Comments on Remainder of Board's Continued Entrenchment Actions and Recently Adopted Poison Pill
Believes Paragon Stockholders Deserve a Highly Experienced Board Whose Interests are Aligned with Stockholders'
Slate Includes Director Candidates with Significant Ownership including Paragon's Largest Stockholder and SEDC's Visionary Leader
Contends that His Director Candidates Are Best Positioned to Continue Paragon's Path to Significant Growth and Profitability while Enhancing Corporate Governance by Separating Chairman and CEO Roles
NEW YORK, NY / ACCESS Newswire / March 18, 2025 / Hesham "Sham" Gad is the largest stockholder of Paragon Technologies, Inc. (OTC PINK:PGNT) ("Paragon" or the "Company"), owning approximately 28.4% of the Company's outstanding shares. Today, Mr. Gad issued the below open letter to stockholders regarding his nomination of five highly qualified candidates for election to the Company's Board of Directors (the "Board") at the 2025 Annual Meeting of Stockholders (the "Annual Meeting").
The full text of the letter is set forth below:
Dear Fellow Paragon Stockholders:
In August of 2024, the then Paragon Board announced my removal as Chairman and CEO, a strategic plan initiative and the termination of a costly activist campaign.
Today, nearly eight months later, there has been no strategic plan delivered to stockholders and no clear plan outlined for Paragon's future. Instead, stockholders have witnessed significant stockholder money being expended on adopting and defending entrenchment devices and actions - a breathtakingly ironic situation considering Mr. Weiser cited the Company's past activist expenses as one of the reasons for the drastic management changes back in August.
Further, in late September 2024, stockholders representing approximately 53% of the Company's outstanding shares delivered signed written consents removing Messrs. Weiser and Jacobs from the Board. Rather than respect the clear directive of a majority of the Company's stockholders, the remaining then-serving Board members rejected the written consents on a technicality and the following business day Messrs. Weiser and Jacobs amended the Company's bylaws to directly impede stockholders' ability to act by written consent in clear violation of the Delaware General Corporate Law (the "DGCL"). After having to commence litigation and incurring legal expenses, Messrs. Weiser and Jacobs tacitly admitted the bylaw amendments violated the DGCL and Delaware law, and reversed their bylaw amendments. Later in December 2024, the Company, apparently under Mr. Weiser's direction, announced the appointment of three new directors and the subsequent retirement of Jack Jacobs.
Today I am writing to announce that I have nominated five uniquely qualified directors with significant stockholder alignment, product innovation, business turnaround, capital allocation and extensive industry experience for election to Paragon's Board at the upcoming 2025 Annual Meeting. This was not a decision I made lightly, as I had hoped to work constructively with the new members of the Board appointed in December 2024 and that they would not be beholden to protecting Mr.?Weiser. However, my hand has been forced, because despite the serious concerns I raised privately to the newly constituted Board regarding Mr. Weiser's apparent history of self-serving decisions and pattern of entrenchment, the remainder of the Board seems intent on continuing its current wasteful spending path defending these actions and pursuing new entrenchment actions.
The remainder of the Board's disregard for the Company's stockholders and good corporate governance was made particularly evident this week by the majority of the Board's latest decision to adopt a stockholder rights plan or "poison pill" a mere two weeks after I submitted my nomination notice. If triggered, the poison pill would significantly dilute the stock ownership of any person who acquires 10% or more of Paragon's outstanding stock (or 20% for passive investors). Worse yet, the pill can be triggered and such stockholders diluted if the Board determines a shareholder "indirectly acquired" such stock, not by buying shares, but by simply having certain agreements, arrangement or understandings with other stockholders, who when added together, would hold in excess of ten percent. I believe this second prong to be an egregious abuse of a Board's power that massively stifles stockholder communications, specifically, between any stockholder who currently owns over 10% (including myself) or between any other stockholders who currently own close to 10% - for fear that such conversations, at the Board's?determination could be misconstrued as an "understanding" that triggers the poison pill,?causing?drastic negative economic consequences for the triggering shareholders. This poison pill continues a pattern of entrenchment and disregard of the rights of the true owners of Paragon - its shareholders.?
I believe the Company's contention that the poison pill was created to protect stockholders from other stockholders seeking control without paying a control premium is simply an excuse for what the remainder of the Board really wants to accomplish - to isolate stockholders and stifle their communications, thereby restricting our ability to make fully informed decisions about the Company's future.
In my view, the adoption of the poison pill with its severe restrictions on stockholder communications is clearly the act of a desperate and entrenched Board who is more concerned about protecting their board seats than the Company's strategy or proper corporate governance. This becomes all the more apparent when considering the fact that the poison pill places little to no restrictions on the remainder of the Board's ability to communicate with stockholders, as these four directors that directly own a de minimis amount of the Company's outstanding stock are not in any real danger of triggering the poison pill. Yet still, they could always, of course, grant themselves an exemption to triggering the pill, something on which no other stockholder can rely.
This is truly unfortunate, as I have enjoyed my conversations with my fellow Paragon stockholders over the past several months as they have shared with me their appreciation for what Paragon has accomplished, but more importantly their constructive comments and views as to what would best ensure that Paragon continues to be a long-term creator of shareholder value.
I took that feedback into account when assembling my slate of candidates. To that effect, if elected, my slate of director candidates would:
Bring a new layer of independence to Board, with a majority of nominees who have been wholly uninvolved with the recent and unfortunate corporate governance controversies and litigation at the Company;
In the spirit of best corporate governance practices, intend to work to separate the Chairman and Chief Executive Officer roles and terminate the poison pill; and
Commit to not implementing any equity incentive plans. I believe that insider ownership of Paragon stock should be result from open market purchases, just as I have acquired the overwhelming majority of my shares in the open market. My nominees and I intend to implement a reasonable stock ownership commitment under which our directors would acquire Paragon shares through open market purchases.
