law and applicable listing rules.
Tax and Accounting ConsiderationsTAX AND ACCOUNTING CONSIDERATIONS
In designing our compensation programs, we take into account the various tax, accounting and disclosure rules associated with various forms of compensation. We also review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and design our compensation programs with the intent that they comply with Section 409A of the Code. Section 162(m) of the Code limits the amount of compensation that may be deducted per covered employee to $1 million per taxable year. Following the enactment of the Tax Cuts and Jobs Act, beginning with the 2018 calendar year, this $1 million annual deduction limitation applies to all compensation paid to any individual who is the Chief Executive Officer, Chief Financial Officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year. There is no longer any exception to this limitation for qualified performance-based compensation (as there was for periods prior to 2018). We generally seek to preserve tax deductions for executive compensation but recognize that it may be beneficial to grant compensation that is not fully tax deductible when we believe it is in the best interests of the Company and our shareholders.
| 2019 PROXY STATEMENT | 55 | |||
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
THE COMPENSATION COMMITTEE
Nuno Brandolini, Chairman
David B. Kilpatrick
Samuel Merksamer
Heather R. Zichal
THE COMPENSATION COMMITTEE |
Neal A. Shear, Chairman Nuno Brandolini David B. Kilpatrick Andrew Langham |
| 56 | CHENIERE | |||
The following compensation tables and narrative text containing information related to the compensation of our NEOs in 2015 were also included in our Proxy Statement dated April 21, 2016. Narrative information has been updated where applicable.
The following table and narrative text sets forth the total compensation awarded to, earned by or paid to our CEO,Chief Executive Officer (“CEO”), Chief Financial Officer and three other most highly compensated executive officers for 2015,2018, who are referred to as our “NEOs.” Effective December 12, 2015, Charif Souki ceased to serve as our Chairman, CEO and President, and Neal Shear began serving as our Interim CEO and President. The total 2015 compensation for Messrs. Souki and Shear is reported“NEOs” in the below table. Subsequent to December 31, 2015, Messrs. Rayford and Teague and Ms. Gentle ceased to be employed by the Company.following compensation tables.
Summary Compensation TableSUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) (4) | Nonqualified ($) | All Other Compensation ($) (5) | Total ($) | |||||||||||||||||||||||||||
Neal A. Shear(6) | 2015 | $ | 38,462 | — | — | — | $ | 1,309,333 | — | $ | 24,516 | $ | 1,372,311 | |||||||||||||||||||||||
Charif Souki(7) | 2015 | $ | 1 | — | — | — | $ | 53,819,000 | — | $ | 222,014 | $ | 54,041,015 | |||||||||||||||||||||||
| 2014 | $ | 800,000 | $ | 2,400,000 | — | — | $ | 4,200,000 | — | $ | 291,346 | $ | 7,691,346 | |||||||||||||||||||||||
| 2013 | $ | 800,000 | $ | 3,680,000 | $ | 132,930,000 | — | $ | 4,200,000 | — | $ | 339,280 | $ | 141,949,280 | ||||||||||||||||||||||
Michael J. Wortley | 2015 | $ | 565,385 | $ | 436,800 | — | — | $ | 13,186,000 | — | $ | 16,278 | $ | 14,204,463 | ||||||||||||||||||||||
| 2014 | $ | 503,846 | $ | 900,000 | — | — | $ | 96,000 | — | $ | 16,138 | $ | 1,515,984 | |||||||||||||||||||||||
| 2013 | $ | 325,000 | $ | 500,000 | $ | 7,428,167 | — | $ | 96,000 | — | $ | 18,938 | $ | 8,368,105 | ||||||||||||||||||||||
Meg A. Gentle | 2015 | $ | 630,000 | $ | 486,720 | — | — | $ | 16,000,000 | — | $ | 1,509,755 | $ | 18,626,495 | ||||||||||||||||||||||
| 2014 | $ | 578,654 | $ | 1,000,000 | — | — | $ | 600,000 | — | $ | 1,056,605 | $ | 3,235,259 | |||||||||||||||||||||||
| 2013 | $ | 420,000 | $ | 935,000 | $ | 18,990,000 | — | $ | 600,000 | — | $ | 776,238 | $ | 21,721,238 | ||||||||||||||||||||||
Greg W. Rayford General Counsel | 2015 | $ | 565,385 | $ | 436,800 | — | — | $ | 11,260,000 | — | $ | 20,978 | $ | 12,283,163 | ||||||||||||||||||||||
| 2014 | $ | 519,231 | $ | 700,000 | — | — | $ | 480,000 | — | $ | 20,182 | $ | 1,719,413 | |||||||||||||||||||||||
| 2013 | $ | 375,000 | $ | 750,000 | $ | 15,192,000 | — | $ | 480,000 | — | $ | 19,512 | $ | 16,816,512 | ||||||||||||||||||||||
R. Keith Teague | 2015 | $ | 565,385 | $ | 436,800 | — | — | $ | 13,570,000 | — | $ | 20,978 | $ | 14,593,163 | ||||||||||||||||||||||
| 2014 | $ | 519,231 | $ | 900,000 | — | — | $ | 480,000 | — | $ | 20,182 | $ | 1,919,413 | |||||||||||||||||||||||
| 2013 | $ | 375,000 | $ | 800,000 | $ | 15,192,000 | — | $ | 480,000 | — | $ | 19,512 | $ | 16,866,512 | ||||||||||||||||||||||
NAME AND PRINCIPAL POSITION | YEAR | SALARY ($)(1) | BONUS ($)(2) | STOCK AWARDS ($)(3) | NON-EQUITY INCENTIVE PLAN COMPENSATION ($)(4) | ALL OTHER COMPENSATION ($)(5) | TOTAL ($) | |||||||||||||||||||||
Jack A. Fusco President and CEO | 2018 | $ | 1,250,000 | $ | — | $ | 17,116,952 | $ | 2,875,000 | $ | 24,949 | $ | 21,266,901 | |||||||||||||||
| 2017 | $ | 1,250,000 | $ | — | $ | 6,506,329 | $ | 3,125,000 | $ | 23,316 | $ | 10,904,645 | ||||||||||||||||
| 2016 | $ | 778,846 | $ | 2,303,938 | $ | 8,214,240 | $ | — | $ | 3,190 | $ | 11,300,214 | ||||||||||||||||
Michael J. Wortley EVP and CFO | 2018 | $ | 624,231 | $ | — | $ | 8,379,493 | $ | 1,043,280 | $ | 17,633 | $ | 10,064,637 | |||||||||||||||
| 2017 | $ | 598,533 | $ | — | $ | 1,561,515 | $ | 1,100,000 | $ | 16,951 | $ | 3,276,999 | ||||||||||||||||
| 2016 | $ | 561,750 | $ | 1,000,000 | $ | — | $ | 1,186,000 | $ | 16,215 | $ | 2,763,965 | ||||||||||||||||
Anatol Feygin EVP and Chief Commercial Officer | 2018 | $ | 512,115 | $ | — | $ | 7,488,990 | $ | 852,840 | $ | 21,648 | $ | 8,875,593 | |||||||||||||||
| 2017 | $ | 499,309 | $ | — | $ | 1,301,341 | $ | 850,000 | $ | 16,057 | $ | 2,666,707 | ||||||||||||||||
| 2016 | $ | 481,500 | $ | 700,000 | $ | — | $ | 1,090,000 | $ | 2,645 | $ | 2,274,145 | ||||||||||||||||
Sean N. Markowitz General Counsel and Corporate Secretary | 2018 | $ | 470,192 | $ | — | $ | 3,195,383 | $ | 699,200 | $ | 21,557 | $ | 4,386,332 | |||||||||||||||
| 2017 | $ | 444,577 | $ | — | $ | 702,705 | $ | 675,000 | $ | 21,024 | $ | 1,843,306 | ||||||||||||||||
Douglas D. Shanda SVP, Operations | 2018 | $ | 470,192 | $ | 118,750 | $ | 4,068,083 | $ | 699,200 | $ | 21,557 | $ | 5,377,782 | |||||||||||||||
| 2017 | $ | 447,500 | $ | 112,500 | $ | 702,705 | $ | 720,000 | $ | 21,024 | $ | 2,003,729 | ||||||||||||||||
| 2016 | $ | 381,365 | $ | 621,250 | $ | — | $ | 1,090,000 | $ | 17,956 | $ | 2,110,571 | ||||||||||||||||
| (1) | This column represents the base salary earned, including any amounts invested by the NEOs in the Company’s Retirement Plan. The Company’s Retirement Plan is described in |
| (2) | For 2016, this column represents the cash bonus awards paid to the NEOs for performance for |
| (3) | The amounts in this column reflect the grant date fair value of awards, computed in accordance with stock-based compensation accounting rules. Values for awards subject to performance conditions are computed based on the probable outcome of the performance condition as of the grant date for the award. A discussion of the assumptions used in calculating the award values may be found in Note |
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For 2017, the Stock Awards column |
For Mr. |
| (4) | For 2018 and |
For 2016, the amounts in this column reflect the grant date fair value of cash-settled |
On October 1, 2016, Messrs. Wortley, |
In addition, upon the issuance of |
| (5) | This column represents all other compensation not reported in the previous columns, including the costs to the Company of providing certain perquisites and other personal benefits, payment of insurance premiums and matching contributions allocated by the Company pursuant to the Company’s Retirement Plan. See the table below for more details. |
| 2019 PROXY STATEMENT | 57 | |||
SUMMARY COMPENSATION
All Other Compensation included in the Summary Compensation TableALL OTHER COMPENSATION INCLUDED IN THE SUMMARY COMPENSATION TABLE
| Name | Year | Perquisites and ($)(1) | Insurance Premiums ($)(2) | Company Contributions to Retirement and 401(k) Plans ($)(3) | Total ($) | |||||||||||||||
| 2015 | $ | 24,516 | — | — | $ | 24,516 | ||||||||||||||
Neal A. Shear | 2014 | — | — | — | — | |||||||||||||||
| 2013 | — | — | — | — | ||||||||||||||||
| 2015 | $ | 220,634 | $ | 1,380 | $ | 0 | $ | 222,014 | ||||||||||||
Charif Souki | 2014 | $ | 290,206 | $ | 1,140 | $ | 0 | $ | 291,346 | |||||||||||
| 2013 | $ | 337,600 | $ | 1,680 | $ | 0 | $ | 339,280 | ||||||||||||
| 2015 | $ | 3,698 | $ | 1,380 | $ | 11,200 | $ | 16,278 | ||||||||||||
Michael J. Wortley | 2014 | $ | 2,598 | $ | 1,140 | $ | 12,400 | $ | 16,138 | |||||||||||
| 2013 | $ | 2,880 | $ | 1,248 | $ | 14,810 | $ | 18,938 | ||||||||||||
| 2015 | $ | 1,492,475 | $ | 1,380 | $ | 15,900 | $ | 1,509,755 | ||||||||||||
Meg A. Gentle | 2014 | $ | 1,039,865 | $ | 1,140 | $ | 15,600 | $ | 1,056,605 | |||||||||||
| 2013 | $ | 760,017 | $ | 1,411 | $ | 14,810 | $ | 776,238 | ||||||||||||
| 2015 | $ | 3,698 | $ | 1,380 | $ | 15,900 | $ | 20,978 | ||||||||||||
Greg W. Rayford | 2014 | $ | 3,442 | $ | 1,140 | $ | 15,600 | $ | 20,182 | |||||||||||
| 2013 | $ | 3,442 | $ | 1,260 | $ | 14,810 | $ | 19,512 | ||||||||||||
| 2015 | $ | 3,698 | $ | 1,380 | $ | 15,900 | $ | 20,978 | ||||||||||||
R. Keith Teague | 2014 | $ | 3,442 | $ | 1,140 | $ | 15,600 | $ | 20,182 | |||||||||||
| 2013 | $ | 3,442 | $ | 1,260 | $ | 14,810 | $ | 19,512 | ||||||||||||
| NAME | YEAR | PERQUISITES AND OTHER PERSONAL BENEFITS ($)(A) | INSURANCE PREMIUMS ($)(B) | COMPANY CONTRIBUTIONS TO RETIREMENT AND 401(k) PLANS ($)(C) | TOTAL ($) | |||||||||||||||
Jack A. Fusco | 2018 | $ | 6,889 | $ | 1,560 | $ | 16,500 | $ | 24,949 | |||||||||||
| 2017 | $ | 5,556 | $ | 1,560 | $ | 16,200 | $ | 23,316 | ||||||||||||
| 2016 | $ | 2,280 | $ | 910 | $ | — | $ | 3,190 | ||||||||||||
Michael J. Wortley | 2018 | $ | 3,588 | $ | 1,560 | $ | 12,485 | $ | 17,633 | |||||||||||
| 2017 | $ | 3,420 | $ | 1,560 | $ | 11,971 | $ | 16,951 | ||||||||||||
| 2016 | $ | 3,420 | $ | 1,560 | $ | 11,235 | $ | 16,215 | ||||||||||||
Anatol Feygin | 2018 | $ | 3,588 | $ | 1,560 | $ | 16,500 | $ | 21,648 | |||||||||||
| 2017 | $ | 3,420 | $ | 1,560 | $ | 11,077 | $ | 16,057 | ||||||||||||
| 2016 | $ | 1,140 | $ | 1,505 | $ | — | $ | 2,645 | ||||||||||||
Sean N. Markowitz | 2018 | $ | 3,588 | $ | 1,469 | $ | 16,500 | $ | 21,557 | |||||||||||
| 2017 | $ | 3,420 | $ | 1,404 | $ | 16,200 | $ | 21,024 | ||||||||||||
Douglas D. Shanda | 2018 | $ | 3,588 | $ | 1,469 | $ | 16,500 | $ | 21,557 | |||||||||||
| 2017 | $ | 3,420 | $ | 1,404 | $ | 16,200 | $ | 21,024 | ||||||||||||
| 2016 | $ | 855 | $ | 1,201 | $ | 15,900 | $ | 17,956 | ||||||||||||
| (A) | The amount in this column includes the aggregate incremental cost to the Company attributable to a parking space in our Houston office building for |
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| (B) |
| The amounts in this column reflect insurance premiums payable for basic term life insurance with a benefit of two times annual base salary capped at a maximum of $1,000,000. |
| (C) | The amounts in this column reflect matching contributions allocated by the Company to each of the NEOs pursuant to the Company’s Retirement Plan. These benefits are available to all employees of the Company. |
| 58 | CHENIERE | |||
GRANTS OF PLAN-BASED AWARDS
Grants of Plan-Based AwardsGRANTS OF PLAN-BASED AWARDS
The following table and narrative text describe the plan-based awards madegranted to each NEO during 20152018, valued at fair market value on the date of grant. The awards listed in the table were granted under the Cheniere Energy, Inc. 2011 Incentive Plan, as amended (the “2011 Plan”) and are described in more detail in “Compensation Discussion and Analysis” beginning on page 34 of this Proxy Statement.
Grants of Plan-Based Awards During Fiscal Year 2015GRANTS OF PLAN-BASED AWARDS DURING FISCAL YEAR 2018
| NAME | TYPE OF AWARD | GRANT DATE | ESTIMATED FUTURE PAYOUTS UNDERNON-EQUITY INCENTIVE | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF (#) | GRANT DATE FAIR VALUE OF ($)(2) | ||||||||||||||||||||||||||||||||
THRESHOLD ($) | TARGET ($) | MAXIMUM ($) | THRESHOLD (#) | TARGET (#) | MAXIMUM (#) | |||||||||||||||||||||||||||||||||
Jack A. Fusco | Cash Bonus | 781,250 | 1,562,500 | 3,125,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| RSUs | 02/14/2018 | — | — | — | — | — | — | 57,678 | 3,355,706 | |||||||||||||||||||||||||||||
| PSUs | 02/14/2018 | — | — | — | 34,607 | 69,214 | 138,428 | — | 4,026,871 | |||||||||||||||||||||||||||||
| RSUs | 05/22/2018 | — | — | — | — | — | — | 156,250 | 9,734,375 | |||||||||||||||||||||||||||||
Michael J. Wortley | Cash Bonus | 283,500 | 567,000 | 1,134,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| RSUs | 02/14/2018 | — | — | — | — | — | — | 54,535 | 3,172,846 | |||||||||||||||||||||||||||||
| PSUs | 02/14/2018 | — | — | — | 7,268 | 14,535 | 29,070 | — | 845,646 | |||||||||||||||||||||||||||||
| RSUs | 05/22/2018 | — | — | — | — | — | — | 70,000 | 4,361,000 | |||||||||||||||||||||||||||||
Anatol Feygin | Cash Bonus | 231,750 | 463,500 | 927,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| RSUs | 02/14/2018 | — | — | — | — | — | — | 41,882 | 2,436,695 | |||||||||||||||||||||||||||||
| PSUs | 02/14/2018 | — | — | — | 5,941 | 11,882 | 23,764 | — | 691,295 | |||||||||||||||||||||||||||||
| RSUs | 05/22/2018 | — | — | — | — | — | — | 70,000 | 4,361,000 | |||||||||||||||||||||||||||||
Sean N. Markowitz | Cash Bonus | 190,000 | 380,000 | 760,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| RSUs | 02/14/2018 | — | — | — | — | — | — | 21,576 | 1,255,292 | |||||||||||||||||||||||||||||
| PSUs | 02/14/2018 | — | — | — | 3,288 | 6,576 | 13,152 | — | 382,592 | |||||||||||||||||||||||||||||
| RSUs | 05/22/2018 | — | — | — | — | — | — | 25,000 | 1,557,500 | |||||||||||||||||||||||||||||
Douglas D. Shanda | Cash Bonus | 190,000 | 380,000 | 760,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| RSUs | 02/14/2018 | — | — | — | — | — | — | 36,576 | 2,127,992 | |||||||||||||||||||||||||||||
| PSUs | 02/14/2018 | — | — | — | 3,288 | 6,576 | 13,152 | — | 382,592 | |||||||||||||||||||||||||||||
| RSUs | 05/22/2018 | — | — | — | — | — | — | 25,000 | 1,557,500 | |||||||||||||||||||||||||||||
| (1) | The amounts in these columns represent the payout at the threshold, target and maximum award levels for 2018 under the Annual Incentive Program. If the threshold performance level is not met, the pool funding level will be 0%. Other than for the CEO, actual awards to NEOs can exceed the maximum estimated possible payout of 200% of the individual’s target due to adjustments made for individual performance. Under Mr. Fusco’s employment agreement, his maximum award level is 200% of his target. The various measures and details relating to the 2018 Annual Incentive Awards are presented beginning on page 43. |
| (2) | The amounts shown in this column reflect the total grant date fair values of RSUs and PSUs calculated in accordance with generally accepted accounting principles in the United States regarding stock compensation. A discussion of the assumptions used in calculating the award values may be found in Note 15 to our 2018 audited financial statements beginning on page 99 of our Form10-K filed with the SEC on February 26, 2019. Please see “2018 LTI Awards” on page 45 of this Proxy Statement for more information about these RSU and PSU awards. |
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The following table and narrative text describe the phantom unit awards made during 2015 valued at fair market value on the date of grant compared to the fair market value of such phantom unit awards on December 31, 2015 (other than for Mr. Souki). The amounts reported at year end are supplemental to the SEC-required disclosure in the table above.
| Upon Grant(1) | At Year End(2) | |||||||||||||||||
| Name | Plan | Grant Date | Number of Units Granted | Fair Market Value | Fair Market Value | |||||||||||||
Neal A. Shear(3) | 2015 Long-Term Cash Incentive Plan | 12/18/2015 | 36,330 | $ | 1,309,333 | $ | 1,353,293 | |||||||||||
Charif Souki(4) | 2014 – 2018 Long- Term Cash Incentive Plan | 4/21/2015 | 1,100,000 | $ | 84,700,000 | $ | 45,419,000 | |||||||||||
Michael J. Wortley | 2014 – 2018 Long- Term Cash Incentive Plan | 4/21/2015 | 170,000 | $ | 13,090,000 | $ | 6,332,500 | |||||||||||
Meg A. Gentle | 2014 – 2018 Long- Term Cash Incentive Plan | 4/21/2015 | 200,000 | $ | 15,400,000 | $ | 7,450,000 | |||||||||||
Greg W. Rayford | 2014 – 2018 Long- Term Cash Incentive Plan | 4/21/2015 | 140,000 | $ | 10,780,000 | $ | 5,215,000 | |||||||||||
R. Keith Teague | 2014 – 2018 Long- Term Cash Incentive Plan | 4/21/2015 | 170,000 | $ | 13,090,000 | $ | 6,332,500 | |||||||||||
Narrative to the Summary Compensation & Grants of Plan-Based Awards Tables
Compensatory Arrangements for Certain Executive OfficersSUMMARY COMPENSATION
On July 24, 2013, the Compensation Committee approved an Assignment Letter for Ms. Gentle to assign her to the London office, effective August 19, 2013. On June 16, 2015, Ms. Gentle’s assignment was extended and continued until August 18, 2016. Ms. Gentle remained an at-will employee of the Company at all times during her assignment, subject to the existing terms and conditions of her employment. Ms. Gentle also continued to be eligible to participate in the Company’s bonus plan and any other incentive plan arrangements that may be approved by the Compensation Committee. Pursuant to the Assignment Letter, the Company agreed to a tax equalization arrangement so that Ms. Gentle received the same amount of compensation, after taxes, while on assignment as she would have received had she remained a resident in the United States. Ms. Gentle also received certain allowances in connection with her assignment. Ms. Gentle’s Assignment Letter is also described in the CD&A under “Compensation Arrangements for Overseas or Foreign NEOs.”NARRATIVE TO THE SUMMARY COMPENSATION & GRANTS OF PLAN-BASED AWARDS TABLES
For a discussion regarding the compensatory arrangement between the Company and Mr. Shear for his service as former Interim CEO and President and former Interim Special Advisor to the CEO, see pages 18 and 20, respectively, of this Proxy Statement.COMPENSATORY ARRANGEMENTS FOR CERTAIN EXECUTIVE OFFICERS
For a discussion regarding the compensatory arrangement between the Company and Mr. Fusco for his service as President and CEO, see “Compensatory Arrangement with President and CEO” on page 2048 of this Proxy Statement.
For a discussion regarding the awards granted to the NEOs in 2018 as disclosed in the table above, see “Annual Incentive Award” on page 43 and “LTI Program” on page 45 of this Proxy Statement.
| 60 | CHENIERE | |||
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END
The following table contains information about our NEOs’ outstanding equity awards at December 31, 2018.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table reflects the number of securities underlying unexercised stock options held by the NEOs as of DecemberDECEMBER 31, 2015, the exercise price of the unexercised stock options and the date of expiration of the unexercised stock options. The table also reflects the total number and aggregate value of unvested restricted stock held by the NEOs as of December 31, 2015.
