UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
Paradigm Advanced Technologies, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 33-0692466
(State or Other Jurisdiction of (I.R.S.Employer Identification
Incorporation or Organization) Number)
5140 Yonge Street, Suite 1525, North York, Ontario, Canada M2N 6L7
(Address of Principal Executive Offices) (Zip Code)
(416) 222-9629
Issuer's Telephone Number
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
Common Stock, Par Value $0.0001 Per Share None.
Securities to be registered pursuant to Section 12(g) of the Act: None.
<PAGE>
PART I
Item 1. Description of Business.
Paradigm Advanced Technologies, Inc. (the "Company") is a developmental
stage company which was formed to act as a marketer and distributor for digital
video surveillance security software products. The Company was incorporated in
Delaware on January 12, 1996, and on the same day purchased all of the right,
title and interest in the security and surveillance products business
established by Paradigm Advanced Technologies Joint Venture. The Company's
headquarters are located at 5140 Yonge Street, Suite 1525, North York, Ontario,
Canada M2N 6L7, and its telephone number is (416) 222-9629.
The Company has entered into a Distributor Agreement with Alpha Systems
Lab, Inc. ("ASL") of Irvine, California, pursuant to which it has acquired the
exclusive right to purchase and distribute certain digital video security
products in Canada, and the non-exclusive right to purchase and distribute them
worldwide. No governmental approvals are required for the distribution of these
products. ASL is currently the Company's sole supplier. The Company's initial
efforts will center on two of ASL's products.
The first product, Videobank, is a software-based video surveillance
system. This differs from conventional, hardware-based video surveillance
systems, which rely upon video cassette recorders (VCRs), in that images are
digitally recorded and stored on, and retrieved from, a computer's memory
instead of a video cassette tape. This eliminates many of the problems
associated with operating a VCR-based security system, such as storage and
preservation of video cassette tapes and the possibility of mechanical failures
and breakdowns of the VCR or other components of the system. It also introduces
a measure of efficiency in improving the system, since improvements can be made
simply by implementing upgrades of the software, instead of having to purchase
and install new hardware components. Additional image storage capacity can be
also added simply by augmenting the computer's memory. The software presently is
designed to operate on a conventional 486 computer and, with its icon-driven
user interface, is designed to be "user-friendly."
The second product, Videobank-Remote, is a predominantly software-based
system which allows images captured by Videobank to be digitally transmitted
over conventional telephone lines. The Company will market and distribute the
software component of this system. Like Videobank, Videobank-Remote operates on
a conventional personal computer and modem. Its software is also designed to be
user-friendly, employing an icon-driven, Windows-based graphical user interface.
By transmitting over telephone lines, it obviates the need to link camera sites
to the remote observation post by installing coaxial cables. Advances in
computer technology have made possible Videobank-Remote and its advances over
existing telephone transmission technology in terms of clarity of image,
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transmission time, and cost of transmission. Videobank-Remote has demonstrably
the best image per transmission time of any existing telephone-based system.
To the Company's knowledge, all of its competitors in the marketplace for
video surveillance security systems offer hardware-based systems. There are
approximately twenty companies which manufacture video transmission systems for
security applications. Though some may have developed software products for use
in video security and surveillance products, the competitors' products are
primarily hardware-based. Many competitors' products are also complex and less
reliable than Videobank. To the Company's knowledge, none of its competitors
have developed a software-based product with the capabilities of Videobank. The
Company also believes that it can offer its products for a substantially lower
price than those of its competitors.
The Company currently has seven full-time employees and two part-time
employees. The Company will conduct its distribution and marketing efforts
through its manufacturer's sales representative network, which consists of seven
independent companies in the United States and Canada with which it maintains
contractual arrangements. These seven companies each employ between three and
ten sales personnel.
Item 2. Management's Discussion and Analysis or Plan of Operation.
In connection with its organization, the Company acquired a security and
surveillance products business established by Paradigm Advanced Technologies
Joint Venture, including the purchase and distribution rights pursuant to the
contract with ASL. During the succeeding months, it raised approximately
$1,000,000 in capital through two private placements completed in accordance
with Rule 504 of the Securities and Exchange Commission. It is currently
conducting an additional private placement in accordance with Rule 505 of the
Securities and Exchange Commission, in which it intends to raise a minimum of
$275,000 and a maximum of $1,375,000 in capital. This has satisfied the
Company's cash requirements for the first six months after its organization.
However, management estimates that the total amount of "seed capital" required
for its venture will be $2,500,000, and anticipates that the Company may need to
raise additional capital during its first twelve months. It anticipates doing so
through additional private placements of unregistered shares of its Common Stock
conducted under an exemption provided by the Securities Act of 1933 or by the
rules of the Securities and Exchange Commission.
The Company's initial efforts for its first twelve months will center on
the marketing and distribution of Videobank and Videobank-Remote. During the
first three months, the Company solidified its manufacturer's representative
network and began the process of creating its advertising and promotional
materials, customer database, and public relations campaign. It also
concentrated on generating initial revenues from existing relationships with
companies which were already familiar with the Company's products and expressed
a willingness to buy. For the next twelve months, the Company will concentrate
on consolidating its distribution networks, cementing its client relationships,
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and establishing an image and brand-name recognition for the Company in the
marketplace in which it competes.
During its first twelve months, the Company will also explore possibilities
of entering into additional marketing and distribution relationships with
manufacturers and developers of software-based video surveillance systems. This
would diversify the suppliers of the products which the Company markets and
distributes.
The Company ultimately intends to market its own proprietary software-based
video surveillance products, and is currently completing the development of its
first product. The Company does not currently have any intentions to acquire any
significant plant or equipment. It may increase the number of its employees as
it further solidifies and consolidates its distribution networks.
Item 3. Description of Property.
The Company's corporate headquarters are located in North York, Ontario,
Canada in leased facilities consisting of approximately 1,000 square feet of
office space. This facility is leased on a month-to-month basis for $600
(Canadian) per month.
The Company's technical support and distribution office is located in
Irvine, California. This office is in a leased facility consisting of
approximately 1,560 square feet. The monthly rent is $1,404. The lease expires
on February 28, 1997, and contains a renewal option for an additional one-year
term.
The Company's marketing office is located in a leased facility in Mesa,
Arizona in a facility consisting of approximately 414 square feet. The monthly
rent is $495. This facility is leased for a one-year term expiring on January
30, 1997.
As its business may permit or require, the Company may add to its staff or
facilities. The Company does not presently own any real estate. The Company has
no policies regarding investments in real estate, securities, or other forms of
property.
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Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) The following table details the security ownership of the only person,
other than directors or officers of the Company, who is known to be the
beneficial owner of more than five percent of the Common Stock of the
Company:
Beneficial Current Percent
Ownership of Percent Options of Class if
Name and Address Common Stock of Class Granted Fully Exercised
Sarah Casse 1,375,000 10.8% 1,875,000 15.7%
63 Otter Crescent
North York, Ontario M5N 2W7
(b) The following table details the security ownership of each of the Company's
directors and executive officers:
Current Percent
Ownership of Percent Options of Class if
Name and Address Common Stock of Class Granted Fully Exercised
Jack Y. L. Lee, Chief Executive
Officer 1,375,000 11.7% 1,875,000 15.7%
28 Old Park Lane
Richmond Hill, Ontario L4B 2L4
David Kerzner, President 2,337,500 19.8% 3,187,500 26.7%
120 Arnold Avenue
Thornhill, Ontario L4J 1B7
C. Richard Brogan, Vice President 104,000 0.9% -- 0.5%
of Marketing
3242 S. Birchett Drive
Tempe, Arizona 85282
Jacob Kerzner, Director -- -- 562,500 2.7%
148 Faywood Boulevard
Downsview, Ontario M3H 247
All directors and executive 3,816,500 30.0% 5,625,000 27.2%
officers as a group
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth information regarding the directors and
executive officers of the Company.
Name Age Position
Jack Y. L. Lee................ 46 Chief Executive Officer and Secretary-
Treasurer and Director
David Kerzner................. 35 President and Director
C. Richard Brogan............. 56 Vice President for Marketing and Sales
Jacob Kerzner................. 38 Director
Jack Y. L. Lee has been Chief Executive Officer and Secretary-Treasurer of
the Company since its inception. He qualified as a Chartered Accountant in 1974
while employed with a major independent accounting firm. Since 1987, he has been
a syndicator for Syndicat Management Inc., a company which specializes in the
syndication of real estate and other investments. He currently serves as its
President. Mr. Lee also has been a director of the Company since its inception,
and is currently holding office as a director until the first annual
shareholders' meeting or until his successor has been elected and qualified.
David Kerzner has served as President of the Company since its inception.
From 1990 to 1994, he worked in the Product and Market Development section at
ISTI Corporation/Intertec Security, where he participated in the research and
development of an integrated remote video and audio surveillance system. From
1987 to 1992, he was the owner and operator of Interactive Security Systems
Inc., a full-service electronic security company. Mr. Kerzner also has been a
director of the Company since its inception, and is currently holding office as
a director until the first annual shareholders' meeting or until his successor
has been elected and qualified.
C. Richard Brogan has been Vice-President for Marketing and Sales of the
Company since its inception. He served as Sales Manager for Robot Research, Inc.
from 1993 to 1995, where he performed marketing for video processing equipment
and PC-based telephone-line transmission systems for use with closed-circuit
television systems, and as Director of Sales and Marketing for Sentry Products
from 1989 to 1993, where he performed marketing for personal duress systems
employing ultrasonic technology.
Jacob Kerzner has served as a director of the Company since its inception,
and is currently holding office as a director until the first annual
shareholders' meeting or until his successor has been elected and qualified. He
founded Nightingale Healthcare Inc., a privately owned hospital and nursing home
staffing company, in 1986, and currently serves as its President and Chief
Executive Officer. He is the brother of David Kerzner.
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Item 6. Executive Compensation.
The following table discloses the amount and kind of annual compensation
payable to the Company's three executive officers, including its Chief Executive
Officer, during the fiscal year ending December 31, 1996:
<TABLE>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation
<S> <C> <C> <C> <C> <C> <C>
Jack Y. L. Lee 1996 $100,000 0 0 1,875,000 0
Chief Executive Officer and
Secretary-Treasurer
David Kerzner 1996 75,000 0 0 3,187,500 0
President
C. Richard Brogan 1996 80,000 0 0 0 0
Vice President for Marketing
and Sales
</TABLE>
The following table contains information concerning the grant of stock
options to the Company's three executive officers, including its Chief Executive
Officer, during the fiscal year ending December 31, 1996. No options have yet
been exercised:
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price per Share Date
Jack Y. L. Lee 1,875,000 37.0% $0.05 1/12/01
Chief Executive Officer
and Secretary-Treasurer
David Kerzner 3,187,500 63.0% $0.05 1/12/01
President
C. Richard Brogan 0 -- -- --
Vice President for
Marketing and Sales
Total................. 5,062,500 100.0%
Directors of the Company do not receive any stated salary for their
services as directors or members of committees of the board of directors, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Directors of the Company may also serve the
Company in other capacities as an officer, agent or otherwise, and may receive
compensation for their services in such other capacity.