To correct this Board's entrenched and self-serving mindset and set the Company back on the path of best governance practices, I have nominated five highly qualified individuals who have the necessary expertise and independence to seamlessly move Paragon forward. My nominees are:
David Duquette
Mr. Duquette is an experienced CEO. He is currently the CEO of Littoral Power Systems, a company he founded that designs, manufactures, sells, and installs marine energy equipment and energy projects. Mr. Duquette brings extensive experience in corporate finance, corporate law, mergers and acquisitions, asset management and capital allocation.
Extensive Experience Managing a Cyclical Business Across All Phases of Growth: Prior to his current role as CEO, Mr. Duquette served as Executive VP and General Counsel at Semandex Networks, Inc., a software firm that develops semantic database applications for intelligence, defense, and financial sectors that he helped successfully navigate during the financial crisis in 2008.
Experience Selling Products Through the Entire Sales Cycle: Mr. Duquette brings deep knowledge in design, manufacturing, selling, and installation of equipment and systems, a significant value add to our automation business.
James Kaufman
Mr. Kaufman is a highly seasoned financial executive that will bring a positive track record of value creation, an independent voice, as well as strategic change.
Finance and Capital Markets Expertise: Mr. Kaufman has over 20 years of experience as Senior Partner at Ernest Young where he was involved in some of the firms most significant projects in Latin America and the U.S, including one of the largest IPO's in U.S history and the largest ever utility IPO in American Water Works. Prior to that, Mr. Kaufman served as Director of Group Audit at Diageo plc.
Elodie Leoni
Ms. Leoni is an inspiring and dynamic leader with significant experience in project management, process optimization, and resource management that will bring a fresh, independent voice to the Boardroom.
Experience Driving Organizational Change: Ms. Leoni has nearly a decade of experience managing cross-functional teams, implementing and improving workflow efficiencies and fostering collaboration among global stakeholders.
Expertise in Leveraging Consumer Data and Insights to Drive Growth: Ms. Leoni has a proven track record of analyzing consumer insights to refine client experiences and optimize growth marketing strategies for a worldwide professional organization operating in 186 countries worldwide. She helped lead a series of groundbreaking initiatives which have significantly contributed to her organization's growth and innovation.
Ronell Rivera
Mr. Rivera is the current President of SEDC, Paragon's largest and most valuable subsidiary with an outstanding record of value creation and has extensive experience building and scaling high-performing businesses.
Proven Value Creator with Deep Knowledge of SEDC: Mr. Rivera founded and established SEDC in 1997 and he has overseen multiple turnarounds at SEDC. After Paragon acquired SEDC in 2016, Mr. Rivera has more than doubled annual revenues to nearly $120 million1 and delivered a consistent track record of growing profitability.
Strong Alignment with Stockholders: Mr. Rivera has steadfastly represented Paragon stockholders' interests by safeguarding and managing SEDC, widely viewed as one of the most efficient and highly regarded technology products distributors in the region with one of the strongest profit margins amongst its peers. Mr. Rivera also understands a stockholder's perspective, owning a 20% equity interest in SEDC, a significant financial stake on par with a large equity investment in Paragon.
Hesham Gad
Mr. Gad is a long-tenured director of Paragon and its former CEO, with a vast and intimate knowledge of the Company's businesses.
Stockholder Perspective with a Clear Understanding of Paragon's Businesses: As the former Chief Executive Officer of Paragon, Mr. Gad drove the operational and acquisition strategy decisions at Paragon. He has been instrumental in the successful reorganization of Paragon's wholly owned subsidiary, SI Systems, beginning in 2016, and the renegotiation of substantially all of Paragon's legacy contracts and overseeing and implementing Paragon's acquisition and growth strategy.
Strong Alignment with Stockholders: As Paragon's largest stockholder with an overwhelming majority of shares acquired in the open market, Mr. Gad's interests are aligned with stockholders' interests. He will not only bring a stockholder's perspective to the boardroom, but will also be laser-focused on driving value for all stockholders.
I strongly believe that my nominees' highly effective and complementary skillsets will help ensure that a refreshed, independent and deeply experienced Board will work constructively to identify the biggest and most compelling opportunities for Paragon's future growth and use those insights to enhance the Company's corporate governance to reignite the Company's growth, profitability and market value. Most importantly, this reconstituted Board will work tirelessly for the benefit of Paragon's true owners - its stockholders.
I continue to believe that it is in the best interest of all stockholders for the remainder of Paragon's Board to cease its wasteful spending through the adoption and defense of questionable entrenchment measures that seek to impede the will of Paragon's stockholders and/or restrict the free communication between stockholders to make their own free and fully informed choices as owners about the future of the Company. That is certainly the overwhelming message I have previously heard from my fellow stockholders. Clearly, with the recent adoption of the poison pill, the Board continues to go down a self-serving path that unnecessarily squanders resources to defend those who are most responsible for the current calamity. I am reviewing the poison pill and reserve all rights with respect to it and its adoption and waive none.
I look forward to letting Paragon stockholders decide the future of our Company at the Annual Meeting in summer of 2025.
Sincerely,
Sham Gad
CONTACT:
hmgad78@gmail.com
SOURCE: Sham Gad
View the original press release on ACCESS Newswire
