Founding Shareholder Calls For Special Meeting of InterOil Shareholders

HOUSTON, March 31, 2016 /PRNewswire/ -- The founding shareholder and former chairman and Chief Executive Officer of InterOil Corporation ("InterOil" or the "Company") (NYSE: IOC), Phil Mulacek, and Petroleum Independent & Exploration, LLC (the "Concerned InterOil Shareholders"), announced today that the Concerned InterOil Shareholders and certain other shareholders who collectively own over 7.5% of the issued and outstanding shares of the Company have requisitioned (the "Requisition") a special meeting of InterOil shareholders (the "Special Meeting") at which shareholders will be asked to approve several resolutions focused on improving the corporate governance of InterOil.

"These proposals reflect fundamental concerns of the Concerned InterOil Shareholders about the Board's approach to setting the Company's strategy and its oversight of management. They are intended to increase transparency and align Board and management compensation with growth in shareholder value. If passed by shareholders and adopted by the Board, these proposals will also provide for meaningful shareholder input on transactions that materially affect shareholder value," Mr. Mulacek said.

"The objective of the Concerned InterOil Shareholders is to help ensure that future transactions are accretive to the long-term growth in shareholder value. The Concerned InterOil Shareholders look forward to engaging in a constructive dialog with the Board and our fellow shareholders and working with the Company to implement the policies we believe are required to position InterOil for success," continued Mr. Mulacek.

The Requisition proposes that resolutions addressing the following matters be put to a vote by InterOil's shareholders:

• reducing the size of the InterOil board of directors (the "Board") from ten to six, which the shareholders may specify under the Company's By-laws. The Concerned InterOil Shareholders believe that the Company's current ten-member Board is too large and expensive for a company with no operations and that reducing the size of the Board and aligning it more with shareholder interests through the other proposals in the Requisition would more efficiently use the Company's capital and other resources and enhance shareholder value going forward;
  
  
• requesting the Board to amend InterOil's compensation policy to ensure industry best practices and align director and management compensation with shareholder value accretion by limiting the cash component of director compensation, imposing holding periods on equity compensation and restricting "change of control" cash payments to senior managers;
  
  
• requesting the Board to amend InterOil's policy on qualifications of Board nominees to increase focus on core competencies related to InterOil's onshore oil and gas assets in Papua New Guinea by requiring that at least one-third of the directors have direct experience in exploration and development of such assets. In the Concerned InterOil Shareholders' view, having proven Papua New Guinea expertise in a significant number of the directors would enhance the Board's ability to supervise and direct management's choice and execution of exploration and development projects in Papua New Guinea;
  
  
• requesting the Board to amend the manner and extent of required third-party reviews of InterOil's reserves and resources to strengthen and include review of management's discovery announcements and development plans so that shareholders and the public may more fully understand InterOil's operations. The Concerned InterOil Shareholders believe that this enhanced third-party review will increase the transparency of the Company's disclosure about its resources/reserves and discoveries; improve the quality and objectivity in the Company's decision-making process in determining whether and how to explore and develop its assets; improve management accountability to shareholders; and reduce the likelihood that the Company's capital and other resources will be spent on exploration and development projects that are unlikely to be commercially viable;
  
  
• requesting the Board to amend its charter to require shareholder approval of transactions over 10% of total asset value to help ensure that in the future, material transactions are more aligned with the interests of InterOil's shareholders. The Concerned InterOil Shareholders believe that certain recent material transactions the Company has undertaken without Shareholder approval, including the transaction with TOTAL S.A., have been non-accretive for Shareholder value. To help ensure that future material transactions are aligned with the interests of Shareholders, the Concerned InterOil Shareholders believe that the Board and management should be required to obtain prior Shareholder approval of material transactions in order to avoid transactions that, among other things, may impair the Company's capital or its ability to undertake its core operational business of exploration and development of upstream oil and gas in Papua New Guinea, or that trigger payments of transaction break-up fees through failure to secure Shareholder approval of the transaction; and
  
  
• requesting the Board to adopt and comply with a rigorous disclosure policy to further increase transparency and consistency in public disclosure and accountability of the Board and management to shareholders.

