Silk Energy Ltd SLKEF

The naive doingthejob

[victor2009]

doingthejob/aatozz has been touting the financial savvy of his idol the Randy Man. I think the skills of the ISM CEO are an excellent topic for this forum, now that doingthejob has shown some willingness to show his face on this forum - and his admiration for the skills of the CEO.

My first example of strategy and business savvy comes from disclosure in the Management Information Circular listed on Sedar May 30, 2010:
 

F. Employment Agreements

As of the date of this Information Circular, the Corporation has entered into a consulting agreement with Adrea Capital Corp., a private British Columbia company owned and / or controlled by Mr. Miller. In the event that the consulting agreement is terminated due to the death, retirement of disability of Mr. Miller, the agreement provides for the lump sum payment of an amount equal to two (2) times the annual salary and two (2) times the average annual bonus paid to Adrea Capital Corp. In the event that the agreement is terminated for any other reason or not for just cause or in the event Mr. Miller resigns for "Good Reason", as such term is defined therein, Mr. Miller will be entitled to a payment that, in the aggregate, equals the annual salary at time of termination and an amount equal to the greater of: (i) six (6) times the annual salary; and (ii) an amount equal to the result obtained when the annual salary is multiplied by a fraction, the numerator of which is the number of days between the date of termination and Mr. Miller's retirement date and the denominator of which is 365. In addition, the Corporation is required to purchase from Mr. Miller, at the fair market value, all shares, rights, options or warrants to acquire shares of the Corporation owned by Mr. Miller and shall pay him three (3) times the difference between the exercise price and the fair market value of all rights, options or warrants to acquire shares subject to issuance pursuant to any options or warrants held by Mr. Miller.

Now that is one savvy bit of business, there's no doubt about it. It's original, I've never seen one like it. But whether the savvy involved is beneficial to ISM is another matter. There's no doubt in my mind that Mr. Miller's interests have been well represented, but what is this doing for ISM shareholders? Would a nasty hacking cough be considered "good Reason" for Mr. Miller to resign, pick up $2.16 million for loss of office, $1.4 million for his shares and an amount to be determined for his options? Who would pick up the legal costs when the company and Mr. Miller fought over the confusing wording on the payment for option? The way this savvy business man has worded the disclosure he could be paid for options that are out of the money!

So tell me doingthejob - do you feel this type of savvy business deal is beneficial to the company's shareholders? If so, please tell me how. I have the idea that prospective shareholders might be hesitant to invest in a company that could have a multi million dollar bombshell dropped on them at the whim of someone's "Good Reason".

I should add that I am savvy enough to believe you won't come up with a logical defence - I don't think you'll even try.