The Company has entered into a Consulting Agreement with Jack Y. L. Lee
which defines the terms of Mr. Lee's employment with the Company. Pursuant to
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this agreement, Mr. Lee is to serve as the Company's Chief Executive Officer and
also as a Director for a 10-year term commencing on February 1, 1996, with
primary responsibility in the area of product development and marketing within
the video security marketplace in the United States, Canada and abroad. The
agreement may be terminated early in the event of the resignation, death or
disability or other incapacity of Mr. Lee. At the end of the agreement's term,
it may be extended by the mutual consent of the parties for further five-year
terms, with Mr. Lee's compensation to be renegotiated at the time of each
extension. The agreement also contains provisions regarding confidentiality of
information, ownership of inventions and patents, non-competition, and
non-solicitation.
The Company has entered into a similar Consulting Agreement with David
Kerzner, pursuant to which Mr. Kerzner is to serve as the Company's President
and also as a Director for a 10-year term commencing on February 1, 1996, with
head office and product development responsibilities. Like the agreement with
Mr. Lee, this agreement may be terminated early in the event of the resignation,
death or disability or other incapacity of Mr. Kerzner, and may be extended at
the end of its term by the mutual consent of the parties for further five-year
terms, with Mr. Kerzner's compensation to be renegotiated at the time of each
extension. The agreement also contains provisions regarding confidentiality of
information, ownership of inventions and patents, non-competition, and
non-solicitation.
The Company entered into an agreement with Sarah Casse on January 12, 1996,
pursuant to which Ms. Casse is to provide advice and/or assistance with respect
to the Company's use of technology, with respect to the preparation and
implementation of the Company's business plan; and with respect to marketing
matters. In consideration for these services, the Company granted Ms. Casse the
options to purchase up to 1,875,000 shares of its Common Stock which are
disclosed elsewhere in this registration statement. See "Item 4. Security
Ownership of Certain Beneficial Owners and Management" in Part I of this
Registration Statement.
The Company has entered into a consulting agreement with Industry Marketing
Service, a corporation located in Tempe, Arizona of which C. Richard Brogan
serves as Principal. Pursuant to this agreement, Industry Marketing Service is
to market the Company's products in the commercial and industrial security
market, and to administer the Company's advertising and public relations
functions. The agreement runs for a one-year term beginning on January 1, 1996.
The Company paid Industry Marketing Service $8,000 at the beginning of the term
of the agreement, and is to pay an additional $6,000 per month thereafter.
Item 7. Certain Relationships and Related Transactions.
On January 12, 1996, the Company issued and sold 6,000,000 unregistered
shares of its Common Stock to the participants in Paradigm Advanced Technologies
Joint Venture in consideration for the purchase by the Company of all of the
right, title and interest in the security and surveillance products business
established by it. Certain of its directors and officers were participants in
Paradigm Advanced Technologies Joint Venture, and therefore received shares of
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the Common Stock of the Company in this transaction. These included Jack Y. L.
Lee, the Company's Chief Executive Officer, who received 1,875,000 shares
(including 500,000 shares in trust), and David Kerzner, the Company's President,
who received 2,337,500 shares. Lisa Kerzner, Jacob Kerzner's wife, received
412,500 shares in the transaction. Sarah Casse, a holder of more than 5% of the
Company's issued and outstanding Common Stock, received 1,375,000 shares in the
transaction. See also "Item 4. Recent Sales of Unregistered Securities" in Part
II of this Registration Statement.
The Company has entered into employment agreements with each of David
Kerzner and Jack Y. L. Lee. See "Item 6. Executive Compensation."
Item 8. Description of Securities.
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $0.0001 per share. As of June 16, 1996, there were
issued and outstanding 12,716,674 shares of the Company's Common Stock. On June
5, 1996, there were 47 holders of record of the Company's Common Stock.
Each stockholder of the Company is entitled to one vote, in person or by
proxy, for each share of Common Stock entitled to vote held by such stockholder.
All elections for directors are decided by plurality vote; all other questions
are decided by majority vote except as may otherwise be provided by the
Company's Charter or by the Delaware General Corporation Law.
The holders of the Company's Common Stock are not entitled to cumulative
voting rights with respect to the election of directors, and as a consequence,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Holders of the Company's Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. See "Item 1. Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder Matters" in Part II of this
Registration Statement. In the event of a liquidation, dissolution or winding up
of the Company, holders of the Company's Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities. Holders of the
Company's Common Stock have no preemptive rights and no right to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of the
Company's Common Stock are fully paid and non-assessable.
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
At the time of the filing of this Registration Statement, there is no
established public trading market for the Company's Common Stock. The Company's
Common Stock is traded over-the-counter on the NASDAQ Bulletin Board under the
symbol "PRAV." The range of high and low bid prices for the Company's Common
Stock during the period commencing on April 12, 1996 (the date of its approval
for trading on the NASDAQ Bulletin Board) and ending on July 22, 1996, as
reported on the NASDAQ Bulletin Board, are as follows:
Year and Period High Low
1996:
Period commencing April 12
and ending July 22 ................. $0.75 $0.375
These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not reflect actual transactions or the "penny
stock" rules to which the Company's Common Stock is subject.
As of June 16, 1996, there were issued and outstanding 12,716,674 shares of
the Company's Common Stock. On June 5, 1996, there were 47 holders of record of
the Company's Common Stock. Of the 12,716,674 issued and outstanding shares,
6,000,000 were "restricted securities" available for sale in the public market
subject to restrictions as to volume and other limitations pursuant to Rule 144
of the Securities and Exchange Commission, and 5,800,000 were freely tradable
pursuant to Rule 504(b)(1) of the Securities and Exchange Commission. 916,674
shares were issued pursuant to the Company's June private placement, conducted
in reliance upon Rule 505 of the Securities and Exchange Commission, of Units
consisting of shares of its Common Stock and warrants to purchase shares of its
Common Stock. In addition, 8,000,000 shares were subject to issuance pursuant to
outstanding options with an exercise price of $0.05 per share granted under the
Company's stock option plan. The Company has agreed with the subscribers in its
June private placement to file a registration statement pursuant to the
Securities Act of 1933 with respect to the shares of its Common Stock which it
will issue to them. The Company currently has no other proposals to make any
public offering of its Common Stock.
The Company has not declared or paid any cash dividends on its Common Stock
since its inception, and its Board of Directors currently intends to retain all
earnings for use in the business for the foreseeable future. Any future payment
of dividends will depend upon the Company's results of operations, financial
condition, cash requirements and other factors deemed relevant by the Company's
Board of Directors.
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Item 2. Legal Proceedings.
The Company is not party to any material litigation.
Item 3. Changes in and Disagreements with Accountants.
There have been no changes in, or disagreements with, the Company's
accountants. The Company's principal independent accountant has not resigned or
been dismissed. During January 1996, the month of the Company's organization,
Bromberg & Associates, Chartered Accountants, of Mississauga, Ontario, Canada
were engaged as the principal accountants to audit the Company's financial
statements.
Item 4. Recent Sales of Unregistered Securities.
On January 12, 1996, the Company issued 6,000,000 unregistered shares of
its Common Stock, par value $0.0001 per share, to the participants in Paradigm
Advanced Technologies Joint Venture. These shares were issued in connection with
the formation and organization of the Company and the contribution to the
Company of all of the right, title and interest in the security and surveillance
products business of Paradigm Advanced Technologies Joint Venture by its
participants. The Company also assumed all of the liabilities and obligations
relating to this business. The assets acquired were valued at $91,295.00, and
the liabilities assumed were valued at $35,150.00.
On January 25, 1996, the Company commenced an offering of 3,000,000
unregistered shares of its Common Stock, par value $0.0001 per share. On
February 8, 1996, this offering was fully subscribed and closed. These shares
were sold at a price of $0.10 per share, for a total offering price of $300,000.
The offering was not underwritten, and there were no underwriting discounts or
commissions. This sale was made in reliance upon Rule 504 of the Securities and
Exchange Commission. The aggregate offering price did not exceed $1,000,000, and
the offering was otherwise in compliance with Rules 501 and 502 of the
Securities and Exchange Commission. These securities were sold to a small number
of private investors.
On February 14, 1996, the Company commenced an offering of 2,800,000
unregistered shares of its Common Stock, par value $0.0001 per share. On May 1,
1996, this offering was fully subscribed and closed. These shares were sold at a
price of $0.25 per share, for a total offering price of $700,000. The offering
was not underwritten, and there were no underwriting discounts or commissions.
This sale was made in reliance upon Rule 504 of the Securities and Exchange
Commission. The aggregate offering price did not exceed $1,000,000, and the
offering was otherwise in compliance with Rules 501 and 502 of the Securities
and Exchange Commission. These securities were sold to a small number of private
investors.
On June 3, 1996, the Company commenced an offering of 55 Units, each
consisting of 83,334 unregistered shares of its Common Stock, par value $0.0001
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per share, at $0.30 per share, and warrants to purchase 83,334 shares of
its Common Stock at $0.30 per share. The warrants may not be exercised for six
months after the date of their issuance, and expire three years after the date
of their issuance. The Company intends to raise a minimum of $275,000 and a
maximum of $1,375,000 in capital in this offering. The offering is being made to
a limited number of investors who qualified as "accredited investors," as such
term is defined in Rule 501(a) of the Securities and Exchange Commission. To
date, this offering has been made to two investors, and eleven Units have been
sold at a price of $25,000 per Unit. No other offers have been made yet;
however, it is anticipated that the offering may later be expanded to include
more offerees, but would not be made to more than a total of seven prospective
investors. The offering is not being underwritten, and as a result there will be
no underwriting discounts or commissions. This sale is being made in reliance
upon Rule 505 of the Securities and Exchange Commission. The aggregate offering
price will not exceed $5,000,000, and the offering is otherwise being conducted
in compliance with Rules 501 and 502 of the Securities and Exchange Commission.
Item 5. Indemnification of Directors and Officers.
The Company's By-Laws require it to indemnify to the fullest extent
permitted by law each person that the Company is empowered by law to indemnify.
The Company's Charter requires it to indemnify to the fullest extent permitted
by Sections 102(b)(7) and 145 of the Delaware General Corporation Law, as
amended from time to time, each person that such Sections grant the corporation
the power to indemnify.
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorney's fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit, or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e. one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
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The Company's Charter also contains a provision stating that no director
shall be liable to the Company or any of its stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Section 174 of the Delaware
General Corporation Law (for unlawful payment of dividends, or unlawful stock
purchases or redemptions) or (4) a transaction from which the director derived
an improper personal benefit. The intention of the foregoing provision is to
eliminate the liability of the Company's directors to the Company or its
stockholders to the fullest extent permitted by Section 102(b)(7) of the
Delaware General Corporation Law, as amended from time to time.
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PART F/S
BROMBERG & ASSOCIATE 1177 Finch Avenue West Suite 21
- - --------------------- Downsview, Ontario M3J 2B9
CHARTERED ACCOUNTANTS Office: (416) 663-1974
Fax: (416) 630-1345
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
PARADIGM ADVANCED TECHNOLOGIES, INC.
We have audited the interim balance sheet of Paradigm Advanced
Technologies, Inc. as at March 31, 1996 and the statements of income, deficit,
changes in shareholders' equity and changes in financial position for the period
then ended. These audited financial statements are the responsibility of the
corporation's management. Our responsibility is to express an opinion on the
audited financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Canada. These standards require that we plan and perform an audit
to obtain reasonable assurance whether the audited financial statements are free
of material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the audited financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation.
In our opinion, these interim audited financial statements presents fairly,
in all material respects, the financial position of the Corporation as at March
31, 1996 and the results of its operations and the changes in its financial
position for the period then ended in accordance with generally accepted
accounting principles.