The Concerned InterOil Shareholders have suggested that the Special Meeting be held in conjunction with the June 14, 2016 annual and special meeting of shareholders, which InterOil recently announced (the "InterOil 2016 Meeting"). The Requisition has been made pursuant to the Business Corporations Act (Yukon) ("YBCA")

A copy of the Requisition was delivered to InterOil on March 21, 2016, and is included with this press release.

InterOil has not yet responded to the Concerned InterOil Shareholders regarding the Requisition. InterOil has until April 12, 2016 to call the Special Meeting. If InterOil does not call the Special Meeting by that time, the Concerned InterOil Shareholders are themselves entitled to call the Special Meeting.

Advisors:

The Concerned InterOil Shareholders have retained Wildeboer Dellelce LLP and Taft Stettinius & Hollister LLP as their legal advisors, and Bayfield Strategy as its strategic communications advisor in connection with this matter.

About Phil Mulacek:

Mr. Mulacek is the founding shareholder of InterOil and served as chairman, CEO and a director until his retirement from the company in November, 2013. During his tenure at the company, its market capitalization grew from approximately US$10 million (~ US$0.50/share) to over US$4.5 billion (~ US$92.00/share) at his departure. The company also constructed the first petroleum refinery in Papua New Guinea, a 36,000 bpd facility at Napa Napa, with a fully integrated downstream business that contributed to support of the company.

Mr. Mulacek led InterOil's discovery of the world-class Elk and Antelope gas fields in the Gulf Province of Papua New Guinea, with approximately 10 to 15 tcfe of certified hydrocarbon resource, and the nearby Triceratops gas field, with approximately 1 tcfe of certified hydrocarbon resource. These fields have been among the largest onshore discoveries in PNG and Asia recent years.

Since retiring from InterOil in 2013, Mr. Mulacek has remained actively involved in the upstream oil and gas industry in Papua New Guinea, the US and elsewhere globally through his affiliated companies with offices in Singapore and branch offices in the United States. He resides in Singapore.

Cautionary Statement Regarding Forward-Looking Statements:

This press release contains forward-looking statements. All statements contained in this filing that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations of the Concerned InterOil Shareholders and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict, and are based upon assumptions as to future events that may not prove to be accurate. The Concerned InterOil Shareholders do not assume any obligation to update any forward-looking statements contained in this press release.

Information Contact:

For additional information on this press release and a copy of the Requisition (including the proposed resolutions), please contact the Concerned InterOil Shareholders at +1 (832) 510-7028, or by email at [email protected]

Media Contact:

Bayfield Strategy, Inc.
Riyaz Lalani
+1 (416) 907-9365
[email protected]

Additional Information:

The Concerned InterOil Shareholders do not know at this time whether the business called for in the Requisition will be put to a vote by the shareholders of InterOil at the InterOil 2016 Meeting. 

Information in Support of Public Broadcast Solicitation:

The Concerned InterOil Shareholders are relying on the exemption under section 9.2(4) of National Instrument 52-102 - Continuous Disclosure Obligations to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations.

This solicitation is being made by the Concerned InterOil Shareholders and not by or on behalf of the management of InterOil.

The address of InterOil is 163 Penang Road, Winsland House II, #06-02, Singapore, 238463.

The Concerned InterOil Shareholders have filed an information circular dated March 31, 2016 (the "Concerned InterOil Shareholders Circular") concerning the Requisition. The Concerned InterOil Shareholders Circular will be available on InterOil's company profile on SEDAR at http://www.sedar.com. The Concerned InterOil Shareholders have also filed a statement of beneficial ownership on Form 13-D (the "Form 13-D"), with the U.S. Securities and Exchange Commission. The Form 13-D also includes the Requisition as an Exhibit and is available at https://www.sec.gov/Archives/edgar/data/1221715/000114420416090986/v435587_sc13d.htm.

The Concerned InterOil Shareholders have not yet made a determination as to whether they will formally solicit a proxy from any person in connection with the Requisition. If the Concerned InterOil Shareholders do choose to solicit proxies for the Special Meeting, they may do so by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person by directors, officers and employees of the Concerned InterOil Shareholders who will not be specifically remunerated therefor. In addition, the Concerned InterOil Shareholders may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. The Concerned InterOil Shareholders may engage the services of one or more agents and authorize other persons to assist them in soliciting proxies on behalf of the Concerned InterOil Shareholders.

