TPL 2.0 : Investor Preferences

This thread is pinned to the top.  The list below is based upon the comments from our original c-corp conversion open thread.  The list remains very much open to edits.  Comments and suggested edits welcome.

Investor Preferences in C-Corp Conversion:

  1. No dilution.  Share issuance of any kind should be prohibited in the corporate charter.  Any changes to this policy should require a significant majority vote. 
  2. Share repurchases should remain the primary method of returning capital.
    1. If a dividend is necessary, it should be regular and consistent.
  3. Board members, including originating board members, must be voted upon by shareholders.  Board terms should be of reasonable length.
  4. Board should be of reasonable size so as to function healthily at all times. Independent directors should outnumber executive members. 
  5. Remain in “business of going out of business”.  Primary duty of corporation is return of capital via royalty collections and asset sales.
    1. State limitations on additional business activity such as new business ventures and additional land/royally acquisitions.  
  6. Executives shall be required to purchase shares via dedicated cash compensation and/or company loans to ensure that shareholder and management incentives are aligned.  Executives should be required to attain and maintain some material level of ownership. 
  7. Executive compensation should be simple and oriented towards long term results.
  8. Stock shall be split regularly so as to facilitate liquidity for repurchases.
  9. Transparency in reporting of results and material events should be commensurate with those expected of a $5B+ publicly traded corporation.
  10. Corporation must hold an annual meetings and be regularly open to investor communcation.

The list above was kept short deliberately.  Spin-offs, head count, and other business decisions (in my opinion) should be the responsibility of directors and management with interests and incentives that are aligned with those of shareholders (TPL 2.0).

Settlement Agreement

Docs posted on Edgar.  Some things that caught my eye below.  Big things to me are 1) 5 of 7 votes are needed for a decision or recommendation which puts concerns around the perceived 4/3 split to rest and 2) montly updates to investors.


Committee. The Committee will continue to be governed by its charter dated June 23, 2019, as amended and restated on July 30, 2019 (the “Committee Charter”). The CEC shall complete its work by December 31, 2019 (the “Committee Period”), unless the CEC determines otherwise. All decisions and recommendations of the Committee shall require the affirmative vote of at least five of the seven members. Due to the legal obligations of the Trustees as fiduciaries, the Committee’s recommendation will be non-binding on the Trustees and the Trust. If the Committee recommends a plan of Conversion (as defined below) by the end of the Committee Period, the Trustees will have a time period of 30 days following the receipt of such recommendation to decide whether to implement such plan of Conversion (such time period, the “Decision Period”).

Settlement Agreement

The Committee shall be comprised of a maximum of seven members. The members of the Committee shall be: (i) John R. Norris III; (ii) David E. Barry; (iii) General Donald G. Cook, USAF (Ret.); (iv) Dana McGinnis; (v)  Eric Oliver; (vi) Murray Stahl; and (vii) Craig Hodges. The Committee members shall serve for so long as the Committee is in existence or until their earlier resignation or death, in which case the remaining members of the Committee shall as promptly as practicable select a replacement with the approval of five Committee members then serving and consent of the Trustees (such consent not to be unreasonably withheld, delayed or conditioned). Mr. Norris and Mr. Barry shall serve as co-chairmen of the Committee (“Co-Chairmen”). The Co-Chairmen shall coordinate all their activities in consultation with other Committee members. The Committee may remove any member of the Committee (other than the Trustees) with the affirmative vote of five of the other Committee members if the Committee determines, in good faith, that reason exists to remove such member.

All members of the Committee agree to promptly confer and, if necessary, submit to mediation in front of a JAMS mediator in Dallas, Texas, within 20 days of any disputes arising out of or relating to this Charter.

Conversion Exporation Committee Charter

Without the prior written consent of the Trust, neither the Committee nor any of its members shall make any public announcements or other disclosures relating to the Committee and its work that has not previously been disclosed, including, but not limited to, discussions, recommendation, work product, and materials. Beginning in September, the Committee shall provide a report of its work to shareholders on a monthly basis provided that the Trustees approve such report (such approval not to be unreasonably withheld). Upon completion of its work, the Committee shall provide a final report to shareholders with the Committee’s recommendations provided that the Trustees approve such report (such approval not to be unreasonably withheld).