Outstanding Equity Awards at December 31, 20152018
| Name | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Equity Incentive Awards: (#) | Option ($) | Option Expiration Date | Number of of Stock | Market Value of Shares or of Stock Vested | Equity Incentive Units or Not (#) | Equity Incentive Awards: of Unearned Units or Rights That Have Not ($) | |||||||||||||||||||||||||||||
| Exercisable | Unexercisable | |||||||||||||||||||||||||||||||||||
Neal A. Shear | — | — | — | — | — | 5,562 | (2) | $ | 207,185 | — | — | |||||||||||||||||||||||||
Charif Souki(3) | — | — | — | — | — | 2,100,000 | (4) | $ | 78,225,000 | — | — | |||||||||||||||||||||||||
Michael J. Wortley | 1,500 | (5) | — | — | $ | 33.39 | 09/05/2016 | 20,000 | (6) | $ | 745,000 | — | — | |||||||||||||||||||||||
| — | — | — | — | — | 116,666 | (4) | $ | 4,345,809 | — | — | ||||||||||||||||||||||||||
Meg A. Gentle | — | — | — | — | — | 125,000 | (6) | $ | 4,656,250 | — | — | |||||||||||||||||||||||||
| — | — | — | — | — | 300,000 | (4) | $ | 11,175,000 | — | — | ||||||||||||||||||||||||||
Greg W. Rayford | — | — | — | — | — | 100,000 | (6) | $ | 3,725,000 | — | — | |||||||||||||||||||||||||
| — | — | — | — | — | 240,000 | (4) | $ | 8,940,000 | — | — | ||||||||||||||||||||||||||
R. Keith Teague | — | — | — | — | — | 100,000 | (6) | $ | 3,725,000 | — | — | |||||||||||||||||||||||||
| — | — | — | — | — | 240,000 | (4) | $ | 8,940,000 | — | — | ||||||||||||||||||||||||||
| STOCK AWARDS | ||||||||||||||||
NAME AND GRANT DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($)(1) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#)(2) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED ($)(3) | ||||||||||||
Jack A. Fusco | ||||||||||||||||
New Hire Award (5/12/2016) | 35,457 | (4) | $ | 2,098,700 | ||||||||||||
2017 LTI Award (2/17/2017) | 46,431 | (5) | $ | 2,748,251 | 69,646 | $ | 8,244,693 | |||||||||
2018 LTI Award (2/14/2018) | 57,678 | (5) | $ | 3,413,961 | 69,214 | $ | 8,193,553 | |||||||||
Milestone Award (5/22/2018) | 156,250 | (6) | $ | 9,248,438 | ||||||||||||
Michael J. Wortley | ||||||||||||||||
2017 LTI Award (2/17/2017) | 11,144 | (5) | $ | 659,613 | 16,715 | $ | 1,978,722 | |||||||||
2018 LTI Award (2/14/2018) | 14,535 | (5) | $ | 860,327 | 14,535 | $ | 1,720,653 | |||||||||
2018 LTI Award (2/14/2018) | 40,000 | (7) | $ | 2,367,600 | ||||||||||||
Milestone Award (5/22/2018) | 70,000 | (6) | $ | 4,143,300 | ||||||||||||
Anatol Feygin | ||||||||||||||||
2017 LTI Award (2/17/2017) | 9,287 | (5) | $ | 549,698 | 13,930 | $ | 1,649,033 | |||||||||
2018 LTI Award (2/14/2018) | 11,882 | (5) | $ | 703,296 | 11,882 | $ | 1,406,591 | |||||||||
2018 LTI Award (2/14/2018) | 30,000 | (7) | $ | 1,775,700 | ||||||||||||
Milestone Award (5/22/2018) | 70,000 | (6) | $ | 4,143,300 | ||||||||||||
Sean N. Markowitz | ||||||||||||||||
2017 LTI Award (2/17/2017) | 5,015 | (5) | $ | 296,838 | 7,522 | $ | 890,454 | |||||||||
2018 LTI Award (2/14/2018) | 6,576 | (5) | $ | 389,233 | 6,576 | $ | 778,467 | |||||||||
2018 LTI Award (2/14/2018) | 15,000 | (7) | $ | 887,850 | ||||||||||||
Milestone Award (5/22/2018) | 25,000 | (6) | $ | 1,479,750 | ||||||||||||
Douglas D. Shanda | ||||||||||||||||
2017 LTI Award (2/17/2017) | 5,015 | (5) | $ | 296,838 | 7,522 | $ | 890,454 | |||||||||
2018 LTI Award (2/14/2018) | 6,576 | (5) | $ | 389,233 | 6,576 | $ | 778,467 | |||||||||
2018 LTI Award (2/14/2018) | 30,000 | (7) | $ | 1,775,700 | ||||||||||||
Milestone Award (5/22/2018) | 25,000 | (6) | $ | 1,479,750 | ||||||||||||
| (1) | The values represented in this column have been calculated by multiplying |
| (2) | The amounts in this column are the target amount of PSUs granted as part of the annual LTI program. The 2017 awards have a performance measurement period of January 1, 2018 to December 31, 2019, and the 2018 awards have a performance period of January 1, 2018 to December 31, 2020. PSU awards will vest upon certification by the Compensation Committee of the level of achievement of the performance conditions during the performance measurement period. |
| (3) | The values represented in this column have been calculated by multiplying $59.19, the closing price of our common stock on December 31, 2018, by the maximum number of shares that could be earned under the PSUs. This estimated payout is not necessarily indicative of the actual payout at the end of the performance period. |
| (4) | This amount represents the unvested restricted stock that Mr. |
| (5) | Awards vest ratably over three years. |
| (6) | These |
| (7) | These |
| 2019 PROXY STATEMENT | 61 | |||
STOCK VESTED
The following table sets forth the stock options exercised by the NEOs during 2015 and their restricted stock that vested during 2015. The number of securities for which stock options were exercised (if any) and the aggregate dollar value realized upon the exercise of such stock options is reflected in the table. The number of shares of restricted stock that vested and the aggregate dollar value realized upon the vesting of such restricted stock is also reflectedfor our NEOs in the table.2018. There were no option exercises by our NEOs in 2018.
Option Exercises and Stock Vested During Fiscal Year 2015OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR 2018
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on ($) (2) | ||||||||||||
Neal A. Shear(3) | — | — | 5,931 | $ | 417,246 | |||||||||||
Charif Souki(4) | — | — | 1,400,000 | $ | 72,065,000 | |||||||||||
Michael J. Wortley | — | — | 12,000 | $ | 821,400 | |||||||||||
Meg A. Gentle | — | — | 75,000 | $ | 5,133,750 | |||||||||||
Greg W. Rayford | — | — | 110,000 | $ | 8,138,500 | |||||||||||
R. Keith Teague | — | — | 60,000 | $ | 4,107,000 | |||||||||||
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||
| NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | VALUE REALIZED ON EXERCISE ($) | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($)(1) | ||||||||||||
Jack A. Fusco | — | — | 94,129 | $ | 5,737,616 | |||||||||||
Michael J. Wortley | 75,571 | $ | 4,939,012 | |||||||||||||
Anatol Feygin | — | — | 4,643 | $ | 267,623 | |||||||||||
Sean N. Markowitz | — | — | 2,507 | $ | 144,503 | |||||||||||
Douglas D. Shanda | — | — | 13,507 | $ | 870,173 | |||||||||||
| (1) |
| The value in this column for the NEOs’ restricted stock and restricted stock units that vested during |
| 62 | CHENIERE | |||
TERMINATION OR
CHANGE-IN-CONTROL
The following table and narrative text describe the potential value that the NEOs would receive upon accelerated vesting of their outstanding equity grants andchange-in-control cash payments assuming certain triggering events occurred on December 31, 2015.2018. The value shown in the table assumes a December 31, 20152018 termination date, and uses the closing price of our common stock of $37.25,$59.19 on December 31, 2018, as reported on the NYSE MKT LLCAmerican, and assumes that performance-based incentive awards vest based on December 31, 2015.the maximum award level. All amounts are estimates of the amounts which would be realized upon the triggering event. The actual value of the amounts can only be determined at the time such NEO leaves the Company.
As discussed in CD&A under the Components of our Executive Compensation Program, we have entered into an employment agreement with Mr. Fusco and adopted a Severance Plan that covers all of our NEOs. For a description of the potential payments upon termination orchange-in-control for (i) Mr. Fusco under his employment agreement and (ii) all of our NEOs under the Severance Plan, please see page 49 and page 50 of this Proxy Statement, respectively.
Potential Payments upon Termination or Change-in-Control Assuming Termination Event Occurs on DecemberPOTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL ASSUMING TERMINATION EVENT OCCURS ON DECEMBER 31, 20152018
| Name | Change of Plan - Cash | Date of Grant | Number of Unvested Stock Options | Amount of Unvested Long-Term Commercial Cash Awards | Number of Unvested Restricted Shares or Phantom Units | Benefit | Termination without Cause ($) | Termination ($) | Death or ($) | Immediately ($) | Termination Without Cause or by the NEO for Good Reason w/in One Year of Change-in- Control ($) | |||||||||||||||||||||||||||||||||
Neal A. Shear | 9/11/2014 | 1,885 | (2) | Vesting | $ | 70,216 | (2) | $ | 70,216 | (2) | $ | 70,216 | (2) | — | — | |||||||||||||||||||||||||||||
| — | 6/11/2015 | — | — | 2,766 | (2) | Vesting | $ | 103,034 | (2) | $ | 103,034 | (2) | $ | 103,034 | (2) | — | — | |||||||||||||||||||||||||||
| — | 12/18/2015 | — | — | 36,330 | (2) | Vesting | $ | 1,353,293 | (2) | $ | 1,353,293 | (2) | $ | 1,353,293 | (2) | — | — | |||||||||||||||||||||||||||
| — | 12/18/2015 | — | — | — | — | $ | 1,500,000 | (2) | $ | 1,500,000 | (2) | $ | 1,500,000 | (2) | — | — | ||||||||||||||||||||||||||||
| Total Potential Payment Upon Termination or Change-in-Control |
| $ | 3,026,543 | $ | 3,026,543 | $ | 3,026,543 | — | — | ||||||||||||||||||||||||||||||||||
Charif Souki | $ | 1 | — | — | — | — | — | — | — | — | $ | 1 | (1) | — | ||||||||||||||||||||||||||||||
| — | 8/9/2012 | — | $ | 4,200,000 | 875,000 | (3) | Vesting | $ | 40,328,750 | (3) | — | — | — | — | ||||||||||||||||||||||||||||||
| — | 2/18/2013 | — | — | 2,100,000 | (4) | Vesting | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| — | 4/21/2015 | — | — | 1,100,000 | (5) | Vesting | $ | 45,419,000 | (5) | — | — | — | — | |||||||||||||||||||||||||||||||
| Total Potential Payment Upon Termination or Change-in-Control |
| $ | 85,747,750 | — | — | $ | 1 | — | |||||||||||||||||||||||||||||||||||
Michael J. Wortley | $ | 546,000 | — | — | — | — | — | — | — | — | $ | 546,000 | (1) | — | ||||||||||||||||||||||||||||||
| — | 8/9/2012 | — | $ | 96,000 | 20,000 | (3) | Vesting | $ | 841,000 | (3) | $ | 841,000 | (3) | $ | 841,000 | (3) | $ | 841,000 | (3) | — | ||||||||||||||||||||||||
| — | 2/18/2013 | — | — | 116,666 | Vesting | — | — | — | — | $ | 4,345,809 | (4) | ||||||||||||||||||||||||||||||||
| — | 4/21/2015 | — | — | 170,000 | (5) | Vesting | $ | 6,332,500 | (5) | $ | 6,332,500 | (5) | $ | 6,332,500 | (5) | $ | 6,332,500 | (5) | — | |||||||||||||||||||||||||
| Total Potential Payment Upon Termination or Change-in-Control |
| $ | 7,173,500 | $ | 7,173,500 | $ | 7,173,500 | $ | 7,719,500 | $ | 4,345,809 | ||||||||||||||||||||||||||||||||
Meg A. Gentle | $ | 608,400 | — | — | — | — | — | — | — | — | $ | 608,400 | (1) | — | ||||||||||||||||||||||||||||||
| — | 8/9/2012 | — | $ | 600,000 | 125,000 | (3) | Vesting | $ | 5,256,250 | (3) | $ | 5,256,250 | (3) | $ | 5,256,250 | (3) | $ | 4,656,250 | (3) | — | ||||||||||||||||||||||||
| — | 2/18/2013 | — | — | 300,000 | Vesting | — | — | — | — | $ | 11,175,000 | (4) | ||||||||||||||||||||||||||||||||
| — | 4/21/2015 | — | — | 200,000 | (5) | Vesting | $ | 7,450,000 | (5) | $ | 7,450,000 | (5) | $ | 7,450,000 | (5) | $ | 7,450,000 | (5) | — | |||||||||||||||||||||||||
| Total Potential Payment Upon Termination or Change-in-Control |
| $ | 12,706,250 | $ | 12,706,250 | $ | 12,706,250 | $ | 13,314,650 | $ | 11,175,000 | ||||||||||||||||||||||||||||||||
Greg W. Rayford | $ | 546,000 | — | — | — | — | — | — | — | — | $ | 546,000 | (1) | — | ||||||||||||||||||||||||||||||
| — | 8/9/2012 | — | $ | 480,000 | 100,000 | (3) | Vesting | $ | 4,205,000 | (3) | $ | 4,205,000 | (3) | $ | 4,205,000 | (3) | $ | 4,205,000 | (3) | — | ||||||||||||||||||||||||
| — | 2/18/2013 | — | — | 240,000 | Vesting | — | — | — | — | $ | 8,940,000 | (4) | ||||||||||||||||||||||||||||||||
| — | 4/21/2015 | — | — | 140,000 | (5) | Vesting | $ | 5,215,000 | (5) | $ | 5,215,000 | (5) | $ | 5,215,000 | (5) | $ | 5,215,000 | (5) | — | |||||||||||||||||||||||||
| Total Potential Payment Upon Termination or Change-in-Control |
| $ | 9,420,000 | $ | 9,420,000 | $ | 9,420,000 | $ | 9,966,000 | $ | 8,940,000 | ||||||||||||||||||||||||||||||||
R. Keith Teague | $ | 546,000 | — | — | — | — | — | — | — | — | $ | 546,000 | (1) | — | ||||||||||||||||||||||||||||||
| — | 8/9/2012 | — | $ | 480,000 | 100,000 | (3) | Vesting | $ | 4,205,000 | (3) | $ | 4,205,000 | (3) | $ | 4,205,000 | (3) | $ | 4,205,000 | (3) | — | ||||||||||||||||||||||||
| — | 2/18/2013 | — | — | 240,000 | Vesting | — | — | — | — | $ | 8,940,000 | (4) | ||||||||||||||||||||||||||||||||
| — | 4/21/2015 | — | — | 170,000 | (5) | Vesting | $ | 6,332,500 | (5) | $ | 6,332,500 | (5) | $ | 6,332,500 | (5) | $ | 6,332,500 | (5) | — | |||||||||||||||||||||||||
| Total Potential Payment Upon Termination or Change-in-Control |
| $ | 10,537,500 | $ | 10,537,500 | $ | 10,537,500 | $ | 11,083,500 | $ | 8,940,000 | ||||||||||||||||||||||||||||||||
|
| JACK A. FUSCO EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | TERMINATION FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON | TERMINATION BY COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD REASON | DEATH/ DISABILITY | IMMEDIATELY UPON CHANGE-IN-CONTROL | TERMINATION WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE WITH GOOD REASON, IN CONNECTION WITH CHANGE- IN-CONTROL | |||||||||||||||
Cash Compensation | — | $ | 5,625,000 | — | — | $ | 8,437,500 | |||||||||||||
Prorated Target Bonus | — | $ | 1,562,500 | — | — | $ | 1,562,500 | |||||||||||||
Health and Welfare Benefits | — | $ | 71,466 | — | — | $ | 71,466 | |||||||||||||
Long-Term Incentives (by Grant Date): | — | |||||||||||||||||||
05/12/2016 Restricted Stock(1) | — | $ | 2,098,700 | $ | 2,098,700 | $ | 2,098,700 | — | ||||||||||||
02/17/2017 Restricted Stock Units | — | $ | 2,748,251 | $ | 2,748,251 | $ | 2,748,251 | — | ||||||||||||
02/17/2017 Performance Stock Units | — | $ | 5,038,424 | $ | 4,122,347 | $ | 4,122,347 | — | ||||||||||||
02/14/2018 Restricted Stock Units | — | $ | 3,413,961 | $ | 3,413,961 | $ | 3,413,961 | — | ||||||||||||
02/14/2018 Performance Stock Units | — | $ | 2,731,184 | $ | 4,096,777 | $ | 4,096,777 | — | ||||||||||||
05/22/2018 Restricted Stock Units | — | $ | 9,248,438 | $ | 9,248,438 | $ | 9,248,438 | — | ||||||||||||
Total | $ | — | $ | 32,537,924 | $ | 25,728,472 | $ | 25,728,472 | $ | 10,071,466 | ||||||||||
| 2019 PROXY STATEMENT | 63 | |||
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL ASSUMING TERMINATION EVENT OCCURS ON DECEMBER 31, 2018
| MICHAEL J. WORTLEY EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | TERMINATION FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON | TERMINATION BY COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD REASON | DEATH/ DISABILITY | IMMEDIATELY UPON CHANGE-IN-CONTROL | TERMINATION WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE WITH GOOD REASON, IN CONNECTION WITH CHANGE- IN-CONTROL | |||||||||||||||
Cash Compensation | — | $ | 1,795,500 | — | — | $ | 2,394,000 | |||||||||||||
Prorated Target Bonus | — | $ | 567,000 | — | — | $ | 567,000 | |||||||||||||
Health and Welfare Benefits | — | $ | 71,466 | — | — | $ | 71,466 | |||||||||||||
Long-Term Incentives (by Grant Date): | ||||||||||||||||||||
02/17/2017 Restricted Stock Units | — | $ | 659,613 | $ | 659,613 | $ | 659,613 | — | ||||||||||||
02/17/2017 Performance Stock Units | — | $ | 1,209,219 | $ | 989,361 | $ | 989,361 | — | ||||||||||||
02/14/2018 Restricted Stock Units | — | $ | 860,327 | $ | 860,327 | $ | 860,327 | — | ||||||||||||
02/14/2018 Performance Stock Units | — | $ | 573,551 | $ | 860,327 | $ | 860,327 | — | ||||||||||||
02/14/2018 Restricted Stock Units(2) | — | — | $ | 2,367,600 | $ | 2,367,600 | — | |||||||||||||
05/22/2018 Restricted Stock Units | — | $ | 4,143,300 | $ | 4,143,300 | $ | 4,143,300 | — | ||||||||||||
Total | $ | — | $ | 9,879,976 | $ | 9,880,528 | $ | 9,880,528 | $ | 3,032,466 | ||||||||||
| ANATOL FEYGIN EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | TERMINATION FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON | TERMINATION BY COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD REASON | DEATH/ DISABILITY | IMMEDIATELY UPON CHANGE-IN-CONTROL | TERMINATION WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE WITH GOOD REASON, IN CONNECTION WITH CHANGE- IN-CONTROL | |||||||||||||||
Cash Compensation | — | $ | 1,467,750 | — | — | $ | 1,957,000 | |||||||||||||
Prorated Target Bonus | — | $ | 463,500 | — | — | $ | 463,500 | |||||||||||||
Health and Welfare Benefits | — | $ | 39,656 | — | — | $ | 39,656 | |||||||||||||
Long-Term Incentives (by Grant Date): | ||||||||||||||||||||
02/17/2017 Restricted Stock Units | — | 549,698 | $ | 549,698 | $ | 549,698 | — | |||||||||||||
02/17/2017 Performance Stock Units | — | $ | 1,007,743 | $ | 824,517 | $ | 824,517 | — | ||||||||||||
02/14/2018 Restricted Stock Units | — | $ | 703,296 | $ | 703,296 | $ | 703,296 | — | ||||||||||||
02/14/2018 Performance Stock Units | — | $ | 468,864 | $ | 703,296 | $ | 703,296 | — | ||||||||||||
02/14/2018 Restricted Stock Units(2) | — | $ | — | $ | 1,775,700 | $ | 1,775,700 | — | ||||||||||||
05/22/2018 Restricted Stock Units | — | $ | 4,143,300 | $ | 4,143,300 | $ | 4,143,300 | — | ||||||||||||
Total | $ | — | $ | 8,843,806 | $ | 8,699,805 | $ | 8,699,805 | $ | 2,460,156 | ||||||||||
| 64 | CHENIERE | |||
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL
| SEAN N. MARKOWITZ EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | TERMINATION FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON | TERMINATION BY COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD REASON | DEATH/ DISABILITY | IMMEDIATELY UPON CHANGE-IN-CONTROL | TERMINATION WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE WITH GOOD REASON, IN CONNECTION WITH CHANGE- IN-CONTROL | |||||||||||||||
Cash Compensation | — | $ | 1,282,500 | — | — | $ | 1,710,000 | |||||||||||||
Prorated Target Bonus | — | $ | 380,000 | — | — | $ | 380,000 | |||||||||||||
Health and Welfare Benefits | — | $ | 71,466 | — | — | $ | 71,466 | |||||||||||||
Long-Term Incentives (by Grant Date): | ||||||||||||||||||||
11/02/2015 Phantom Units | — | $ | 295,950 | $ | 295,950 | $ | 295,950 | — | ||||||||||||
02/17/2017 Restricted Stock Units | — | $ | 296,838 | $ | 296,838 | $ | 296,838 | — | ||||||||||||
02/17/2017 Performance Stock Units | — | $ | 544,167 | $ | 445,227 | $ | 445,227 | — | ||||||||||||
02/14/2018 Restricted Stock Units | — | $ | 389,233 | $ | 389,233 | $ | 389,233 | — | ||||||||||||
02/14/2018 Performance Stock Units | — | $ | 259,489 | $ | 389,233 | $ | 389,233 | — | ||||||||||||
02/14/2018 Restricted Stock Units(2) | — | $ | — | $ | 887,850 | $ | 887,850 | — | ||||||||||||
05/22/2018 Restricted Stock Units | — | $ | 1,479,750 | $ | 1,479,750 | $ | 1,479,750 | — | ||||||||||||
Total | $ | — | $ | 4,999,393 | $ | 4,184,082 | $ | 4,184,082 | $ | 2,161,466 | ||||||||||
| DOUGLAS D. SHANDA EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | TERMINATION FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON | TERMINATION BY COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD REASON | DEATH/ DISABILITY | IMMEDIATELY UPON CHANGE-IN-CONTROL | TERMINATION WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE WITH GOOD REASON, IN CONNECTION WITH CHANGE- IN-CONTROL | |||||||||||||||
Cash Compensation(3) | — | $ | 1,638,750 | — | $ | — | $ | 2,066,250 | ||||||||||||
Prorated Target Bonus | — | $ | 380,000 | — | — | $ | 380,000 | |||||||||||||
Health and Welfare Benefits | — | $ | 49,050 | — | — | $ | 49,050 | |||||||||||||
Long-Term Incentives (by Grant Date): | ||||||||||||||||||||
02/17/2017 Restricted Stock Units | — | $ | 296,838 | $ | 296,838 | $ | 296,838 | — | ||||||||||||
02/17/2017 Performance Stock Units | — | $ | 544,167 | $ | 445,227 | $ | 445,227 | — | ||||||||||||
02/14/2018 Restricted Stock Units | — | $ | 389,233 | $ | 389,233 | $ | 389,233 | — | ||||||||||||
02/14/2018 Performance Stock Units | — | $ | 259,489 | $ | 389,233 | $ | 389,233 | — | ||||||||||||
02/14/2018 Restricted Stock Units(2) | — | $ | — | $ | 1,775,700 | $ | 1,775,700 | — | ||||||||||||
05/22/2018 Restricted Stock Units | — | $ | 1,479,750 | $ | 1,479,750 | $ | 1,479,750 | — | ||||||||||||
Total | $ | — | $ | 5,037,276 | $ | 4,775,982 | $ | 4,775,982 | $ | 2,495,300 | ||||||||||
| (1) | Mr. |
| (2) | The shares of restricted stock units granted |
| (3) | For Mr. Shanda, if his employment is terminated by the Company |
Narrative to the Potential Payments upon Termination or Change-in-Control
| 2019 PROXY STATEMENT | 65 | |||
Change-in-Control Cash Payment
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL ASSUMING TERMINATION EVENT OCCURS ON DECEMBER 31, 2018
We have entered into Change of Control Agreements with each of the NEOs other than Mr. Shear. The Change of Control Agreements provide for a cash payment upon a “Change of Control” (as defined in the Change of Control Agreements) in an amount equal to one times the NEOs’ base salaries in effect at or immediately prior to the Change of Control. The cash payments are payable within 30 days of the effective date of the Change of Control. A cessation of an NEO’s employment at the previously designated level (including as a result of death or disability) for any reason, a termination of an NEO other than for Cause (as defined in the Change of Control Agreements), and a termination by the NEO for Good Reason (generally, as defined in the Company’s 2011 Plan) that occurs not more than three months prior to a Change of Control will be deemed to be a termination of employment pursuant to a Change of Control, provided the NEO demonstrates that such cessation or termination of employment was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or the NEO’s termination otherwise arose in connection with or in anticipation of a Change of Control. The Change of Control Agreements expire on December 31 of each calendar year, but are automatically extended for an additional year each January 1 unless the Compensation Committee determines, and the Company provides notice to employees, that the Change of Control Agreements will not be extended.NARRATIVE TO THE POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL
In September 2016, the Board terminated the Company’s 2008 Change of Control Cash Payment Plan and provided notice to employees that the Change of Control Agreements will not be extended beyond December 31, 2016. CHANGE-IN-CONTROL CASH PAYMENT
In December 2016, the Compensation Committee recommended and the Board approved the Cheniere Energy, Inc. Key Executive Severance Pay Plan (the(as amended, the “Severance Plan”) for certain employees of the Company, including the NEOs, with effect beginning on January 1, 2017. The Severance Plan was amended and restated in February 2017 and further amended in January 2018. Please see “Severance Plan” on page 3149 of this Proxy Statement for details regarding the Company’s Severance Plan.