At this time, the Concerned InterOil Shareholders have not entered into any agreement pursuant to which an agent has agreed that it will act as proxy agent for the Concerned InterOil Shareholders should the Concerned InterOil Shareholders commence a formal solicitation of proxies. All costs incurred for the solicitation will be borne by the Concerned InterOil Shareholders. The Concerned Shareholders will seek reimbursement of their costs pursuant to the YBCA.

A registered holder of common shares of InterOil that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the form of proxy to be provided by the Concerned InterOil Shareholders, or as otherwise provided in the proxy circular, once made available to shareholders; (b) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing, as the case may be: (i) at the registered office of InterOil at any time up to and including the last business day preceding the day of the Special Meeting or any adjournment or postponement of the Special Meeting is to be held, or (ii) with the chairman of the Special Meeting prior to its commencement on the day of the Special Meeting or any adjournment or postponement of the Special Meeting; or (c) in any other manner permitted by law.

A non-registered holder of common shares of InterOil will be entitled to revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary. It should be noted that revocation of proxies or voting instructions by a non-registered holder can take several days or even longer to complete and, accordingly, any such revocation should be completed well in advance of the deadline prescribed in the form of proxy or voting instruction form to ensure it is given effect in respect of the meeting.

Neither the Concerned InterOil Shareholders, nor any directors or officers, or any associates or affiliates of the foregoing, has: (i) any material interest, direct or indirect, in any transaction since the beginning of InterOil's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect InterOil or any of its subsidiaries; or (ii) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter currently known to be acted on at the Special Meeting, other than the matters set forth in the Requisition. 

However, certain of the Concerned InterOil Shareholders are the beneficial holders of minority indirect participation interests in certain of InterOil's petroleum prospecting licenses and petroleum retention licenses in Papua New Guinea under indirect participation agreements with InterOil. The Concerned InterOil Shareholders believe that these indirect participation interests are not material to InterOil but are nevertheless fully aligned and not in conflict with the interests of InterOil shareholders.

REQUISITION FOR MEETING OF THE
SHAREHOLDERS OF INTEROIL CORPORATION

DATE: MARCH 18, 2016

TO: INTEROIL CORPORATION (the "Corporation")

AND TO: EACH OF THE DIRECTORS OF THE CORPORATION

The undersigned, being the registered or beneficial holders of not less than 5% (five percent) of the issued and outstanding shares of the Corporation that carry the right to vote at the meeting of shareholders sought to be held pursuant to this requisition, hereby requisition the directors of the Corporation to call a meeting of the shareholders of the Corporation (the "Meeting") pursuant to the provisions of section 144 of the Business Corporations Act (Yukon), as amended (the "Act"):

(a) to consider, and if deemed advisable, pass, with or without variation, the ordinary resolution attached as Schedule A to this Requisition (the "Director Election Resolution");

(b) to consider, and if deemed advisable, pass, with or without variation, the ordinary resolution attached as Schedule B to this Requisition (the "Compensation Committee Charter Resolution");

(c) to consider, and if deemed advisable, pass, with or without variation, the ordinary resolution attached as Schedule C to this Requisition (the "Nomination and Governance Committee Resolution");

(d) to consider, and if deemed advisable, pass, with or without variation, the ordinary resolution attached as Schedule D to this Requisition (the "Reserves Governance Committee Resolution");

(e) to consider, and if deemed advisable, pass, with or without variation, the ordinary resolution attached as Schedule E to this Requisition (the "Material Transactions Resolution"); and

(f) to consider, and if deemed advisable, pass, with or without variation, the ordinary resolution attached as Schedule F to this Requisition (the "Disclosure Policy Resolution").

[Remainder of Page Intentionally Left Blank]

Pursuant to section 144(4) of the Act, if the directors do not within twenty-one (21) days after receipt of this requisition call such a Meeting, the undersigned shall call the Meeting.

