I want to make sure that the intent of this post is clear to everyone:
This post is only intended as a source of information and in no way reflects any support for management of Petaquilla or for any group trying to change that management.
Just in case some of you do not know about what represents a change of control and its implications you should read the following from public documents. Before you do that you should also consider a few facts:
The PTQ Board is limited in the By-laws to 5 members and at the last stockholders meeting 5 Board members were elected to a 1 year term ending in November 2014
In some companies by-laws or Shareholders right documents a Board member can be removed with 50% of the voting shares. I have no confirmation that this clause exits for Petaquilla and that a Board member can be removed prior to the end of his/her term. I could not find it in the Shareholders rights document approved last year and do not have a copy of the by-laws.
In case that removal was authorized, in order to elect 4 new Board members that are not proposed by the present Board you need to first remove the present Board members then vote in the new ones under a majority vote.
The same clause applies to regular election of the Board.
If accomplished that change triggers a lot of different items.
Here is what you can find in the 2013 notice of annual meeting for petaquilla:
"Each of the Named Executive Officers has written employment agreements with the Company that sets out his rights in the event of termination without cause. Each agreement entitles the Named Executive Officers with separation payments equal to either one time or three times, as the case may be, his annual compensation if dismissed from his position without Cause as defined therein. In the agreements, Cause is defined as one of the following:
(a) the inability of the Named Executive Officer to perform his duties due to a legal impediment such as an injunction, restraining order or other judicial judgment, decree or order entered against the Named Executive Officer; (b) a breach by the Named Executive Officer of a material provision of this Agreement; (c) the failure of the Named Executive Officer to follow the Company's reasonable instructions with respect to the performance of his duties; (d) any material breach by the Named Executive Officer of his obligations under any code of ethics, any other code of business conduct or any lawful policies or procedures of the Company; (e) excessive absenteeism, flagrant neglect of duties or serious misconduct; or (f) any act or omission of the Named Executive Officer that would in law permit an employer to, without notice or payment in lieu of notice, terminate the employment of an employee.
All of the Named Executive Officers have written agreements with the Company that set out their rights in the event of termination following a “change of control” of the Company. In the event of termination, either by the Named Executive Officer or the Company, of the Named Executive Officer’s engagement by the Company following a “change of control” as defined therein, the Company shall pay to the Named Executive Officer, an amount three times the annual compensation being paid to the Named Executive Officer as the time of the change of control.
A “change of control” shall be deemed to have occurred when:
(a) a person becomes a “control person” (as that term is defined in the Securities Act, (British Columbia)) of the Company; or
(b) a majority of the directors elected at any annual or special general meeting of shareholders of the Company are not individuals nominated by the Company’s then incumbent board of directors; or
(c) any person or group of persons acquires the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of the Company through:
(i) the legal or beneficial ownership of voting securities; (ii) the right to appoint managers, directors or corporate management; (iii) contract; (iv) operating agreement; (iv) voting trust;
By the way the total separation package for all officers would amount to $3.5M payable immediately. Ouch!!!
Change of control triggers a lot more than the severance payments to Directors and Officers.
Most contractual agreements include a "change of control clause"
I would guess that the FQ/DB agreement has such a clause.
Leasing agreements and loans also have that clause.
Most agreements made with regular creditors become null and void at a change of control and the liability is due immediately.
Mining concessions very often include a change of control clause. Here goes Portugal (maybe)
The first point in all of that is that someone better have a good handle of the unintended consequences of a change of control because it is clear that it is a change of control. If one does not have control over the events or ignore them one may become liable individually or/and as a group.
Another thing that I would like to bring to your attention is that in the shareholders rights agreement contained in the annual meeting notice there are several cases that a person or group having a 20% voting right are defined as "beneficial owners" and therefore "acquiring person" with all the liabilities attached to those definitions. It is a very complex document that needs to be reviewed by legal counsel.
The second point is that I strongly advice people pledging there shares to another person or entity to review all documents before doing so.
One more thing.
A representation has been made publically " believe it or not, but I can guarantee you here that already over 70 MILLION SHARES IN PANAMA agree and support my plan. "
This is a very serious representation made by a person seeking proxy votes or pledges of votes to make major changes in the functioning of a publically traded corporation. The word "guaranty" means that signed documents of verified ownership has been received. If it is not correct it could be considered as a misrepresentation of facts by a proxy seeker. It also mentions a "plan" that does not seem to be supported by a legal opinion that reviewed its viability. That viability is in serious doubt considering the document listed above. The "plan" also has major risks factors for the supporters that have not yet been clearly defined. Other representation that "money is available if the Chairman is out" are a bit risky statements. Not as bad as the "guaranty" but close.
I have a very very friendly suggestion . I would restate that statement to say something like: "I received strong interest of support for my potential action plan from stockholders that claim to represent an aggregate ownership of 70 millions shares. Details, legal viability and risk factors of that action plan are forthcoming and will soon be presented to them and any other interested person for their review. I also received strong indication that financing would be made a lot easier to obtain with a new team leading the company"
I stated before that I am not in favor of a plan that is not based on sound legal advice and sound financial knowledge. An illustration of the financial part is the recent convoluted discussion about AP and liabilities of the company. I favor a different more rational approach to move forward and protect our shareholders rights. It may not be as satisfying as chopping a bunch of heads but it has at least a chance to succeed.
What I would not like to see is a lot of nice people that are pretty upset but well intentioned embark in a project that has a lot of unforeseen implications that go well beyond losing 100% of your investment.
Good luck to all of us.
Disclaimer:
Any opinion, interpretation of documents or otherwise expressed in this post are to the best of knowledge and could be wrong.
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