Cash and Restricted Stock AwardsCASH, RESTRICTED STOCK, RSU AND PSU AWARDS
The cash and restricted stockUnder the Severance Plan, all incentive awards granted to Messrs. Wortley, Teague and Rayford and Ms. Gentlein 2017 or later generally vest in full, with performance-based incentive awards vesting at the target level, upon achange-in-control; provided that any performance-based incentive awards that vest based on TSR will vest based on the actual TSR as their LTI Awards for construction of Trains 1 and 2 of the SPL Project will immediately vest ifdate of thechange-in-control. In the event that the Company terminates the NEO’s employment without Cause (as defined in the grant agreements), the NEO terminates his or her employment with the Company for Good Reason (as defined in the grant agreements), the NEO dies or incurs a disability or a Change of Control (as defined in the grant agreements) of the Company occurs. This award, with respect to Mr. Souki, immediately vested upon the termination of Mr. Souki’s employment with the Company on December 12, 2015.
The restricted stock awards granted to the Messrs. Wortley, Teague and Rayford and Ms. Gentle as their Milestone Awards for construction of Trains 3 and 4 of the SPL Project will vest in full in the event the Company terminates the NEO’s employment without Cause (as defined in the grant agreements) or the NEO terminates his or her employment for Good Reason (as definednot in connection with achange-in-control, (1) all time-based incentive awards that were granted in 2017 or later and more than six months prior to the grant agreements) within one year after the effective datetermination generally vest in full and (2) a prorated portion of a Change of Control (as definedperformance-based incentive awards that were granted in the grant agreements)2017 or later and more than six months prior to termination vest based on actual performance.
The award agreements pursuant to which each of the Company. Mr. Souki’soutstanding awards were granted also generally provide that the awards vest in full upon a termination of employment due to death or disability.
Notwithstanding the terms of the Severance Plan, the Special Retention Awards granted in February 2018 do not vest if the NEO does not remain employed with the Company terminated on December 12, 2015. The shares of restricted stock ofthrough the Company that were granted to Mr. Souki as his Milestone Award for construction of Trains 3 and 4 of the SPL Project that were unvested immediately prior to his termination will vest upon satisfaction of the milestones.
The phantom units granted to Messrs. Wortley, Teague and Rayford and Ms. Gentle under the 2014—2018 LTIP will immediately vest in fullvesting date except in the event the Company terminates the NEO’s employment without Cause (as defined in the grant agreements),of death or disability,change-in-control or if the NEO terminates hisis terminated without cause or her employment for Good Reason (as defined in the grant agreements), the NEO dies or incursgood reason within three months prior to a disability, or a Change of Control (as defined in the grant agreements) of the Company occurs. This award, with respect to Mr. Souki, immediately vested upon the termination of Mr. Souki’s employment with the Company on December 12, 2015.change-in-control.
Pursuant to the grant agreements, other than with Mr. Shear, “Cause” generally means the termination of employment of anthe NEO with the Company or an affiliate under any of the following circumstances: (i) the willful commission by the NEO of a crime or other act of misconduct that causes or is likely to cause substantial economic damage to the Company or an affiliate or substantial injury to the business reputation; (ii) the commission by the NEO of an act of fraud in the performance of the NEO’s duties on behalf of the Company or an affiliate; (iii) the willful and material violation by the NEO of the Company’s Code of Business Conduct and Ethics Policy; or (iv) the continuing and repeated failure of the NEO to perform his or her duties to the Company or an affiliate, including by reason of his or her habitual absenteeism, which failure has continued for a period of at least 30 days following delivery of a written demand for substantial performance to the NEO by the Board which specifically identifies the manner in which the Board believes that the NEO has not performed his or her duties.
A “Good Reason” termination of a NEO generally will occur, assuming the Company fails to cure such circumstances within 30 days after receipt of written notice of the Good Reason termination, upon the NEO’s termination of employment due to one of the following events: (i) the removal from or failure tore-elect the NEO to the office or position in which he or she last served; (ii) the assignment to the NEO of any duties, responsibilities, or reporting requirements materially inconsistent with his or her position with the Company or an affiliate, or any material diminishment, on a cumulative basis, of the NEO’s overall duties, responsibilities, or status; or (iii) a material reduction by the Company or an affiliate in the NEO’s annual base salary; or (iv) the requirement by the Company or an affiliate that the principal place of business at which the NEO performs his or her duties be changed to a location more than fifty (50) miles from his or her current place of business. The definition of “Cause” applicable to Mr. Shear’s grant of restricted stock is as set forth in the 2015 Plan: (i) the commission by the NEO of a crime or other act of misconduct that causes or is likely to cause economic damage to the Company or an affiliate or injury to the business reputation of the Company or affiliate; (ii) the commission by the NEO of an act of fraud or dishonesty in the performance of the NEO’s duties (or in the case of a Consultant, the NEO’s services) on behalf of the Company or an affiliate; (iii) the violation by the NEO of the Company’s Code of Business Conduct and Ethics Policy; or (iv) the failure of the NEO to perform his or her duties at a level and in a manner satisfactory to the Company in its sole discretion.
Generally, a “Change of Control”“Change-in-Control” of the Company will occur if: (i) any person or entity directly or indirectly becomes the beneficial owner of 30%50.1% or more (or 30% for certain past awards) of the shares of voting stock of the Company then outstanding; (ii) the consummation of any merger, organization,reorganization, business combination or consolidation of the Company or one of its subsidiaries with or into any other company (other than when the holders of the voting stock immediately prior thereto hold more than 50% of the combined voting power of the stock of the surviving company or parent of the surviving company immediately thereafter); (iii) a majority of the current members of the Board or their approved successors cease to be our directors; or (iv) the consummation of a sale or disposition by the Company of all or substantially all of our assets (other than a sale or disposition in which the same shareholders before the sale or disposition own 50% of the outstanding common stock after the transaction is complete).
In December 2016, the Compensation Committee recommended and the Board approved the Severance Plan for certain employees of the Company, including the NEOs, with effect beginning on January 1, 2017. Under the Severance Plan, our officers, including our Chief Executive Officer and other executive officers, are eligible for certain compensation and benefits in the event of a termination or a change in control. For more information regarding the Severance Plan, please see the Company’s Current Report on Form 8-K filed with the SEC on December 14, 2016, including the full Severance Plan filed as Exhibit 10.1 thereto.
Subsequent to December 31, 2015, Messrs. Rayford and Teague and Ms. Gentle ceased to be employed by the Company and certain of their outstanding awards vested. For further detail regarding these vestings, please see the Company’s Current Reports on Form 8-K filed with the SEC on June 3, 2016 and August 26, 2016 and Item 5. “Other Information” of the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 5, 2016.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Shear served as a member of our Compensation Committee prior to and up until his appointment as an officer of Cheniere in December 2015. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Compensation Committee.
The compensation earned by or paid to our directors for the year ended December 31, 2015, is set forth in the following table:
| Director Compensation Table for Fiscal Year 2015 | ||||||||||||||||||||||||||||
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation | Change in Pension | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Vicky A. Bailey(2) | $ | 95,000 | $ | 95,015 | — | — | — | — | $ | 190,015 | ||||||||||||||||||
G. Andrea Botta(3) | $ | 98,237 | $ | 90,025 | — | — | — | — | $ | 188,262 | ||||||||||||||||||
Nuno Brandolini(4) | $ | 91,098 | $ | 90,025 | — | — | — | — | $ | 181,123 | ||||||||||||||||||
Keith Carney(5)(6) | — | — | — | — | — | $ | 1,851 | $ | 1,851 | |||||||||||||||||||
Jonathan Christodoro(7) | $ | 24,167 | $ | 72,520 | — | — | — | — | $ | 96,687 | ||||||||||||||||||
John Deutch(6) | $ | 47,500 | — | — | — | — | — | $ | 47,500 | |||||||||||||||||||
David I. Foley(8) | — | $ | 180,051 | — | — | — | — | $ | 180,051 | |||||||||||||||||||
Randy Foutch(6) | — | — | — | — | — | — | — | |||||||||||||||||||||
Paul Hoenmans(6) | $ | 45,000 | — | — | — | — | — | $ | 45,000 | |||||||||||||||||||
David B. Kilpatrick(9) | — | $ | 200,009 | — | — | — | — | $ | 200,009 | |||||||||||||||||||
Samuel Merksamer(10) | — | $ | 145,040 | — | — | — | — | $ | 145,040 | |||||||||||||||||||
Donald A. Robillard, Jr.(11) | — | $ | 200,009 | — | — | — | — | $ | 200,009 | |||||||||||||||||||
Neal A. Shear(12) | — | $ | 200,009 | — | — | — | — | $ | 200,009 | |||||||||||||||||||
Charif Souki(13) | $ | 9,884 | — | — | — | — | — | $ | 9,884 | |||||||||||||||||||
Heather R. Zichal(14) | $ | 90,000 | $ | 90,025 | — | — | — | — | $ | 180,025 | ||||||||||||||||||
Set forth below is the annual total compensation of our median employee, the annual total compensation of Mr. Fusco and the ratio of those two values:
During the fiscal year ended December 31, 2015, the Board approvedThe 2018 annual total compensation to each non-employee director for his or her service for the period from the 2015 Annual Meeting through the 2016 Annual Meeting. The Board also awarded the Chairman of the Audit Committee,median employee (other than our President and CEO) was $183,131;
The 2018 annual total compensation of our President and CEO, Mr. Fusco, was $21,266,901; and
For 2018, the Chairmanratio of the Compensation Committee and the Lead Director additionalannual total compensation of $20,000 each andMr. Fusco to the Chairman of the Governance and Nominating Committee additionalmedian annual total compensation of $10,000 forall of our employees was reasonably estimated to be 116.1 to 1.
To calculate the additional time required to perform their responsibilities. For 2015, the non-employee directors’ annual compensation was payable on June 11, 2015, the date of the 2015 Annual Meeting. In order to provide the directors some flexibility on the type and timing of the compensation, directors were given the option to elect payment of such amounts 100% in restricted stock or 50% in restricted stock and 50% in cash. Cash payments are made quarterly. The number of shares of restricted stock issued was determined based on the closing price of the Company’s common stock as reported by the NYSE MKT LLC on the date payable (for June 11, 2015: $72.31). The directors’ restricted stock vests on the earlier of (i) the day immediately prior to the date of the Company’s regular annual meeting of shareholders in the calendar year next following the calendar year in which the date of the grant occurs and (ii) the first anniversary of the date of grant. In December 2015 in connection with their appointments, the Board awarded (i) Mr. Botta $75,000 for a partial year of service as Non-Executive Chairman of the Board, (ii) Mr. Brandolini $10,000 for a partial year of service as Chairman of the Compensation Committee and (iii) Mr. Souki $90,000 for a partial year of service as a non-employee director (which amount was prorated as a result of Mr. Souki’s resignation as a director on February 12, 2016), in each case for service through the 2016 Annual Meeting.
PROPOSAL 1—APPROVAL OF THE ISSUANCE OF AWARDS WITH RESPECT TO 7,845,630 SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE CHENIERE ENERGY, INC. 2011 INCENTIVE PLAN, AS AMENDED
The Board unanimously adopted the 2011 Plan in March 2011, and our shareholders approved the 2011 Plan in June 2011. On December 7, 2012, the Board adopted Amendment No. 1 to the 2011 Plan (“Amendment No. 1”). Amendment No. 1 (i) increased the number of shares of common stock available for issuance under the 2011 Plan from 10 million shares to 35 million shares (subject to adjustment for stock dividends, stock splits and certain other changes in capitalization, pursuant to the terms of the 2011 Plan); and (ii) added a performance goal and modified the performance period provisions so that awards satisfied the qualified performance-based compensation exception under Section 162(m) of the Code. Our shareholders approved Amendment No. 1 in February 2013.
The Board believes the 2011 Plan provides valuable stock-based compensation and furthers the success of the Company by aligning the financial interests of employees, officers, non-employee directors and consultants with those of the Company and our shareholders through ownership of the Company’s stock. The Board also believes stock-based awards issued under the 2011 Plan serve to attract and retain employees and consultants and to enhance their incentive to perform at the highest level and contribute significantly to the Company’s success.
In April 2015, the Board approved the 2014-2018 LTIP. The Compensation Committee viewed the 2014-2018 LTIP as a “bridge” program to attract, reward, and incentivize our executive officers and employees while we transitioned from a development-focused company to an LNG operator. Under the 2014-2018 Plan, the Company issued awards consisting of phantom units settled in cash.
The Compensation Committee believes that a new long-term incentive program that provides for equity-based awards is a required and critical element of the new compensation philosophy and strategy. Equity grants align our employees’ interests with the interests of shareholders by rewarding long-term value creation. They enable us to attract and retain highly qualified individuals for important positions throughout the Company.
Beginning in 2017, the Compensation Committee intends to approve annual equity grants to the NEOs in the first quarter of each year. Equity award vesting is generally subject to continued employment, with exceptions in some cases, including for a change in control or termination due to death or retirement.
The Compensation Committee plans to implement the following key attributes in the Annual LTIP beginning in 2017:
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In connection with the Order and Stipulation, we are subject to certain conditions relating to stock-based compensation and awards under the 2011 Plan. Among the provisions of the Order and Stipulation is a requirement that, prior to use, we hold a shareholder vote to approve or not approve the issuance of awards with respect to 7,845,630 shares of common stock comprising the Available Shares (defined in the Order as the approximately 7,845,630 shares (subject to equitable adjustment in accordance with the terms of the 2011 Plan) of the 25 million shares listed with the NYSE MKT LLC and registered with the SEC subject to Amendment No. 1 that either had not been awarded or had again become available for grant following the forfeiture or lapse of
awards as of October 7, 2014). In order to further the Company’s transition and fully implement our new compensation strategy, we are seeking such shareholder approval.
Burn Rate and Overhang Disclosure
In connection with its approving and recommending that the Board seek shareholder approval for the issuance of awards with respect to 7,845,630 shares of common stock available for issuance under the 2011 Plan, the Compensation Committee considered certain information regarding historical share usage under the Company’s equity compensation plans (sometimes referred to as “burn rate”) and the potential dilution of the Company’s shareholders that could occur with respect to the Company’s equity plans (sometimes referred to as “overhang”). The Company’s burn rate and overhang are summarized below.
“Burn rate’” is a calculation of shares used (granted) during the year divided by weighted average shares outstanding. The Company’s three year average burn rate, expressed as a percentage of common shares outstanding, was approximately 0.12% for the three year period ending December 31, 2016 (assuming no grants are made for the remainder of 2016). During the past two years, stock-based awards have been limited becauseratio above, we used phantom units settled in cash for our long-term performance awards. Ifthe same employee that we were to include these phantom unit awards in our calculation of the burn rate, it would have been approximately 1.25% for the three year period ending December 31, 2016 (assuming no grants are made for the remainder of 2016). The Company does not intend to make any grants to employees for the remainder of 2016. In 2017, the Company anticipates a burn rate of less than 1%.
Overhang is a calculation of total potential dilution attributable to equity-based compensation and reflects the shares reserved for all outstanding (unvested) grants plus shares available for future grantshad identified as a percent of common shares outstanding. As of December 31, 2016 (assuming2017. We believe there have been no changes from the Record Date throughin our employee population or our compensation arrangements in 2018 that would result in a material change in our pay ratio disclosure or our median employee.
To identify our median employee in 2017, we used our employee population as of December 31, 2016),2017, including full-time, part-time and temporary employees. We excluded our employees in Singapore and Chile, as the total overhang with respect to the Company’s equity plansemployees located in these countries (7 and unvested awards, expressed as a percentage of common shares outstanding, was approximately 6%.
The following table outlines the share reservations and issuances under all3, respectively) represented fewer than 5% of our outstandingtotal employees. Our total employee count at that time was 1,203 prior to excluding Singapore and Chile and 1,193 after accounting for these exclusions. We measured compensation based on annual total compensation (including equity awards received in 2017 valued on the grant date) using the same methodology that we use to determine our NEOs’ annual total compensation plans as offor the Record Date. Summary Compensation Table. We annualized the base salary paid to permanent employees newly hired during 2017 and did not apply anycost-of-living adjustments in measuring compensation.
As ofrequired by SEC rules, we calculated 2018 annual total compensation for both our median employee and Mr. Fusco using the Record Date, there were 234,961,842 shares of common stock ofsame methodology that we use to determine our NEOs’ annual total compensation for the Company outstanding.Summary Compensation Table.
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| 2019 PROXY STATEMENT | 67 | |||
NON-BINDING VOTE TO
APPROVE THE COMPENSATION
OF THE COMPANY’S NAMED
EXECUTIVE OFFICERS FOR 2018
In accordance with Section 14A of the Exchange Act, we are asking shareholders to vote on an advisory,non-binding basis to approve the compensation paid to our named executive officers for fiscal year 2018. We ask shareholders to read the CD&A section of this Proxy Statement for a full discussion of our executive compensation practices and decisions. The CD&A details our executive compensation policies and incentive programs and explains the compensation decisions relating to the named executive officers for fiscal year 2018. In response to shareholder feedback, the Compensation Committee and Board have taken considerable steps to further align our executive compensation programs with the Company’s strategy and long-term performance. The Compensation Committee believes that our compensation policies and programs continue to align our executive officers’ interests with the interests of our shareholders and that the compensation received by the named executive officers is commensurate with the performance of the Company as a whole.
Specifically, we ask the shareholders to approve the following resolution:
RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and narrative discussion on pages 34 through 66 of this Proxy Statement.
Although the outcome of this vote is not binding on the Board, the Board values shareholders’ views, and the Compensation Committee and Board will consider the outcome of the advisory vote when making future compensation decisions.
The Board has adopted a policy of providing for annualsay-on-pay votes. The nextsay-on-pay vote will occur at our 2020 Annual Meeting of Shareholders.
The Board recommends a voteFOR the resolution approving the named executive officer compensation for fiscal year 2018 as disclosed in this Proxy Statement.
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COMMITTEE
The Audit Committee of the Board is responsible for oversight of the accounting and financial reporting processes of the Company and oversight of the audits of our financial statements. Management is responsible for the Company’s internal control over financial reporting and the preparation of the financial statements. KPMG LLP, the Company’s independent registered public accounting firm (“KPMG”), is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon. KPMG is also responsible for performing an independent audit of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to oversee these processes.
The Audit Committee currently consists of four Directors. All members of the Audit Committee meet the NYSE American independence standards and the applicable rules of the SEC. The Board has determined that each of Messrs. Mather and Robillard is an “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of RegulationS-K promulgated by the SEC. The Audit Committee operates under a written charter adopted by the Board which is available on our website atwww.cheniere.com. The Audit Committee reviews the adequacy of, and compliance with, the Audit Committee charter annually.
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of KPMG. As part of fulfilling this responsibility, the Audit Committee engages in an annual evaluation of, among other things, KPMG’s qualifications, independence, performance and communications with the Audit Committee, and whether KPMG should be retained for the upcoming year’s audit. The Audit Committee reviews significant audit findings together with management’s responses thereto. The Audit Committee performs additional activities in accordance with the responsibilities of the Audit Committee specified in the Audit Committee charter.
The Audit Committee reviews the Company’s hiring policies and practices with respect to current and former employees of KPMG. In addition, the Audit Committee preapproves all services provided by KPMG.
The Audit Committee discussed with both our internal auditor and KPMG the overall scope and plans for their respective audits. In addition, the Audit Committee met with the Company’s internal auditor and KPMG, with and without management present, to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues, the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. Management advised the Audit Committee that all financial statements were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee’s review with the internal auditor and KPMG included discussions of those matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board and the SEC. The Audit Committee also discussed with KPMG, among other things, matters relating to their independence, and the Audit Committee received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence.
On the basis of these reviews and discussions, the Audit Committee recommended to the Board that the Board approve the inclusion of the Company’s audited financial statements in our Annual Report on Form10-K for the year ended December 31, 2018 for filing with the SEC.
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| THE AUDIT COMMITTEE Donald F. Robillard, Jr., Chairman Vicky A. Bailey David B. Kilpatrick Courtney R. Mather | |||||
Voting Standard
To
OF KPMG LLP AS
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
FOR 2019
KPMG LLP (“KPMG”) served as our independent auditor for the fiscal year ended December 31, 2018, and the Audit Committee has appointed KPMG to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019. The Company is asking shareholders to ratify this appointment. Although the Company is not required to obtain shareholder ratification of the appointment of KPMG, the Board considers the selection of an independent registered accounting firm to be approved, Proposal 1an important matter to approveshareholders and considers a proposal for shareholders to ratify such appointment to be an opportunity for shareholders to provide input to the issuanceAudit Committee and the Board on a key corporate governance issue. If the shareholders do not ratify the appointment, the Audit Committee will reconsider whether or not to retain KPMG. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of awardsthe Company and its shareholders.
The following table sets forth the fees billed to us by KPMG for professional services for the fiscal years ended December 31, 2018 and 2017.
| KPMG LLP | KPMG LLP | |||||||
| FISCAL 2018 | FISCAL 2017 | |||||||
Audit Fees | $ | 6,663,332 | $ | 6,954,381 | ||||
Audit Related Fees | $ | — | $ | — | ||||
Tax Fees | $ | 196,480 | $ | 88,565 | ||||
All Other Fees | $ | 2,430 | $ | 80,570 | ||||
Total | $ | 6,862,242 | $ | 7,123,516 |
Audit Fees—Audit fees for the fiscal years ended December 31, 2018 and 2017 include fees associated with the integrated audit of our annual consolidated financial statements, reviews of our interim consolidated financial statements, local statutory audits and services performed in connection with registration statements and debt offerings, including comfort letters and consents.
Audit Related Fees—There were no audit related fees in 2018 or 2017.
Tax Fees—Tax fees for the fiscal years ended December 31, 2018 and 2017 were for tax consultation services with respect to 7,845,630a sales and use tax analysis for the CCL Project and tax consulting services with respect to the assistance with the computation of the Section 382 ownership change calculations.
Other Fees—Other fees for the fiscal years ended December 31, 2018 and 2017 were for services performed in assistance with the application of new accounting standards and/or for accounting research tools.
We did not pay KPMG any additional fees during the fiscal years ended December 31, 2018 or 2017.
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PRE-APPROVAL POLICIES AND PROCEDURES
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee’s policy is topre-approve all audit andnon-audit services provided by the independent accountants and not to engage the independent accountants to perform anynon-audit services specifically prohibited by law or regulation. All audit andnon-audit services provided to us during the fiscal years ended December 31, 2018 and 2017 werepre-approved.
We anticipate that a representative of KPMG will participate in the Meeting. Such representative may make a statement if he or she desires to do so and will be available to respond to appropriate questions concerning our financial statements.