/s/ BROMBERG & ASSOCIATE
CHARTERED ACCOUNTANTS
DOWNSVIEW, ONTARIO
May 16, 1996
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM BALANCE SHEET
AS AT MARCH 31, 1996
ASSETS
Current Assets
Bank $ 15,940
Inventories (Note 1a) 349,275
Prepaid expenses and deposit 2,626
---------
367,841
Capital Assets (Note 1b & 3) 4,729
---------
$ 372,570
=========
LIABILITIES
Current Liabilities
Accounts payable 37,028
---------
SHAREHOLDERS' EQUITY
Share capital (Note 4)
Authorized 30,000,000 common shares at $.0001
Issued and outstanding
10,140,000 common shares 641,145
Deficit (305,603)
---------
335,542
---------
$ 372,570
=========
APPROVED ON BEHALF OF THE BOARD
/s/ Jacob Kerzner
Director
/s/ David Kerzner
Director
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF INCOME
FOR THE PERIOD FROM THE DATE OF INCORPORATION
JANUARY 12, 1996 TO MARCH 31, 1996
Sales $ -
Cost of Sales
Purchases 349,275
Inventory-end of period $ 349,275
---------
-
---------
Expenses
Consulting fees $ 222,769
Legal and professional 13,722
Salaries and benefits 21,275
Office and general 13,106
Travel and entertainment 28,268
Occupancy costs 6,214
Depreciation 249
---------
$ 305,603
---------
Net gain (loss) for the period
($ 305,603)
---------
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF DEFICIT
FOR THE PERIOD FROM THE DATE OF INCORPORATION
JANUARY 12, 1996 TO MARCH 31, 1996
Balance, beginning of period $ -
Net Loss 305,603
Balance, end of period ($ 305,603)
---------
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE PERIOD FROM JANUARY 12, 1996 TO MARCH 31, 1996
PAID IN
SHARES CAPITAL
Issuance of common
shares to purchase all
of the assets and liabilities
of Paradigm Advanced
Technologies Joint Venture 6,000,000 $ 56,145
Issuance of common
shares in February 1996 in
connection with a private
placement offering 3,000,000 $ 300,000
Issuance of common
shares in February and March
1996 in connection with a
private placement 1,140,000 $ 285,000
--------- ---------
10,140,000 $ 641,145
========== =========
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PARADIGM ADVANCED TECHNOLOGIES, INC.
INTERIM STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE PERIOD FROM THE DATE OF INCORPORATION
JANUARY 12, 1996 TO MARCH 31, 1996
Cash provided by (used in) operations
Net loss for the period $ (305,603)
Item not requiring an outlay of cash: 249
Depreciation of fixed assets
Net changes in non-cash working capital items
related to operations
Inventory (349,275)
Accounts payable 37,028
Sundry assets 2,626
-------------
($ 620,227)
-------------
Cash provided by financing activities
Proceeds of common share issuance $ 641,145
-------------
Cash used in investing activities
Acquisition of fixed assets $( 4,978)
-------------
Net increase in cash for the period $ 15,940
Cash - beginning of the period -
-------------
Cash - end of the period $ 15,940
==============
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PARADIGM ADVANCED TECHNOLOGIES, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) and net realizable value.
b) CAPITAL ASSETS
Capital assets are recorded at cost less accumulated
depreciation. Depreciation is provided using the declining
balance basis at the following annual rate:
Furniture and fixtures - 20%
2. INCORPORATION
The company was incorporated on January 12, 1996 in the state of Delaware.
3. CAPITAL ASSETS
Accumulated Net
Cost Depreciation Book-value
Furniture and
fixtures $4,978 $249 $4,729
4. All amounts are expressed in United States Dollars.
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PART III
Item 1. Index to Exhibits.
Page
3.1 Certificate of Incorporation.
3.2 By-Laws.
4.1 Stock Option Plan.
10.1 Distributor Agreement dated November 29, 1995, together with
Amending Agreement dated January 24, 1996.
10.2 Consulting Agreement with Jack Y. L. Lee dated February 1, 1996.
10.3 Consulting Agreement with David Kerzner dated February 1, 1996.
10.4 Consulting Agreement with Industry Marketing Service dated January 13,
1996.
10.5 Agreement with Sarah Casse dated January 12, 1996.
Item 2. Description of Exhibits.
3.1 Certificate of Incorporation.
3.2 By-Laws.
4.1 Stock Option Plan.
10.1 Distributor Agreement dated November 29, 1995, together with Amending
Agreement dated January 24, 1996.
10.2 Consulting Agreement with Jack Y. L. Lee dated February 1, 1996.
10.3 Consulting Agreement with David Kerzner dated February 1, 1996.
10.4 Consulting Agreement with Industry Marketing Service dated January 13,
1996.
10.5 Agreement with Sarah Casse dated January 12, 1996.
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SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
PARADIGM ADVANCED TECHNOLOGIES, INC.
Date: July 29, 1996
By: /s/ Jack Y. L. Lee
Jack Y. L. Lee
Chief Executive Officer and
Secretary-Treasurer
By: /s/ David Kerzner
David Kerzner
President
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3.1 Certificate of Incorporation.
CERTIFICATE OF INCORPORATION
OF
PARADIGM ADVANCED TECHNOLOGIES, INC.
The undersigned, being of legal age, in order to form a corporation under
and pursuant to the laws of the State of Delaware, does hereby set forth as
follows:
FIRST: The name of the corporation is
PARADIGM ADVANCED TECHNOLOGIES, INC.
SECOND: The address of the initial registered and principal office of this
corporation in this state is c/o United Corporate Services, Inc., 15 East North
Street, in the city of Dover, County of Kent, State of Delaware 19901 and the
name of the registered agent at said address is United Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH: The corporation shall be authorized to issue the following shares:
Class Number of Shares Par Value
----- ---------------- ---------
Common 30,000,000 $0.0001
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
---- -------
Ray A. Barr 10 Bank Street
White Plains, New York 10606
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by, or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the By-Laws so provide.
(2) The Board of Directors shall have power without the assent or vote
of the stockholders:
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(a) To make, alter, amend, change, add to or repeal the By-Laws
of the corporation; to fix and vary the amount to be reserved for any
proper purpose; to authorize and cause to be executed mortgages and
liens upon all or any part of the property of the corporation; to
determine the use and disposition of any surplus or net profits; and
to fix the times for the declaration and payment of dividends.
(b) To determine from time to time whether, and to what times and
places, and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be
open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders, at
any meeting of the stockholders called for the purpose of considering any
such act or contract, or through a written consent in lieu of a meeting in
accordance with the requirements of the General Corporation Law of Delaware
as amended from time to time, and any contract or act that shall be so
approved or be so ratified by the vote of the holders of a majority of the
stock of the corporation which is represented in person or by proxy at such
meeting, (or by written consent whether received directly or through a
proxy) and entitled to vote thereon (provided that a lawful quorum of
stockholders be there represented in person or by proxy) shall be as valid
and as binding upon the corporation and upon all the stockholders as though
it had been approved, ratified, or consented to by every stockholder of the
corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the corporation; subject, nevertheless, to the
provisions of the statutes of Delaware, of this certificate, and to any
by-laws from time to time made by the stockholders; provided, however, that
no by-laws so made shall invalidate any prior act of the directors which
would have been valid if such by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to tome, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
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corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this eleventh day of January, 1996.
/s/ Ray A. Barr
-------------------------------------
Ray A. Barr, Incorporator
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3.2 By-Laws.
BY-LAWS
OF
PARADIGM ADVANCED TECHNOLOGIES, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be established
and maintained at c/o United Corporate Services, Inc., 15 East North Street,
Dover, Delaware 19901 and United Corporate Services, Inc. shall be the
registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the registered office of the
corporation in Delaware.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. - Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
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<PAGE>
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM. - Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote the meeting.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than that
stated in the notice shall be transacted at any meeting without the unanimous
consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
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or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be three (3).
The directors shall be elected at the annual meeting of the stockholders and
each director shall be elected to serve until his successor shall be elected and
shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. - If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. - The number of directors may be increased
by amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors are elected and qualify.
SECTION 6. POWERS. - The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
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SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member or
such committee or committees, the member or members thereof present at any such
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power of authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
Unless restricted by the incorporation document or elsewhere in these
By-Laws, members of the Board of Directors or any committee designated by such
Board may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by a resolution
adopted by the Board. The Chairman of the Board or the President or Secretary
may call, and if requested by any two directors, must call special meeting of
the Board and give five days' notice by mail, or two days' notice personally or
by telegraph or cable to each director. The Board of Directors may hold an
annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
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from time to time until a quorum is obtained, and no further notice thereof need
be given other than by announcement at the meeting which shall be so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any stated salary
for their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. - Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the board, or of such committee as the case
may be, and such written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. More than two officers may be held by the same
person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. - The President shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. He shall preside at all meetings of the stockholders if
present hereat, and in the absence or non-election of the Chairman of the Board
of Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
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it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. - The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation s may be ordered
by the Board of Directors, or the President, taking proper vouchers for such
disbursements. He shall render to the President and Board of Directors at the
regular meetings of the Board of Directors, or whenever they may request it, an
account of all his transactions as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by the law or by these By-Laws, and in case of his absence or refusal
or neglect so to do, any such notice may be given by any person thereunto
directed by the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these By-Laws. He shall record
all the proceedings of the meetings of the corporation and of the directors in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him by the directors or the President. He shall have the custody of
the seal of the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the President, and attest the
same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. - Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by the
Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or its
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employee, or, (2) by a registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against any claim
that may be made against it on account of the alleged loss of any such
certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificate shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledgers, or
to such other person as the directors may designate, by whom they shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer and whenever a transfer shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment o the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjournment meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
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"Corporate Seal, Delaware, 1996". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage, prepaid, addressed to
the person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation of these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
No director shall be liable to the corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except with
respect to (1) a breach of the director's duty of loyalty to the corporation or
its stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability which may be
specifically defined by law or (4) a transaction from which the director derived
an improper personal benefit, it being the intention of the foregoing provision
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to eliminate the liability of the corporation's directors to the corporation or
its stockholders to the fullest extent permitted by law. The corporation shall
indemnify to the fullest extent permitted by law each person that such law
grants the corporation the power to indemnify.
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4.1 Stock Option Plan.
PARADIGM ADVANCED TECHNOLOGIES, INC.
a Delaware Corporation
(the "Company")
1996 STOCK OPTION PLAN
(As adopted by the Board of Directors and Shareholders on the 12th day of
January 1996)
1. Purposes.
The Company's 1996 Stock Option Plan (the "Plan") is intended to attract
and retain the best available personnel for positions of substantial
responsibility with the Company and its subsidiaries, if any, and to provide
additional incentive to such persons to exert their maximum efforts toward the
success of the Company. The Plan is also intended to provide and encourage stock
ownership by officers, directors, employees and consultants of the Company and
to afford such persons the right to increase their proprietary interest in the
Company. The above aims will be effectuated through the granting of certain
options ("Options") to purchase shares of the Company's common stock, par value
$.0001 per share (the "Common Stock"). Under the Plan, the Company may grant
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or Options which are not
intended to be ISOs ("Non-Qualified Options").
