SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to
Commission File Number : 0-26336
______________________________New Paradigm Software Corp.___________________
(Exact name of Registrant as specified in its charter)
_______New York__________ ________________13-3725764
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
630 Third Avenue
___________________________New York, New York 10017_________________________
(Address of principal executive offices)
(212) 557-0933
(Registrant's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Former address: 733 Third Avenue, New York, NY 10017
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
________Class_______ _Outstanding as of November 12, 1997
Common Stock, par value $.01 per share 2,451,729
Transitional Small Business Format (Check one): Yes___ No __X
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Financial statements are included herein following Part II, Item 6.
These statements are unaudited, but reflect all adjustments that, in
the opinion of management, are necessary to provide a fair statement
of the results for the periods covered. All such adjustments are of a
normal recurring nature except where stated.
Item 2. Management's Discussion and Analysis of Financial Condition
and
Results of Operations.
General
New Paradigm Software Corp. (the "Company") is engaged in the
Internet business through its wholly owned subsidiary New Paradigm
Inter-Link, Inc. ("NPIL"). NPIL began operations in December 1995, and
provides Internet services to corporations and other organizations.
Clients include Novartis and the Association of the Bar of the City of
New York. The Company intends to further develop this business by
launching new products and services connected with the Internet. There
is no assurance that the Company will be able to develop or acquire
such products and services or that if it does they will be acceptable
to the market. The Internet is a relatively new and rapidly expanding
market. Gartner Group ( a leading industry analyst) estimates that by
2001, 60% of the US workforce will have a justifiable business need
for Internet access. By the same date, they estimate that more than 8
million households will access the Internet using ISDN lines (digital
telephone lines offered by principal telephone companies suitable for
accessing the Internet) and a further 3 million homes will access the
Internet using cable modems. World-wide Internet use is currently
estimated at 40 million users. With potential access to such numbers,
many corporations are seeking to ensure that they have a presence on
the Internet. Such a presence is established through a collection of
text, graphics and small programs known as a "Web site" maintained on
a computer known as a Web server and viewed by users from all over the
world who are connected to the Internet through the use of a Web
browser such as Netscape Navigator(R) or Microsoft Explorer(R). The
Company seeks to assist companies with creating that Internet presence
and also to exploit other business opportunities which may arise in
servicing the Internet community.
NPIL provides organizations with the ability to utilize the Company's
expertise in creating a Web site. This expertise includes assembling
an appropriate team of independent design consultants and, if
necessary, programmers; designing the site from both technical and
aesthetic perspectives, implementing the design, and then providing
Web server hosting services away from a customer's own internal
network to ensure security. NPIL specializes in providing custom
facilities to enable a customer's presence on the Internet to be
constantly evolving and interesting without adding to their existing
workload. For example, the site for the Association of the Bar of the
City of New York is remotely updated by association staff. A small
software program ("applet") created by NPIL staff in Java - the most
common computer programming language for the Internet today - allows
customers to utilize information in the format in which it was created
under existing word processor programs such as Microsoft Word to
automatically update their Web site from their own offices. No
translations or transitions are required - the customer's staff member
simply uses the common "cut and paste" technique utilized within many
programs to move the required document into the NPIL applet. A
typical site brings in initial revenues of approximately $20,000 -
$30,000 on completion with continuing revenues for maintenance and
changes throughout the year which are expected to amount to $1,000-
$3,000 per annum. The Company has created 5 Web sites for customers
of this service to date.
