FYI
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Sent: Friday, 25 November 2016 10:36 PM
Subject: AGM Resolutions
Dear Athan,
My name is xxxxxxxxxxxxxxxx and I am writing to you on behalf of a small but reasonable group of shareholders and their proxies representing over thirty shareholders.
Recently I have been conversing with Chris Wood via email (cc'ing John Schultz) and I am pleased to say that our communication thus far has been pro-active in nature, cordial, honest, and to the point. Our conversation has covered a wide range of topics including investor communication, executive remuneration, raising capital and corporate governance. We have also been discussing ways to strengthen the company's online presence and image, with potential to create an online initiative that would include a number of ADRC based tutorials (for beginners and intermediates) and a forum for technical Q&A. This could be a useful mechanism not only to encourage communication between the company and its investors, but also potential ADRC customers and consumers where individuals can learn about the merits of Xped's revolutionary products and services and have their Xped tech related questions answered appropriately. The aim of this potential initiative would be to improve the worldwide community's understanding of Xped's tech including ADRC, Xerts, PING etc. with the added benefit of increasing investor, consumer and customer engagement & awareness.
In short, there have been some real positives resulting from our discussion and I am hopeful that this will continue.
However the reason for my email today, and on behalf of a number of other investors which I'll refer to as 'we', is to ask you to carefully re-consider several resolutions that are currently being proposed at this Wednesday's AGM.
Before going into further detail, I would firstly like to say that we are appalled at some of the the recent behaviour and vitriol on social media towards yourself and other members of the Board. We do appreciate that the perpetrators are predominantly current or former investors who are feeling frustrated and let down by the company after having raised some valid points with regards to company specific issues. However there appears to be a number of sadistic 'keyboard warriors' (for lack of a better term) who frequently engage in personal attacks, providing unlicensed advice and ramping on a seemingly daily basis in an effort to further their status and / or position. Their behaviour should never be condoned nor tolerated, particularly when their comments are placed in a public domain.
Resolutions in question
In addition to reading hundreds of opinions from a broad spectrum of 'online' investors and conducting a brief online poll, we have held private discussions with a number of shareholders (including Top 20 and a significant number of authorised proxies) and we have concluded that a consensus may exist (excluding the Board's voting rights) to vote down the following resolutions:
Resolution 5: Adoption Of Remuneration Report:
At this point in time we feel the employees, so identified, are extremely well compensated at this stage of the company’s evolution. There is little information to support how the salaries have been benchmarked and determined, and we believe that a great deal more transparency overall is required, including an organisational chart and the number of in-house employees. We will not be supporting this resolution in its current form as we do not believe it is in the best interests of all share holders. It is incumbent on us to point out that both CBA and CSL, two of the largest listed companies on the ASX, have had their recent remuneration reports receive a first strike from their shareholders. The performance benchmarks of $2.5M and $5M respectively would suggest that bonuses for revenue are largely reliant on JCT achieving its target of $3m for the year, and little to no revenue otherwise within the next twelve months. We also note that a recently appointed employee of the company has already been appropriately incentivised for the achievement of $3m this year, as per the the terms of the JCT SPA. Thus we are unclear as to why the MD and CEO should receive cash bonuses for the same achievement.
Our proposal: Management and the Board Of Directors agree to withdraw all said cash bonuses as set out in the company announcement dated 26th October, and provide shareholders with further information to support how the baseline salaries were benchmarked and determined.
Special Resolutions 7 & 8: Approval to issue shares Shares to Dalext Pty Ltd and MMEYE LLC
Whilst we firmly believe in incentivising staff to perform over and above what is expected from their base remuneration, we cannot support these resolutions in their current form. For a company that has yet to generate any income from the core technology of its business, we believe it is totally unreasonable to include revenue that has been gained by acquisition, as is proposed in this case. If the revenue targets were increased significantly and the revenue from non ADRC based technology was excluded i.e. JCT, then we would be happy to support a reasonable proposal. But to approve 100 million loan funded shares at an issue price of $0.044 in addition to the proposed cash bonuses is, in our view, completely unreasonable at the present time. We also have the view that providing incentives for capital raising initiatives can lead to a potential conflict of interest and therefore should be excluded completely. Finally, it seems odd to us that an employee (within the company) who has the responsibility for raising capital as required, is incentivised for doing so. i.e. Is this not a major function of the CEO or any other position as per standard public company practice?
Our proposal: Management and the Board of Directors agree to withdraw both Resolutions 7 & 8 prior to the AGM, and until such time that appropriate revenue targets can be set and met. As these are Special Resolutions, we are mindful that both resolutions require a 75% or more majority to be passed and that the Board of Directors are ineligible to vote in this instance.
Resolution 12: Ratification of issue of (30 million) Seneca Options
We will not be supporting this resolution with an exercise price of only $0.05. We feel that somewhere closer to $0.10 would seem more appropriate, given all the good news and value adding being proposed in recent announcements, than the current proposal of issuing shares at a below average market price (VWAP) since re-listing.
Our proposal: Withdraw the resolution prior to the AGM and until such time that an appropriate target can be set.
Resolution 13: Ratification of issue of (10 million) KTM Capital Shares
We cannot support this resolution at this time due to the lack of information in the Explanatory Memorandum i.e. that adequately explains the payment of the shares to KTM Capital. Please confirm what KTM have been paid already (including any cash payments resulting from the appointment as Lead Manager to the Prospectus, as announced on the 18th January, 2016) and also what value did they contribute to the company in their brief time with Xped? We are also concerned that in less than twelve months Xped have engaged three different corporate advisors.
Our proposal: Withdraw the resolution prior to the AGM and until such time that a full explanation of KTM's contribution is outlined.
In summary and given our collective views, we sincerely hope that yourself and the Board will re-consider the appropriateness of the above resolutions at this time, and we trust that any resolutions that need to be revised can be included in the proposed EGM.
We look forward to meeting you all at the AGM.
Kind Regards,
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