These are the documents that were sent out to shareholders who were interested in requesting an EGM. They are presented here 'as is' for your reference.
A few of the details are not quite relevant now due to the rapidly changing nature of the situation however for the most part this should demonstrate the intent behind shareholder action so far...
For up to date commentary on the EGM resolutions please see the "Shareholder Action" menu.
RESOLUTION COMMENT AND EXPLANATORY NOTES
It must be clearly stated the overall objective of ALL actions being undertaken by this group of shareholders is to restore transparency and accountability to the company. To attract new investment and repair the company’s reputation in Australian markets this is a critical prerequisite.
Broadly speaking the resolutions drafted all relate to the following key objectives:
- Modify Mark Smyth’s role with the Company and remove risk by decentralising power away from one man and toward the board generally.
- Prevention or modification of the non-renounceable rights issue.
- Require the company to provide disclosure on key points relating to its projects and some of the past transactions that have been questioned.
- Update the terms of the issued options to reflect that large dilution that is in place.
- Install either one or several shareholder advocate directors.
It is important to note that by signing your name to this request for an EGM you are not committing to any particular resolution. The provisions in the Corporations Act that allow for shareholders to call a meeting and put up resolutions require that we all sign an identical letter. We have tried to word this as flexibly as possible so that no one is locked into a particular course of action. The debate can continue after the request is made but once it is made we cannot add new resolutions or change existing ones. So we have tried to cover as many possibilities as we can. If you disagree with any particular resolution you can still sign this EGM request but vote against that resolution.
Addressing the key objectives and how the resolutions are designed to achieve them:
Prevention of the non-renounceable rights issue
Whilst we are aware that the rights issue may be completed by the time of the EGM it is important to note that actions are currently being pursued to either delay, amend or stop the issue. If those actions are unsuccessful then this resolution will become a moot point and can be struck off the agenda.
If they are successful, then it places the company in a position of having to win this vote by convincing shareholders of its necessity. We are not fundamentally opposed to the rights issue, we simply wish the company to make us understand why it is necessary on these terms. If they can do so then shareholders may support it.
We have included the option for the company to do a new rights issue subject to a much smaller dilution limit in order to ensure that an avenue remain to raise working capital.
Removal (or otherwise) of Mark Smyth
Many shareholder concerns have been raised about the company placing so much power in hands of one person. Legitimate concern has also been raised as to whether the removal of Mark Smyth is in shareholder interests. We include this resolution as an option. There are a number of ways this could be achieved. We have chosen the first option as it is most in line with our objective.
1. By EGM resolution to remove him as Director. This will keep Mark in his position as CEO but remove his vote from the Board. He will continue to be accountable to the board and his skills as CEO will remain available to the company. This requires a minimum of two months notice before it can be voted upon.
2. By EGM resolution to remove him as CEO but maintain him as Director. This is not considered a good option as the service contract with Romarcam Investments Pty Ltd requires one years notice for either party to terminate. We must consider that Mark may simply resign as director in this case.
Require the company to provide disclosure to shareholders
This is directly aimed at improving transparency and giving existing shareholder confidence in the company’s actions. Several transactions and actions which have been frequently questioned have not resulted in satisfactory answers. The aim of resolutions: 3 – 7 is to require the company to make those answers available. Resolutions 3 and 4 appear quite similar however they relate to both a short term and long term outlook. We envisage that the time taken to prepare the reports required by these resolutions will vary. They have been separated into two resolutions so that a response from resolution 3 does not need to wait until the completion of resolution 4.
Update the terms of the issued options to reflect that large dilution that is in place.
Resolution 8 (NOW REMOVED BY CVI) addresses the fact that the register has been heavily diluted since the issue of options. With more dilution to come, those option holders have a vastly reduced chance of seeing their options in the money. It is of benefit to the company for them to be above the strike price before expiry to encourage take up thus providing additional funds to the company. The new exercise price of 4c has been calculated based upon the approximate dilution expected by the time of the EGM from the time the options were issued.
