... and the wall crumbles !, page-27

"I suspect the real angst is that RC is getting such a large up front fee, large oppies package "

We need to divide this package into their components. There are three: a sign on fee, a salary, and market-linked performance options.

It is normal practice to pay a recruiting agent a fee for an executive search. The fee can be as high as 30% of one year's salary. I see this sign-on fee as a fee to RC for recruiting Mike Herrington and Gasteen. If Askin paid someone else this fee, there would be no drama.

My understanding is Cottee's annual salary is no different from what JH was paid. This can be easily verified, so there is nothing to prove. JH expenses may be a bit difficult to establish. I see an immediate savings in private investigators fees and private plane hires (LOL). So, I doubt Cottee will outspend JH.

For options, we must appreciate that these are market-linked performance options and therefore link to shareholders returns. In other words, when RC benefits, the SH benefit as well.

The vesting hurdles of 15c, 20c and 29c are not as easy as people think.

You have to agree all spec stocks will go backwards unless they achieve success. For the options to be vested, CTP must be successful, and be successful in the midst of the Euro crisis, dilution due to CR, 320m CTP options kicking in at 16c, a strengthening $AUD, a mining labour shortage, MRRT and the carbon tax.

The first tranche vests at an SP of 15c. It is 25% discount (15c – 9c -2.2c / 15c) to the market price. Some capital raisings are at 25% discount to the market price. Also, consider that CP wanted 20% of CTP at 7c when the SP was 11c. This is 36% discount to the market!!! I view this as a small capital-raising to RC.

The second tranche vests at an SP of 20c. The vesting condition of 20c is double the current SP. In itself is a great achievement. If the CTP options (16c strike) have not expired, the capital will increase by 320m shares. These shares will weigh down on the SP. The second tranche vesting condition is to clear this weigh. RC cannot benefit unless the market absorbs the 320m converted shares.

If you look through clear glasses, there are no freebies. If you look through green glasses, you even see a useless stone made of jade.