2. Administration of the Plan.
The Plan shall be administered by a committee (the "Committee") consisting
of at least two (2) persons, appointed by the Board of Directors of the Company
(the "Board of Directors"). Within the limits of the express provisions of the
Plan, the Committee shall have the authority, in its discretion, to take the
following actions under the Plan:
(a) to determine the individuals to whom, and the time or times at which,
Options shall be granted, the number of shares of Common Stock to be subject to
each of the Options and whether such Options shall be ISOs or Non-Qualified
Options;
(b) to interpret the Plan;
(c) to prescribe, amend and rescind rules and regulations relating to the
Plans;
(d) to determine the terms and provisions of the respective stock option
agreements granting Options, including the date or dates upon which Options
shall become exercisable, which terms need not be identical;
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(e) to accelerate the vesting of any outstanding Options; and
(f) to make all other determinations and take all other actions necessary
or advisable for the administration of the Plan.
In making such determinations, the Committee may take into account the
nature of the services rendered by such individuals, and such other factors as
the Committee, in its discretion, shall deem relevant. An individual to whom an
Option has been granted under the Plan is referred to herein as an "Optionee."
The Committee's determinations on the matters referred to in this Section 2
shall be conclusive.
3. Shares Subject to the Plan.
(a) The total number of shares of Common Stock for which Options may be
granted under the Plan shall be 10,000,000.
(b) The Company shall at all times while the Plan is in force reserve such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of outstanding Options. The shares of Common Stock to be issued
upon exercise of Options shall be authorized and unissued or reacquired shares
of Common Stock.
(c) The shares of Common Stock relating to the unexercised portion of any
expired, terminated or canceled Option shall thereafter be available for the
grant of new Options under the Plan.
4. Eligibility.
(a) Options may be granted under the Plan only to directors, employees and
consultants of the Company or any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code (a "Subsidiary"). The term "Company,"
when used in the context of an Optionee's employment, shall be deemed to include
the Company and its Subsidiaries.
(b) Nothing contained in the Plan shall be construed to limit the right of
the Company to grant stock options otherwise than under the Plan for proper
corporate purposes.
5. Terms of Options.
The terms of each Option granted under the Plan shall be determined by the
Committee consistent with the provisions of the Plan, including the following:
(a) The purchase price of the shares of Common Stock subject to each Option
shall be fixed by the Committee, in its discretion, at the time such Option if
granted; provided, however, that in no event shall such purchase price be less
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than the Fair Market Value (as defined in paragraph (g) of this Section 5) of
the shares of Common Stock as of the date such Option is granted.
(b) The dates on which each Option (or portion thereof) shall be
exercisable shall be fixed by the Committee, in its discretion, at the time such
Option is granted.
(c) The expiration of each Option shall be fixed by the Committee, in its
discretion, at the time such Option is granted; provided, however, that no
Option shall be exercisable after the expiration of ten (10) years from the date
of its grant and each Option shall be subject to earlier termination as
determined by the Committee, in its discretion, at the time such Option is
granted.
(d) Options shall be exercised by the delivery to the Company at its
principal office or at such other address as may be established by the Committee
(Attention: Corporate Secretary) of written notice of the number of shares of
Common Stock with respect to which the Option is being exercised accompanied by
payment in full of the purchase price of such shares. Unless otherwise
determined by the Committee at the time of grant, payment for such shares may be
made (i) in cash, (ii) by certified check or bank cashier's check payable to the
order of the Company of shares of Common Stock having a Fair Market Value equal
to such purchase price, (iii) by delivery to the Company of shares of Common
Stock having a Fair Market Value equal to such purchase price, (iv) at the
discretion of the Committee, by simultaneously exercising Options and selling
the shares of Common Stock acquired thereby, pursuant to a brokerage or similar
arrangement approved by the Committee, and using the proceeds as payment of such
purchase price, or (v) by any combination of the methods of payment described in
(i) through (iv) above.
(e) An Optionee shall not have any of the rights of a holder of the Common
Stock with respect to the shares of Common Stock subject to an Option until such
shares are issued to such Optionee upon the exercise of such Option.
(f) An option shall not be transferable, except by will or the laws of
descent and distribution, and during the lifetime of an Optionee, may be
exercised only by the Optionee. No Option granted under the Plan shall be
subject to execution, attachment or other process.
(g) For the purposes of the Plan, the Fair Market Value of the Common Stock
as of any date shall be as determined by the Committee and such determination
shall be binding upon the Company and upon the Optionee. The Committee may make
such determination (i) if the Common Stock is not then listed and traded upon a
recognized securities exchange, upon the basis of the mean between the bid and
asked quotations on the relevant date (as reported by a recognized stock
quotation service) or, if there are no such bid and asked quotations on the
relevant date, then upon the basis of the mean between the bid and asked
quotations on the date nearest the relevant date or (ii) in case the Common
Stock is quoted on the National Association of Securities Dealers Automated
Quotation System National Market System ("NASDAQNMS") or listed on one or more
national securities exchanges, the Fair Market Value of the Common Stock as of
any date shall be deemed to be the mean between the highest and lowest sale
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prices of the Common Stock reported on the NASDAQ-NMS or the principal national
securities exchange on which the Common Stock is listed and traded on the
immediately preceding date, or, if there is no such sale on that date, then on
the last preceding date, on which such a sale was reported.
6. Special Provisions Applicable to ISOs.
The following special provisions shall be applicable to ISOs granted under
the Plan.
(a) No ISOs shall be granted under the Plan after ten (10) years from the
earlier of (i) the date the Plan is adopted, or (ii) the date the Plan is
approved by the Company's shareholders as provided in Section 10 hereof.
(b) If an ISO is granted to a person who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
the purchase price of the shares subject to the Option shall not be less than
110% of the Fair Market Value of such shares as of the date such Option is
granted.
(c) If the aggregate Fair Market Value of the Common Stock with respect to
which ISOs are exercisable for the first time by any Optionee during a calendar
year exceeds $100,000, such ISOs shall be treated, to the extent of such excess,
as Non-Qualified Options. For purposes of the preceding sentence, the Fair
Market Value of the Common Stock shall be determined at the time the ISOs
covering such shares were granted.
7. Adjustment upon Changes in Capitalization.
(a) In the event that the outstanding shares of Common Shares are changed
by reason of reorganization, reclassification, stock split, combination or
exchange of shares and the like, or dividends payable in shares of Common Stock,
an appropriate adjustment shall be made by the Committee in the aggregate number
of shares of Common Stock available under the Plan and in the number of shares
of Common Stock and price per share of Common Stock subject to outstanding
Options. If the Company shall be sold, reorganized, consolidated, taken private,
or merged with another corporation, or if all or substantially all of the assets
of the Company shall be sold or exchanged (a "Corporate Event"), an Optionee
shall at the time of issuance of the stock under such Corporate Event be
entitled to receive upon the exercise of his Option the same number and kind of
shares of stock or the same amount of property, cash or securities as he would
have been entitled to receive upon the occurrence of any such Corporate Event as
if he had been, immediately prior to such event, the holder of the number of
Common Stock covered by his Option; provided, however, that the Committee may,
in its discretion, (i) accelerate the exercisability of outstanding Options, and
shorten the term thereof, to any date prior to the occurrence of such Corporate
Event, or (ii) provide for the cancellation of outstanding Options in exchange
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for cash equal to the aggregate in-the-money value of such Options at the time
of such Corporate Event, as determined in its discretion.
(b) Any adjustment under this Section 7 in the number of shares of Common
Stock subject to Options shall apply proportionately to only the unexercised
portion of any Option granted hereunder. If fractions of a share would result
from any such adjustment, the adjustment shall be revised to the next lower
whole number of shares.
8. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the date of its adoption by the Board of
Directors, and no Option shall be granted after termination of the Plan.
(b) The Plan may at any time be terminated or, from time to time, be
modified or amended by the Board of Directors; provided, however, that the Board
of Directors shall not, without approval by the affirmative vote of the holders
of a majority of the shares of the capital stock of the Company present in
person or by proxy and entitled to vote at a meeting duly held in accordance
with Delaware law, (i) increase (except as provided by Section 7) the maximum
number of shares of Common Stock as to which Options may be granted under the
Plan, (ii) reduce the minimum purchase price at which Options may be granted
under the Plan, or (iii) change the class of persons eligible to receive Options
under the Plan.
(c) No termination, modification or amendment of the Plan adversely affect
the rights conferred by any Options without the consent of the affected
Optionee.
9. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of Directors of
the Company, subject to the approval by the shareholders of the Company. Options
may be granted under the Plan prior to receipt of such approval, provided that,
in the event such approval is not obtained, the Plan and all Options granted
under the Plan shall be null and void and of no force and effect.
10. Not a Contract of Employment.
Nothing contained in this Plan or in any stock option agreement executed
pursuant hereto shall be deemed to confer upon any Optionee any right to remain
in the employ of the Company or any Subsidiary.
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11. Governing Law.
The Plan shall be governed by the laws of the State of Delaware without
reference to principles of conflict of laws thereof.
12. Withholding.
As a condition to the exercise of any Option, the Committee may require
that an Optionee satisfy, through withholding from other compensation or
otherwise, the full amount of federal, state and local income taxes required to
be withheld in connection with such exercise.
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10.1 Distributor Agreement dated November 29, 1995, together with Amending
Agreement dated January 24, 1996.
ALPHA SYSTEMS LAB, INC.
DISTRIBUTOR AGREEMENT
This Agreement, is made on November 29, 1995, by and between Alpha Systems
Lab, Inc., 2361 McGaw Avenue, Irvine, California 92714 ("Supplier"), and
Syndicat Enterprises Limited on behalf of Paradigm Advanced Technologies, Inc.,
a company to be incorporated ("Distributor"). In consideration of the promises
and mutual covenants herein contained, the parties agree as follows:
1. Appointments and Products:
The Supplier appoints Paradigm Advanced Technologies, Inc. as an Authorized
Distributor ("Distributor") of its products. Under the Agreement, Distributor
shall have the exclusive right in Canada, and non-exclusive right worldwide to
purchase and distribute the Supplier products listed in Exhibit B hereto
("Products") worldwide. ("Assigned Territory"). A copy of Supplier's current
price list, as discounted for Distributor ("Discount Prices"), is attached
hereto as Exhibit B. Additional Products may be added to this Agreement,
including any Products in special configuration (i.e., Products made to the
order of Distributor) by mutual agreement of the parties. The Distributor's
primary responsibility is to sell and promote Supplier's System (Private Labeled
for the Distributor) and provide service. The target market applications are
Distributor's primary marketing and sales emphasis. Distributor shall tailor its
organization and product offering to address these markets as determined by it
in its discretion.
Supplier shall grant the Distributor the option within six moths of execution of
contract, to have exclusive right to sell ASL security products in Israel with
an increase of a minimum purchase of 50 units per month in year two, added to
Distributor's minimum purchase requirements as outlined in Exhibit A.
2. Duration and Termination:
(A) This Agreement has a specific term of ten (10) years from the date
stated above ("Initial Term"), and the parties shall discuss prior to the
expiration of the Initial Term to determine whether Supplier shall renew or
extend the term hereof acting reasonably. Either party may terminate, upon
default of this Agreement, with thirty (30) days prior written notice and
subject to compliance to 2B and 2E. Both parties have considered the making of
expenditures in preparing the performance of this Agreement and possible losses
resulting from its termination. It is expressly understood that the right of
termination is absolute, provided that it is done in accordance to 2B and 2E,
and it is agreed that neither party shall be liable to the other for damages, or
otherwise, in case of termination.
(B) Supplier may automatically terminate this Agreement upon written notice to
Distributor in the event that:
(i) Distributor defaults in any payment due Supplier and such default
continues for a period of thirty (30) days after written notice by
Supplier; or
(ii) Distributor fails to perform any other obligation, duty or
responsibility by Distributor under this Agreement, and such failure or
defaults continues unremedied or is not in the process of being remedied
for a period of thirty (30) days after written notice by Supplier.
