Hession Change of Control payments

[2126]

Regarding Dr. Hession's 'Change of Control' payments:

According to the 5/4/16 AGM Management Information Circular:

Hession receives his "Termination Compensation" if a "Change of Control" takes place.

The "change of control" trigger event is an IOC BOD recommendation to accept a bid to sell the company, not the actual sale of the company. Thus, it has already taken place.

Such 'termination compensation' is

• :50% of the RSUs available to Hession for ALL milestone events in his contract, including FEED, FID, First Cargo, etc.
• He also, upon termination, receives double his severance payment of a full-year's compensation, including any performance and bonus compensation (thus, 2 full-year's compensation) if the 'Change of control' happens prior to July 10, 2016. [of which the 'trigger event' did'].
• Finally, all of Hession's RSUs are immediately vested upon the 'trigger event' which was the BOD recommendation of the OSH bid [not its acceptance by shareholders].
• To add to the shareholder pain, Hession also receives his discovery bonus for any new discovery well found within 12 months of his termination, if such discovery well lease was held by IOC at the time of his termination (even if by 'change of control'].

The bottom line is that Hession's Termination Package is a done deal, regardless of the outcome of the current situation, short of any lawsuit for breach of fiduciary duty [which I personally see as a very uphill battle at this point.]

The wording in this section of the AGM material is unclear, but I believe that the 'change of control trigger event' also applies to this provision (double severance compensation). It would appear that the BOD and Dr. Hession were fully aware of the timing of the subsequent events (ie. IOC BOD acceptance of the OSH bid and recommendation to shareholders to vote "yes"] as these events took place prior to the July 10, 2016 deadline for Dr. Hession.

I have not calculated all of the dollar amounts for all of this, but I believe that earlier reports of around $40 million are correct. Note that that amount could still increase post any sale due to his post-sale ability to continue to earn a discovery bonus.

As much as I detest this golden and diamond-studded parachute, one has to very grudgingly give him credit for getting all of this into his contract and its subsequent revisions by his new BOD. He may have set a new standard for such golden parachutes, certainly with regard to the actual valuation of the company giving such a termination package after 3 years work.

[Palm]

I think this needs to be read/understood:

"Under the terms of Dr. Hession’s employment contract, there are two termination events in which Dr. Hession is entitled to receive the full amount of the “Termination Remuneration”, as described below. First, InterOil may terminate Dr. Hession’s employment immediately for any reason other than for cause or for physical or mental incapacity. Second, Dr. Hession may terminate his employment by notice if: (a) he ceases to be Chief Executive Officer or the most senior employee in the Group (as defined in the employment agreement); (b)there is a material adverse change in his status, job content or responsibilities or they are materially diminished; © InterOil materially breaches a provision of his employment agreement which is either not remedied or not capable of being remedied; (d) there is a “Change of Control” of InterOil (as defined in the employment agreement); or (e) InterOil becomes insolvent or similar.

In any of these cases, Dr. Hession is entitled to receive the Termination Remuneration. Any RSU previously granted to Dr. Hession also immediately vests. Dr. Hession is also entitled to receive an exploration bonus if a discovery is made on an exploration license (within 12 months of a relevant termination of his employment) which was held by InterOil at the time of Dr. Hession’s termination. Dr. Hession is also entitled to receive all unearned RSU milestone awards associated with every Milestone.

InterOil may also terminate Dr. Hession’s employment by reason of physical or mental incapacity or on the basis that he is otherwise unable to fulfil his responsibilities. In this case, he (or, in the case of his death, his estate) is entitled to half of the Termination Remuneration, together with all post termination performance incentives which attach to the prior two termination events described above.

The definition of Change of Control “Trigger Event” was amended as part of the restatement of Dr. Hession’s employment agreement. A Change of Control “Trigger Event” occurs when an offer to InterOil stockholders under a takeover bid or through the proposal of a plan of arrangement, merger or other reorganization is capable of giving rise to a Change of Control, and which the Directors of InterOil recommend to shareholders. In this event, Dr. Hession will receive 50% of the RSU Milestone awards associated with each of the Milestones. If the Trigger Event does not result in a Change of Control, or if the Trigger Event results in a Change of Control but Dr. Hession’s employment continues, the remaining 50% of the RSU awards in respect of all of the remaining Milestones will continue to be capable of being earned. 