The Board recommends a voteFOR the ratification of the Audit Committee’s appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee, under the Audit Committee Charter, has the responsibility to review and approve any transactions or series of related financial transactions, arrangements or relationships involving amounts exceeding $120,000 between the Company and our directors, executive officers, nominees for director, any greater than 5% shareholders and their immediate family members. The Audit Committee will only approve related party transactions when it determines such transactions are in the best interests of the Company and its shareholders after considering the standards described below. In reviewing a transaction, the Audit Committee considers all facts and circumstances that it considers relevant to its determination. In determining whether to approve or ratify a related party transaction, the Audit Committee will apply the following standards, as provided in our Audit Committee Charter, and such other standards it deems appropriate:
whether the related party transaction is on terms no less favorable than the terms generally available to an unaffiliated third-party under the same or similar circumstances;
whether the transaction is material to the Company or the related party; and
the extent of the related person’s interest in the transaction.
The Company had no related party transactions in 2018.
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WHY DID I RECEIVE THESE PROXY MATERIALS?
We are providing these proxy materials in connection with the solicitation by the Board of proxies to be voted at our 2019 Annual Meeting of Shareholders and any adjournment or postponement thereof.
You are invited to attend the Meeting on May 16, 2019, beginning at 9:00 a.m., Central Time. The Meeting will be held at the Company’s headquarters at 700 Milam Street, Suite 1900, Houston, Texas 77002.
This Notice of Annual Meeting (“Notice”), Proxy Statement, proxy card and 2018 Annual Report on Form10-K for the year ended December 31, 2018, are being mailed to shareholders on or about April 15, 2019.
DO I NEED A TICKET TO ATTEND THE MEETING?
You will need proof of your ownership of Cheniere common stock and valid government-issued picture identification to enter the Meeting.
If your shares are held beneficially in the name of a bank, broker or other holder of record and you plan to attend the Meeting, you must present proof of your ownership of Cheniere common stock as of the Record Date, such as a bank or brokerage account statement, to be admitted to the Meeting.
If you have any questions about attending the Meeting, you may contact Investor Relations at Investors@cheniere.com or713-375-5000.
No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the Meeting.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Holders of Cheniere common stock at the close of business on the Record Date are entitled to receive this Notice and to vote their shares at the Meeting. As of the Record Date, there were 257,390,300 shares of common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote on each matter properly brought before the Meeting.
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER?
If your shares are registered directly in your name with Cheniere’s transfer agent, Computershare Trust Company, N.A., you are considered the “shareholder of record” of those shares. The Notice, Proxy Statement, proxy card and 2018 Annual Report on Form10-K for the year ended December 31, 2018, have been sent directly to you by Cheniere. If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of such shares held in street name. The Notice, Proxy Statement, proxy card and 2018 Annual Report on Form10-K for the year ended December 31, 2018, have been forwarded to you by your broker, bank or other holder of record, who is considered the shareholder of record of those shares. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or on the Internet.
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HOW DO I VOTE?
You may vote using any of the following methods:
By mail
You may submit your proxy vote by mail by signing a proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your broker, trustee or nominee, and mailing it in the enclosed envelope. If you provide specific voting instructions, your shares will be voted as you have instructed. If you do not indicate your voting preferences, your shares will be voted as recommended by the Board; provided, however, if you are a beneficial owner, your bank, broker or other holder of record is not permitted to vote your shares on the following proposals if your bank, broker or other holder of record does not receive specific voting instructions from you: Proposal 1 to elect directors and Proposal 2 to approve, on an advisory andnon-binding basis, the compensation of the Company’s named executive officers for 2018.
By telephone or on the Internet
If you have telephone or Internet access, you may submit your proxy vote by following the instructions provided on your proxy card or voting instruction form. If you are a beneficial owner, the availability of telephone and Internet voting will depend on the voting processes of your broker, bank or other holder of record. Therefore, we recommend that you follow the voting instructions in the materials you receive.
In person at the Meeting
If you are the shareholder of record, you have the right to vote in person at the Meeting. If you are the beneficial owner, you are also invited to attend the Meeting. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Meeting unless you obtain a “legal proxy” from your broker, bank or other holder of record that holds your shares, giving you the right to vote the shares at the Meeting. You will need proof of your ownership of Cheniere common stock and valid government-issued picture identification to enter the Meeting. See “Do I need a ticket to attend the Meeting?” above for more information on the requirements to enter the Meeting.
CAN I REVOKE MY PROXY?
If you are a shareholder of record, you can revoke your proxy before it is exercised by:
written notice to the Corporate Secretary of the Company;
timely delivery of a valid, later-dated proxy; or
voting by ballot at the Meeting.
If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank, broker or other holder of record. You may also vote in person at the Meeting if you obtain a legal proxy as described in the answer to the preceding question.
WHO WILL RECEIVE A PROXY CARD?
If you are a shareholder of record, you will receive a proxy card for the shares you hold in certificate form or in book-entry form. If you are a beneficial owner, you will receive voting instructions from your bank, broker or other holder of record.
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FREQUENTLY ASKED QUESTIONS
IS THERE A LIST OF SHAREHOLDERS ENTITLED TO VOTE AT THE MEETING?
The names of shareholders of record entitled to vote at the Meeting will be available at the Meeting and for issuance underten days prior to the 2011 Plan must receiveMeeting for any purpose germane to the approvalMeeting. The list will be available between the hours of 8:30 a.m. and 4:30 p.m., Central Time, at our offices at 700 Milam Street, Suite 1900, Houston, Texas 77002, by contacting the Corporate Secretary of the Company.
WHAT ARE THE VOTING REQUIREMENTS TO ELECT THE DIRECTORS AND TO APPROVE EACH OF THE PROPOSALS DISCUSSED IN THIS PROXY STATEMENT?
The presence in person or by proxy of the holders of a majority in voting power of the outstanding shares of common stock entitled to vote at the Meeting is necessary to constitute a quorum. In the absence of a quorum at the Meeting, the Meeting may be adjourned from time to time without notice, other than an announcement at the Meeting, until a quorum is present. Abstentions and “brokernon-votes” represented by submitted proxies will be included in the calculation of the number of the shares present at the Meeting for purposes of determining a quorum. “Brokernon-votes” occur when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
Proposal 1 – Directors are elected by a majority of the shares present and entitledvotes cast with respect to vote onsuch director nominee at the proposal,Meeting, meaning that the number of votes cast “for” Proposal 1a director must exceed the number of votes cast “against” it. Abstentions will be counted as the functional equivalent of “no” votes and broker non-votes will not be considered in determining the outcome of Proposal 1, but will be counted for purposes of establishing a quorum.that director. If you are a beneficial owner, your bank, broker or other holder of record may not vote your shares with respect to Proposal 1 without specific instructions from you because Proposal 1 is not considered a “routine” matter.
Recommendation of the Board of Directors
The Board recommends aas to how to vote FOR approval of Proposal 1 to approve the issuance of awards with respect to 7,845,630 shares of common stock available for issuance under the Cheniere Energy, Inc. 2011 Incentive Plan, as amended.
Summary of the 2011 Plan
Below is a summary of the material terms of the 2011 Plan. The full text of the 2011 Plan is attached as Appendix A to this Proxy Statement. The statements made in this Proxy Statement with respect to the 2011 Plan shouldelection of each of the ten nominees for director. Abstentions and brokernon-votes represented by submitted proxies will not be readconsidered votes cast and therefore will not be taken into account in conjunctiondetermining the outcome of the election of directors.
Proposal 2 – To be approved, Proposal 2 regarding the compensation of the Company’s named executive officers for fiscal year 2018 must receive the affirmative vote of the holders of a majority in voting power of the shares entitled to vote on the matter, present in person or by proxy at the Meeting. Because your vote is advisory, it will not be binding on the Board or the Company. If you are a beneficial owner, your bank, broker or other holder of record may not vote your shares with andrespect to Proposal 2 without specific instructions from you. Abstentions will be counted “against” Proposal 2. Brokernon-votes will not count as shares entitled to vote on the matter.
Proposal 3 – To be approved, Proposal 3 to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2019 must receive the affirmative vote of the holders of a majority in voting power of the shares entitled to vote on the matter, present in person or by proxy at the Meeting. If you are qualified in their entirety by referencea beneficial owner, your bank, broker or other holder of record has the authority to vote your shares on Proposal 3 if you have not furnished voting instructions within a specified period of time prior to the full textMeeting. Abstentions will be counted “against” Proposal 3.
WHAT IF A DIRECTOR NOMINEE DOES NOT RECEIVE A MAJORITY OF VOTES CAST?
Our Amended and Restated Bylaws, as amended (“Bylaws”) require directors to be elected by the majority of the 2011 Plan attachedvotes cast with respect to such director (i.e., the number of votes cast “for” a director must exceed the number of votes cast “against” that director). If a nominee who is serving as Appendix Aa director is not elected at the Meeting and no one else is elected in place of that director, then, under Delaware law, the director would continue to this Proxy Statement.
| 2019 PROXY STATEMENT | 75 | |||
PurposeGENERAL INFORMATION
would consider the resignation and recommend to the Board whether to accept or reject the tendered resignation, or whether some other action should be taken. The Board would then make a decision whether to accept the resignation, taking into account the recommendation of the 2011 Plan
Governance and Nominating Committee. The 2011 Plan is designed to promote the interests of the Company and our shareholders by offering employees, consultants and non-employee directors of the Companydirector who tenders his or its affiliates an opportunity toher resignation will not participate in the growthGovernance and financial success ofNominating Committee’s or the CompanyBoard’s decision. The Board is required to disclose publicly (by a press release and in performance-related incentives. A further purpose ofa filing with the 2011 PlanSEC) its decision regarding the tendered resignation and, if the tendered resignation is to providerejected, the Company and its affiliates an opportunity to attract and retainrationale behind the best available individuals needed for the continued growth and success of the Company. Accordingly, the 2011 Plan provides for the following:
We believe the 2011 Plan is a valuable compensation component for the Company and helps further the successcertification of the Company by aligningelection results. If a nominee for director is not elected and the financial interests of employees, consultants and non-employee directors with those ofnominee is not an incumbent director, then the Company and our shareholders through ownership ofBoard may fill the Company’s common stock.resulting vacancy.
Historical Grant InformationCOULD OTHER MATTERS BE DECIDED AT THE MEETING?
As of the Record Date, there were 8,497,012 shares of common stock available for issuance under the 2011 Plan, including the 7,845,630 shares of common stock subject to approval in Proposal 1. An aggregate of 21,359,096 shares of restricted stock were issued and 5,143,892 shares of restricted stock are issuable pursuant to outstanding awards under the 2011 Plan through the date of the filing of this Proxy Statement. Based on 234,961,842 sharesStatement, we do not know of common stock issued and outstanding on the Record Date, the shares currently available for issuance under the 2011 Plan (including the 7,845,630 shares of common stock subject to approval in Proposal 1) represent about 3.6% of the Company’s outstanding shares.
Administration
The 2011 Plan is administered by the Compensation Committee or, if there is no Compensation Committee at any relevant time, by the Board. With respect to any award granted to a Covered Employee (as described below) that is intendedmatters to be “performance-based compensation”raised at the Meeting other than those referred to in this Proxy Statement. If other matters are properly presented for purposes of Section 162(m) ofconsideration at the Code,Meeting, the Section 162(m) Subcommittee, which is comprised solely of two or more non-employee directors who also qualify as “outside directors” (as described under Section 162(m) ofpersons named in your proxy card will have the Code) makes performance-based award decisions. References hereindiscretion to the “Committee” mean the Section 162(m) Committee, or the Compensation Committee or Board, along with the Equity Grant Committee and the Option Grant Committee described below, as applicable. A Covered Employee is the CEO of the Company and each other officer of the Company that is required to be treated as a “covered employee”vote on those matters for purposes of applying Section 162(m) of the Code to awards.you.
The Committee has full authority, subject to the terms of the 2011 Plan, to establish rules that it deems relevantWHO WILL PAY FOR THE COST OF THIS PROXY SOLICITATION?
We will pay for the proper administrationcost of the 2011 Plan,soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by telephone, electronic transmission and facsimile transmission. We have hired D. F. King & Co., Inc., 48 Wall Street, 22nd Floor, New York, NY 10005, to select the employees, consultants and non-employee directors to whom awards are granted, and to set the type and sizesolicit proxies. We will pay D.F. King a fee of awards that are made and the other terms of the awards. When granting awards, the Committee may consider any factors that it deems relevant.$15,000 plus expenses for these services.
The Board has established an Equity Grant Committee and has appointed the President and CEO of the Company as the sole member of that Committee of the Board to act on behalf of the Board and the Compensation Committee to grant Restricted Stock Awards and Non-qualified Stock Options to eligible employees and consultants (other than executive officers of the Company or our affiliates, including Covered Employees, and non-employee directors).WHO WILL COUNT THE VOTE?
Broadridge Financial Solutions, Inc., an independent third party, will tabulate the Equity Grant Committee in a calendar year cannot exceed 150,000 shares of restricted stock per recipient or an aggregate of 600,000 shares of restricted stock to all recipients.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2019 ANNUAL MEETING TO BE HELD ON MAY 16, 2019
The Proxy Statement, including the Equity Grant Committee in a calendar year cannot exceed 450,000 stock options per recipient or an aggregate of 3,000,000 stock options to all recipients (reduced by the number of shares of common stock covered by Non-qualified Stock Options granted by the Option Grant CommitteeNotice and 2018 Annual Report on Form10-K for the calendar year).
The Board also has establishedyear ended December 31, 2018, are available on our website athttp://www.cheniere.com/2019AnnualMeeting. Please note that the Notice is not a form for voting and presents only an Option Grant Committee and has appointed the President and CEOoverview of the Company asmore complete proxy materials, which contain important information and are available on the sole member of that CommitteeInternet or by mail. We encourage our shareholders to act on behalfaccess and review the proxy materials before voting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the BoardExchange Act, directors, certain officers and the Compensation Committee to grant Non-qualified Stock Options to eligible employees and consultants (other than executive officersbeneficial owners of the Company or our affiliates, including Covered Employees, and non-employee directors).
The Compensation Committee may periodically ratify all stock options and Restricted Stock Awards granted by the Equity Grant Committee and the Option Grant Committee.
Limitation on Individual Awards
In addition to the above limits, the 2011 Plan provides that no individual may be granted, in any calendar year, awards covering or relating to an aggregate of 6,000,000 shares of common stock under the 2011 Plan. With respect to cash awards, the 2011 Plan provides that no individual may receive payment for cash awards during any calendar year aggregating in excess of $25 million.
Eligibility
All employees, consultants, and non-employee directors of the Company and our affiliates are eligible to participate in the 2011 Plan. The selection of employees, consultants, and non-employee directors, from among those eligible, who will receive Incentive Stock Options, Non-qualified Stock Options, Bonus Stock Awards, Stock Appreciation Rights, Phantom Stock Awards, Restricted Stock Awards, Performance Awards, Other Stock or Performance-Based Awards, or any combination thereof is within the discretion of the Committee. However, Incentive Stock Options may be granted only to employees of the Company or our affiliates. As of the Record Date, there were approximately 900 employees, 100 consultants and ten non-employee directors eligible to participate in the 2011 Plan.
Term of 2011 Plan
The 2011 Plan became effective on June 16, 2011. If not sooner terminated, the 2011 Plan will terminate on the earlier of the tenth anniversary of the effective date or the date on which no shares of common stock subject to the 2011 Plan remain available to be granted as awards under the 2011 Plan, and no further awards may be granted thereafter. The Board, in its discretion, may terminate the 2011 Plan at any time with respect to any shares of common stock for which awards have not theretofore been granted.
Term of Awards
The term of any Incentive Stock Option, Non-qualified Stock Option, Stock Appreciation Right or Other Stock or Performance-Based Award may not exceed a period of ten years.
Stock Options
a.Term of Option. The term of each stock option is as specified by the Committee at the date of grant but cannot exceed ten years.
b.Acceleration of Vesting. Unless an individual award agreement or then-effective employment agreement between the Company and the participant provides otherwise, stock options vest upon termination by the Company (or removal of a non-employee director) without cause, a change of control of the Company (as defined in the 2011 Plan), termination upon death or disability (as defined in the 2011 Plan) or such other events as the Committee determines.
c.Exercise Price. The exercise price is determined by the Committee and can be no less than the fair market value of the shares of common stock covered by the stock option on the date the stock option is granted.
d.Special Rules for Certain Shareholders. If an Incentive Stock Option is granted to an employee who then owns stock possessing more than 10% of any class of the total combined voting powerCompany’s stock (“Reporting Persons”) are required from time to time to file with the SEC and NYSE American reports on ownership and changes of ownership. Reporting Persons are required to furnish the Company with copies of all classesSection 16(a) reports they file. Based solely on its review of stock of the Company or a subsidiary, the term of the stock option cannot exceed five years,forms and the exercise price must be at least 110% of the fair market value of the shares on the date that the stock option is granted.
e.Size of Grant. Subject to the aggregate maximum number of shares available to be granted under the 2011 Plan and the limit on individual awards provided for in the 2011 Plan, the number of shares for which a stock option is granted to an employee, consultant or non-employee director is determined by the Committee. The Committee may adjust the number and kind of shares for which a stock option is granted to reflect certain corporate transactions and changes in capitalization.
f.Status of Stock Options. The status of each stock option granted to an employee as either an Incentive Stock Option or a Non-qualified Stock Option is designated by the Committee at the time of grant. If, however, the aggregate fair market value (determined as of the date of grant) of shares with respect to which Incentive Stock Options become exercisable for the first time by an employee exceeds $100,000 in any calendar year, the stock optionswritten representations received from Reporting Persons with respect to the excess shares are Non-qualified Stock Options. All stock options granted to consultants and non-employee directors are Non-qualified Stock Options.
g. Payment. The Committee may determine the method by which the stock option price may be paid upon exercise, including in cash, by check, or by delivery of other shares of our common stock owned by the optionee. The 2011 Plan also allows the Committee, in its discretion, to establish procedures pursuant to which an optionee may effect a cashless or net exercise of a stock option.
h.Amendment. The Committee may modify, extend or renew a stock option subject to the terms and conditions of the 2011 Plan, and where applicable, with the written consent of the affected option holder.
i.Transferability. An Incentive Stock Option is not transferable other than by will or the laws of descent and distribution, and may be exercised during the employee’s lifetime only by the employee or his or her guardian or legal representative. A Non-qualified Stock Option is not transferable other than by will or the laws of descent and distribution, or with the consent of the Committee, to one or more immediate family members or related family trusts or partnerships or similar entities, subject to securities registration requirements.
j.Limitations on Exercise. No Incentive Stock Option may be exercised more than (i) three months after the optionee ceases to perform continuous service for the Company for any reason other than death or disability (as defined in the 2011 Plan) or (ii) onefiscal year after the optionee ceases to perform continuous service for the Company due to death or disability. No Non-qualified Stock Option may be exercised more than (i) six months after the optionee ceases to perform continuous service for the Company for any reason other than death or disability or (ii) one year after the optionee ceases to perform continuous service for the Company due to death or disability. If an optionee’s continuous service with the Company is terminated for cause (as defined in the 2011 Plan), the option shall immediately terminate.
k.Other Terms and Conditions. The Committee may establish other terms and conditions regarding the grant of Non-qualified Stock Options and Incentive Stock Options that are consistent with the terms of the 2011 Plan.
Bonus Stock Awards
The Committee may grant shares of our common stock to employees, consultants and non-employee directors on terms and conditions and for such payment, if any, as established by the Committee on the date of grant, which grant shall constitute a transfer of unrestricted shares of common stock to such recipients.
Stock Appreciation Rights
a.Rights Related to Stock Options. A Stock Appreciation Right granted in connection with a stock option entitles the participant to surrender all or part of the stock option for a cash payment at such time and to the extent such stock option is exercisable. Any such Stock Appreciation Right is transferable only to the extent the related stock option is transferable.
b.Rights Without Stock Options. A Stock Appreciation Right granted independently of a stock option is exercisable at such time and in such manner as determined by the Committee and set forth in the applicable award agreement.
c.Exercise Price. The exercise price is determined by the Committee and can be no less than the fair market value of the shares of common stock subject to the Stock Appreciation Right on the date the Stock Appreciation Right is granted.
d.Other Terms and Conditions. The Committee determines at the date of grant the times at which and the circumstances under which a Stock Appreciation Right may be exercised (including based on achievement of performance goals and/or future service requirements), the method of exercise, whether the Stock Appreciation Right is in combination with another award, whether the Stock Appreciation Right will be settled in cash, shares of common stock, or a combination of cash and stock, and any other terms and conditions of the Stock Appreciation Right under the 2011 Plan.
e.Other Terms and Conditions. The Committee may establish other terms and conditions with respect to the grant of Stock Appreciation Rights under the 2011 Plan.
Phantom Stock Awards
a. Restrictions and Forfeiture. Phantom Stock Awards under the 2011 Plan are subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose. A Phantom Stock Award terminates if the recipient’s employment with or service to the Company terminates during the applicable restricted or deferral period, except as otherwise determined by the Committee or set forth in any agreement pertaining to a Phantom Stock Award. A Phantom Stock Award may be paid at the end of the restricted period or the last day of a deferral period in the form of shares of the Company’s common stock or cash.
b.Performance Goals. If the Committee determines a Phantom Stock Award constitutes performance-based compensation for purposes of Section 162(m) of the Code or otherwise determines that a Phantom Stock Award will be subject to performance measures, the grant or settlement of the award shall, in the Committee’s discretion, be subject to the achievement of performance goals as described under the section entitled “Performance Awards” below.
c.Other Terms and Conditions. The Committee may establish other terms and conditions regarding the grant of Phantom Stock Awards under the 2011 Plan.
Restricted Stock Awards
a.Transfer Restrictions and Forfeiture Obligations. Restricted Stock Awards are subject to certain restrictions on the disposition thereof and certain obligations to forfeit and surrender such shares to the Company as may be determined in the discretion of the Committee. The Company may purchase or recover such shares for the amount of cash paid therefore, if any, if (i) the participant terminates his or her employment with or service to the Company prior to the lapse of such restrictions, subject to accelerated vesting or (ii) the Restricted Stock Award is forfeited by the participant pursuant to the terms of the award. Upon the issuance of shares of common stock pursuant to a Restricted Stock Award, except for the foregoing restrictions and unless otherwise provided, the recipient of the award will have all of the rights of a shareholder of the Company with respect to such shares, including the right to vote such shares and to receive all dividends or other distributions paid with respect to such shares, but prior to the lapse of such restrictions, the participant shall not be entitled to delivery of the shares and the participant may not sell, transfer, assign or otherwise dispose of such shares.
b.Acceleration of Vesting. Unless the individual award agreement provides otherwise and subject to limitations contained in the 2011 Plan relating to awards that are intended to satisfy the performance-based compensation rules of Section 162(m) of the Code, any unvested shares of a Restricted Stock Award vest if the participant’s employment with or service to the Company (or removal as a non-employee director) is terminated without cause by the Company, the occurrence of change of control of the Company (as defined in the 2011 Plan), or termination as a result of death or disability (as defined in the 2011 Plan).
c. Other Terms and Conditions. The Committee may establish other terms and conditions of the grant of Restricted Stock Awards under the 2011 Plan.