(iii) This contract is a full recourse agreement, concluded under the
laws of the United States which jurisdiction shall govern the construction,
interpretation, execution, validity, enforceability, performance and any
other matters in respect of this contract, including breach or claim of
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breach thereof. The parties agree to have any such matter arbitrated under
the rules of the American Institute of Arbitrators. Judgment upon the award
may be entered in any court having jurisdiction thereof. Neither this
Agreement nor any term or party hereof may be changed, waived, discharged
or terminated without mutual agreement and acceptance by both parties. If
any one or more of the provisions contained herein shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement.
(C) Upon termination of this Agreement by either party, Supplier shall be
entitled to request cash in advance for any Distributor orders received from
Distributor after notice, but prior to the effective date of termination.
(D) In the event that Distributorship is acquired, Supplier reserves the
right to re-evaluate whether the Distributor relationship shall be continued, if
the new relationship is a competitor and change of ownership is legal and
binding.
(E) Distributor has the right to terminate for any of the following reasons:
(i) Failure to supply;
(ii) Failure to provide in a timely manner, modifications in
software as reasonably required by Distributor as in PTZ:
(iii) Failure to maintain product competitiveness in a timely
manner.
(F) Upon termination, Distributor has the right to sell its existing inventory.
3. Sales and Service:
Distributor shall actively market, provide and solicit sales in the Assigned
Territory and provide technical support of Products according to programs
established by Supplier from time to time. Such customer support will include
warranty repairs while promoting extended warranty contracts as determined by
Distributor an in any event no greater than any warranty obtained from Supplier.
Distributor shall not misrepresent Supplier's products as being manufactured,
designed or owned by any party other that Supplier or Distributor. Supplier
authorizes Distributor to release product under Supplier's exclusive label as
determine by Distributor from time to time. Supplier may not market or authorize
others to market Products under Distributor's exclusive label. Distributor shall
achieve the minimum purchase requirements assigned by Supplier to Distributor as
set forth in Exhibit A. Supplier shall provide Distributor with technical
support on a timely and ongoing basis.
4. Pricing:
(A) The Discount Prices are set forth in Exhibit B.
(B) The Discount Prices set forth in Exhibit B is Ex Works Supplier's warehouse
unless otherwise unless otherwise specified. The Prices do not include sales
taxes, value-added taxes and all other taxes (except Supplier's income taxes),
levies, fees, import or export duties or charges of any kind imposed by any
governmental authority, which are the sole responsibility of Distributor.
(C) Notwithstanding the provisions of subparagraph (A) of this Section 4,
Supplier may, based on independent third party cost changes only, change the
discount price(s) on any product or products provided that Supplier gives
Distributor thirty (30) days written notice of any price change(s) and the
effective date of such change(s), as verified by vendor's suppliers.
(D) All products shipped after the effective date of any price decrease or
increase with respect thereto will be shipped and invoiced at the price in
effect at the time of order placement.
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(E) If for any reason other than the significant default of the
Distributor, Supplier defaults in providing the Products to the Distributor in
accordance with the terms of this Agreement, the Distributor is hereby granted
the license during the term of this Agreement to manufacture and duplicate any
of the Products on its own behalf and to market and sell them. In such event,
the license fees payable to Supplier shall be the costs of the Products, less
the costs of manufacture and duplication of the Products. This fee will be
calculated and determined by a third party arbitrator based on invoice price of
Distributor. The cost to be determined by third party arbitration. Term is until
Supplier can provide the Product at agreed to terms. Subject to ASL's written
confirmation of legal authorization, Distributor may be allowed to omit the
inclusion of ASI's RemoteWatch copyright for its private label purpose.
Otherwise, the ASI copyright may appear inconspicuously if required under the
law of that country for copyright protection.
(F) Supplier will not sell Products to another entity for equal or less pricing
if volume commitment is not at least equivalent to this Distributor's Agreement.
5. Terms:
Unless prior arrangements have been made, non-cancelable orders are secured and
guaranteed by a 30% irrevocable L/C with supplier as beneficiary, upon written
acceptance of Purchase Order. Supplier is entitled to call on L/C immediately if
shipment is rejected. Shipments are paid via C.O.D. either in cash, cashier's
check, wire transfer or money order. All Purchase Orders must have written
acceptance of approval from Supplier prior to execution. Supplier reserves the
right to schedule partial delivery dates within Purchase Order requirements.
All payment terms apply accordingly.
It is anticipated that after shipment of 1,000 units, an open credit line of no
more than $200,000 payable in 30 days may be considered based on financial
evaluation and on mutual agreement of both parties.
6. Shipping:
(A) Goods are shipped Ex Works Supplier's warehouse. Supplier will partial ship
and back order any out-of-stock items. All products shipped by Supplier to
Distributor will be at the expense of the Distributor. Back orders will be
shipped at Supplier's expense unless Distributor is advised within ten (10) days
of receipt of Purchase Order. All orders to be shipped within forecast to be
shipped within 30 days. Orders exceeding forecast may exceed this time frame.
(B) All returned merchandise (RMA) will be shipped to Supplier at Distributor's
expense. After defect is verified, and repaired or replaced, Supplier will ship
product to Distributor with next regular order that ships to Distributor. If no
defect is verified, Supplier will ship product to Distributor at the expense of
the Supplier.
7. Initial Stocking Order:
Distributor shall place, upon Agreement Date, an initial order of two (2) demo
units to be paid via C.O.D. and within 15 days following receipt of these units,
an Initial Stocking Purchase Order (approved by Supplier) for a minimum of 198
RemoteWatch PRO Systems. Shipments from said purchase order may be in quantities
not less than 200 systems and must be shipped within 30 days of purchase order
and thereafter must be per Exhibit A. All orders will be placed by written
purchase order, faxed or mailed to Supplier. In no event will a verbal order be
accepted.
8. Special Orders:
Special orders require a non-refundable minimum deposit of 50%. In some
instances, a non-cancelable purchase order may also be required.
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9. Purchase Orders:
(A) Each order placed by the Distributor, shall be deemed to incorporate all the
terms and conditions of this Agreement, and any terms and conditions of such
Distributor purchase orders which are in addition or inconsistent with the terms
and conditions of this Agreement shall be deemed stricken from such Distributor
purchase orders. Supplier assumes that Distributor purchase orders have been
researched by the Distributor and that the products contained therein are
compatible with the intended applications. Supplier assumes no responsibility
for Distributor's errors in selecting products.
10. Product Warranty:
(A) Each Product delivered by Supplier to Distributor hereunder shall be
warranted, from the date of receipt of such product, to Distributor in
accordance with Supplier's standard warranty (see paragraph D).
(B) Distributor shall perform diagnostics on any product returned to them
by their customer and perform an evaluation of product. If product is not
defective, Distributor will return product to customer. If product proves to be
defective, Distributor will provide replacement product to their customer from
their inventory stock on hand. Distributor will then call Supplier and request a
RMA (see section 11). Distributor will hold defective merchandise on their floor
until they have a minimum of two (2) defective pieces and will then ship to
Supplier. After verification of defective merchandise, Supplier will ship
required replacement products to Distributor with next regular order from
Distributor.
(C) The foregoing Supplier Limited Warranty is in lieu of all other warranties,
whether oral, written, express, implied or statutory. Implied warranties of
merchantability and fitness for a particular purpose will not apply. Supplier's
warranty obligations and Distributor's remedies hereunder are solely and
exclusively as stated herein. Supplier's liability, whether based on contract,
misrepresentation, fraud, warranty, negligence, strict liability or any other
theory, shall not exceed the price of the individual produce(s) whose defect or
damage is the basis of the claim. In no event shall the supplier be liable for
any loss of profits, loss of use of facilities or equipment, or other indirect,
incidental or consequential damages.
(D) Limited Warranty: All hardware delivered by Alpha Systems Lab, Inc. are
warranted for one (1) year. The warranty period begins from the date of receipt
of the product by Distributor. In this period Alpha Systems Lab, Inc. warranties
this product to be free from defects in material and workmanship under normal
use and service. (if Alpha Systems Lab, Inc. does not have the item in stock at
the time, we reserve the right to keep the defective merchandise for one (1) to
thirty (30) days for repair or exchange.) This limited warranty is contingent
upon proper use of the product in question and does not cover products which
have been modified or which have been subjected to unusual physical or
electrical stresses. For details on warranty, refer to the RemoteWatch PRO User
Guide, Appendix F.
Limitation of Liability: Alpha Systems Lab, Inc. will not be responsible for
consequential damage to the system or its components caused by either internal
or external equipment, shorted connections or components not installed or
obtained by Alpha Systems Lab, Inc. Alpha Systems Lab, Inc. shall not be liable
for damage to painted surfaces or keyboard keys due to physical abuse, or
excessive use, or liquids, or chemicals spilled upon or inside the system,
including oxidation or corrosion to components caused by exposure to salt air.
The limited warranty also does not cover any losses or damages that may occur as
a result of:
1. Shipping or improper installation or maintenance.
2. Misuse, neglect or improper environment.
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3. Any repair, modification, adjustment, or installation or options
or parts by anyone other than and/or an ASL authorized service
provider or Distributor.
4. Excessive or inadequate electrical power surges, or other
irregularities.
Manufacturer's Warranties: Alpha Systems Lab, Inc. will repair products
covered under the warranty upon request. Alpha Systems Lab, Inc. in no way
claims responsibility for these products or their warranties. Distributor's
liabilities under this contract shall at all times be limited to (1) the
Distributor's failure to pay any amount due hereunder as and when required; or
(2) the changing of the price structure as contemplated by Exhibit A. Item (F),
if it fails to meet the minimum purchase requirement in which event, Distributor
shall be required to pay the revised amount for any future orders.
11. Returned Merchandise:
All merchandise returned to the Supplier for warranty must have been diagnosed
by Distributor and contain no missing parts or external damage of any kind.
Distributor must have a Return Merchandise Authorization (RMA) number issued by
Supplier's Technical Support department. All RMAs which are verified as repair
related will not be refused. When calling for an RMA number, please have the
following information available:
a. Supplier's invoice and sales order number
b. Product name.
c. The serial number of the unit.
d. The reasons for RMA request.
After an RMA number has been assigned, it must be prominently displayed ON THE
SHIPPING LABEL. Merchandise should be returned to the Supplier freight pre-paid
in the original boxes and packing materials. Returned equipment that arrives at
Supplier without an RMA number prominently displayed on the shipping label will
not be accepted and returned at Distributor's expense.
12. Independent Contractors:
It is understood and agreed that Supplier and Distributor are independent
contractors and each is engaged in the operation of its own business and neither
will be considered the agent of the other for any purpose. Nothing contained in
the Agreement will be construed to establish a relationship that would allow
either party to make representation or warranties on behalf of the other, except
as expressly set forth herein.
13. Governing Law:
This Agreement shall be construed and governed by the laws of the State of
California, county of Orange. Neither party shall be liable to the other
pursuant to this Agreement for any amounts representing loss of profits, loss of
business, or indirect, consequential, or punitive damages of the other party.
Distributor shall pay all court and attorney fees on any action instituted on
behalf of this Agreement. In the event of any disputes or action, this Agreement
shall be governed by the laws of California, County of Orange. Distributor
agrees to binding arbitration by impartial third party under arbitration. The
prevailing party shall be entitled to recover costs, including those for expert
witnesses and reasonable legal fees therein.