Dated March 18, 2016

SCHEDULE A

THE DIRECTOR ELECTION RESOLUTION

BE IT RESOLVED, as an ordinary resolution, that in accordance with Section 4 of By-Law No. 2 of the Corporation, the number of directors to be elected at the 2016 annual meeting of the Corporation's shareholders be fixed at six (6).

SCHEDULE B

THE COMPENSATION COMMITTEE CHARTER RESOLUTION

BE IT RESOLVED, as an ordinary resolution, that the board of directors of the Corporation consider and, if thought appropriate, amend the charter of the Compensation Committee of the board of directors of the Corporation (the "CC Charter") as follows:

(a) by deleting Section 5.1 of the CC Charter and adding the following:

"Director Compensation. The Committee shall periodically review and make recommendations to the Board with respect to compensation payable for serving as a director. In making these recommendations to the Board, the Committee shall be guided by the following guidelines (unless these guidelines are clearly non-aligned with compensation best practices at the time as certified by Advisors and disclosed in the Company's compensation disclosure):  (i) not less than 50% of the total compensation payable for serving as a director shall be in the form of equity-based compensation; (ii) for as long as the individual serves as a director and for a period of one year from the date the individual ceases serving as a director, that individual may not sell, transfer or assign to any third party more than 50% of the total number of shares of the Company received by way of compensation  for serving as a director; and (iii) the total cash compensation payable to all directors of the Company for service as directors shall not exceed an aggregate amount of US$600,000 annually."

(b) by adding the following as the last sentence of Section 5.3 of the CC Charter:

"In approving these compensation arrangements for Executive Officers, the Committee shall be guided by the following principles:  (i) no Executive Officer shall receive a payment in connection with a change-in-control transaction (a "Change of Control Payment") unless the price per share payable to shareholders as a result of the transaction exceeds both (x) US$60.00 per share (based on the number of shares outstanding as of the day this charter was amended to include this provision, and as adjusted appropriately as a result of consolidation, etc.) over a 30 day trailing VWAP (the "Threshold Price"), and (y) the 30 day trailing VWAP as of the date of the commencement of the Executive Officer's employment with the Company; and (ii) the Change of Control Payment may be pro-rated by the Board in its discretion above the Threshold Price up to any maximum amount determined by the Board, based on the price per share payable to shareholders as a result of the transaction."  In any event, any of these awards, opportunities, agreements, arrangements, provisions, compensation or benefits must clearly align with compensation best practices as certified by Advisors and disclosed in the Company's compensation disclosure."

SCHEDULE C

THE NOMINATION AND GOVERNANCE COMMITTEE CHARTER RESOLUTION

BE IT RESOLVED, as an ordinary resolution, that the board of directors of the Corporation consider and, if thought appropriate, amend the charter of the Nomination and Governance Committee of the board of directors of the Corporation (the "NGC Charter") as follows:

(a) by deleting the first sentence of Section 5.1 of the NGC Charter and replacing it with the following sentence:

"The Committee shall formulate the criteria for directors, and shall consider personal characteristics and core competencies required of Board members when evaluating persons to be nominated for election to the Board (including, for greater certainty, at least one third of the directors must have direct skills, competency and experience in matters relevant to the exploration and development of the Company's onshore licenses and development assets in the Papua New Guinea jungle), taking into account the composition of the Board as a whole."

(b) by deleting the second sentence of Section 5.3 of the NGC Charter and replacing it with the following sentence:

"The Committee shall also annually review each incumbent director's past performance and skills (including, for greater certainty, at least one third of the directors must have direct skills, competency and experience in matters relevant to the exploration and development of the Company's onshore licenses and development assets in the Papua New Guinea jungle) and recommend to the Board whether such director should be nominated for re-election."