When the options were listed, 290,460,848 shares were on issue, compared to 498,053,228 as at November 7th 2008. Shares have more than doubled in number issued, with more dilution expected from capital raisings. Assuming a 100% further dilution this represents an almost fourfold increase in issued shares since options issue.
Install from 2 to 4 shareholder advocate (non-executive) directors.
Resolutions 9 – 12 (NOW 8 to 11) permit the actual appointments. Special Resolution 13 (NOW 12) is a constitutional change that will enable these appointments to be more effective.
The purpose of appointing our own directors is primarily to have shareholder advocates inside the company where they will have the necessary access to understand fully the company’s activities. This goes toward our primary objective of restoring a public image of accountability to the company. Secondary to this, and only in the event that enough Directors are elected, is to give the shareholder advocates more power to veto a board action deemed to be not in the shareholders interests, however, we have capped the maximum number at one less than a majority such that a successful veto vote cannot be exercised by them without the support of an existing director.
Two directors who work well as a team can be supportive of each other, and the nominees have the joint skills to carry out all necessary tasks efficiently. More than two voted in means spreading the load further, with swifter reporting back to shareholders.
In putting this strategy together we must consider several important factors:
- That some shareholders may be comfortable with two directors and some will prefer more.
- That these are shareholder advocates, not professional Directors and as such their role is a more passive one. They will leave the operation of the company to the professional Directors. They will use their rights as Directors to examine internal company documents in order to satisfy themselves that there are reasonable answers to major shareholder concerns and if not, act to ensure the company informs shareholders. Otherwise they will not interfere in any way with the internal operations of the company. Only in the most extreme circumstances will they act.
- That public credibility must be maintained. We do not wish Cityview to be publicly perceived as being controlled by inexperienced Directors. Thus we have capped the maximum number at one less than a majority such that a successful veto vote cannot be exercised by them without the support of an existing director. We hope by limiting their power their role can be more easily understood to be passive.
- That these directors must be perceived to be acting on behalf of shareholders and that these appointments will not place undue financial burden upon the company. As such and considering the more passive role they will take, they have all agreed to be appointed for a minimal level of remuneration. Some remuneration is fair and reasonable for their time; however it is reduced partly in recognition of their passive role and partly as a symbolic gesture. The amount proposed is $12k/annum which compares to the current Director fees of $30k/annum. The candidates may choose to take part of this remuneration as scrip to further demonstrate their commitment to the company’s success.
Taking all of those points into account the resolutions have been written such that each shareholder can vote for 2,3 or 4 Directors. We ask that if you do not wish to vote for all of them that you vote yes for Director appointment resolutions 9, 10 and 11 (NOW 8a and b,9 & 10) from the top of the list down. This will avoid spreading votes around and ensure that each Director receives the maximum possible number of votes.
The appointment of all Directors excepting the first two on the list is temporary for twelve months. If it is later thought necessary to extend this term it can only be done if another EGM is called (or resolutions added to an AGM) and shareholders are prepared to support it. Again this is to establish the point that these appointments are for the purpose of bringing the company back to a culture of accountability. It is envisaged that ultimately these directors will be replaced with independent professional company directors if such can be found to take on the role.
Special resolution 13 (now 12) is to ensure that a Director can participate in a board meeting by telephone in the event they are unable to travel to a meeting in time. It also prevents the Board from withdrawing consent to attend via telephone without allowing adequate time for the Director to travel to the Board meeting location.
What if the rights issue is concluded before the EGM can be called?
We are pursuing several avenues to have the rights issue delayed or suspended. If these fail we still believe an EGM should be called. Whilst our resolutions may have a lesser chance of passing under that scenario it will still provide an opportunity to ask some of these questions. The very act of management opposing requests for disclosure in a public vote raises questions about accountability that should attract significant attention. We believe the management will not want this sort of attention and may prefer to provide shareholders the disclosure that they want. There are many possible courses open to us through this EGM if the rights issue cannot be suspended. There can be no question of management claiming publicly that they are unaware of the critical transparency issues the company faces. That alone should bring pressure to improve the state of affairs in that respect.