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14. Severability:
If any provision of this Agreement shall be held to be unenforceable for any
reason, the remaining terms and provisions hereof shall not be affected thereby.
15. Force Majeure:
Except for the obligation to pay money properly due and owing, either party
shall be excused from delay or failure in performance hereunder caused by
occurrence or contingency beyond its reasonable control, including but not
limited to, an act of GOD, earthquake, labor disputes, shortages or materials or
supplies, riots, government requirements and transportation difficulties. The
obligations and rights of the party so excused shall be extended on either a
day-to-day basis for the time period equal to the period of such excusable
delay, or a mutually agreed upon date. In order to obtain a suspension under
this paragraph, the party delayed shall send written notice of delay and the
reason therefore to the other party within seven (7) calendar days from the time
the party delayed knew of the delay in question. In witness thereof, the parties
hereto have executed this Agreement in multiple counterparts, each of which
shall be considered an original, but all of which shall constitute a single
Agreement.
16. Arbitration provisions as set out in 2B(iii):
I have read and accepted the above conditions outlined in this Distributor
Agreement.
SUPPLIER DISTRIBUTOR
Alpha Systems Lab, Inc. Syndicat Enterprises Limited on behalf of
Paradigm Advanced Technologies, Inc., a
company to be incorporated
By:/s/ By:/s/ Jack Lee - Syndicat
- - ------------------------------- --------------------------------
Title:President Title:President
Date:11/30/95 Date:November 29, 1995
David Kerzner-Paradigm Advanced
Technologies. Inc.
President
5071 Yonge Street
Willowdale, Ont.
45
<PAGE>
AMENDING AGREEMENT
RE: DISTRIBUTOR AGREEMENT MADE ON 24th DAY OF JANUARY, 1996 BETWEEN ALPHA
SYSTEMS LAB, INC., AS SUPPLIER AND PARADIGM ADVANCED TECHNOLOGIES, INC., AS
DISTRIBUTOR.
The parties agree the above-noted Distributor Agreement is hereby amended
as follows:
1. Copyright Warranty and Notice
The Supplier hereby warrants that it is the sole owner of the copyright of
the software "Remote Watch(TM)" and of the modified version of "Remote
Watch(TM)" made for private label resale by the Distributor. The Distributor
acknowledges that it does not hereby obtain any right or interest in such
copyright. The Distributor undertakes that it will not assert any claim of
ownership in such copyright, nor represent to any third parties that it has any
right or interest in such copyright. The parties agree that copies of the
modified version of "Remote Watch(TM)" supplied to the Distributor for private
label resale will not identify the Supplier in any manner, but will include a
copyright notification in the following terms, or in such other terms as the
parties may agree in writing: "This software is protected by copyright. No
unauthorized reproduction is permitted. Inquiries may be directed to Paradigm
Advanced Technologies, Inc.".
Distributor agrees to issue appropriate written warnings that software has
been copyrighted and will not be used without authorization in writing.
Distributor agrees not to reverse engineer or authorize others to reverse
engineer the Remote Watch(TM) software. Distributor agrees not to register
Remote Watch(TM) or the private labeled version of the Remote Watch(TM)
copyright in Canada.
2. Assistance of Customized Accounts
The Supplier agrees to support the Distributor in its efforts to sell OEM
accounts on a case by case basis depending on the terms and requirements agreed
to by the parties. The Supplier agrees that during the term of the Distributor
Agreement, the Supplier shall not, directly or indirectly, or in any way
whatsoever, approach, solicit, or obtain orders or sell any product to any OEM
account or customer introduced by the Distributor to the Supplier, and that any
and all dealings with such customers shall be conducted by the Supplier only
through the Distributor. The Supplier shall respond to the Distributor on a
timely basis with respect to any requests or information or products required by
the Distributor in connection with any OEM account. It is expressly agreed that
all orders of system generated by any OEM arrangement or account shall be
considered as part of the minimum purchase and marketing requirements to be
purchased by Distributor pursuant to the Distributor Agreement.
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<PAGE>
3. Covenant
From the date of this Amending Agreement and for a period of two (2) years
thereafter, the Distributor shall not engage the Supplier's employees to work of
the Distributor or for any person, firm, corporation, or entity affiliated with
the Distributor. The Distributor shall not induce or influence (or seek to
induce or influence) any person engaged as an employee, agent, independent
contractor, or otherwise by the Supplier (collectively "Associates") to
terminate his or her employment or association with the Supplier for the benefit
of the Distributor.
Except as amended by this Amending Agreement, the Distributor Agreement
remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by a
duly authorized representative as of this 24th day of January, 1996.
DISTRIBUTOR SUPPLIER
PARADIGM ADVANCE ALPHA SYSTEMS LAB
TECHNOLOGIES
By: /s/ David Kerzner By: /s/ Mitchell Phan
--------------------------- ---------------------------
Name: David Kerzner Name: Mitchell Phan
Title: President Title: VP
Date: February 7, 1996 Date: 02/07/96
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<PAGE>
10.2 Consulting Agreement with Jack Y. L. Lee dated February 1, 1996.
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is entered into the 1st day of February, 1996.
BETWEEN:
PARADIGM ADVANCED TECHNOLOGIES, INC., a
corporation incorporated under the laws of the State of Delaware,
herein called "PARADIGM"
OF THE FIRST PART;
- and -
JACK LEE, of the City of Toronto,
in the Municipality of Metropolitan Toronto,
herein called the "CONSULTANT"
OF THE SECOND PART.
A. WHEREAS Paradigm wishes to receive from the Consultant financial advice,
guidance, counsel and supervision with reference to the business operations of
the corporation in the United States, Canada and abroad.
AND WHEREAS the Consultant by reason of contracts, experience, expertise
and background is qualified to render such financial advice, guidance, counsel
and direction to Paradigm.
B. Pursuant to the January 12, 1996 Key Employees Stock Option Plan, the
Board of Directors of Paradigm (the "Board") had decided to grant to the
Consultant a stock option (the "Option") to purchase 1,875,000 common shares of
Paradigm's common share stock at a price of $0.05 per share. In granting the
Consultant the Option, the Board is providing the Consultant with additional
incentive to maximize the Consultant's efforts to develop Paradigm to the
fullest extent possible.
C. Paradigm and the Consultant desire to define the terms of the
Consultant's employment with Paradigm.
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<PAGE>
PROVISIONS RELATING TO THE OPTION
1. Stock Option
The Option is the right to purchase 1,875,000 common shares (the "Option
Common Shares") at a price per share of $0.05 per share (the "Option Price").
The Stock Option is attached hereto and marked Exhibit "A" to this
Agreement.
PROVISIONS RELATING TO THE CONSULTING AGREEMENT
2. Services of Consultant
During the term of this Agreement, the Consultant shall render such
financial advice, guidance, counsel, supervision and other services as Paradigm
may reasonably require.
3. Position and Duties
(a) During the term of this Agreement the Consultant shall serve as the
Chief Executive Officer and shall have the normal duties, responsibilities and
authority of the Chief Executive Officer of Paradigm, subject to the power of
the Board to expand or limit such duties, responsibilities and authority and to
override actions of the Chief Executive Officer.
(b) The Consultant shall also serve as a Director of Paradigm.
(c) The Consultant shall report to the Board, and the Consultant shall
devote his best efforts and the majority of his full business time and attention
(except for permitted vacation periods and reasonable periods of illness or
other incapacity) to the business and affairs of Paradigm and its subsidiaries.
The Consultant shall perform his duties and responsibilities to the best of his
ability in a diligent, trustworthy, businesslike and efficient manner.
4. Paradigm's Employment of Consultant
Paradigm retains the Consultant as Chief Executive Officer and a Director
of Paradigm with reference to the operations of Paradigm with primary
responsibility in the area of product development and marketing of the product
within the video security marketplace in the United States, Canada and abroad.
5. Term
The term of this Agreement shall be for a term of ten (10) years commencing
from the 1st day of February, 1996 (the "Term").
49
<PAGE>
The term of this Consulting Agreement may be terminated earlier in the
event of the resignation, death or disability or other incapacity (as determined
by the Board in its good faith judgment) of the Consultant.
At the end of the term the parties may by mutual consent extend the
Consulting Agreement for further five (5) year increments with the Consultant's
compensation to be renegotiated at the time of the said renewal.
6. Compensation
(a) Base Salary. During the term of this Agreement the Consultant's fee
shall be US $100,000.00 per annum, or such higher amount as the Board may
determine from time to time, or an amount calculated to be proportionately less
in the event that during normal working hours in any year the Consultant spends
less than his full time and efforts with reference to the affairs of Paradigm,
which Consultant's fee shall be paid in regular installments in accordance with
Paradigm's general practices. The parties acknowledge that not less than 66-2/3
of the Consultant's time will be devoted to the affairs of Paradigm.
(b) Expenses. Paradigm shall reimburse the Consultant for all reasonable
direct expenses incurred by him in the course of performing his duties under
this Agreement consistent with Paradigm's policies in effect from time to time
with respect to travel, entertainment and other business expense, subject to
Paradigm's customary requirements with respect to reporting and documentation of
such expenses.
(c) Automobile and Other Benefits. During the term of this Agreement the
Consultant shall be entitled to participate in all of Paradigm's employee
benefit programs for which key employees of Paradigm and its subsidiaries are
generally eligible, including medical and dental plans, key man insurance and
automobile allowances.
(d) Annual Bonus. An annual bonus to be determined by the Board of
Directors.
7. Confidential Information
The Consultant acknowledges that the information, observations and data
obtained by him while acting as Consultant to Paradigm concerning the business
or affairs of Paradigm, or any subsidiary of Paradigm (the "Confidential
Information") are the property of Paradigm or such subsidiary. Therefore, the
Consultant agrees that he shall not disclose to any unauthorized person or use
for his own account any Confidential Information without the prior written
consent of the Board, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of the Consultant's acts or omissions to act. The Consultant shall
deliver to Paradigm at the termination of the Consulting Period, or at any other
time Paradigm may request, all memoranda, notes, plans, records, reports,
computer tapes and software and other documents and data (and copies thereof)
relating to the Confidential information, Work Product (as defined below) or the
50
<PAGE>
business of Paradigm or any subsidiary which he may then possess or have under
his control.
8. Inventions and Patents
The Consultant agrees that all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports, and all similar or
related information which relates to Paradigm or any of its subsidiary's actual
or anticipated business, research and development or existing or future products
or services and which are conceived, developed or made by the Consultant while
employed by Paradigm or its predecessor (the "Work Product") belonging to
Paradigm or such subsidiary. The Consultant will promptly disclose such Work
Product to the Board and perform all actions reasonably requested by the Board
(whether during or after the Consulting Period) to establish and confirm such
ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
9. Non-Compete, Non-Solicitation
(a) The Consultant acknowledges that in the course of his providing
services to Paradigm he will become familiar with Paradigm's trade secrets and
with other confidential information concerning Paradigm and its predecessors and
that his services have been and will be of special, unique and extraordinary
value to Paradigm. Therefore, the Consultant agrees that during the Consulting
Period and for two (2) years thereafter (the "Non-Compete Period"), he shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or any manner engage in any business competing with the
business of Paradigm or its subsidiaries as such business exist or are in
process on the date of the termination of the Consultant's employment, with any
geographical area in which Paradigm or its subsidiaries engage or plan to engage
in such business. Nothing herein shall prohibit the Consultant from being a
passive owner of not more than 5% of the outstanding stock of any class of a
corporation which is publicly traded, so long as the Consultant has no active
participation in the business of such corporation.
