Ann: Notice of Extraordinary General Meeting/Proxy Form-CM8.AX, page-22

Hi Brighton, I won't suggest how to vote.

What I will say is this:

Despite being unpalatable, the problem is this is effectively a fait a compli. By that I mean we have to think of the consequence of rejecting the CN proposal.

Management have taken 6 months to arrive at this proposal, and all the while speculation about re-financing (and Track performance) have driven the SP down. Had they done a CR months ago, as oztrader points out, it would have been at a significantly higher price than now. If the CN resolutions were to be rejected then the company would have to repay the increased borrowing figure - roughly $3M - that replaced the pre-existing cash balance that was used to pay the June earn-out payment. That would leave around $1M in cash reserves, and the company would have to do a CR to raise the additional working capital (as we've seen from the figures, they would not have been able to pay the earn-out totally from free cash flow). Such a CR would be dilutive, but at least it would be like ripping off the bandaid quickly, whereas imo the CN is structured to allow pulling off that bandaid very slowly and painfully. I can say that because I have seen it before (if interested review the history of the Springtree CN that BCC - Buccaneer energy (no longer in busines) - took out in 2010 - look at the SP over the course of the following 18 months and the regular sequence of CN shares converted monthly at 95% of the 5 day vwap prior to end of each month).

So now that we are where we are (SP-wise), an alternative CR would be more costly than it would have been done 6 months ago, because it would be at a much lower price, and I question what level of support it would receive given how the SP has performed in the last 6 months.

Brighton, I note the DVL clause which limits the issue of shares each month. However if you have followed any stocks which have even a moderate level of shorting, you can see what the impact of 20% short sales can have on a SP, especially if it occurs monthly, as this would. With BCC and Springtree there was a predictable monthly cycle where the SP was pumped for the 5 day vwap period, and then pushed down as the newly converted shares were issued on to the market.

Had the conversion been a straight 30% premium to the EGM closing SP I would have been ok with that, because I could see the SP still getting to 30c within the next 12 months. Unfortunately with the "lower of" condition I anticipate one or both of the monthly pricing mechanisms will be applied to exercise conversion shares - there is absolutely no incentive for BGC not do so.

Cheers, Sharks.