SCHEDULE D

THE RESERVES GOVERNANCE COMMITTEE CHARTER RESOLUTION

BE IT RESOLVED, as an ordinary resolution, that the board of directors of the Corporation consider and, if thought appropriate, amend the charter of the Reserves Governance Committee of the board of directors of the Corporation (the "RGC Charter") as follows:

(a) by deleting Section 4(c) of the RGC Charter and replacing it with the following:

"to review any proposed public disclosure or regulatory filings by the Corporation with respect to any reserves and/or resources evaluation and oil and gas activities and the material compliance thereof with applicable regulatory requirements and, if appropriate, make recommendations to the Board to approve or disapprove of the release or filing thereof; provided that, subject to and in further compliance with applicable securities laws, whenever the Corporation files a report disclosing a certain well location as a commercial discovery or otherwise provides disclosure in that regard, the Committee shall request the Corporation to disclose in reasonable detail: (i) the Corporation's view as to why the location is a commercial discovery, including its views and assumptions on costs of development (including the overall cost breakdown for wells and operations); (ii) likely markets for production from the discovery; and (iii) any update such discovery implies to the most recent annual resource report."

(b) by deleting Section 4(d) of the RGC Charter and replacing it with the following:

"to review and make recommendations to the Board respecting the appointment of a qualified reserves evaluator or auditor pursuant to the requirements of NI 51-101; provided that, subject to and in further compliance with applicable securities laws, the Committee shall, to the extent practicable:

(i) ensure that any qualified reserves evaluator or auditor it recommends to the Board has sufficient relevant experience in evaluating reserves and/or resources similar to the Corporation's onshore licenses and development assets in the Papua New Guinea jungle; and

(ii) provided the evaluator remains qualified in the Committee's view, maintain the same evaluator from year to year to provide a more consistent assessment of the Corporation's reserves over time."

(c) by deleting Section 4(k) of the RGC Charter and replacing it with the following:

"to review the scope of the annual review of the Corporation's reserves and/or resources; provided that in addition to complying with the disclosure requirements of NI 51-101, such annual review shall include an evaluation by the qualified reserves evaluator or auditor of any new claimed discoveries by the Corporation referred to in Section 4(c) of this Charter and the Corporation's related assumptions and development plans."

SCHEDULE E

THE MATERIAL TRANSACTIONS RESOLUTION

BE IT RESOLVED, as an ordinary resolution, that the board of directors of the Corporation consider and, if thought appropriate, amend the charter of the board of directors of the Corporation (the "Board Charter") as follows:

(a) by adding the following section after "Mandate and Stewardship of the Corporation" and before "Board Renewal" in the Board Charter:

"Approval of Material Transactions

In the event that the Corporation is a party to any transaction (a "Transaction") involving the disposition or acquisition of assets with a fair market value equal to or greater than 10% of the total book value of the Corporation's assets at that time (the "Transaction Threshold"), the Board shall submit the Transaction for approval of the shareholders by majority resolution at a meeting of the shareholders held in compliance with the Business Corporations Act (Yukon) and applicable securities laws. The Board will review and establish the appropriate Transaction Threshold on an annual basis."

SCHEDULE F

THE DISCLOSURE POLICY RESOLUTION

BE IT RESOLVED, as an ordinary resolution, that the board of directors of the Corporation consider and, if thought appropriate, amend the charter of the board of directors of the Corporation (the "Board Charter") as follows:

(a) by deleting the text of the section of the Board Charter entitled "Communication to Shareholders" and replacing it with the following:

"The Board of Directors have a responsibility to have appropriate procedures in place so that accurate, appropriate and timely disclosure is being made to the Corporation's shareholders and to the public.  Therefore, the Board must prepare, maintain in effect at all times and rigorously comply in all respects with a policy regarding effective communication with its shareholders and the public that is consistent with best corporate governance practices, provides opportunity for significant input by independent directors into Board decisions on public disclosures, and ensures that shareholders and the public are provided sufficient detailed information by the Corporation to understand fully the exploration and development status of the Corporation's onshore licenses and development assets in the Papua New Guinea jungle (the "Disclosure Policy").  On an annual basis, the Board must review (and to the extent required to comply with the preceding sentence, update) the Disclosure Policy, and report in reasonable detail to the Corporation's shareholders on the Corporation's practices and procedures in place to ensure compliance with the Disclosure Policy.  The Disclosure Policy shall be made available on the Corporation's website in addition to all other required disclosures."

SOURCE Petroleum Independent & Exploration, LLC