Examples of Web sites created by New Paradigm include:
o Novartis - site for its "Program" product: www.programpet.com
o Association of the Bar of the City of New York: www.abcny.org
o Nuway Corporation: Corporate Website, site for moistmates
product: www.nuwaycorp.com
o Smolin Lupin, accountants: corporate Website:
www.cpasmolinlupin.com
o Novartis - site for its "Sentinel" product: www.petprotect.com
o New Paradigm: corporate Website: www.newparadigm.com
o Proballfan: NFL football site written by fans:
www.proballfan.com
Until April 1, 1997, through its wholly owned subsidiary, New Paradigm
Commerce, Inc. ("NPC") (formerly New Paradigm Golden Link, Inc.), the
Company operated a service bureau business providing electronic data
interchange ("EDI") services (the conveying of business documents
electronically). As of April 1, 1997, the Company sold its EDI
business to Custom Information Systems Corp. of New York ("CIS") for
$6,000 and a note receivable monthly over three years with a face
value of $355,000 and a present value of approximately $300,000.
On July 23, 1997 the Company sold the rights to its COPERNICUS(R)
software product and certain related assets to VIE Systems Inc., a
Delaware corporation ("VIE") for $2,050,000 in cash and a 5% royalty
on future COPERNICUS related license fees payable commencing after the
first 12 months. Subject to VIE's approval, the Company will have the
right to enter into OEM agreements with VIE on commercially reasonable
terms, to incorporate COPERNICUS within future products which the
Company may develop or acquire.
The Company's revenues and profitability may vary significantly both
in the case of consecutive quarters and in the case of a quarter
compared to the corresponding quarter of the preceding year. Such
variations may result from, among other factors, timing of new product
and service introductions by the Company and its competitors, changes
in levels of the Company's operating expenditures, the size and timing
of customer orders, revenue received from the royalty from VIE, if
any, as well as consulting, and training, increased competition,
reduced prices, the effect of currency exchange rate fluctuations,
delays in the development of new services or products, the costs
associated with the introduction of new products and services and the
general state of national and global economies. As a result of such
factors, the Company's revenues and profitability for any particular
quarter are not necessarily indicative of any future results.
Fluctuations in quarterly results may also result in volatility in the
price of the Company's securities.
The Company will need additional financing prior to March 1998 and
thereafter if demand for the Company's services is sufficiently great
to require expansion at a faster rate than anticipated or the extent
of service and customer support that the Company is required to
provide are greater than expected or other opportunities such as
acquisitions arise which require significant investment, or if
revenues are significantly lower than expected. Additionally, the
Company may require significant additional financing to complete any
acquisition. If financing is required, such financing may be raised
through additional equity offerings, including offerings of preferred
stock, joint ventures or other collaborative relationships, borrowings
and other sources. There can be no assurance that additional financing
will be available or, if it is available, that it will be available on
acceptable terms. If adequate funds are not available to satisfy
either short or long-term capital requirements, the Company may be
required to limit its operations significantly and may be unable to
carry out its plan of operation.
The Company intends to seek to raise additional capital by the
issuance of further equity securities. Preliminary negotiations are
currently underway with investment bankers to this end. However, there
can be no assurances that any such financing will be available or, if
it is available, that it will be available on acceptable terms. If
additional funds are raised through the issuance of equity securities,
the percentage ownership of the then current shareholders of the
Company will be reduced and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Common
Stock. Unless the market price of the Company's Common Stock increases
significantly over its market price on November 12, 1997 additional
issuances of equity security could cause significant dilution to
purchasers of Common Stock in the Company's Initial Public Offering.
Comparison of fiscal quarters
1. Changes in Financial Condition
On July 23, 1997 the Company sold VIE the rights to COPERNICUS and
certain related assets for $2,050,000 in cash and a 5% royalty on
future COPERNICUS related license fees payable commencing after the
first 12 months. Subject to VIE's approval, the Company will have the
right to enter into OEM agreements with VIE on commercially reasonable
terms, to incorporate COPERNICUS within future products which the
Company may develop or acquire.
On July 23, 1997 the Company repaid its loan to Level 8 Systems, Inc.
This loan, bore interest at 10% per annum and was collateralized by
the COPERNICUS product and related assets. The principal amount of
this loan was $550,000. A break-up fee of $100,000 and interest
totaling $18,986 was paid to Level 8 Systems, Inc. A further $15,000
fee was paid to Level 8 Systems, Inc. to extend the maturity date of
the loan which matured on July 17, 1997.
