Ann: CEO Appointment and Funding Arrangement, page-62

On another thread, Mister S and I had a discussion about what was needed to align the interests of directors and shareholders.

I'd suggested that, in order to encourage the directors to stay on, the company should invite the directors to put in $5 million for 20% of the company with the right to be given a further 15% subject to the company meeting performance milestones. He thought that was too generous and that, as company directors, they had responsibilities under the Corporations Act to perform anyway.

Now I must be wrong about the following so please correct me.

The company had roughly 2 billion shares on issue which have now been consolidated on a 1 for 20 basis, which means that there are currently 100 million shares on issue.

Under this funding arrangement the directors, managers and Messrs Pavlovic and Palermo are going to lend OBJ $2.3 million, with an option to convert it to shares. Each of those shares will carry an option to acquire another share for the same price.

Let's say that the nominal price per share, if and when relisted, is 30c (20 times 1.5c). Let's assume that that price will drift lower in the absence of good news and that it may reach somewhere in the vicinity of 15c per share.

Let's also assume that the holders of the Convertible Notes convert their Notes to shares at about that price and also exercise the option to take up a further $2.3 million worth of shares at the same price.

That would result in them paying $4.6 million to OBJ and getting a little over 30 million shares in return or 30% of the company.

I don't know about you but I'd have been in it too had it been offered to me.