Ann: Notice of Requisition for EGM, page-19

I have copied the Letter that Drake sent to certain shareholders on 31 August. I have only become aware of that Letter through Patong’s HC post today. I have placed in Bold points made in the letter that I want to discuss (my reply in italics):

“31 August 2022

Fellow CDI holders of Structural Monitoring Systems,

It has now been a month since our first letter to shareholders, and I felt it important to update you on the current situation as it has developed over the past weeks. Since sending out our initial Letter to Shareholders on 31 July, we have had meaningful conversations with a substantial portion of the shareholder base and are confident that our resolutions at the upcoming EGM will not only pass, but will very likely will carry an outright majority of all votes outstanding. With that said, we do want to address a few potential questions regarding our newest Notice of Requisition.
For some background, we are all holders of CDIs and not the underlying shares of Structural Monitoring Systems plc (the UK company). CDIs are issued by CHESS Depositary Nominees Pty Limited, which is a subsidiary of the ASX and currently owns 100% of the shares of Structural Monitoring Systems plc, which passes on the underlying economic AND corporate governance rights to CDI holders. Whether held through a nominee custodian or directly, CDIs are meant to be treated equivalently to owning the underlying shares of SMS, a fact the current Board of Directors has been doing its best to ignore as they have repeatedly refused to call an EGM since receiving our first Notice of Requisition two months ago. The Board of Directors continues to try and find any scheme possible to avoid accountability at a meeting. As late as last night, Structural Monitoring System’s counsel questioned the authority of CHESS Depositary Nominees Pty Limited’s representative to call a meeting in an email to the ASX. Is it now the Chairman Love’s stance that a 100% shareholder has no corporate governance rights?In my opinion Drake seeking an EGM has resulted in the share price not only languishing but continuing to be under severe pressure. In saying that I had hoped and expected the Company would enter into serious and fruitful discussions with Drake to find a compromise position that not only served the wishes of both parties, but also served the best longer term needs of SMN. Instead we have public, negative arguments by both sides, for the benefit of no one particular group (although it certainly plays in the hands of any potential suitor for a cheap acquisition of the technology).Over the course of the last month, you may have noticed we have initiated two filings with ASX that show we moved shares out of our Bank of New York Mellon account (custodied at HSBC Australia Nominees) and into newly created brokerage accounts in Drake Private Investments name directly. While this process has taken longer to play out than we had hoped, it did facilitate a direct dialogue with the ASX and CHESS Depositary Nominees Pty Limited. This culminated in the issuance of a Notice of Requisition to Structural Monitoring Systems plc on 30 August 2022 by CHESS Depositary Nominees Pty Limited, the 100% shareholder of Structural Monitoring Systems plc. The Notice of Requisition is functionally equivalent to those we have filed previously and calls for the removal of Sam Wright and Bryant Mclarty from the Board. We feel these changes are an absolute necessity and of highest urgency in order to allow the company to recover its path to CVM commercialization.

The company has used every strategy to avoid an EGM in order to keep Mr. Mclarty and Mr. Wright firmly entrenched on the Board at the detriment to shareholders.

The incumbent board has demonstrated poor judgement inseeking to stall the requisitioning of an EGM, thus resulting in a negativeview of its approach to corporate governance. That in itself is quite telling (andmaybe demonstrates the naivete of Ross Love?).Make no mistake, Mr. Love’s appeal to shareholders to wait for an AGM in order to settle the Board issues is nothing more than a red herring and a ploy to buy time.