"Termination Remuneration” is, if the termination occurs within three years of commencement of employment, an amount being the aggregate of two years’ base annual salary, twice the amount of the annual fixed cash bonus for the year in which termination takes effect and twice the amount of the performance bonus for that year. If the termination occurs three years (after July 10, 2016) or more after the employment commencement date, the Termination Remuneration is an amount being the aggregate of one year’s base annual salary and the amount of the performance bonus for that year.

There are two instances where Dr. Hession’s termination does not trigger the Termination Remuneration. First, Dr. Hession may terminate his employment by giving three months’ written notice to InterOil. Second, InterOil may terminate Dr. Hession for cause. In either of these events, Dr. Hession is entitled to the accrued amount of base annual salary and other benefits accruing as at the end of the period of notice. Any rights to annual fixed cash bonus, performance bonus or exploration bonus (but not an entitlement which has been unconditionally accrued) are forfeited.

On termination of his employment Dr. Hession must resign from office as a director or officer of all InterOil companies, maintain confidentiality obligations and observe a 12 month non-compete and non-solicitation covenant."

[Libtardius Maximus]

Perhaps we should change Dr. Libor Plus 6's nickname to Warden thanks to the three year prison sentence he subjected long time shareholders to. The good news is we are all up for parole soon.

There's that word again...soon.

[Indoreservoir]

Regarding Dr. Hession's 'Change of Control' payments:

According to the 5/4/16 AGM Management Information Circular:

Hession receives his "Termination Compensation" if a "Change of Control" takes place.

The "change of control" trigger event is an IOC BOD recommendation to accept a bid to sell the company, not the actual sale of the company. Thus, it has already taken place.

Such 'termination compensation' is

• :50% of the RSUs available to Hession for ALL milestone events in his contract, including FEED, FID, First Cargo, etc.
• He also, upon termination, receives double his severance payment of a full-year's compensation, including any performance and bonus compensation (thus, 2 full-year's compensation) if the 'Change of control' happens prior to July 10, 2016. [of which the 'trigger event' did'].
• Finally, all of Hession's RSUs are immediately vested upon the 'trigger event' which was the BOD recommendation of the OSH bid [not its acceptance by shareholders].
• To add to the shareholder pain, Hession also receives his discovery bonus for any new discovery well found within 12 months of his termination, if such discovery well lease was held by IOC at the time of his termination (even if by 'change of control'].

The bottom line is that Hession's Termination Package is a done deal, regardless of the outcome of the current situation, short of any lawsuit for breach of fiduciary duty [which I personally see as a very uphill battle at this point.]

The wording in this section of the AGM material is unclear, but I believe that the 'change of control trigger event' also applies to this provision (double severance compensation). It would appear that the BOD and Dr. Hession were fully aware of the timing of the subsequent events (ie. IOC BOD acceptance of the OSH bid and recommendation to shareholders to vote "yes"] as these events took place prior to the July 10, 2016 deadline for Dr. Hession.

I have not calculated all of the dollar amounts for all of this, but I believe that earlier reports of around $40 million are correct. Note that that amount could still increase post any sale due to his post-sale ability to continue to earn a discovery bonus.

As much as I detest this golden and diamond-studded parachute, one has to very grudgingly give him credit for getting all of this into his contract and its subsequent revisions by his new BOD. He may have set a new standard for such golden parachutes, certainly with regard to the actual valuation of the company giving such a termination package after 3 years work.

I have no idea why anyone would give him credit for ripping-off the shareholders and an incompetent Board.

On the contrary, he's a very poor manager who destroyed shareholder value for his personal gain.

Why should ANYONE give him credit?  What was the share price when he took over? $80 or so/share?

And what happened to the TOTAL initial payment - pissed away on phantom discoveries that are worth nothing.  And I mean nothing.  No one is paying anything for them - my company sure wouldn't.   But Pinkie sure got paid for them!

The only 'credit' he deserves is for being a person of low character and morals. The record and his BS speak to that - look at the May presentation and his statements over the months that IOC was a $9 billion company.

Enuf of a diatribe for now.

GLTAL

[jft310]

He set himself up and the BOD for one heck of a Breach lawsuit unless we get a whale of an offer from Exxon or Total . No reason to sell it all or any reason not to sell just E/A from the shareholders point of view .