XTO Energy execs sort of waive hefty fees…

December 16, 2009

On Monday, Exxon Mobil (XOM) announced its $31 billion deal for XTO Energy (XTO), prompting the WSJ to declare in today’s edition that “the deal is mounting a comeback”.

But we’re more interested in another trend: that of senior executives giving up truckloads of money that they’d normally get as a result of a change in control. In this 8-K filed yesterday, XTO notes that “Messrs. Simpson, Hutton, Vennerberg, Baldwin and Petrus have agreed to waive their employment and change in control protections under their existing arrangements with the Company” and enter into consulting agreements with Exxon Mobil instead.

Under the agreements, which were included in XTO’s 10K filed back on Feb. 25, Simpson would have been entitled to three times his base salary and bonus plus a tax gross up. The other four executives would have received 2.5 times their salary and bonus plus the gross-up. Simpson’s current base salary is $3.6 million. Of course, under the new agreements, Simpson’s annual consulting fee will be $1.8 million, though he’ll also collect an unspecified fee of $10.8 million (which is equal to 3 times his salary) plus another $24.7 million in retention payments, so it’s not really clear what exactly he’s being forced to give up.

One other interesting thing about this deal: back in February, XTO entered into a new agreement with its outside directors to provide them with hefty severance following a change in control that was equal to three times their annual cash retainer of $180K plus another $460K worth of stock. According to yesterday’s filing, each director would have been entitled to around $1 million each upon completion of the deal. But the filing notes that on Dec. 13 “each non-employee member of the Company’s board of directors voluntarily waived his right to receive the payments that otherwise would have become payable to him upon the completion of the Merger”.

So unlike the top executives, the directors are really giving up something of value!

Image source: Squires & Company

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