Performance Awards
a.Cash and Other Performance Awards. The Committee may grant cash awards that are rights to receive a cash payment upon the achievement of a single or multiple performance goals over a specified performance period established by the Committee. The Committee also may designate any form of award under the 2011 Plan as a Performance Award that will be subject to the achievement of performance goals based on business criteria described below during a specified performance period.
b.Performance Period. The Committee may grant Performance Awards under the 2011 Plan that may be paid in common stock, cash or a combination thereof as determined by the Committee. Achievement of performance goals in respect of Performance Awards may be measured based on performance over a Performance Period, as specified by the Committee, or may be determined based on whether or not the performance goals are satisfied at any time prior to the expiration of a Performance Period. In the case of a performance goal measured over a Performance Period, the Committee shall determine the amount, if any, of Performance Awards payable to each Participant based upon achievement of the business criteria over a Performance Period at or after the end of the Performance Period. In the case of a performance goal satisfied based upon whether or not certain specified business criteria are achieved at any time during a Performance Period, at or following the satisfaction of the applicable business criteria (even if prior to the expiration of the applicable Performance Period), the Committee shall determine the amount, if any, of Performance Awards payable to each Participant upon the achievement of the applicable business criteria.
c. Performance Goals. The Committee uses one or more of the following business criteria in establishing performance goals for Performance Awards expressed in terms of Company-wide objectives or in terms of objectives that relate to the performance of specified subsidiaries, divisions or business or geographical units of the Company, or one or more product lines of the Company’s business: earnings per share; revenue (including increased revenues); profit measures (including gross profit, operating profit,
economic profit, net profit before taxes and adjusted pre-tax profit); cash flow measures (including cash flow return on capital, cash flow return on tangible capital, net cash flow and net cash flow before financing activities); return measures (including return on equity, return on assets, return on capital, risk-adjusted return on capital, return on investors’ capital and return on average equity); economic value added; gross margin; net income measures (including income after capital costs and income before or after taxes); earnings; pretax earnings; earnings before interest, taxes, depreciation and amortization (“EBITDA”); earnings before taxes and depreciation (“EBTD”); earnings before interest and taxes (“EBIT”); pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items; operating measures (including operating income, funds from operations, cash from operations, after-tax operating income; sales volumes, production volumes and production efficiency); stock price measures (including growth measures and total stockholder return); debt reduction; price per share of Common Stock; market share; earnings per share or adjusted earnings per share (actual or growth in); economic value added (or an equivalent metric); market value added; debt to equity ratio; expense measures (including overhead cost and general and administrative expense); changes in working capital; margins; stockholder value; proceeds from dispositions; total market value; customer satisfaction or growth and contracted LNG quantity; and implementation, completion or attainment of measurable objectives with respect to financing or construction of entire projects or stages of projects. Any of the above business criteria may be determined on an absolute or relative basis or as compared to the performance of a published or special index.
d.Payment. Following the end of the performance period, the Committee determines and certifies in writing the amount payable to the holder of the Performance Award based on the achievement of the performance measures for such performance period. Payments are made in cash, common stock or a combination thereof as determined by the Committee. The Committee may exercise its discretion to increase amounts payable under any Performance Award except for awards designed to comply with Section 162(m) of the Code.
e.Performance Awards Under Section 162(m) of the Code. A Performance Award granted to a person designated by the Committee who is likely to be a Covered Employee constitutes “performance-based compensation” within the meaning of Section 162(m) of the Code, and the terms of such awards are to be subject to and interpreted consistently with Section 162(m) of the Code, including the timing for establishing the performance goals and requirement that the settlement of the awards be contingent on achievement of the performance goals, as certified by the Committee.
f.Other Terms and Conditions. The Committee may establish other terms and conditions for Performance Awards under the 2011 Plan, subject to the special rules relating to Performance Awards under Section 162(m) of the Code.
Other Stock or Performance-Based Awards
a.General. The Committee may grant to employees, consultants and non-employee directors Other Stock or Performance-Based Awards which consist of a right denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of our common stock or cash.
b. Other Terms and Conditions. The Committee may establish such terms and conditions for Other Stock or Performance-Based Awards under the 2011 Plan as it determines appropriate. The term of any such award may not exceed ten years.
Amendments
The Board may amend, suspend or terminate the 2011 Plan; however, any change that would terminate an award or impair the rights of a participant in any material respect with respect to an award previously granted requires the participant’s consent. Furthermore, any amendment which would constitute a “material revision” of the 2011 Plan (as that term is used in the rules of the NYSE MKT LLC) or to the extent necessary to comply with the Code, including Sections 162(m) and 422 of the Code, is subject to shareholder approval.
Federal Income Tax Aspects of the 2011 Plan
The following is a brief summary of certain of the U.S. federal income tax consequences of certain transactions under the 2011 Plan as normally operated and is not intended to provide or supplement tax advice to eligible employees, consultants or directors. The summary contains general statements based on current U.S. federal income tax statutes, regulations and currently available interpretations thereof. This summary is not intended to be exhaustive and does not describe state, local or foreign tax consequences or the effect, if any, of gift, estate and inheritance taxes.
Incentive Stock Options. Incentive Stock Options are subject to special federal income tax treatment. No federal income tax is imposed on the optionee upon the grant of an Incentive Stock Option. The optionee would recognize no ordinary taxable income upon exercise of an Incentive Stock Option or later disposition of shares acquired pursuant to his or her exercise of an Incentive
Stock Option if the optionee (a) does not dispose of the shares acquired pursuant to the exercise within the two-year period beginning on the date that the stock option was granted or within the one-year period beginning on the date that the stock option was exercised (collectively, the “holding period”) and (b) is an employee of the Company or any of our subsidiaries at all times beginning on the date of grant and ending on the date three months before the date of exercise. With respect to an Incentive Stock Option, the difference between the fair market value of the stock on the date of exercise and the exercise price must generally be included in the optionee’s alternative minimum taxable income for the year in which such exercise occurs. However, if the optionee exercises an Incentive Stock Option and disposes of the shares received in the same taxable year and the amount realized is less than the fair market value of the shares on the date of exercise, then the amount included in the alternative minimum taxable income of the optionee will not exceed the amount realized over the adjusted basis of the shares.
Upon disposition of the shares received upon exercise of an Incentive Stock Option after the holding period, any appreciation of the shares above the exercise price should constitute capital gain. In such event, the Company would not be entitled to any deduction for federal income tax purposes in connection with the grant or exercise of the Incentive Stock Option or the disposition of the shares so acquired. If an optionee disposes of shares acquired pursuant to his or her exercise of an Incentive Stock Option prior to the end of the holding period, the optionee will be treated as having received, at the time of disposition, compensation taxable as ordinary income. In such event, and subject to the application of Section 162(m) of the Code as discussed below, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as received by the optionee. The amount treated as ordinary income is the excess of the fair market value of the shares at the time of exercise (or in the case of a sale in which a loss would be recognized, the amount realized on the sale if less) over the exercise price; any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as short-term or long-term capital gain, depending on the holding period of the shares.
Non-qualified Stock Options and Stock Appreciation Rights. As a general rule, no federal income tax is imposed on the optionee upon the grant of a Non-qualified Stock Option such as those under the 2011 Plan (whether or not including a Stock Appreciation Right), and the Company is not entitled to a tax deduction by reason of such grant. Generally, upon the exercise of a Non-qualified Stock Option, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the excess of the fair market value of the shares of stock at the time of exercise over the option price paid for such shares. In the case of the exercise of a Stock Appreciation Right, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the cash received and/or the fair market value of the shares distributed to the optionee, determined based on the excess of the fair market value of the shares of common stock covered by the portion of the Stock Appreciation Rights being exercised over the exercise price for such shares. Upon the exercise of a Non-qualified Stock Option or a Stock Appreciation Right, and subject to the application of Section 162(m) of the Code as discussed below, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation income is recognized by the optionee assuming any federal income tax reporting requirements are satisfied.
Upon a subsequent disposition of the shares received upon exercise of a Non-qualified Stock Option or a Stock Appreciation Right, any difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition would be treated as capital gain or loss.
Restricted Stock Awards. Subject to the special rules discussed below relating to elections made under Section 83(b) of the Code, the recipient of a Restricted Stock Award will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the restrictions constitute a substantial risk of forfeiture for federal income tax purposes. When the risk of forfeiture with respect to the stock subject to the award lapses and the individual vests in the underlying shares, the holder will realize ordinary income in an amount equal to the fair market value of the shares of common stock at such time, and, subject to Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. All dividends and distributions (or the cash equivalent thereof) with respect to a Restricted Stock Award paid to the holder before the risk of forfeiture lapses will also be compensation income to the holder when paid and, subject to Section 162(m) of the Code, deductible as such by the Company.
Upon a subsequent disposition of the shares received pursuant to a Restricted Stock Award, other than a share for which the Section 83(b) election is made as discussed below, the difference between the amount realized on the disposition of the shares and the fair market value of the shares on the date the substantial risk of forfeiture lapsed would be treated as a capital gain or loss.
Notwithstanding the foregoing, the holder of a Restricted Stock Award may elect under Section 83(b) of the Code to be taxed at the time of grant of the Restricted Stock Award (rather than the date on which the substantial risk of forfeiture lapses) based on the fair market value of the shares of common stock on the date of the award, in which case (a) subject to Section 162(m) of the Code, the Company will be entitled to a deduction at the same time and in the same amount, (b) dividends paid to the recipient during the period the forfeiture restrictions apply will be taxable as dividends and will not be deductible by the Company, and (c) there will be no further federal income tax consequences when the risk of forfeiture lapses. Such election must be made not later than 30 days after the grant of the Restricted Stock Award and is irrevocable.
Upon a subsequent disposition of Restricted Stock Award shares for which the Section 83(b) election is made, the difference between the fair market value of the shares on the disposition date and the fair market value of the shares on the date of grant would be treated as a capital gain or loss.
Performance Awards, Phantom Stock Awards and Other Stock or Performance-Based Awards. An individual who has been granted a Performance Award, Phantom Stock Award or Other Stock or Performance-Based Award generally will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. Whether a Performance Award, Phantom Stock Award or Other Stock or Performance-Based Award is paid in cash or shares of common stock, the individual will have taxable compensation and, subject to the application of Section 162(m) of the Code as discussed below, the Company will have a corresponding deduction. The measure of such income and deduction will be the amount of any cash paid and the fair market value of any shares of common stock either at the time the Performance Award, Phantom Stock Award or Other Stock or Performance-Based Award is paid or at the time any restrictions on the shares (including restrictions under Section 16(b) of the Exchange Act) subsequently lapse, depending on the nature, if any, of the restrictions imposed and whether the individual elects to be taxed without regard to any such restrictions. Any dividend equivalents paid with respect to a Performance Award, Phantom Stock Award, or Other Stock or Performance-Based Award prior to the actual issuance of shares under the award will be compensation income to the individual and, subject to the application of Section 162(m) of the Code as discussed below, deductible as such by the Company.
Upon a subsequent disposition of the shares received pursuant to a Performance Award, Phantom Stock Award or Other Stock or Performance-Based Award, the difference between the amount realized on the disposition of the shares and the fair market value of the shares on the vest date would be treated as a capital gain or loss.
Bonus Stock Awards. In general, a participant who receives a Bonus Stock Award will be taxed on the fair market value of the shares of common stock on the date the shares are issued to the individual, less any amount paid by the participant for the shares of stock. The Company will be entitled to a deduction for a corresponding amount. Upon a subsequent disposition of the shares received pursuant to a Bonus Stock Award, the difference between the amount realized on the disposition of the shares and the fair market value of the shares on the award date would be treated as a capital gain or loss.
Section 162(m) of the Code. Section 162(m) of the Code as interpreted by the Internal Revenue Service precludes a public corporation from taking a deduction for annual compensation in excess of $1,000,000 paid to its chief executive officer and any of its three other highest-paid executives, excluding the chief financial officer, who are employed as of the end of the year. However, compensation that qualifies under Section 162(m) of the Code as “performance-based” is specifically exempt from the deduction limit. Based on Section 162(m) of the Code and the regulations issued thereunder, the Company’s ability to deduct compensation expense generated in connection with the exercise of Incentive Stock Options, Non-qualified Stock Options and Stock Appreciation Rights granted by the Committee under the 2011 Plan with an exercise price that is not less than the fair market value of our common stock on the grant date should not be limited by Section 162(m) of the Code. Furthermore,ended December 31, 2018, the Company believes that compensation expense generated in connection with Performance Awards designated byall filing requirements applicable to the Committee as performance-based compensation granted by the Committee under the 2011 Plan should not be limited by Section 162(m) of the Code. The 2011 Plan has been designed to provide flexibility with respect to whether Restricted Stock Awards or Phantom Stock Awards granted by the Committee will qualify as performance-based compensation under Section 162(m) of the Code and, therefore, be exempt from the deduction limit. Assuming no election is made under Section 83(b) of the Code with respect toCompany’s Reporting Persons were met on a Restricted Stock Award, if the lapse of the forfeiture restrictions relating to a Restricted Stock Award or Phantom Stock Award granted by the Committee is based solely upon the satisfaction of the performance goals based on one or more of the business criteria set forth in the 2011 Plan and described above under the section entitled “Performance Awards”, thentimely basis. However, the Company believes that the compensation expense deductiontwo Form 4s required to be filed by Ms. Zichal relating to such an award should not be limited by Section 162(m)sales of shares during the Code if the Restricted Stock Award or Phantom Stock Award becomes vested. However, compensation expense deductions relating to Restricted Stock Awards or Phantom Stock Awards granted by the Committee will be subject to the Section 162(m) deduction limitation if the Restricted Stock Award or Phantom Stock Award becomes vested based upon any other criteria set forth in such award (such as the occurrence of a change of control or vesting based solely upon continued service with the Company). Furthermore, the income generated in connection with all awards granted under the 2011 Plan by the Equity Grant Committee and the Option Grant Committee will not qualify as performance-based compensation, but those committees are not authorized to grant awards to persons whose compensation is subject to Section 162(m) of the Code.
Tax-Qualified Status of the Plan
The 2011 Plan is not qualified under Section 401(a) of the Code.
Section 409A of the Internal Revenue Code
Some awards issued under the 2011 Plan may be considered non-qualified deferred compensation that is subject to special rules under Section 409A of the Code. In such event, the Committee intends to generally design and administer such award and the 2011 Plan to comply with the rules of Section 409A of the Code; however, there is no commitment or guarantee that any federal, state, or local tax treatment will apply or be available to any person who participates in the 2011 Plan.
Inapplicability of ERISA
Based upon current law and published interpretations, the Company does not believe that the 2011 Plan is subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended.
Annual LTIP Benefits
A new plan benefits table for the Annual LTIP and the benefits or amounts that would have been received by or allocated to participants for the last completed fiscal year under the Annual LTIP if the Annual LTIP was then in effect, as described in the SEC proxy rules, areended December 31, 2017 were not provided because all awards made under the Annual LTIP will be made at the Compensation Committee’s discretion, subject to the terms and conditions of the Annual LTIP. Therefore, the benefits and amounts that will be received or allocated under the Annual LTIP are not determinable at this time. Under Mr. Fusco’s employment agreement, for each fiscal year beginning with 2017, Mr. Fusco will be eligible to receive a long-term incentive award with a grant date value of 500% of his annual base salary.timely filed.
OTHER MATTERSSHAREHOLDER PROPOSALS
Management anticipates that the Company’s 20172020 Annual Meeting of Shareholders will be held during May 2017.2020. Any shareholder who wishes to submit a proposal for action to be included in the Proxy Statement and form of proxy relating to the Company’s 20172020 Annual Meeting of Shareholders pursuant to Rule14a-8 of the Exchange Act must submit the proposal to the Company not earlier than November 14, 2019 or later than the close of business on or before December 22, 2016.14, 2019. Any such proposals should be timely received by the Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, Texas 77002. Such proposal must meet all of the requirements of the SEC to be eligible for inclusion in the Company’s 20172020 proxy materials. If a shareholder wishes to submit a proposal outside of the process of Rule14a-8 under the Exchange Act, in order for such proposal to be considered “timely” under our Bylaws, the proposal must be received by the Secretary of the Company at the Company’s Headquarters no earlier than February 2, 2017January 17, 2020 and not later than March 4, 2017.February 16, 2020.
Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access)
DIRECTOR NOMINEES FOR INCLUSION IN NEXT YEAR’S PROXY STATEMENT (PROXY ACCESS)
Our Board recently amended our Bylaws to permit a shareholdershareholders (or a groupgroups of no more than 20 shareholders) who hashave maintained (individually and, in the case of a group, collectively) continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years and has complied with the other requirements set forth in our Bylaws, to submit an aggregate number of director nominees of up to 20% of the number of directors serving on the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) satisfy the requirements set forth in our Bylaws.
When to send such proposals. Notice of director nominees submitted under these bylawBylaw provisions must be received by our Secretary no earlier than 5:00 p.m., Central Time, November 22, 2016,13, 2019 and no later than 5:00 p.m., Central Time, on December 22, 2016.13, 2019.
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OTHER MATTERS
Where to send such proposals. Proposals should be addressed to the Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, TX 77002.
| • | What to include. Notice must include the information required by our |
COMMUNICATIONS WITH THE BOARD
The Board maintains a process for shareholders to communicate with the Board. Shareholders wishing to communicate with the Board should send any communication to the Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, Texas 77002. Any such communication must state the number of shares beneficially owned by the shareholder making the communication. The Corporate Secretary will forward such communication to the full Board or to any individual director or directors to whom the communication is directed, unless the Corporate Secretary determines that the communication does not relate to the business or affairs of the Company or the functioning or constitution of the Board or any of its committees, relates to routine or insignificant matters that do not warrant the attention of the Board, is an advertisement or other commercial solicitation or communication, is frivolous or offensive, or is otherwise not appropriate for delivery to the directors. The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made through the Corporate Secretary and only in accordance with the Company’s policies and procedures and the applicable laws and regulations relating to the disclosure of information.
Householding of Proxy Materials
HOUSEHOLDING OF PROXY MATERIALS
The SEC’s rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement and annual report addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies. Some brokers household proxy materials and annual reports, delivering a single proxy statement and annual report to multiple shareholders sharing an address, although each shareholder will receive a separate proxy card. Once a shareholder has received notice from his or her broker that they will be householding materials, householding will continue until the shareholder is notified otherwise or revokes consent. If at any time a shareholder no longer wishes to participate in householding and would prefer to receive a separate proxy statement and annual report, or if a shareholder is receiving multiple copies of either document and wishes to receive only one, the shareholder should notify his or her broker. If a shareholder would like to receive a separate copy of this Proxy Statement, or Notice of SpecialAnnual Meeting or 2018 Annual Report on Form10-K for the year ended December 31, 2018, he or she should contact the Company by writing to the Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, Texas 77002.77002; (713)375-5000. The Company undertakes to deliver the requested materials promptly upon request.
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AVAILABILITY OF DOCUMENTS
The Company is including with this Proxy Statement a copy of its 2018 Annual Report on Form10-K for the year ended December 31, 2018, which has been filed with the SEC 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 directions to the Meeting to vote in person or for copies of this Proxy Statement and the 2018 Annual Report on Form10-K for the year ended December 31, 2018 (including exhibits thereto) for the Meeting and future shareholders meetings should be directed to the Corporate Secretary, Cheniere Energy, Inc., 700 Milam Street, Suite 1900, Houston, Texas 77002. Paper or email copies of this Proxy Statement and the 2018 Annual Report on Form10-K for the year ended December 31, 2018 (including exhibits thereto) for the Meeting can also be obtained free of charge by callingtoll-free 1-877-375-5001 and asking for the Company’s Investor Relations Department or can be accessed at the Investor Relations section of our website athttp://www.cheniere.com/2017SpecialMeeting.2019AnnualMeeting.Any such requests shallmust be made by January 17, 2017May 3, 2019 to facilitate timely delivery.
By order of the Board of Directors
Sean N. Markowitz
Corporate Secretary
December 20, 2016
CHENIERE ENERGY, INC.
2011 INCENTIVE PLAN
(As amended by Amendment
No. 1, dated February 1, 2013)
Table of ContentsApril 15, 2019
Definition of Cumulative Distributable Cash Flow Per Share for 2018 LTI Awards
Performance Period: January 1, 2018 through December 31, 2020
Definition of Distributable Cash Flow
Cheniere Energy, Inc. (the “Company”) defines Distributable Cash Flow as net income (loss) (prior to noncontrolling interest), adjusted for certainnon-cash items, restructuring and severance payments, litigation settlement payments, subsequent board approved projects thatre-invest otherwise distributable cash flow, cash settled share based compensation (LTIP III), annual bonus payments above or below assumed targets, changes in subsidiary distribution policies, less maintenance capital expenditures.Non-cash items include, but are not limited to, depreciation, depletion and amortization,non-cash compensation expense,paid-in-kind interest expense, gains and losses on disposals of assets, unrealized gains and losses on commodity, FX and interest rate risk management activities,non-cash restructuring expense,non-cash impairment charges, losses/gains on early extinguishment of debt and associated termination of interest rate hedges, change in income tax valuation allowance and deferred income taxes. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). For unconsolidated affiliates, Distributable Cash Flow reflects the Company’s proportionate share of the investee’s distributable cash flow.
On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of the Company’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among the Company’s subsidiaries, the Distributable Cash Flow is calculated by adjusting Distributable Cash Flow (consolidated), as follows:
For subsidiaries with publicly traded equity interests, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, and Distributable Cash Flow attributable to the Company includes distributions (including Management Fees and Tax Sharing Payments) to be received by the parent company.
For consolidated joint ventures or similar entities, where the noncontrolling interest is not publicly traded, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, but Distributable Cash Flow attributable to the Company (including Management Fees and Tax Sharing Payments) is net of distributions to be paid by the subsidiary to the noncontrolling interests.
For Distributable Cash Flow attributable to the Company, as adjusted, certain transaction-related andnon-recurring expenses that are included in net income may be excluded as determined by the Compensation Committee.
Definition of Distributable Cash Flow Per Share
The Company defines Distributable Cash Flow Per Share as Distributable Cash Flow for any given quarter divided by weighted average shares outstanding for that quarter (share count assumption subject to adjustment for variances related to share based compensation).
Definition of Cumulative Distributable Cash Flow Per Share
The Company defines Cumulative Distributable Cash Flow Per Share as the sum of Distributable Cash Flow Per Share for the twelve consecutive quarters ended December 31, 2020.
Definition of Cumulative Distributable Cash Flow Per Share and Total Shareholder Return for
2019 LTI Awards
Performance Period: January 1, 2019 through December 31, 2021
Definition of Distributable Cash Flow
Cheniere Energy, Inc. (the “Company”) defines Distributable Cash Flow as net income (loss) (prior to noncontrolling interest), adjusted for certainnon-cash items, restructuring and severance payments, litigation settlement payments, subsequent board approved projects thatre-invest otherwise distributable cash flow, subsequent board approved capital allocation initiatives related to debt pay down or share buybacks that affect distributable cash flow per share, cash settled share based compensation above or below assumed forecasts, cash settled taxes related to share based compensation above or below assumed forecasts, annual bonus payments above or below assumed targets, changes in subsidiary distribution policies, less maintenance capital expenditures.Non-cash items include, but are not limited to, depreciation, depletion and amortization,non-cash compensation expense,paid-in-kind interest expense, gains and losses on disposals of assets, unrealized gains and losses on commodity, FX and interest rate risk management activities,non-cash restructuring expense,non-cash impairment charges, losses/gains on early extinguishment of debt and associated termination of interest rate hedges, change in income tax valuation allowance and deferred income taxes. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). For unconsolidated affiliates, Distributable Cash Flow reflects the Company’s proportionate share of the investee’s distributable cash flow.
On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of the Company’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among the Company’s subsidiaries, the Distributable Cash Flow is calculated by adjusting Distributable Cash Flow (consolidated), as follows:
For subsidiaries with publicly traded equity interests, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, and Distributable Cash Flow attributable to the Company includes distributions (including Management Fees and Tax Sharing Payments) to be received by the parent company.
For consolidated joint ventures or similar entities, where the noncontrolling interest is not publicly traded, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, but Distributable Cash Flow attributable to the Company (including Management Fees and Tax Sharing Payments) is net of distributions to be paid by the subsidiary to the noncontrolling interests.
For Distributable Cash Flow attributable to the Company, as adjusted, certain transaction-related andnon-recurring expenses that are included in net income may be excluded as determined by the Compensation Committee.
