Crystallex International

I simply don't like the way it way put out there that without the 10% they may leave and hurt our case.

They didn't have the guts to say that they would leave if not given the incentive plan. The only specific mention I can find in the documents filed is the comment in the engagement letter from KRY's attorneys to the alleged neutral party (attorney Swartz) that "potential financing sources" "during the course of re-financing discussions" "expressed the desire to have management and directors sufficiently financially aligned with the corporation so as to incentivize them to remain with Crystallex and pursue the arbitration vigorously."

The so-called "potential financing sources" were not disclosed. That was the first problem with the justification for an incentive plan. If the basis was that management was going to leave the company if they were not given an incentive plan, then make sure that the underlying premise - that management will leave the company if not incentivized - is true. You do that by having Swartz, who was given the authority to conduct his own investigation, question management and ask them if it's true that they would leave the company if not given an incentive plan. But that was never done here so we don't know as a fact that they would leave the company if not given the plan. The second thing Swartz needed to do, which he did not do, was to ask management, assuming they said they would leave, what type of incentive they required - 100,000 shares, 1 million shares, 2% of the award, etc. He never did this because he never even asked if they really required an incentive plan. Once Swartz did these things, and only then, did he need to determine what type of incentive plan would be appropriate. But he never did that either. Instead, all he did was to accept as a reasonable starting point a previous refinancing proposal in which it was proposed that management would get 10%. I assume that if some previous proposal had given them 50% plus the first born of the shareholders' wives, Swartz would have agreed to that too. The fact is that some previous proposal to which no one but a potential financier and management were parties should have been irrelevant to a determination as to what was fair.

There is further proof that this whole thing was a sham. To mollify shareholders, it was proposed that management would not get any of the incentives until after the award was made, at which time the Compensation Committee would then and only then decide what they should get, based upon many factors. But this Compensation Committee, if I am not mistaken, consists only of three of the existing Directors of the company, none of whom are independent in any sense and all whom are close friends of Fung and who, I am virtually certain, got their jobs as Directors because of Fung and thus who are beholden to him.

The idea that management needs incentive to further perform their duties is ludicrous. They are paid to do their duties and they have been handsomely paid for years with generous salaries and generous options. If they plan not to perform their duties further unless they receive a package of blackmail, then let them leave without this 10%, and if Fung's testimony is necessary by way of affidavit or live testimony for KRY's Reply to Vz's Rejoinder in the arbitration proceedings, then subpoena him or whatever the equivalent is in ICSID proceedings, and publish for the world their statements. Their reputations would go done the drain. And if a skilled company President is then needed to negotiate a settlement with Vz, assuming Vz in the course of the arbitration wants to settle, then hire some great retired mining company exec or retired major corp exec for a million and let him and Freshfields deal with counsel for Vz in trying to reach a settlement.

What has happened here is that the company has had their blackmail request conveyed indirectly to Swartz through their attorneys so that they can have Judge Newbould approve the compensation plan rather than wait until after the award and ask the shareholders to approve it, as would be normal. Why? I have to assume because they know the shareholders would never give them millions, let alone 70-124 mil, for doing nothing but their jobs regardless of the outcome as that outcome would be related to the skill of their attorneys and not to any skill they have exercised.