Ann: Application to transfer Uley Graphite Mine, page-9

Most litigation results in a settlement prior to going to court - we can only hope that SER can force a better deal than is currently on the table. The secured creditors and directors (resolutions 6 & 7) are given highly favourable treatment by getting the $0.00252 deal (including expenses they endorsed from the secured loan facility), the rest of us are the ones suffering (not the Directors - largely appointed by Chimaera/Lycopodium, who get $0.001 - even better than the secured creditors). The secured creditors obviously think they have us over a barrel. My support is completely behind SER - I would prefer to end up with nothing than accept this deal; it's simply unfair.

We may end up with a better deal if whole the lot was liquidated; at least then secured creditors (Chimaera) would only get what they could from liquidated assets at Uley - they are not a miner so would have to sell it to someone else (maybe SER) to operate.

Tony Harbrow, Thornton Group (Australia) Pty Ltd and Robert Mencel get 1/10th of the secured creditors ($0.0252); other unsecured creditors get slightly better at $0.016 (i.e $8m). Then (the secured creditors who own enough for a special resolution (i.e above 75%) want to be able to issue a further 15% (under ASX rule 7.1 - resolution 5) to dilute us further.

They do not define the amount of money they wish to raise under schedule 2 but put up $4.5m to give them 89.7% (enough for a special resolution). Robert Mercel said on 4/3/2016 that the company needed $18m (less the then current secured debt of $6.3m) this means they need at another $12m (i.e a lot more than $4.5m shown above for addressing the capital structure - sch 2). To me that implies immediately after the AGM they are going to use the now approved 15% (under ASX rule 7.1) to issue further shares "without shareholder approval" to dilute us so that existing holders and unsecured creditors have less than 10% (i.e secured creditors greater than 90%) to trigger the compulsory purchase rules (i.e above 90%) when they will give us whatever they want for our remaining shares (likely nothing). SER says "directors of a company must not improperly use their position to gain advantage for themselves or someone else, or to cause detriment to the company" - Corps Act s.182; this is an important provision and has to be queried in this case when issuing the 15% allowed without shareholder approval (both before and after the AGM) and then setting it up for a further 15% to allow them to compulsory purchase our shares (and those of the unsecured creditors) - no doubt the directors will be looked after. It's certainly buyer beware when a company takes on a secured loan - it's a lesson to be well and truly learned.