Definition of Distributable Cash Flow Per Share
The Company defines Distributable Cash Flow Per Share as Distributable Cash Flow for any given quarter divided by weighted average shares outstanding for that quarter (share count assumption subject to adjustment for variances related to share based compensation).
Definition of Cumulative Distributable Cash Flow Per Share
The Company defines Cumulative Distributable Cash Flow Per Share as the sum of Distributable Cash Flow Per Share for the twelve consecutive quarters ended December 31, 2021.
Definition of Absolute Total Shareholder Return (ATSR)
The Company defines ATSR as the annualized rate of return that Cheniere Energy, Inc. shareholders receive through changes in share price and assumed reinvestment of dividends paid over the performance period. Dividends per share paid other than in the form of cash shall have a value equal to the amount of such dividends reported by Cheniere Energy, Inc. to its shareholders for purposes of Federal income taxation. For purposes of determining the ATSR, the change in the price of a share will be based upon (x) the average of the closing share prices on each of the 45 trading days preceding the start of the performance period and (y) the average of the closing share prices on each of the 45 trading days preceding the end of the performance period.
Definition and Reconciliation ofNon-GAAP Measure
Consolidated Adjusted EBITDA represents net income (loss) attributable to Cheniere before net income attributable to thenon-controlling interest, interest, taxes, depreciation and amortization, adjusted for certainnon-cash items, othernon-operating income or expense items, and other items not otherwise predictive or indicative of ongoing operating performance, as detailed in the following reconciliation. Consolidated Adjusted EBITDA is not intended to represent cash flows from operations or net income (loss) as defined by U.S. GAAP and is not necessarily comparable to similarly titled measures reported by other companies. We use Consolidated Adjusted EBITDA as a quantitative performance goal in our annual incentive program.
Consolidated Adjusted EBITDA is calculated by taking net income attributable to common stockholders before net income (loss) attributable tonon-controlling interest, interest expense, net of capitalized interest, changes in the fair value and settlement of our interest rate derivatives, taxes, depreciation and amortization, and adjusting for the effects of certainnon-cash items, othernon-operating income or expense items, and other items not otherwise predictive or indicative of ongoing operating performance, including the effects of modification or extinguishment of debt, impairment expense and loss on disposal of assets, changes in the fair value of our commodity and foreign currency exchange (“FX”) derivatives andnon-cash compensation expense. We believe the exclusion of these items enables investors and other users of our financial information to assess our sequential and year-over-year performance and operating trends on a more comparable basis and is consistent with management’s own evaluation of performance.
Non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or in lieu of an analysis of our results as reported under GAAP, and should be evaluated only on a supplementary basis.
The following table reconciles our Consolidated Adjusted EBITDA to U.S. GAAP results for the twelve months ended December 31, 2018 (in millions):
| YEAR ENDED DECEMBER 31, 2018 | ||||
Net income attributable to common stockholders | $ | 471 | ||
Net income attributable tonon-controlling interest | 729 | |||
Income tax provision | 27 | |||
Interest expense, net of capitalized interest | 875 | |||
Loss on modification or extinguishment of debt | 27 | |||
Derivative gain, net | (57 | ) | ||
Other income | (48 | ) | ||
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Income from operations | $ | 2,024 | ||
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Adjustments to reconcile income from operations to Consolidated Adjusted EBITDA: | ||||
Depreciation and amortization expense | 449 | |||
Gain from changes in fair value of commodity and FX derivatives, net | 77 | |||
Totalnon-cash compensation expense | 76 | |||
Impairment expense and loss on disposal of assets | 8 | |||
Legal Settlement Expense | 7 | |||
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Consolidated Adjusted EBITDA | $ | 2,641 | ||
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| C-1 | ||||||||
CHENIERE ENERGY, INC.
2011 INCENTIVE PLAN
(As amended by Amendment
No. 1, dated February 1, 2013)
1.ESTABLISHMENT OF PLAN. Cheniere Energy, Inc. establishes the “Cheniere Energy, Inc. 2011 Incentive Plan” effective as of the Effective Date. Awards granted under the Plan shall be subject to the terms and conditions of the Plan as set forth herein, as it may be amended from time to time.
2.PURPOSES. The purposes of the Plan are (i) to offer selected Employees, including Executive Officers, Consultants and Non-Employee Directors of the Company or its Affiliates an opportunity to participate in the growth and financial success of the Company, (ii) to provide the Company an opportunity to attract and retain the best available personnel for positions of substantial responsibility, (iii) to provide performance-related incentives to certain of such Employees and Consultants to achieve established Performance Goals, and (iv) to promote the growth and success of the Company’s business by aligning the financial interests of Employees, Consultants and Non-Employee Directors with that of the stockholders of the Company. Toward these objectives, this Plan provides for the grant of performance and non- performance-based equity Awards and performance-based Cash Awards.
3.DEFINITIONS. As used herein, unless the context requires otherwise, the following terms have the meanings indicated below.
(a)“Addendum” means an addendum to the Plan approved by the Compensation Committee, as constituted from time to time, of the Board containing terms, conditions and limitations applicable to certain Awards to Employees and other individuals described in the addendum who, in each case, are residents of a country other than the United States to which such addendum relates. An Award to an individual under an Addendum shall be made pursuant to, and subject to the terms and conditions of, the Plan, as modified by the terms of the Addendum.
(b) “Affiliate” means (i) any entity in which the Company, directly or indirectly, owns 10% or more of the combined voting power, as determined by the Committee, (ii) any “parent corporation” of the Company (as defined in section 424(e) of the Code), (iii) any “subsidiary corporation” of any such parent corporation (as defined in section 424(f) of the Code) of the Company and (iv) any trades or businesses, whether or not incorporated which are members of a controlled group or are under common control (as defined in Sections 414(b) or (c) of the Code) with the Company;provided, however, with respect to Awards of Options and Stock Appreciation Rights that are intended to be excluded from the application of Section 409A of the Code, the term affiliate will be applied in a manner to ensure that the Common Stock covered by such Awards would be “service recipient stock” with respect to the Participants to whom the Awards are granted; and provided further, however , with respect to Awards of Options that are intended to be Incentive Stock Options, Affiliate means an entity described in clauses (ii) and (iii) of this Section 3(b) and any other entity as may be permitted from time to time by the Code or by the Internal Revenue Service to be an employer of Employees to whom Incentive Stock Options may be granted.
(c) “Award” means any right granted under the Plan (or under the Plan as modified by an Addendum), including an Option, a Restricted Stock Award, a Stock Appreciation Right, Bonus Stock, a Cash Award, a Performance Award, a Phantom Stock Award, and an Other Stock or Performance-Based Award, whether granted singly or in combination, to a Participant pursuant to the terms, conditions and limitations that the Committees may establish in order to fulfill the objectives of the Plan. An Award may be granted under the Plan pursuant to a written Award agreement between the Company and a Participant, a written Award notice provided to the Participant of the Award, or a written program adopted by the Company or the Committee establishing Awards under the Plan. Notwithstanding any other provision of the Plan relating to Award agreements, an Award of an Option or a Restricted Stock Award and related documents, including the Plan and any prospectus for the Plan, may be delivered to a Participant in electronic format pursuant to such policies and procedures as adopted from time to time by the Company. If an Award or related documents are delivered in an electronic format and the Participant consents to participate in the electronic Award procedures established by the Company with respect to the Plan by using his personal identification number to access the Award documents, such action by the Participant shall constitute the Participant’s electronic signature and acceptance of the terms and conditions of the Award.
(d) “Board” means the Board of Directors of the Company.
(e) “Bonus Stock Award” means an Award grant under Section 9 of the Plan.
(f) “Cash Award” means an Award granted pursuant to Section 13 of the Plan.
(i) in the case of a Director, the commission of an act of fraud or intentional misrepresentation or an act of embezzlement, misappropriation or conversion of assets or opportunities of the Company or any Affiliate;
(ii) in the case of a Participant whose employment with the Company or an Affiliate is subject to the terms of a written employment agreement between such Participant and the Company or Affiliate, which employment agreement includes a definition of “Cause,” the term “Cause” as used in the Plan or any agreement establishing an Award shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and
(iii) in all other cases,
(A) the willful commission by a Participant of a criminal or other act that causes or is likely to cause substantial economic damage to the Company or an Affiliate or substantial injury to the business reputation of the Company or Affiliate; or
(B) the commission by a Participant of an act of fraud in the performance of such Participant’s duties on behalf of the Company or an Affiliate; or
(C) the willful violation by the Participant of the Code of Business Conduct and Ethics Policy; or
(D) the continuing and repeated failure of a Participant to perform the duties of such Participant to the Company or an Affiliate, including by reason of the Participant’s habitual absenteeism (other than such failure resulting from the Participant’s incapacity due to physical or mental illness).
For purposes of the Plan, no act, or failure to act, on the Participant’s part shall be considered “willful” or “intentional” unless done or omitted to be done by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company or an Affiliate, as the case may be. The determination of whether Cause exists with respect to an Executive Officer shall be made by the Board in its sole discretion and with respect to all other Participants, the existence of Cause shall be determined by the Company’s Vice President of Human Resources in his or her sole discretion in consultation with the Company’s General Counsel.
(h) “Change of Control” means the occurrence during the term hereof of any of the following events:
(i) any “person” (as defined in Section 3(a)(9) of the Exchange Act and as modified in Section 13 (d) and 14(d) of the Exchange Act) other than (A) the Company or any of its subsidiaries, (B) any employee benefit plan of the Company or any of its subsidiaries, (C) any Affiliate, (D) a company owned, directly or indirectly, by stockholders of the Company, or (E) an underwriter temporarily holding securities pursuant to an offering of such securities, becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the shares of voting stock of the Company then outstanding;
(ii) the consummation of any merger, organization, business combination or consolidation of the Company or one of its subsidiaries with or into any other company, other than a merger, reorganization, business combination or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities which represent immediately after such merger, reorganization, business combination or consolidation more than 50% of the combined voting power of the voting securities of the Company or the surviving company or the parent of such surviving company;
(iii) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board; or
(iv) the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition if the holders of the voting securities of the Company outstanding immediately prior thereto hold securities immediately thereafter which represent more than 50% of the combined voting power of the voting securities of the acquiror, or parent of the acquirer, of such assets.
(i) “Chief Executive Officer” means the individual serving at any relevant time as the chief executive officer of the Company.
(j) “Code” means the Internal Revenue Code of 1986, as amended, and any successor statute. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any Treasury regulations promulgated under such section.
(k) “Committee” means the Compensation Committee, as constituted from time to time, of the Board that is appointed by the Board to administer the Plan, or if no such committee is appointed (or no such committee shall be in existence at any relevant time), the term “Committee” for purposes of the Plan shall mean the Board; provided, however , that as necessary in each case to satisfy the requirements of Sections 162(m) of the Code and Rule 16b-3 with respect to Awards granted under the Plan, while the
Common Stock is publicly traded, the Committee shall be a committee of the Board consisting solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Notwithstanding the foregoing provisions, (i) the Board may delegate to a committee of one or more members of the Board who are not Outside Directors or Non-Employee Directors (the “Equity Grant Committee”) the authority to grant equity-based awards, including Options and Restricted Stock Awards, subject to the terms of the Plan, including specifically the limitations contained in Section 6 and any additional limitations as may be contained in resolutions adopted by the Board from time to time, to selected Employees and Consultants who are not then (A) Executive Officers, (B) Non- Employee Directors or (C) persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and (ii) the Board or the Compensation Committee of the Board may delegate to one or more Executive Officers of the Company (the “Option Grant Committee”) the authority to grant Options, subject to the terms of the Plan, including specifically the limitations contained in Section 6 and any additional limitations as may be contained in resolutions adopted by the Board or the Compensation Committee from time to time, to Employees (other than Employees who are Executive Officers or persons with respect to whom the Company wishes to comply with Section 162(m) of the Code) and Consultants. When used in the Plan, except as provided otherwise in Section 12, the term “Committees” shall refer to the Committee, the Equity Grant Committee and the Option Grant Committee, each acting within the scope of its authority under the Plan with respect to the matter covered by the particular reference.
(l)“Common Stock” means the common stock of the Company, $.003 par value per share or the common stock that the Company may in the future be authorized to issue.
(m) “Company” means Cheniere Energy, Inc., a Delaware corporation, and any successor corporation.
(n) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Affiliate to render consulting or advisory services to the Company or such Affiliate and who is a “consultant or advisor” within the meaning of Rule 701 promulgated under the Securities Act or Form S-8 promulgated under the Securities Act.
(o) “Continuous Service” means the provision of services to the Company or an Affiliate, or any successor, as an Employee, Director or Consultant which is not interrupted or terminated. Except as otherwise provided in a particular Award agreement, service shall not be considered interrupted or terminated for this purpose in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Affiliate, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or an Affiliate, or any successor, as an Employee, Director or Consultant. An approved leave of absence shall include sick leave, military leave or any other authorized personal leave. For purposes of each Incentive Stock Option, if such leave exceeds ninety (90) days, and re-employment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day that is three (3) months and one (1) day following the expiration of such ninety (90)-day period.
(p) “Covered Employee” means the Chief Executive Officer and each other officer of the Company who is required to be treated as a “covered employee” for purposes of applying Section 162(m) of the Code to Awards, including, if applicable, by reason of formal interpretations issued by the Internal Revenue Service.
(q) “Director” means a member of the Board or the board of directors of an Affiliate.
(r) “Disability” means the “disability” of a person as defined in a then effective long-term disability plan maintained by the Company that covers such person or, if such a plan does not exist at any relevant time, the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. For purposes of determining the time during which an Incentive Stock Option may be exercised under the terms of an Option Agreement, “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. Section 22(e)(3) of the Code provides that an individual is totally and permanently disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.
(s)“Effective Date” means June 16, 2011, the date the Plan was approved by the Company’s stockholders at the Company’s 2011 annual meeting of stockholders.
(t) “Employee” means any person, including an Executive Officer or Director, who is employed by the Company or an Affiliate. The payment of compensation by the Company or an Affiliate to a Director or Consultant solely with respect to such individual rendering services in the capacity of a Director or Consultant, however, shall not be sufficient to constitute “employment” by the Company or that Affiliate.
(u) “Executive Officer” means a person who is an “officer” of the Company or any Affiliate within the meaning of Section 16 of the Exchange Act (whether or not the Company is subject to the requirements of the Exchange Act).
(v) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute. Reference in the Plan to any section of the Exchange Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section.
(w) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock has an established market by virtue of being listed or quoted on any registered stock exchange, the Fair Market Value of a share of Common Stock shall be the closing sales price for such a share of Common Stock (or the closing bid price, if applicable) on such exchange (or, if the Common Stock is listed or traded on more than one registered exchange, on the exchange with the greatest volume of trading in the Common Stock) on the day of determination (or if no such price is reported on that day, on the last market trading day prior to the day of determination), as reported in The Wall Street Journal or such other source as the Committee deems reliable.
(ii) In the absence of any listing or quotation of the Common Stock on any such registered exchange, the Fair Market Value shall be determined in good faith by the Committee.
(x) “Incentive Stock Option” means any Option that satisfies the requirements of Section 422 of the
Code and is granted pursuant to Section 8 of the Plan.
(y) “Non-Employee Director” means a Director of the Company who either (i) is not an Employee or Officer, does not receive compensation (directly or indirectly) from the Company or an Affiliate in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.
(z) “Non-Qualified Stock Option” means an Option granted under 8 of the Plan that is not intended to be an Incentive Stock Option.
(aa) “Option” means an Award granted pursuant to Section 8 of the Plan to purchase a specified number of shares of Common Stock during the Option period for a specified exercise price, whether granted as an Incentive Stock Option or as a Non-Qualified Stock Option.
(ab) “Option Agreement” means the written agreement or notice evidencing the grant of an Option executed by the Company and the Optionee or issued by the Company and accepted by the Optionee, including any amendments thereto. Each Option Agreement shall be subject to the terms and conditions of the Plan. If an Option Agreement or related document is delivered to a Participant by electronic means, and the Participant consents to participate in the electronic Award procedures adopted by the Company by using his personal identification number to access the Award documents, such action by the Participant shall constitute the Participant’s electronic signature and acceptance of the terms and conditions of the Award.
(ac) “Optionee” means a Participant to whom an Option has been granted under the Plan.
(ad) “Other Stock or Performance-Based Award” means an award granted pursuant to Section 14 the Plan that is not otherwise specifically provided for in the Plan, the value of which is based in whole or in part upon the value of a share of Common Stock.
(ae) “Outside Director” means a Director of the Company who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of the Treasury regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” receiving compensation for prior services (other than benefits under a tax qualified pension plan), has not been an officer of the Company or an “affiliated corporation” at any time and is not currently receiving (within the meaning of the regulations promulgated under Section 162(m) of the Code) direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.
(af) “Participant” means any Employee, Non-Employee Director, or Consultant to whom an Award has been granted under the Plan.
(ag) “Performance Award” means an Award granted pursuant to Section 13 of the Plan to a Participant that is subject to the attainment of one or more Performance Goals.
(ah) “Performance-Based Compensation” means “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.
(ai) “Performance Goal“ means a standard established by the Committee based on one or more business criteria described in Section 13 to determine in whole or in part whether a Performance Award shall be earned.
(aj) “Performance Period” shall mean that period established by the Committee at the time any Performance Award is granted or, except in the case of any grant to a Covered Employee, at any time thereafter, during which any Performance Goals specified by the Committee with respect to such Award are to be measured.
(ak)“Phantom Stock Agreement” means the written agreement evidencing a Phantom Stock Award. Each Phantom Stock Agreement shall be subject to the terms and conditions of the Plan.
(al) “Phantom Stock Award” means an Award granted pursuant to Section 11 of the Plan.
(am) “Plan” means this Cheniere Energy, Inc. 2011 Incentive Plan, as set forth herein and as it may be amended from time to time.
(an) “Regulation S-K” means Regulation S-K promulgated under the Securities Act, as it may be amended from time to time, and any successor to Regulation S-K. Reference in the Plan to any item of Regulation S-K shall be deemed to include any amendments or successor provisions to such item.
(ao) “Restricted Period” means the period established by the Committee with respect to an Award during which the Award is subject to forfeiture or is not exercisable by the Participant and with respect to a Restricted Stock Award, the period during which the Forfeiture Restrictions as described in Section 12(a) apply to the Award.
(ap) “Restricted Stock Agreement” means the written agreement evidencing the grant of a Restricted Stock Award executed by the Company and the Participant or issued by the Company and accepted by the Participant, including any amendments thereto. Each Restricted Stock Agreement shall be subject to the terms and conditions of the Plan. If a Restricted Stock Agreement or related document is delivered to a Participant by electronic means, and the Participant consents to participate in the electronic Award procedures adopted by the Company by using his personal identification number to access the Award documents, such action by the Participant shall constitute the Participant’s electronic signature and acceptance of the terms and conditions of the Award.
(aq) “Restricted Stock Award” means an Award granted under Section 12 of the Plan of shares of Common Stock issued to the Participant for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions and other terms and conditions, as are established by the Committee.
(ar) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as it may be amended from time to time, and any successor to Rule 16b-3.
(as) “Section” means a section of the Plan unless otherwise stated or the context otherwise requires.
(at) “Securities Act” means the Securities Act of 1933, as amended, and any successor statute. Reference in the Plan to any section of the Securities Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section.
(au) “Stock Appreciation Rights” means an Award granted under Section 10 of the Plan.
(av) “Stock Appreciation Rights Agreement” means a written agreement with a Participant with respect to an Award of Stock Appreciation Rights.
(aw) “Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) at the time an Option is granted stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
4.INCENTIVE AWARDS AVAILABLE UNDER THE PLAN. Awards granted under this Plan may be (a) Incentive Stock Options, (b) Non-Qualified Stock Options, (c) Restricted Stock Awards; (d) Stock Appreciation Rights; (e) Bonus Stock, (f) Cash Awards; (g) Performance Awards; (h) Phantom Stock Awards; and (i) Other Stock or Performance-Based Awards.
5.SHARES SUBJECT TO PLAN. Subject to adjustment pursuant to Section 15(a) hereof, the aggregate number of shares of Common Stock that may be issued with respect to Awards granted under the Plan shall not exceed 35,000,000 (the “Share Pool Limit”). At all times during the term of the Plan, the Company shall allocate and keep available such number of shares of Common Stock as will be required to satisfy the requirements of outstanding Awards under the Plan. Except as provided in Section 8(i) with respect to certain assumed or substituted options resulting from a merger transaction, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares of Common Stock issued in connection with the exercise or settlement of an Award or used to determine the amount of cash paid in connection with the exercise of Stock Appreciation Rights and the settlement of Phantom Stock Awards. Any shares of Common Stock covered by an Award (or a portion of an Award) that is forfeited or canceled or that expires shall be deemed not to have been issued for purposes of determining the maximum aggregate number of shares of Common Stock which may be issued under the Share Pool Limit and shall remain available for Awards under the Plan. The shares to be delivered under the Plan shall be made available from (a) authorized but unissued shares
of Common Stock, (b) Common Stock held in the treasury of the Company, or (c) previously issued shares of Common Stock reacquired by the Company, including shares purchased on the open market, in each case as the Committee may determine from time to time in its sole discretion.
6.ELIGIBILITY. Awards other than Incentive Stock Options may be granted to Employees, Executive Officers, Directors, and Consultants. Incentive Stock Options may be granted only to Employees. The Committee in its sole discretion shall select the recipients of Awards; provided, however that (i) the Equity Grant Committee may select the recipients of Non-Qualified Stock Options and/or Restricted Stock Awards if (A) such recipients are not members of the Equity Grant Committee, Executive Officers, Non-Employee Directors or persons with respect to which the Company desires to comply with Section 162(m) of the Code, (B) the aggregate number of shares of Common Stock subject to such Options does not exceed 3,000,000 shares in any one calendar year (reduced by the number of shares of common Stock covered by Options granted by the Option Grant Committee for such calendar year) and the aggregate number of shares of Common Stock covered by such Restricted Stock Awards granted in any one calendar year does not exceed 600,000 shares of Common Stock and (C) the aggregate number of shares of Common Stock that may be awarded to any individual under such Options does not exceed 450,000 shares and the aggregate number of shares of Common Stock that may be awarded to any individual under such Restricted Stock Awards does not exceed 150,000 shares and (ii) the Option Grant Committee may select the recipients of Non-Qualified Stock Options (A) if such recipients are Employees (who are not members of the Option Grant Committee, Executive Officers or persons with respect to whom the Company wishes to comply with Section 162(m) of the Code) or Consultants, (B) the aggregate number of shares of Common Stock subject to such Options does not exceed 3,000,000 shares in any calendar year (reduced by the number of shares of Common Stock covered by Options granted by the Equity Grant Committee for such calendar year) and (C) the aggregate number of shares of Common Stock that may be awarded to any individual under such Options does not exceed 450,000 shares. A Participant may be granted more than one Award under the Plan, and Awards may be granted at any time or times during the term of the Plan. The grant of an Award to an Employee, Executive Officer, Director or Consultant shall not be deemed either to entitle that individual to, or to disqualify that individual from, participation in any other grant of Awards under the Plan.
7.LIMITATION ON INDIVIDUAL AWARDS. Except for Cash Awards described in Section 13, no individual shall be granted, in any calendar year, Awards under the Plan covering or relating to an aggregate of more than 6,000,000 shares of Common Stock. No individual shall receive payment for Cash Awards during any calendar year aggregating in excess of $25,000,000. The preceding shall be applied in a manner which will permit compensation generated under the Plan, where appropriate, to constitute Performance-Based Compensation.
