After speaking with Mr. Selke on January 31, 2013, VN Capital advised Ceres that it would delay requisitioning a special meeting until February 28 to provide Ceres' Board time to respond to the issues raised in VN Capital's letter.
Ceres' Board established a special committee on February 5, 2013 and responded to VN Capital in a letter dated February 21, 2013. Ceres' letter failed to adequately respond to VN Capital's concerns. On March 6, 2013, VN Capital issued a press release announcing the requisition of the special meeting of shareholders and highlighting its concerns that the excessive fees paid to Front Street depress Ceres' stock price because the market feels that Ceres is being run for the benefit of Front Street and not Ceres shareholders. VN Capital called for (i) the termination of Ceres' management agreement with Front Street and (ii) Ceres to adopt a dedicated internal management team to run the company independent of Front Street, ensuring a clean, transparent and accountable financial record.
On March 8, 2013, Front Street issued a press release acknowledging VN Capital's concerns and stating that it would examine all possibilities with respect to moving Ceres forward.
On March 21, 2013, VN Capital provided a proposal to Ceres entitled "A New Vision for Ceres Global Ag Corp. - An Operating Company With An Operating Company Structure". VN Capital proposed:
c. The Ceres' Board announce a transition period to a "new Ceres".d. By April 15, 2013, Ceres reconstitute its Board to a "Transition Board" consisting of (i) the five current directors, (ii) one new director, being Mr. Vanasek, and (iii) three new independent directors not affiliated with Front Street.e. The Transition Board would establish a search committee to identify a dedicated internal chief executive officer and chief financial officer, targeting their appointment for September 30, 2013. The compensation for these officers would be based on market comparables.f. Upon appointment of the new chief executive officer and chief financial officer, the management agreement between Ceres and Front Street be terminated. Front Street would receive a termination fee, negotiated by an independent committee of the Transition Board, in the form of cash and stock options.g. The Transition Board would undertake a strategic review with respect to, among other things, organizational structure, capital allocation and goals and compensation for the management team.h. By December 31, 2013, the Transition Board be reconstituted as a "Permanent Board" consisting of (i) Mr. Selke as Chairman, paid as per comparable norms, (ii) the new chief executive officer of Ceres, and (iii) three independent directors from the Transition Board not affiliated with Front Street (each of Messrs. Little, Parniak, Heimbecker and Vanasek would resign).i. VN Capital and Front Street agree not to oppose the Permanent Board for an agreed number of years.j. Ceres reimburse VN Capital for incurred legal and other expenses, estimated to be $35,000 and in any event to be capped at $50,000.
VN Capital believed that at the end of the transition period the new Ceres would have a dedicated full-time management team, transparent SG&A costs, a conflict-free governance structure, appropriate, shareholder-focused stewardship and a new lease on life, free from its past as a failed closed-end fund with a hedge fund fee structure.