Whilst it is a means to buy time to get to an AGM IMO the aim is to try to get a more satisfactory outcome rather than Drake’s demand of US or THEM!While he claims to have opened the nomination process to shareholders, actions truly do speak louder than words.Unless we get to an AGM to consider alternative director nominations we will never know what might happen at an AGM.There has been no peace offering made from the current Board of Directors.We have not been privy to what discussions, if any, have been forthcoming from the Company to Drake since the latest series of requisitions began. Thus we don’t know if there were any other options put on the table to Drake.We control almost 18% of the company, and they continue to refuse to allow our previously agreed upon seat at the table. It is also notable that neither Mr. Mclarty nor Mr. Wright have announced their intentions to step aside.Certainly it would have been reasonable to expect that BM and SW would indicate a preparedness to step aside in the event that the AGM was successfully reached with new nominations due as per Ross Love’s proposal. (In any event it doesn’t take Einstein to realise that both director’s days are numbered, whether it goes to an EGM or AGM IMO!).and allow other nominees to join the Board at the AGM. Assuming the company would like to add qualified Board members, does Mr. Love really feel a six or seven seat Board is appropriate at this moment in time?IMO there is no need for more than 4 directors at this point, until the size of the business increases appreciably.The company is also under no obligation to hold a meeting in November, as evidenced by the 2021 meeting being held on 24 January 2022. Further delays should be expected given this Board’s recent track record.
That is conjectural and actually I doubt would be the case – its an emotional comment by Drake IMO. The AGM in January 2021 reflected the issues brought about by Covid.Our valid Notice of Requisition was filed two months ago, meaning the EGM should have been held already and SMS would be moving forward under proper and representative Board leadership right now. Instead, the company hired specialty counsel to violate shareholder / CDI holder rights as a way of entrenching certain members of the current Board. While the timing of the upcoming EGM may approach the proposed timing of the AGM, we do not believe the company should get a free pass for refusing to play by the well-established rules of corporate governance. Additionally, the EGM and AGM, as currently constituted, will have to very different slates of Resolutions and are not reflective of each other.

It is truly striking that we needed to get Structural Monitoring Systems’ regulators (i.e., the ASX and ASIC) involved to make any progress on enforcing our rights, and it remains to be seen how SMS will respond to a Notice of Requisition from their 100% shareholder. It is time for the Board of Directors of Structural Monitoring Systems to stop playing games with shareholder capital by way of high-priced attorneys employed to squash shareholder rights. As an almost 18%, shareholder we are paying over $1 in every $6 dollars in legal fees to fight ourselves, in addition to the cost of our own counsel. This ridiculous waste of corporate resources needs to end, and the only remaining expenses should be the ~$30,000 (according to our counsel’s upper end estimates) to call and hold an EGM. We demand that Mr. Love and the Board make public the total amount of shareholder capital burned through legal and other expenses in order to protect Mr. Mclarty and Mr. Wright from shareholder accountability these last two months.
I agree that this ongoing spat is simply a waste of shareholders money, and a waste from where the true focus of the board and the Company’s business should be. IF I don’t trust anyone, it is lawyers who are happy to clock up the hours on wasteful and commercially non-effective issues!

Sincerely,

Anthony Faillace

Drake Management & affiliates”

Unfortunately if this goes to an EGM none of us retailshareholders will benefit IMO. I don’t know that we can trust either party topursue ALL our interests, and once we have voted and the decision is made, wehave to live with that outcome. Do we trust either party to do that 100% -I don’t!I wish there was a compromise that supported the Company into the future.

Some questions for Drake supporters to consider:

1.What is Drake’s longer term exit strategy?Obviously Drake won’t outline that to anyone, but its something that needs tobe carefully considered – certainly its unlikely that Drake would aim torealise value to its shareholding by selling just under 18% of the shares onissue on market. Does Drake envisage a corporate deal of some sort, is therealready one on the table? Can you trust Drake to seek out a deal that benefitsALL retail shareholders as well?

2.Will Drake commit to a fund-raising toassist the Company with its cashflows over following months? On what sort ofterms and conditions?

3.What is the benefit to having HeinrichLoechteken on board? Is it simply to have over-riding control of the board?

4.If Andrew Roberto is elected to the boardwill he be considered a beneficial holder of shares held by Drake? Does Drakeactually have a business plan for SMN?

I'm still hoping that this game of chess can be resolved without the need for the EGM, and that both parties can focus on a more positive future for the Company, to the benefit of ALL shareholders.