(a)Terms and Conditions of Options. Except with respect to grants of Non-Qualified Stock Options by the Equity Grant Committee and/or the Option Grant Committee, the Committee shall determine whether an Option shall be granted as an Incentive Stock Option or a Non-Qualified Stock Option. The Committees shall determine the provisions, terms and conditions of each Option including, but not limited to, the vesting schedule, the number of shares of Common Stock subject to the Option, the exercise price of the Option, the period during which the Option may be exercised, repurchase provisions, forfeiture provisions, methods of payment, and all other terms and conditions of the Option, subject to the following:
(i)Form of Option Grant. Each Option granted under the Plan shall be evidenced by a written Option Agreement in such form (which need not be the same for each Optionee) as the Committees from time to time approve, but which is not inconsistent with the Plan, including any provisions that may be necessary, as determined by the Committee, to assure that any Option that is intended to be an Incentive Stock Option will comply with Section 422 of the Code.
(ii)Date of Grant. The date of grant of an Option shall be the date on which the Committees make the determination to grant such Option unless a later date is specified by the Committees at the time of such determination. The Option Agreement evidencing the Option shall be delivered to the Optionee, with a copy of the Plan and other relevant Option documents, within a reasonable time after the date of grant.
(iii)Exercise Price. The exercise price of an Option shall be not less than the Fair Market Value of the shares of Common Stock on the date of grant of the Option. In addition, the exercise price of any Incentive Stock Option granted to a Ten Percent Stockholder shall not be less than 110% of the Fair Market Value of the shares of Common Stock on the date of grant of the Option. The exercise price for each Option granted under this Section 8 shall be subject to adjustment pursuant to Section 15(a).
(iv)Exercise Period. Options shall be exercisable within the time or times or upon the event or events determined by the Committees and set forth in the Option Agreement; provided, however, that no Option shall be exercisable later than the expiration of ten (10) years from the date of grant of the Option, and provided further, that no Incentive Stock Option granted to a Ten Percent Stockholder shall be exercisable after the expiration of five (5) years from the date of grant of the Option.
(v)Limitations on Incentive Stock Options. The aggregate Fair Market Value (determined as of the date of grant of an Option) of Common Stock which any Employee is first eligible to purchase during any calendar year by exercise of Incentive Stock Options granted under the Plan and by exercise of incentive stock options (within the meaning of Section 422 of the Code) granted under any other incentive stock option plan of the Company or an Affiliate shall not exceed $100,000. If the Fair Market Value of stock with respect to which all incentive stock options described in the preceding sentence held by any one Optionee are exercisable for the first time by such Optionee during any calendar year exceeds $100,000, the Options (that are intended to be Incentive Stock Options on the date of grant thereof) for the first $100,000 worth of shares of Common Stock to become exercisable in such year shall be deemed to constitute incentive stock options within the meaning of Section 422 of the Code and the Options (that are intended to be Incentive Stock Options on the date of grant thereof) for the shares of Common Stock in the amount in excess of $100,000 that become exercisable in that calendar year shall be treated as Non-Qualified Stock Options. If the Code is amended after the Effective Date to provide for a different limit than the one described in this Section 8(a)(v), such different limit shall be incorporated herein and shall apply to any Options granted after the effective date of such amendment.
(vi)Acceleration of Vesting. Any Option granted hereunder which is not otherwise vested shall vest (unless specifically provided to the contrary by the Committee in the document or instrument evidencing an Option granted hereunder) upon (A) the involuntary termination of an Employee or Consultant or removal of a Non-Employee Director without Cause; (B) a Change of Control, but only as provided for in Section 15(c); or (C) death or Disability of the Participant.
(b)Transferability of Options. Options granted under the Plan, and any interest therein, shall not be transferable or assignable by the Optionee, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee; provided, however , that the Optionee may designate persons who or which may exercise his Options following his death. Notwithstanding the preceding sentence, Non-Qualified Stock Options may be transferred to such family members, family member trusts, family limited partnerships and other family member entities as the Committee, in its sole discretion, may provide for in the Optionee’s Option Agreement and approve prior to any such transfer. No such transfer will be approved by the Committee if the Common Stock issuable under such transferred Option would not be eligible to be registered on Form S-8 promulgated under the Securities Act.
(c)Manner of Exercise. Options may be exercised in such manner as approved by the Company from time to time, including by delivery to the Company of a written exercise notice or by an exercise election made by a Participant through an electronic procedure authorized by the Company (which method or procedure need not be the same for each Optionee), stating the number of shares of Common Stock being purchased, the method of payment, and such other matters as may be deemed appropriate by the Company in connection with the issuance of shares of Common Stock upon exercise of the Option, together with payment in full of the exercise price for the number of shares of Common Stock being purchased and satisfaction of the tax withholding provisions described in Section 17.
(d)Payment of Exercise Price. Payment of the aggregate exercise price for the shares of Common Stock to be purchased upon exercise of an Option may be made in cash (by check) or, if elected by the Optionee, in any of the following methods: (i) if a public market for the Common Stock exists, upon the Optionee’s written request, the Company may deliver certificates for the shares of Common Stock for which the Option is being exercised to a broker for sale on behalf of the Optionee, provided that the Optionee has irrevocably instructed such broker to remit from the proceeds of such sale directly to the Company on the Optionee’s behalf the full amount of the exercise price plus any taxes the Company is required to withhold (ii) by surrender to the Company for cancellation of shares of Common Stock owned by the Optionee having an aggregate Fair Market Value on the date of exercise equal to (or, to avoid the cancellation of fractional shares of Common Stock, less than) the aggregate exercise price of the shares of Common Stock being purchased upon such exercise; provided, that such surrendered shares are not subject to any pledge or other security interest and have or meet such other requirements, if any, as the Committees may determine necessary in order to avoid an accounting earnings charge in respect of the Option being exercised; (iii) by a “net exercise” method whereby the Company withholds from the delivery of shares of Common Stock subject to the Option (or the portion thereof that is being exercised) that number of whole shares having an aggregate Fair Market Value on the date of exercise equal to (or, to avoid the issuance of fractional shares of Common Stock, less than) the aggregate exercise price of the shares of Common Stock being purchased upon such exercise; or (iv) by any combination of the foregoing, including a cash payment. No shares of Common Stock may be issued until full payment of the purchase price thereof has been made.
(e)Exercise of Option Following Termination of Continuous Service.
(i) Subject to the other provisions of this Section 8(e), (A) an Optionee may exercise an Incentive Stock Option for a period of three (3) months following the date the Optionee’s Continuous Service terminates and (B) an Optionee may exercise a Non-Qualified Stock Option for a period of six (6) months following the date the Optionee’s Continuous Service terminates, but in each case, only to the extent the Optionee was otherwise entitled to exercise the Option on the date the Optionee’s Continuous Service terminates).
(ii) If the Optionee’s Continuous Service is terminated by the Company or an Affiliate for Cause, the Optionee’s right to exercise the Option shall immediately terminate.
(iii) If the Optionee’s Continuous Service terminates as a result of the Optionee’s Disability, the Optionee may exercise the Option for a period of one (1) year following the date the Optionee’s Continuous Service terminates.
(iv) In the event of the termination of the Optionee’s Continuous Service as a result of the Optionee’s death, the Optionee’s estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the Option for a period of one (1) year following the Optionee’s date of death.
(v) An Option shall terminate to the extent not exercised on the last day of the specified post- termination exercise periods set forth above or the last day of the original term of the Option, whichever occurs first.
(vi) The Committees shall have discretion to determine whether the Continuous Service of an Optionee has terminated, the effective date on which such Continuous Service terminates and whether the Optionee’s Continuous Service terminated as a result of the Disability of the Optionee. The determination of whether a Participant’s Continuous Service was terminated for Cause shall be determined as provided for in Section 3(g).
(i) The Committees may specify a reasonable minimum number of shares of Common Stock or a percentage of the shares subject to an Option that may be purchased on any exercise of an Option; provided, that such minimum number will not prevent Optionee from exercising the full number of shares of Common Stock as to which the Option is then exercisable.
(ii) The obligation of the Company to issue any shares of Common Stock pursuant to the exercise of any Option shall be subject to the condition that such exercise and the issuance and delivery of such shares pursuant thereto comply with the Securities Act, all applicable state securities laws and the requirements of any stock exchange or market-quotation system upon which the shares of Common Stock may then be listed or quoted, as in effect on the date of exercise. The Company shall be under no obligation to register the shares of Common Stock with the Securities and Exchange Commission or to effect compliance with the registration, qualification or listing requirements of any state securities laws or stock exchange or market-quotation system, and the Company shall have no liability for any inability or failure to do so.
(iii) As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such shares of Common Stock if, in the opinion of counsel for the Company, such a representation is required by any securities or other applicable laws.
(g)Modification, Extension And Renewal of Options. The Committee shall have the power to modify, cancel, extend (subject to the provisions of Section 8(a)(iv) hereof) or renew outstanding Options and to authorize the grant of new Options and/or Restricted Stock Awards in substitution therefor;provided, however, that (i) except as permitted by Section 15(a) of the Plan, any such action may not reprice any outstanding Option to reduce the exercise price thereof, directly or indirectly, without the approval of the stockholders of the Company and, (ii) without the written consent of any affected Optionee, (A) impair any rights under any Option previously granted to such Optionee, (B) cause the Option or the Plan to become subject to Section 409A of the Code, or (C) cause any Option to lose its status as Performance-Based Compensation. Notwithstanding anything to the contrary contained in this Section 8(g), no Option may be replaced with another Award that would have a higher intrinsic value than the value of the Option at the time of its replacement. Any outstanding Incentive Stock Option that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code.
(h)Privileges of Stock Ownership. No Optionee will have any of the rights of a stockholder with respect to any shares of Common Stock subject to an Option until such Option is properly exercised and the purchased shares are issued and delivered to the Optionee, as evidenced by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to such date of issuance and delivery, except as provided in the Plan.
(i)Acquisitions and Other Transactions. The Committee may, from time to time, assume outstanding options granted by another entity, whether in connection with an acquisition of such other entity or otherwise, by either (i) granting an Option under the Plan in replacement of or in substitution for the option assumed by the Company, or (ii) treating the assumed option as if it had been granted under the Plan if the terms of such assumed option could be applied to an Option granted under the Plan. Such assumption shall be permissible if the holder of the assumed option would have been eligible to be granted an Option hereunder if the other entity had applied the rules of the Plan to such grant. The Committee also may grant Options under the Plan in settlement of or substitution for outstanding options or obligations to grant future options in connection with the Company or an Affiliate acquiring another entity, an interest in another entity or an additional interest in an Affiliate, whether by merger, stock
purchase, asset purchase or other form of transaction. Shares of Common Stock subject to an assumed or substituted option resulting from a merger transaction involving the Company or an Affiliate will not reduce the Share Pool Limit described in Section 5. Notwithstanding the foregoing provisions of this Section 8, in the case of an Option issued or assumed pursuant to this Section 8(i), the exercise price for the Option shall be determined in accordance with the principles of Sections 424(a) and 409A of the Code.
(a)Bonus Stock Awards. The Committee may, from time to time and subject to the provisions of the Plan, grant a Bonus Stock Award to Employees, Consultants or Non-Employee Directors. A Bonus Stock Award is a grant of shares of Common Stock for such consideration, if any, as established by the Committee and that are not subject to forfeiture provisions.
(b)Rights as Shareholder. Shares of Common Stock awarded pursuant to a Bonus Stock Award shall be represented by a stock certificate registered in the name of and delivered to, or held in a book entry account by the Company’s transfer agent established on behalf of, the Participant to whom such Bonus Stock Award is granted.
(c)Payment for Bonus Stock. The Committee shall determine the amount and form of any payment for shares of Common Stock received by a Participant pursuant to a Bonus Stock Award. In the absence of such a determination, the Participant shall not be required to make any payment for shares of Common Stock received pursuant to a Bonus Stock Award, except to the extent otherwise required by law.
10.STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation Rights to Employees, Consultants or Non-Employee Directors. The terms and conditions of Stock Appreciation Rights, including the vesting and exercise provisions, shall be set forth in a Stock Appreciation Rights Agreement (which need not be the same for each Participant) in such form as the Committee approves, but which is not inconsistent with the Plan. A Stock Appreciation Right may be granted (i) if unrelated to an Option, at any time or (ii) if related to an Option, either at the time of grant or at any time thereafter during the term of the Option. The exercise price of any Stock Appreciation Right shall be not less than the Fair Market Value of the Common Stock on the grant date of the Award.
(a)Payment of Stock Appreciation Rights. A Stock Appreciation Right is a right to receive, upon exercise of the right, shares of Common Stock or their cash equivalent in an amount equal to the increase, if any, in Fair Market Value of the Common Stock between the grant and exercise dates. The Committee may specifically designate in a Stock Appreciation Rights Agreement that the Award will be settled (i) only in cash, (ii) only in shares of Common Stock or (iii) in such combination of such forms and, if not so provided in the Stock Appreciation Rights Agreement, the Award will be settled in shares of Common Stock unless the Committee determines, at the time of exercise of the Award, that the Award will be settled in cash or a combination of shares of Common Stock and cash.
(b)Tandem Rights. Stock Appreciation Rights may be granted in connection with the grant of an Option, in which case (i) the Stock Appreciation Rights shall be exercisable at such time or times and only to the extent that the related Option is exercisable, (ii) exercise of Stock Appreciation Rights will result in the surrender of the right to purchase the shares under the Option as to which the Stock Appreciation Rights were exercised and (iii) the Stock Appreciation Rights will not be transferable (other than by will or the laws of descent and distribution) except to the extent the Related Option is transferable. Upon the exercise of an Option granted in connection with Stock Appreciation Rights, the Stock Appreciation Rights shall be cancelled to the extent of the number of shares of Common Stock as to which the Option is exercised or surrendered.
(c)Stock Appreciation Rights Unrelated to an Option. Stock Appreciation Rights unrelated to Options shall contain such terms and conditions as to exercisability, vesting and duration as the Committee shall determine, but in no event shall they have a term greater than ten (10) years. Each such Stock Appreciation Right that is unrelated to an Option may be exercised by the Participant for a period of six (6) months following the date the Participant’s Continuous Service terminates, but only to the extent the Participant was otherwise entitled to exercise the Stock Appreciation Right on the date the Participant’s Continuous Service terminates (and in no event later than the expiration date of the Award);provided, however , that if the Participant’s Continuous Service terminates for Cause, the Optionee’s right to exercise the Stock Appreciation Right shall immediately terminate.
(d)Date of Grant. The date of grant of an Award of Stock Appreciation Rights shall be the date on which the Committee makes the determination to grant such Award unless a later date is specified by the Committee at the time of such determination.
11.PHANTOM STOCK AWARDS. The Committee may, from time to time and subject to the terms of the Plan, grant Phantom Stock Awards to Employees, Consultants and Non-Employee Directors. Each Phantom Stock Award Agreement shall be in such form and contain such terms and conditions (which need not be the same for each Participant who receives a Phantom Stock Award) as the Committee shall deem appropriate, but such terms shall take into account the provisions of Section 409A of the Code applicable to the Award. The Award date of a Phantom Stock Award shall be the date on which the Committee makes the determination to grant the Award unless a later date is specified by the Committee at the time of such determination.
(a)Payment of Phantom Stock Awards. A Phantom Stock Award is a right to receive a specified number of shares of Common Stock or cash equal to the Fair Market Value of a specified number of shares of Common Stock issued or paid at the end of a Restricted Period or the last day of a specified deferral period.
(i)Award and Restrictions. Satisfaction of a Phantom Stock Award shall occur upon expiration of the deferral period or a Restricted Period specified for such Phantom Stock Award by the Committee (which may include a risk of forfeiture), if any, as the Committee may impose. Such restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, installments or otherwise, as the Committee may determine.
(ii)Award Period; Forfeiture. The Committee shall establish, at the time of grant of each Phantom Stock Award, a period over which (or the conditions with respect to which) the Award shall vest with respect to the Participant and the time at which the Award will be settled and paid. Except as otherwise determined by the Committee or as may be set forth in any Phantom Stock Award Agreement, employment or other agreement pertaining to a Phantom Stock Award, upon termination of the Participant’s Continuous Service during the applicable deferral period or Restricted Period (including any applicable Performance Period) or portion thereof to which forfeiture conditions apply, all Phantom Stock Awards that are at that time subject to deferral of a Restricted Period shall be forfeited; provided that the Committee, subject to the provisions and limitations contained in Section 13(c) relating to Performance Awards, may provide at the time of grant of a Phantom Stock Award that restrictions or forfeiture conditions relating to Phantom Stock Awards shall be waived in whole or in part in the event of terminations of Continuous Service resulting from specified causes.
(iii)Performance Goals. To the extent the Committee determines that any Phantom Stock Award granted pursuant to this Section 11 is intended to constitute Performance-Based Compensation, the grant and settlement of the Award shall be subject to the achievement of Performance Goals determined and applied in a manner consistent with the provisions of Section 13 and the other relevant provisions of Section 13.
12.RESTRICTED STOCK AWARDS. The Committee and the Equity Grant Committee may, from time to time and subject to the terms of the Plan, grant Restricted Stock Awards to Employees, Consultants and Non-Employee Directors. Each Restricted Stock Agreement shall be in such form and shall contain such terms and conditions as the Committee, or if applicable, the Equity Grant Committee, shall deem appropriate. The terms and conditions of such Restricted Stock Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Agreements need not be identical, but each such Restricted Stock Agreement shall be subject to the terms and conditions of this Section 12. Solely for purposes of this Section 12, the term “Committees” means the Committee and the Equity Grant Committee, each acting within the scope of its authority under the Plan with respect to Restricted Stock Awards. The Award date of a Restricted Stock Award shall be the date on which the Committees make the determination to grant the Award unless a later date is specified by the Committees at the time of such determination.
(a)Forfeiture Restrictions. Shares of Common Stock that are the subject of a Restricted Stock Award shall be subject to restrictions on disposition by the Participant and to an obligation of the Participant to forfeit and surrender the shares to the Company under certain circumstances (the “Forfeiture Restrictions”). The Forfeiture Restrictions and the Restricted Period shall be determined by the Committees in their sole discretion, and the Committees may provide that the Forfeiture Restrictions and the Restricted Period shall lapse on the passage of time, the attainment of one or more Performance Goals, established by the Committees or the occurrence of such other event or events determined to be appropriate by the Committees. The Forfeiture Restrictions applicable to a particular Restricted Stock Award (which may differ from any other such Restricted Stock Award) shall be stated in the Restricted Stock Agreement and vesting of such Restricted Stock Award shall occur upon the lapse of the Forfeiture Restrictions applicable to such Restricted Stock Award.
(b)Rights as Stockholder. Shares of Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Participant of such Restricted Stock Award or by a book entry account with the Company’s transfer agent. The Participant shall have the right to receive dividends with respect to the shares of Common Stock subject to a Restricted Stock Award, to vote the shares of Common Stock subject thereto and to enjoy all other stockholder rights with respect to the shares of Common Stock subject thereto, except that, unless provided otherwise in the Restricted Stock Agreement, (i) the Participant shall not be entitled to delivery of the stock certificates evidencing the shares of Common Stock or release of transfer restrictions on shares of Common Stock held in a book entry account with the Company’s transfer agent until the Forfeiture Restrictions have expired, (ii) the Company or an escrow agent shall retain custody of the stock certificates evidencing the shares of Common Stock (or such shares shall be held in a book entry account with the Company’s transfer agent) until the Forfeiture Restrictions expire and (iii) the Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the shares of Common Stock until the Forfeiture Restrictions expire.
(c)Release of Common Stock. One or more stock certificates representing shares of Common Stock, free of Forfeiture Restrictions, shall be delivered to the Participant (or the transfer restrictions on shares of Common Stock held in a book entry account for the
Participant will be released) promptly after, and only after, the Forfeiture Restrictions expire and Participant has satisfied all applicable federal, state and local income and employment tax withholding requirements. The Participant, by his acceptance of the Restricted Stock Award, shall irrevocably grant to the Company a power of attorney to transfer any shares so forfeited to the Company and agrees to execute any documents requested by the Company in connection with such forfeiture and transfer, and such provisions regarding transfers of forfeited shares of Common Stock shall be specifically performable by the Company in a court of equity or law.
(d)Payment for Restricted Stock. The Committees shall determine the amount and form of any payment for shares of Common Stock received pursuant to a Restricted Stock Award; provided, that in the absence of such a determination, the Participant shall not be required to make any payment for shares of Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by law.
(e)Forfeiture of Restricted Stock. Unless otherwise provided in a Restricted Stock Agreement, on termination of the Participant’s Continuous Service during the Restricted Period, the shares of Common Stock which are still subject to the Restricted Stock Award shall be forfeited by the Participant. Upon any forfeiture, all rights of the Participant with respect to the forfeited shares of the Common Stock subject to the Restricted Stock Award shall cease and terminate, without any further obligation on the part of the Company. Notwithstanding the foregoing (but subject to the provisions and limitations contained in Sections 13(c) and 13(d) relating to Performance Awards), unless the Award specifically provides otherwise, all Restricted Stock not otherwise vested shall vest upon (i) the involuntary termination by the Company or an Affiliate of an Employee or Consultant or the removal of a Non-Employee Director without Cause; (ii) a Change of Control, but only as provided for in 15(c); or (iii) death or Disability of the Participant.
(f)Waiver of Forfeiture Restrictions; Committee’s Discretion. With respect to a Restricted Stock Award that has been granted to a Covered Employee where such Award has been designed to meet the exception for Performance-Based Compensation, the Committee may not waive the Forfeiture Restrictions applicable to such Restricted Stock Award.
13.CASH AWARDS AND PERFORMANCE AWARDS.
(a)Cash Awards. In addition to granting Options, Stock Appreciation Rights, Bonus Stock, Phantom Stock Awards, Restricted Stock Awards, and Other Stock or Performance-Based Awards, the Committee shall, subject to the limitations of the Plan, have authority to grant Cash Awards. Each Cash Award shall be subject to such terms and conditions, restrictions and contingencies as the Committee shall determine. Restrictions and contingencies limiting the right to receive a cash payment pursuant to a Cash Award shall be based upon the achievement of single or multiple Performance Goals over a Performance Period established by the Committee. The determinations made by the Committee pursuant to this Section 13(a) shall be specified in the applicable Award agreement or other document or documents established by the Committee pursuant to which the Cash Award is granted.
(b)Designation as a Performance Award. The Committee shall have the right to designate any Award of Options, Stock Appreciation Rights, Phantom Stock Awards, Restricted Stock Awards, and Other Stock or Performance- Based Awards as a Performance Award. All Cash Awards shall be designated as Performance Awards. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to increase the amounts payable under any Award subject to performance conditions except as limited under Section 13(c) in the case of a Performance Award granted to a Covered Employee. The grant and/or settlement of a Performance Award shall be subject to the terms and conditions set forth in this Section 13. The Committee may also grant performance-based Awards pursuant to Section 14 that are not intended to satisfy the provisions of this Section 13 to an eligible individual who is not at the time a Covered Employee and is not expected to be a Covered Employee at the time the compensation under the Award is to be paid.
(c)Performance Goals. The grant or vesting of a Performance Award shall be subject to the achievement of Performance Goals over a Performance Period established by the Committee based upon one or more of the business criteria described in Section 13(c)(ii) that apply to the Participant, one or more business units, divisions or subsidiaries of the Company or the applicable sector of the Company, one or more regions or product lines of the Company’s business, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies.
(i)General. The Performance Goals for Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee. In the case of any Award granted to a Covered Employee, Performance Goals shall be designed to be objective and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the level or levels of performance targeted by the Committee are such that the achievement of Performance Goals is “substantially uncertain” at the time of grant. The Committee may determine that such Performance Awards shall be granted and/or settled upon achievement of any one Performance Goal or that two or more of the Performance Goals must be achieved as a condition to the grant and/or settlement of such Performance Awards. Performance Goals may differ among Performance Awards granted to any one Participant or for Performance Awards granted to different Participants.