(b) During the Non-Compete Period, the Consultant shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of Paradigm or any subsidiary to leave the employ of Paradigm or such
subsidiary, or in any way interfere with the relationship, between Paradigm or
any subsidiary and any employee thereof, (ii) hire any person who was an
employee of Paradigm or any subsidiary at any time during the Consulting Period,
or (iii) induce to attempt to induce any customer, supplier, licensee or other
business relation of Paradigm or any subsidiary to cease doing business with
Paradigm or such subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and Paradigm
or any subsidiary.
51
<PAGE>
MISCELLANEOUS PROVISIONS
10. Assignment
During the first year of this Agreement the Consultant shall have the right
to assign this Agreement to a corporation, the shares of which are owned by Jack
Lee or members of his personal family and of which Jack Lee is the Key employee.
At the time of such assignment Jack Lee shall provide to Paradigm a Keyman
Agreement substantially in the form of Exhibit "B" attached hereto.
At the time of the said assignment the services to be performed pursuant to
Paragraph 3 of this Agreement shall be performed by the Key employee and the
employee benefits referred to in Paragraph 6(c) shall be made available to the
Key Employee.
11. Enforcement
If, at the end of enforcement of Paragraph 7, 8 or 9 of this Agreement, a
court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area. Because the Consultant's
services are unique and because the Consultant has access to Confidential
Information and Work Product, the parties hereto agree that money damages would
be an inadequate remedy for any breach of this Agreement. Therefore, in the
event of a breach or threatened breach of this Agreement, Paradigm or its
successors or assigns may, in addition to other rights and remedies existing in
their favour, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).
12. Consultant's Representations
The Consultant hereby represents and warrants to Paradigm that (i) the
execution, delivery and performance of this Agreement by the Consultant does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which the
Consultant is a party or by which he is bound, (ii) except for the supervision
of US properties the Consultant is not a party to or bound by any employment
agreement, noncompete agreement or confidentiality agreement with any other
person or entity, and (iii) upon the execution and delivery of this Agreement by
Paradigm, this Agreement shall be the valid and binding obligation of the
Consultant, enforceable in accordance with its terms.
13. Survival
Paragraphs 7, 8 and 9 shall survive and continue in full force in
accordance with their terms notwithstanding any termination of the Consulting
Period.
52
<PAGE>
14. Notices
Any notice provided for in this Agreement shall be in writing and shall be
either personally delivered, or mailed by first-class mail, return receipt
requested, to the recipient at the address below indicated:
Notices to the Consultant:
Mr. Jack Lee,
28 Old Park Lane,
Richmond Hill, Ontario
L4B 2C4
Notice to Paradigm:
Paradigm Advanced Technologies, Inc.,
5140 Yonge Street,
Suite 1525,
North York, Ontario,
M2N 6L7
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
15. Severability
Whenever possible, each provision of this Agreement may be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.
16. Complete Agreement
This Agreement, those documents expressly referred to herein and other
documents of even date herewith embody the complete agreement and understanding
among the parties and supersedes and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
53
<PAGE>
17. Counterparts
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and the
same Agreement.
18. Successors and Assigns
This Agreement is intended to bind and enure to the benefit of and be
enforceable by the Consultant, Paradigm, the Investors and their respective
successors and assigns, provided that the Consultant may not assign any of his
rights or obligations, except as expressly provided by the terms of this
Agreement.
19. Choice of Law
This Agreement shall be governed by and construed in accordance with the
domestic laws of the Province of Ontario without giving effect to any choice of
law or conflict of law provision or rule (whether the Province of Ontario or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the Province of Ontario.
INTENDING TO BE LEGALLY BOUND, the parties hereto have executed this
Agreement as of the date first written above.
PARADIGM ADVANCED TECHNOLOGIES,
INC.
Per: /s/ David Kerzner
---------------------------------
President
Per: /s/ Jacob Kerzner
---------------------------------
Director
/s/ Jack Lee
---------------------------------
JACK LEE
54
<PAGE>
10.3 Consulting Agreement with David Kerzner dated February 1, 1996.
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is entered into the 1st day of February, 1996.
BETWEEN:
PARADIGM ADVANCED TECHNOLOGIES, INC., a
corporation incorporated under the laws of the State of Delaware,
herein called "PARADIGM"
OF THE FIRST PART;
- and -
DAVID KERZNER, of the Town of Richmond Hill,,
in the Regional Municipality of York,
herein called the "CONSULTANT"
OF THE SECOND PART.
A. WHEREAS Paradigm wishes to receive from the Consultant technical and
other assistance in the planning, design and marketing of digital video
technology within the video security marketplace in the United States, Canada
and abroad and in connection with matters in relation thereto.
AND WHEREAS the Consultant by reason of contracts, experience, expertise
and background is qualified to render such technical advice, guidance, counsel
and direction to Paradigm.
B. Pursuant to the January 12, 1996 Key Employees Stock Option Plan, the
Board of Directors of Paradigm (the "Board") had decided to grant to the
Consultant a stock option (the "Option") to purchase 3,187,500 common shares of
Paradigm's common share stock at a price of $0.05 per share. In granting the
Consultant the Option, the Board is providing the Consultant with additional
incentive to maximize the Consultant's efforts to develop Paradigm to the
fullest extent possible.
C. Paradigm and the Consultant desire to define the terms of the
Consultant's employment with Paradigm.
55
<PAGE>
PROVISIONS RELATING TO THE OPTION
1. Stock Option
The Option is the right to purchase 3,187,500 common shares (the "Option
Common Shares") at a price per share of $0.05 per share (the "Option Price").
The Stock Option is attached hereto and marked Exhibit "A" to this
Agreement.
PROVISIONS RELATING TO THE CONSULTING AGREEMENT
2. Services of Consultant
During the term of this Agreement, the Consultant shall render such
technical advice, guidance, counsel, supervision and other services as Paradigm
may reasonably require to assist Paradigm to design, plan and market digital
video technology within the video security marketplace in the United States,
Canada and abroad. Without limiting the foregoing, the following services are to
be provided:
(a) Head Office Operations and Responsibilities
(i) During the term of this Agreement the Consultant shall serve as
the President of Paradigm and shall have the normal duties,
responsibilities and authority of the President, subject to the power of
the Board to expand or limit such duties, responsibilities and authority
and to override actions of the President.
(ii) The Consultant shall also serve on the Board of Directors of
Paradigm.
(iii) The Consultant shall report to the Board, and the Consultant
shall devote his best efforts and his full business time and attention
(except for permitted vacation periods and reasonable periods of illness or
other incapacity) to the business and affairs of Paradigm and its
subsidiaries. The Consultant shall perform his duties and responsibilities
to the best of his ability in a diligent, trustworthy, businesslike and
efficient manner.
(b) World Wide Operations
(i) Source all required technology and co-ordinate integration of all
technology for Paradigm's products.
(ii) Institution of marketing program information and a marketing
organization within the United States, Canada and abroad.
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<PAGE>
3. Paradigm's Employment of Consultant
Paradigm retains the Consultant as President and a Director of Paradigm
with reference to the operations of Paradigm with primary responsibility in the
area of product development and marketing of the product within the video
security marketplace in the United States, Canada and abroad.
4. Term
The term of this Agreement shall be for a term of ten (10) years commencing
from the 1st day of February, 1996 (the "Term").
The term of this Consulting Agreement may be terminated earlier in the
event of the resignation, death or disability or other incapacity (as determined
by the Board in its good faith judgment) of the Consultant.
At the end of the term the parties may by mutual consent extend the
Consulting Agreement for further five (5) year increments with the Consultant's
compensation to be renegotiated at the time of the said renewal.
5. Compensation
(a) Base Salary. During the term of this Agreement the Consultant's fee
shall be US $75,000.00 per annum, or such higher amount as the Board may
determine from time to time, which Consultant's fee shall be paid in regular
installments in accordance with Paradigm's general practices.
(b) Expenses. Paradigm shall re-imburse the Consultant for all reasonable
direct expenses incurred by him in the course of performing his duties under
this Agreement consistent with Paradigm's policies in effect from time to time
with respect to travel, entertainment and other business expense, subject to
Paradigm's customary requirements with respect to reporting and documentation of
such expenses.
(c) Annual Bonus. An annual bonus to be determined by the Board of
Directors.
(d) Automobile and Other Benefits. During the term of this Agreement the
Consultant shall be entitled to participate in all of Paradigm's employee
benefit programs for which key employees of Paradigm and its subsidiaries are
generally eligible, including medical and dental plans, key man insurance and
automobile allowances.
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<PAGE>
6. Confidential Information
The Consultant acknowledges that the information, observations and data
obtained by him while acting as Consultant to Paradigm concerning the business
or affairs of Paradigm, or any subsidiary of Paradigm (the "Confidential
Information") are the property of Paradigm or such subsidiary. Therefore, the
Consultant agrees that he shall not disclose to any unauthorized person or use
for his own account any Confidential Information without the prior written
consent of the Board, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of the Consultant's acts or omissions to act. The Consultant shall
deliver to Paradigm at the termination of the Consulting Period, or at any other
time Paradigm may request, all memoranda, notes, plans, records, reports,
computer tapes and software and other documents and data (and copies thereof)
relating to the Confidential information, Work Product (as defined below) or the
business of Paradigm or any subsidiary which he may then possess or have under
his control.
7. Inventions and Patents
The Consultant agrees that all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports, and all similar or
related information which relates to Paradigm or any of its subsidiary's actual
or anticipated business, research and development or existing or future products
or services and which are conceived, developed or made by the Consultant while
employed by Paradigm or its predecessor (the "Work Product") belonging to
Paradigm or such subsidiary. The Consultant will promptly disclose such Work
Product to the Board and perform all actions reasonably requested by the Board
(whether during or after the Consulting Period) to establish and confirm such
ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
8. Non-Compete, Non-Solicitation
(a) The Consultant acknowledges that in the course of his providing
services to Paradigm he will become familiar with Paradigm's trade secrets and
with other confidential information concerning Paradigm and its predecessors and
that his services have been and will be of special, unique and extraordinary
value to Paradigm. Therefore, the Consultant agrees that during the Consulting
Period and for two (2) years thereafter (the "Non-Compete Period"), he shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or any manner engage in any business competing with the
business of Paradigm or its subsidiaries as such business exist or are in
process on the date of the termination of the Consultant's employment, with any
geographical area in which Paradigm or its subsidiaries engage or plan to engage
in such business. Nothing herein shall prohibit the Consultant from being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as the Consultant has no active
participation in the business of such corporation.
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(b) During the Non-Compete Period, the Consultant shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of Paradigm or any subsidiary to leave the employ of Paradigm or such
subsidiary, or in any way interfere with the relationship, between Paradigm or
any subsidiary and any employee thereof, (ii) hire any person who was an
employee of Paradigm or any subsidiary at any time during the Consulting Period,
or (iii) induce to attempt to induce any customer, supplier, licensee or other
business relation of Paradigm or any subsidiary to cease doing business with
Paradigm or such subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and Paradigm
or any subsidiary.
MISCELLANEOUS PROVISIONS
9. Assignment
During the first year of this Agreement the Consultant shall have the right
to assign this Agreement to a corporation, the shares of which are owned by
David Kerzner or members of his personal family and of which David Kerzner is
the Key employee. At the time of such assignment David Kerzner shall provide to
Paradigm a Keyman Agreement substantially in the form of Exhibit "B" attached
hereto.