(ii)Business Criteria. One or more of the following business criteria shall be used by the Committee in establishing performance goals for Performance Awards granted to a Participant: (A) earnings per share; (B) revenue (including increased revenues); (C) profit measures (including gross profit, operating profit, economic profit, net profit before taxes and adjusted pre-tax profit); (D) cash flow measures (including cash flow return on capital, cash flow return on tangible capital, net cash flow and net cash flow before financing activities); (E) return measures (including return on equity, return on assets, return on capital, risk-adjusted return on capital, return on investors’ capital and return on average equity); (F) economic value added; (G) gross margin; (H) net income measures (including income after capital costs and income before or after taxes); (I) earnings; (J) pretax earnings; (K) earnings before interest, taxes, depreciation and amortization (“EBITDA”); (L) earnings before taxes and depreciation (“EBTD”); (M) earnings before interest and taxes (“EBIT”); (N) pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items; (O) operating measures (including operating income, funds from operations, cash from operations, after-tax operating income; sales volumes, production volumes and production efficiency); (P) stock price measures (including growth measures and total stockholder return); (Q) debt reduction; (R) price per share of Common Stock; (S) market share; (T) earnings per share or adjusted earnings per share (actual or growth in); (U) economic value added (or an equivalent metric); (V) market value added; (W) debt to equity ratio; (X) expense measures (including overhead cost and general and administrative expense); (Y) changes in working capital; (Z) margins; (AA) stockholder value; (BB) proceeds from dispositions; (CC) total market value; (DD) customer satisfaction or growth; (EE) contracted LNG quantity and (FF) implementation, completion or attainment of measurable objectives with respect to financing or construction of entire projects or stages of projects. Any of the above goals determined on the absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies.
(iii)Performance Period; Timing for Establishing Performance Goals. Achievement of performance goals in respect of Performance Awards may be measured based on performance over a Performance Period, as specified by the Committee, or may be determined based on whether or not the performance goals are satisfied at any time prior to the expiration of a Performance Period. Performance Goals in the case of any Award granted to a Participant shall be established not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted for Performance-Based Compensation. Notwithstanding the foregoing provisions, if the Committee intends for a Performance Award to be granted and administered in a manner designed to preserve the deductibility of the compensation resulting from such Award in accordance with Section 162(m) of the Code, then the Performance Goals for such particular Performance Award relative to the particular period of service to which the Performance Goals relates shall be established by the Committee in writing (i) no later than 90 days after the beginning of such period and (ii) prior to the completion of 25% of such period.
(iv)Settlement of Performance Awards; Compensation Contingent Upon Attainment of Performance Goal. In the case of a performance goal measured over a Performance Period, at or after the end of the Performance Period, the Committee shall determine the amount, if any, of Performance Awards payable to each Participant based upon achievement of the business criteria over a Performance Period. In the case of a performance goal satisfied based upon whether or not certain specified business criteria are achieved at any time during a Performance Period, at or following the satisfaction of the applicable business criteria (even if prior to the expiration of the applicable Performance Period), the Committee shall determine the amount, if any, of Performance Awards payable to each Participant upon the achievement of the applicable business criteria. The Committee may not exercise discretion to increase any such amount payable in respect of a Performance Award designed to comply with Section 162(m) of the Code. The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of Continuous Service by the Participant prior to the end of a Performance Period or settlement of Performance Awards. To the extent a Performance Award is intended to constitute Performance-Based Compensation, compensation payable under the Award must be contingent on attaining the applicable Performance Goals; provided; however, that such an Award may provide that the compensation will be paid on death, Disability or a Change of Control, although compensation actually paid on account of those events prior to the attainment of the applicable Performance Goals will not satisfy the Performance-Based Compensation requirements.
(v)Written Determinations. The Committee shall have the authority to determine whether the Performance Goals and other terms and conditions of the Award satisfied all determinations by the Committee as to the establishment of Performance Goals, the amount of any Performance Award, and the achievement of Performance Goals relating to Performance Awards shall be made in writing in the case of any Award granted to a Participant. The Committee may not delegate any responsibility relating to such Performance Awards.
(d)Status of Performance Awards under Section 162(m) of the Code. It is the intent of the Company that Performance Awards granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Section 162(m) of the Code shall, if so designated by the Committee, constitute Performance-Based Compensation. Accordingly,
the terms of this Section 13 shall be interpreted in a manner consistent with Section 162(m) of the Code. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of a Performance Award, who is likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan as in effect on the date of adoption or any agreements relating to Performance Awards that are designated as intended to comply with Section 162(m) of the Code does not comply or is inconsistent with the requirements of Section 162(m) of the Code, such provision shall be construed or, to the extent permitted under the Code, deemed amended to the extent necessary to conform to such requirements.
(e)Waiver of Performance Goals. The Committee shall have no discretion to modify or waive the Performance Goals or conditions to the grant or vesting of a Performance Award unless such Award is not intended to qualify as qualified Performance-Based Compensation and the relevant Award Agreement provides for such discretion.
14.OTHER STOCK OR PERFORMANCE-BASED AWARDS.
The Committee is hereby authorized to grant to Employees, Consultants and Non-Employee Directors, Other Stock or Performance-Based Awards, which shall consist of a right that (i) is not an Award described in any other Section of the Plan and (ii) is denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock (including, without limitation, securities convertible into shares of Common Stock) as are deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan, the Committee shall determine the terms and conditions of any such Other Stock or Performance-Based Award. The term of an Award granted under this Section shall in no event exceed a period of ten (10) years (or if the Award is intended to satisfy the provisions of Section 13, such shorter period provided for in Section 13). If the Committee intends that the compensation payable under any such Award be treated as Performance-Based Compensation, the Award will be subject to the provisions of Section 13.
15.ADJUSTMENT UPON CHANGES IN CAPITALIZATION AND CORPORATE EVENTS.
(a)Capital Adjustments. The number of shares of Common Stock (i) covered by each outstanding Award granted under the Plan, the exercise or purchase price of such outstanding Award, and any other terms of the Award that the Committee determines requires adjustment and (ii) available for issuance under Sections 5 and 7 shall be proportionately adjusted or an equitable substitution shall be made with respect to such shares to reflect, as determined by the Committee, any increase or decrease in the number of shares of Common Stock resulting from a stock dividend, stock split, reverse stock split, extraordinary cash dividend resulting from a nonrecurring event that is not a payment of normal corporate earnings, combination, reclassification or similar change in the capital structure of the Company without receipt of consideration, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws or other applicable laws;provided, however , that a fractional share will not be issued upon exercise of any Award, and either (i) the value of any fraction of a share of Common Stock that would have resulted will be cashed out at Fair Market Value or (ii) the number of shares of Common Stock issuable under the Award will be rounded down to the nearest whole number, as determined by the Committee. Except as the Committee determines, no issuance by the Company of shares of capital stock of any class, or securities convertible into shares of capital stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award. Notwithstanding the foregoing provisions of this Section 15, no adjustment may be made by the Committee with respect to an outstanding Award that would cause such Award and/or the Plan to become subject to Section 409A of the Code or that would cause an Award that is intended to be Performance-Based Compensation to fail to satisfy the requirements of Section 162(m) of the Code for such form of compensation.
(b)Dissolution or Liquidation. The Committee shall notify the Participant at least twenty (20) days prior to any proposed dissolution or liquidation of the Company. Unless provided otherwise in an individual Award, to the extent that an Award has not been previously exercised or settled, or the Restricted Period has not lapsed, any such Award other than a Restricted Stock Award shall expire and any such Award that is a Restricted Stock Award shall be forfeited and the shares of Common Stock subject to such Restricted Stock Award shall be returned to the Company, in each case, immediately prior to consummation of such dissolution or liquidation, and such Award shall terminate immediately prior to consummation of such dissolution or liquidation. A “dissolution or liquidation of the Company” shall not be deemed to include, or to be occasioned by, any merger or consolidation of the Company with any other corporation or other entity or any sale of all or substantially all of the assets of the Company (unless that sale is effected as part of a plan of liquidation of the Company in which the Company’s business and affairs are wound up and the corporate existence of the Company is terminated).
(c)Change of Control. Unless specifically provided otherwise with respect to Change of Control events in an individual Option Agreement, Stock Appreciation Rights Stock Agreement or in a then-effective written employment agreement between the Participant and the Company, if, during the effectiveness of the Plan, a Change of Control occurs, each Option and Stock Appreciation Right which is at the time outstanding under the Plan shall (i) automatically become fully vested and exercisable,
immediately prior to the specified effective date of such Change of Control, for all of the shares of Common Stock at the time represented by such Option or Stock Appreciation Right and (ii) expire twenty (20) days after the Committee gives written notice to the Participant specifying the terms and conditions of the acceleration of the Participant’s Options or Stock Appreciation Rights, or if earlier, the date by which the Option or Stock Appreciation Right otherwise would expire. To the extent that an Optionee exercises his Option before or on the effective date of the Change of Control, the Company shall issue all Common Stock purchased by exercise of that Option (subject to Optionee’s satisfaction of the requirements of Section 17), and those shares of Common Stock shall be treated as issued and outstanding for purposes of the Change in Control. If a Participant does not exercise his Option within the twenty (20) day period described above, or if earlier, the date by which the Option or Stock Appreciation Right otherwise would expire, the Option or Stock Appreciation Right shall immediately be forfeited and the Participant shall have no further rights to exercise the Option or Stock appreciation Right. Notwithstanding the foregoing provisions, in the event of any Change of Control, all of the Company’s obligations regarding Options and Stock Appreciation Rights that were granted hereunder and that are outstanding and vested on the date of such event (taking into consideration any acceleration of vesting in connection with such transaction) may, on such terms as may be approved by the Committee prior to such event, be (i) assumed by the surviving or continuing corporation (or substituted options of equal value may be issued by such corporation) or (ii) canceled in exchange for cash, securities of the acquiror or other property in an amount equal to the amount that would have been payable to a Participant pursuant to the Change of Control event if the Participant’s vested Options and Stock Appreciation Rights had been fully exercised immediately prior to the Change of Control event; provided, however, that if the amount that would have been payable to a Participant pursuant to such transaction if such Participant’s vested Options and Stock Appreciation Rights had been fully exercised immediately prior thereto would be equal to or less than the aggregate exercise price that would have been payable therefor, the Committee may, in its discretion, cancel any or all such Options for no consideration or payment of any kind.
Unless specifically provided otherwise with respect to Change of Control events in an individual Award or in a then-effective written employment agreement between the Participant and the Company, if, during the effectiveness of the Plan, a Change of Control occurs, the Restricted Period applicable to outstanding Restricted Stock Awards and all other outstanding Awards subject to forfeiture provisions (other than Awards consisting of Options or Stock Appreciation Rights) shall lapse and such Awards shall become fully vested and settled (subject, in each case, to satisfaction by the affected Participant of the requirements of Section 17); provided, however, if the Award is treated as “nonqualified deferred compensation” under Section 409A of the Code and the Award provides for a payment as a result of a Change of Control, (i) the definition of Change of Control for purposes of applying this Section 15(c) and for purposes of determining whether a payment event has occurred shall, in lieu of the definition contained in Section 3(i), be the definition assigned to a “change in the ownership or effective control of a corporation, or change in the ownership of a substantial portion of the assets of a corporation” contained in Treasury Regulation Section 1.409A-3(i)(5), using the default percentages contained in such Treasury Regulation and (ii) the Company must be the relevant corporation described in Treasury Regulation Section 1.409A-3(i)(5)(ii).
16.GENERAL PROVISIONS APPLICABLE TO ALL AWARDS .
(a)General. In addition to the other terms and conditions of the Plan pursuant to which Awards may be granted, the Committee may impose on any Award or the exercise thereof, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of Continuous Service by the Participant and, to the extent permissible under Sections 162(m) and 409A of the Code, terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion to accelerate or waive, at any time, any term or condition of an Award that is not mandatory under the Plan; provided, however , that the Committee shall not have any discretion to accelerate or waive any term or condition of an Award (i) that is intended to qualify as Performance-Based Compensation if such discretion would cause the Award not to so qualify or (ii) that would cause the Participant to incur additional taxes under Section 409A of the Code. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the requirements of the Delaware General Corporation Law, no consideration other than services may be required for the grant of any Award.
(b)Form of Award. Each Award granted under the Plan shall be evidenced by a written Award in such form (which need not be the same for each Participant) as the Committee from time to time approves, but which is not inconsistent with the Plan, including any provisions that may be necessary to assure that Awards satisfy the requirements of Section 409A of the Code to avoid the imposition of excise taxes thereunder and any Option that is intended to be an Incentive Stock Option will comply with Section 422 of the Code.
(c)Awards Criteria. In determining the amount and value of Awards to be granted, the Committee may take into account the responsibility level, performance, potential, other Awards and such other considerations with respect to a Participant as it deems appropriate.
(d)Form and Timing of Payment under Awards. Subject to the terms of the Plan and any applicable Award, payments to be made upon the exercise or settlement of an Award shall be made as soon as administratively practicable following the date on which the amount is payable. The settlement of any Award may, subject to any specific provisions or limitations set forth in the Award, be paid in the form of cash, Common Stock or a combination thereof, as determined by the Committee in connection with such settlement; provided, however , that no Award other than a Cash Award may be paid in cash in lieu of shares of Common Stock if the Committee determines that such action would cause the Participant to be subject to an additional tax under Section 409A of the Code.
(e)Termination of Continuous Service for Cause. In the event a Participant’s Continuous Service is terminated for Cause, all outstanding Awards that have then not been settled (whether vested or unvested) shall be forfeited immediately and any shares of Restricted Stock for which the Restricted Period had not lapsed as of the Participant’s termination of Continuous Service shall be transferred immediately out of the Participant’s name.
(f)Transferability of Awards. Except as provided in Section 8(b) with respect to Non-Qualified Stock Options, Awards granted under the Plan, and any interest therein, shall not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution, and shall be exercisable or payable during the lifetime of the Participant only by the Participant; provided, that the Participant may designate persons who or which may exercise or receive his Awards following his death.
(g)Privileges of Stock Ownership. Except as provided in the Plan with respect to Bonus Stock Awards and as provided in Section 12(b) with respect to Restricted Stock Awards, no Participant will have any of the rights of a shareholder with respect to any shares of Common Stock subject to an Award until such Award is properly exercised or settled and the purchased or awarded shares are issued and delivered to the Participant, as evidenced by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to such date of issuance and delivery, except as provided otherwise in the Plan.
(h)Performance-Based Compensation. The Committee may designate any Award as Performance-Based Compensation. Any Awards designated as Performance-Based Compensation shall be conditioned on the achievement of any one or more Performance Goals and shall be subject to the terms and conditions of Section 13. Notwithstanding any other provision of the Plan, the Committee may grant an Award that is not contingent on performance goals or an Award under Section 14 that is contingent on performance goals other than the Performance Goals and the business criteria set forth in Section 13(c), and is not subject to the other provisions of Section 13 so long as the Committee has determined that such Award is not intended to satisfy the requirements for Performance-Based Compensation under Section 162(m) of the Code.
(i)Separation from Service. Notwithstanding any provision contained in the Plan to the contrary, no amount shall be paid pursuant to the Plan that is treated being paid from a “nonqualified deferred compensation plan” as described in Section 409A(a)(1) of the Code relating to a Participant’s termination of Continuous Service with the Company or an Affiliate unless such termination of Continuous Service constitutes a “separation from service” as such term is defined under Treasury Regulation Section 1.409A-1(h) and any successor provision thereto (“Separation from Service”).
(ii)Deferred Payments for Certain Key Employees. Notwithstanding any other provision contained in the Plan or a related Award document to the contrary, if the Company determines that (i) at the time of the Participant’s Separation from Service the Participant is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code and (ii) any payments to be provided to the Participant under the Plan are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code (“409A Taxes”) if paid at the time such payments are otherwise required under the Plan or a related Award document, then such payments shall be delayed until the earlier of (A) the date that is six months after the date of the Participant’s Separation from Service or (B) the Participant’s death. If the amounts delayed are payable in installments, the delayed payments will be paid on the first day of the seventh month following the date of the Participant’s separation from service (or earlier death). The provisions of this Section 16(i)(ii) shall only apply to the minimum extent required to avoid the Participant’s incurrence of any 409A Taxes.
(iii)Section 409A Compliance; Separate Payments. The Plan is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Plan or a related Award document become subject to (A) the gross income inclusion set forth within Section 409A(a)(1) (A) of the Code or (B) the interest and additional tax set forth within Section 409A(a)(1)(B) of the Code (collectively, “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that a Participant may be eligible to receive under the Plan or a related Award document shall be treated as a separate and distinct payment and shall not collectively be treated as a single payment.
Any issuance of Common Stock pursuant to the exercise of an Option or payment of any other Award under the Plan shall not be made until appropriate arrangements satisfactory to the Company have been made for the payment of any income and employment tax amounts (federal, state, local or other) that may be required to be withheld or paid by the Company with respect thereto. In addition, on the occurrence of an event with respect to an Award that requires the Company to withhold taxes, the Participant shall make arrangements satisfactory to the Company whereby such taxes may be paid. Such arrangements may, at the discretion of the Committee, include allowing the person to tender to the Company shares of Common Stock owned by the person, or to request the Company to withhold shares of Common Stock being acquired pursuant to the Award, whether through the exercise of an Option or as a distribution pursuant to the Award, together with payment of any remaining portion of such tax amounts in cash or by check payable and acceptable to the Company.
Notwithstanding the foregoing, if on the date of an event giving rise to a tax withholding obligation on the part of the Company the person is an Executive Officer or individual subject to Rule 16b-3, such person may direct that such tax withholding be effectuated by the Company withholding the necessary number of shares of Common Stock (at the tax rate required by the Code) from such Award payment or exercise.
(a)No Rights to Awards. No Participant or other person shall have any claim to be granted any Award, there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards and the terms and conditions of Awards need not be the same with respect to each recipient.
(b)Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal law and the laws of the State of Delaware, without regard to any principles of conflicts of law.
(c)Other Laws. The Committee may refuse to issue or transfer any shares of Common Stock or other consideration under an Award if, acting in its sole discretion, it determines that the issuance of transfer or such shares or such other consideration might violate any applicable law.
(d)Administration. The Plan shall be administered by the Committees. The Committees shall interpret the Plan and any Awards granted pursuant to the Plan and shall prescribe such rules and regulations in connection with the operation of the Plan as it determines to be advisable for the administration of the Plan. The Committees may rescind and amend its rules and regulations from time to time. The interpretation by the Committees of any of the provisions of the Plan or any Award granted under the Plan shall be final, binding and conclusive upon the Company and all persons having an interest in any Award or any shares of Common Stock acquired pursuant to an Award. Notwithstanding the authority hereby delegated to the Committees to grant Awards to Employees, Directors and Consultants under the Plan, the Board shall have full authority, subject to the express provisions of the Plan and the requirements of Section 162(m) of the Code for Awards intended to constitute Performance-Based Compensation, to grant Awards to Employees, Directors and Consultants under the Plan, to interpret the Plan, to provide, modify and rescind rules and regulations relating to the Plan, to determine the terms and provision of Awards granted to Employees, Consultants and Directors under the Plan and to make all other determinations and perform such actions as the Board deems necessary or advisable to administer the Plan. No member of the Committees or the Board shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder.
(e)Effect of Plan. Neither the adoption of the Plan nor any action of the Board or the Committees shall be deemed to give any Employee, Executive Officer, Director or Consultant any right to be granted an Award or any other rights except as may be evidenced by the Award, or any amendment thereto, duly authorized by the Committees and executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein. The existence of the Plan and the Awards granted hereunder shall not affect in any way the right of the Board, the Committee or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation or other transaction involving the Company, any issue of bonds, debentures, or shares of preferred stock ahead of or affecting the Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding by or for the Company. Nothing contained in the Plan or in any Award, or in other related documents shall confer upon any Employee, Executive Officer, Director or Consultant any right with respect to such person’s Continuous Service or interfere or affect in any way with the right of the Company or an Affiliate to terminate such person’s Continuous Service at any time, with or without cause.
(f) No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or an Affiliate, Awards shall not be deemed compensation for purposes of computing benefits or contributions under
any retirement plan of the Company or an Affiliate, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.
(g)Amendment or Termination of Plan. The Board in its discretion may, at any time or from time to time after the date of adoption of the Plan, terminate or amend the Plan in any respect, including amendment of any form of Award, exercise agreement or instrument to be executed pursuant to the Plan;provided, however, to the extent necessary to comply with the Code, including Sections 162(m) and 422 of the Code, other applicable laws, or the applicable requirements of any stock exchange or national market system, the Company shall obtain stockholder approval of any Plan amendment in such manner and to such a degree as required. No Award may be granted after termination of the Plan. Any amendment or termination of the Plan shall not affect Awards previously granted, and such Awards shall remain in full force and effect as if the Plan had not been amended or terminated, unless mutually agreed otherwise in a writing (including an amendment to the terms of an Award) signed by the Participant and the Company. Notwithstanding the preceding sentence, the Board unilaterally may amend the Plan to the extent necessary or appropriate to prevent the Plan or an Award from being subject to the provisions of Section 409A of the Code; provided that any such amendment is permitted by Section 409A of the Code, Treasury regulations issued thereunder or other guidance issued by the Internal Revenue Service.
(h)Term of Plan. Unless sooner terminated by action of the Board, the Plan shall terminate on the earlier of (i) the tenth (10th) anniversary of the Effective Date or (ii) the date on which no shares of Common Stock subject to the Plan remain available to be granted as Awards under the Plan according to its provisions.
(i)Severability and Reformation. The Company intends all provisions of the Plan to be enforced to the fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine that the scope of any provision of the Plan is too broad to be enforced as written, the court should reform the provision to such narrower scope as it determines to be enforceable. If, however, any provision of the Plan is held to be wholly illegal, invalid, or unenforceable under present or future law, such provision shall be fully severable and severed, and the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions of the Plan shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance.
(j)Interpretive Matters. Whenever required by the context, pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular shall include the plural, and visa versa. The term “include” or “including” does not denote or imply any limitation. The captions and headings used in the Plan are inserted for convenience and shall not be deemed a part of the Plan for construction or interpretation.
CHENIERE ENERGY, INC.
700 MILAM STREET
SUITE 1900
HOUSTON, TX 77002
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 1A G. Andrea Botta 1B Jack A. Fusco 1C Vicky A. Bailey 1D Nuno Brandolini 1E David I. Foley 1F David B. Kilpatrick 1G Andrew Langham 1H Courtney R. Mather For address change/comments, mark here. (see reverse for instructions) For Against Abstain 1I Donald F. Robillard, Jr 1J Neal A. Shear The Board of Directors recommends you vote FOR proposals 2. and 3.: 2. Approve, on an advisory andnon-binding basis, the compensation of the Company’s named executive officers for 2018. 3. Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2019. For Against Abstain For Against Abstain Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000417136_1 R1.0.1.18
Important Notice Regarding the Availability of Proxy Materials for the SpecialAnnual Meeting:The Notice & Proxy Statement, Annual Report is/are available atwww.proxyvote.com
CHENIERE ENERGY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
SPECIAL ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 31, 2017
MAY 16, 2019 The undersigned hereby appoints Jack Fusco, Michael J. Wortley and Sean N. Markowitz, and each of them, any one of whom may act without joinder of the other, 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 2017 Special2019 Annual Meeting of Shareholders to be held at Cheniere Energy, Inc.’sthe Company’s headquarters at 700 Milam Street, Suite 1900, Houston, Texas 77002 on Tuesday, January 31, 2017Thursday, May 16, 2019 at 9:00 a.m., Central Time, and at any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON. IF NO CONTRARY SPECIFICATION IS MADE, THEN THIS PROXY (IF SIGNED) WILL BE VOTED “FOR” THE ELECTION OF THE TEN DIRECTOR NOMINEES NAMED IN PROPOSAL 1.1 AND “FOR” PROPOSALS 2 AND 3. WHETHER OR NOT SPECIFICATIONS ARE MADE, EACH OF THE PROXIES AREIS AUTHORIZED TO VOTE IN HIS OR HER DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED,PRE-ADDRESSED STAMPED ENVELOPE.
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(If Address change/comments: (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
0000417136_2 R1.0.1.18