At the time of the said assignment the services to be performed pursuant to
Paragraph 3 of this Agreement shall be performed by the Key employee and the
employee benefits referred to in Paragraph 6(c) shall be made available to the
Key Employee.
10. Enforcement
If, at the end of enforcement of paragraph 6, 7 or 8 of this Agreement, a
court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area. Because the Consultant's
services are unique and because the Consultant has access to Confidential
Information and Work Product, the parties hereto agree that money damages would
be an inadequate remedy for any breach of this Agreement. Therefore, in the
event of a breach or threatened breach of this Agreement, Paradigm or its
successors or assigns may, in addition to other rights and remedies existing in
their favour, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).
11. Consultant's Representations
The Consultant hereby represents and warrants to Paradigm that (i) the
execution, delivery and performance of this Agreement by the Consultant does not
and will not conflict with, breach, violate or cause a default under any
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<PAGE>
contract, agreement, instrument, order, judgment or decree to which the
Consultant is a party or by which he is bound, (ii) the Consultant is not a
party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by Paradigm, this Agreement shall be
the valid and binding obligation of the Consultant, enforceable in accordance
with its terms.
12. Survival
Paragraphs 6, 7 and 8 shall survive and continue in full force in
accordance with their terms notwithstanding any termination of the Consulting
Period.
13. Notices
Any notice provided for in this Agreement shall be in writing and shall be
either personally delivered, or mailed by first-class mail, return receipt
requested, to the recipient at the address below indicated:
Notices to the Consultant:
Mr. David Kerzner,
120 Arnold Avenue,
Thornhill, Ontario,
L4J 1B7
Notice to Paradigm:
Paradigm Advanced Technologies, Inc.,
5140 Yonge Street,
Suite 1525,
North York, Ontario,
M2N 6L7
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
14. Severability
Whenever possible, each provision of this Agreement may be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.
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15. Complete Agreement
This Agreement, those documents expressly referred to herein and other
documents of even date herewith embody the complete agreement and understanding
among the parties and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
16. Counterparts
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and the
same Agreement.
17. Successors and Assigns
This Agreement is intended to bind and enure to the benefit of and be
enforceable by the Consultant, Paradigm, the Investors and their respective
successors and assigns, provided that the Consultant may not assign any of his
rights or obligations, except as expressly provided by the terms of this
agreement.
18. Choice of Law
This Agreement shall be governed by and construed in accordance with the
domestic laws of the Province of Ontario without giving effect to any choice of
law or conflict of law provision or rule (whether the Province of Ontario or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the Province of Ontario.
INTENDING TO BE LEGALLY BOUND, the parties hereto have executed this
Agreement as of the date first written above.
PARADIGM ADVANCED TECHNOLOGIES,
INC.
Per: /s/ Jack Lee
------------------------------------
CEO
Per: /s/ Jacob Kerzner
------------------------------------
Director
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PARAGIGM ADVANCED TECHNOLOGIES, INC.
Per: /s/ David Kerzner
------------------------------------
Director
/s/ David Kerzner
------------------------------------
DAVID KERZNER
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10.4 Consulting Agreement with Industry Marketing Service dated January 13,
1996.
INDUSTRY
MARKETING
SERVICE
3242 South Birchett Drive
TEMPE, ARIZONA 85282
CONSULTATION AGREEMENT TELEPHONE: 602-346-2946
FAX: 602-345-8711
INDUSTRY MARKETING SERVICE, hereinafter to be referred to as IMS, with offices
at 3242 South Birchett Drive, Tempe, Arizona 85282, and its client, Paradigm
Advanced Technologies, Inc., located at 5140 Yonge Street, Suite 1525, North
York, Ontario, do, with the signing of this agreement by an authorized official
of each firm, enter into a legal and binding agreement.
With the signing of this agreement by an IMS principal, it is expressly implied
and clearly understood by the principal signing for the client Paradigm Advanced
Technologies, Inc., be it a corporation, that the services and/or materials
outlined in Addendum B shall be executed and/or delivered as said, in the best
effort of IMS, to meet the needs of the client, Paradigm Advanced Technologies,
Inc., and for the fee(s) so charged, to be paid to IMS in the manner and
timeframe as stipulated herein.
Further, with the signing of this agreement by an authorized principal of
Paradigm Advanced Technologies, Inc., the client, it is also expressly implied,
and understood by IMS, that Paradigm Advanced Technologies, Inc. fully agrees to
the service(s) and/or materials as outlined within Addendum B which is/are to be
provided and/or delivered to them in exchange for the fee(s) charged and that
they therefore agree to this criteria as it has been specified.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by the
signatures of their authorized representatives on the dates shown below.
INDUSTRY MARKETING SERVICE Paradigm Advanced Technologies, Inc.
C. Richard Brogan Jack Lee
/s/ C. Richard Brogan 1/13/96 /s/ Jack Lee 1/13/96
- - --------------------------------- -----------------------------------
Principal President
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10.5 Agreement with Sarah Casse dated January 12, 1996.
THIS AGREEMENT made the 12th day of January, 1996.
BETWEEN:
PARADIGM ADVANCED TECHNOLOGIES, INC.
(hereinafter called the "Corporation")
OF THE FIRST PART
- - -and-
SARAH CASSE
(hereinafter called the "Consultant")
OF THE SECOND PART
WITNESSETH that in consideration of the sum of Two ($2.00) Dollars now paid by
each of the parties hereto to the other (the receipt of which is hereby
acknowledged by each of them) and the mutual covenants and agreement herein set
forth, the parties hereto hereby agree as follows:
1. Engagement
The Corporation hereby agrees to engage the services of the Consultant and the
Consultant hereby agrees to serve the Corporation by furnishing the services set
forth below, upon and subject to the terms and conditions herein set forth for a
period which shall commence on the date hereof, and which shall run for a period
of five (5) years from such date unless earlier terminated as herein provided.
The services of the Consultant, which are to be provided directly by the
Consultant or other parties affiliated or associated with the Consultant include
the following:
(a) reviewing and providing advise to the Corporation with respect to
technology to be used or proposed to be used by the Corporation;
(b) reviewing and providing advise and assistance with respect to
preparation and implementation of business plan for the Corporation;
(c) providing advise with respect to marketing matters for the
Corporation; and
(d) providing such other consulting services as may be mutually agreed
between the Consultant and the Corporation.
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2. Compensation
As compensation for the Consultant's services hereunder, the Corporation shall
grant the Consultant certain stock options for up to 1,875,000 common shares of
the Corporation pursuant to an Incentive Stock Option Agreement dated the date
hereof, a copy of which is attached hereto.
3. Expenses
The Consultant will not incur any expenses on the Corporation's behalf that are
not expressly authorized by the Corporation. Each invoice for reimburseable
expenses will be supported by:
(a) an itemized description of expenses claimed;
(b) pertinent information relevant to the expenses; and
(c) attached receipts when such receipts are reasonably available.
4. Termination
Notwithstanding anything herein contained to the contrary, the Consultant's
engagement shall, cease forthwith upon the happening of the following events:
i) if the Consultant dies or shall be adjudicated bankrupt or
suspends payment or compounds with the Consultant's
creditors or makes an unauthorized assignment or is declared
insolvent;
ii) if the Consultant shall be guilty of any material default or
misconduct or any material breach or non-observance of any
of the provisions contained in this Agreement;
iii) if the Consultant shall be diagnosed as an alcoholic or drug
addict;
iv) if the Consultant and all representatives of the Consultant
shall be absent from the business and affairs of the
Corporation and unavailable to provide the services
described in Schedule "A" without reasonable cause or
justification;
v) if the Consultant shall willfully do or cause to be done any
action detrimental to the welfare of the Corporation or
injurious to its reputation.
Should the Corporation wish to terminate the Consultant's engagement for any of
the reasons provided above, the Corporation shall provide to the Consultant or
the Consultant's personal representative ten (10) days written notice of the
Corporation's invention and the Consultant or the Consultant's personal
representative shall then have the right to nominate another individual as a
substitute to provide the services of the Consultant under this agreement, in
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which case this agreement shall not be terminated and the Consultant's rights
under the Incentive Stock Option Agreement shall continue in full force and
effect.
5. Confidentiality
The Consultant shall not, during the term of this Agreement and for a period of
two (2) years thereafter, use outside of the Consultant's work hereunder or
disclose to any person, firm or corporation, any trade secrets, confidential
information, knowledge or data, whether of a technical or commercial nature,
concerning the business or affairs of the Corporation or which the Consultant
may have acquired in the course of or incidental to the Consultant's engagement
by he Corporation or otherwise, (whether prior to the date of commencement of
this agreement or otherwise), whether for the Consultant's own benefit or to the
detriment or intended or probable detriment of the Corporation.
Upon the termination of this agreement, the Consultant will surrender to the
Corporation any and all documents, lists and records relating in any way to the
business of the Corporation, whether or not original or copies, and
notwithstanding that any of these may have been made at the Consultant's own
expense.
6. Independent Contractor
The Consultant is retained only for the purposes and to the extent set
forth in this Agreement and the Consultant's relation to the Corporation shall
be that of an independent contractor. As an independent contractor, the
Consultant shall not be considered as having an employee status and the
Corporation shall make not "employee deductions" for such matters as
unemployment insurance, income tax or Canada pension plan or make provisions for
vacation pay or any other benefit.
7. Waiver
The failure of the Corporation to insist upon the punctual performance of any of
the covenants or obligations of the Consultant hereunder, or the failure of the
Corporation to exercise any right or remedy available to the Corporation under
this Agreement, or any forbearance on the part of the Corporation, shall not
constitute a waiver by the Corporation of any subsequent default or breach by
the Consultant hereunder.
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8. Notice
Any notice, direction or other instrument required or permitted to be given to
the Corporation hereunder shall be n writing and may be given by mailing to the
same postage prepaid or delivering the same addressed to the Corporation at:
5075 Yonge Street
Suite 402
Willowdale, Ontario
M2N 6C6
Any notice, direction or other instrument required or permitted to be given to
the Consultant hereunder shall be in writing and may be given by mailing the
same postage prepaid or delivering the same addressed to the consultant at:
1018 Spandina Road
Toronto, Ontario
M5N 2M6
Any notice, direction or other instrument aforesaid if delivered shall be deemed
to have been given or made on the date on which it was delivered or if mailed,
except in the event of an intervening postal disruption, shall be deemed to have
been given or made on the third business day following the day on which it as
mailed.
Either party may change its address for service from time to time by notice
given in accordance with the foregoing.
9. Entire Agreement
This agreement and the terms hereof shall constitute the entire Agreement
between the parties hereto with respect to all the matters herein, and its
execution has not been induced by, nor do any of the parties hereto rely ;upon
or regard as material any representations or writings whatsoever not
incorporated herein and made a party hereof, and this Agreement shall not be
amended, altered or qualified except by a memorandum in writing signed by all of
the parties hereto.
10. Applicable Law
This agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the laws of Canada applicable therein.
11. Severability
In case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
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invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained
herein, unless the deletion of such provision or provisions would result in such
a material change as to be unreasonable.
IN WITNESS WHEREOF, the parties have hereto executed this agreement.
SIGNED, SEALED AND DELIVERED ) PARADIGM ADVANCED TECHNOLOGIES,
in the presense of: ) INC.
)
) Per:/s/ Jacob Kerzner c/s
) ----------------------------
)
)
) /s/ Sara Casse.
) ----------------------------------
) SARAH CASSE