On July 23, 1997 the Company redeemed its 800,000 Series C redeemable
preferred stock ("C Preferred"), $0.01 par value issued to Mr. Robert
Trump for $200,000, as the Company was obligated to do.
Subsequent events:
On October 15,1997, pursuant to Section 4(d) of the Restated
Certificate of Incorporation of the Company, the Company agreed to
create a Series D Convertible Preferred Stock, $0.01 par value (the
"Series D Preferred"). The Company further agreed to issue to several
of the employees of and a consultant to NPIL an aggregate of 50 shares
of Series D Redeemable Preferred stock, with the following principal
terms:
o The Series D Preferred has no right to vote on any matter
requiring the vote of the holders of the Common Stock. Holders of
Series D Preferred shall have the right to vote on any further
issue of Series D Preferred recommended by the Board of Directors
of the Company.
o The Series D Preferred is not entitled to any dividends or
other distribution on the Common Stock.
o Upon dissolution of the Company the holder of each share of
Series D Preferred is entitled to the same proportion of the
outstanding shares of Common Stock of NPIL as such shares of Series
D Preferred of the holder shall represent of the then total
outstanding shares of Series D Preferred.
o At any time following December 31, 1998 the holders of the
Series D Preferred may convert all of the Series D Preferred into
shares of the Company's Common Stock using the following formula
N=((V-$200,000)/(Dx2))/P where N is the number of shares of the
Company's Common Stock acquired by the holder, V is the value of
NPIL on the conversion date, D is the number of shares of Series D
Preferred issued and outstanding on the conversion date and P is
the value of the Common Stock of the Company, all as calculated
pursuant to the terms of the Amended Certificate of Incorporation.
500,000 shares of Common Stock of the Company have been reserved
for such a conversion.
o Should no conversion by the holders of the Series D Preferred
occur by December 31, 2000, the Company may redeem all of the
shares of the Series D Preferred for $1.00 per share.
o Upon termination of the holder's employment with the Company, the
Series D Preferred shall be converted pursuant to the above-stated
formula, except that in the event that the holder voluntarily
terminates employment or is terminated for cause, the Series D
Preferred shall be redeemable by the Company for $1.00 per share.
Following the sale of Copernicus to VIE Systems Inc., Mr. Blundell,
the Company's President and Chief Executive Officer, gave formal
written notice of his intention to exercise the termination right
under his employment contract since this represented a transfer of
substantially all the assets of the Company. These termination rights
provided for the payment to Mr. Blundell of an amount not less than
$414,000. As the Company is not in a position to make such a payment
without seriously depleting the Company's limited cash reserves, the
compensation committee negotiated with Mr. Blundell to produce the
following settlement, which was entered into on November 13, 1997.
o Mr. Blundell waived his entitlement to any payment in respect of the
VIE transaction and entered into new three year employment contracts
with the Company and its Delaware subsidiary, New Paradigm
Acquisition I Co., Inc ("NPAC") at the same aggregate base salary
which provide a reduced termination benefit of 24 months
compensation in the event that his termination right is triggered
again by subsequent events. Mr. Blundell has waived $50,000 of base
salary for fiscal 1998 and until the Company reports a consolidated
pre-tax profit of not less than $75,000.
o In view of the fact the Company is contemplating a number of
acquisitions of companies with revenues in excess of $2.5 million,
the new contract provides that Mr. Blundell will not be entitled to
receive the bonus of $50,000 in the event that the Comapny's gross
revenues reach $2.5 million provided in his previous contract.
o In addition the change of control clause, which gives Mr. Blundell
certain termination rights would be amended to apply only in the
event that 40% of the Company were to be acquired rather than 25% as
at present.
o In order to retain Mr. Blundell's services in seeking acquisitions
NPAC entered into an employment agreement (as mentioned above) and a
loan agreement providing for a loan to Mr. Blundell of $114,000 at
an interest rate of 6%. The loan will be repaid by applying 60% of
(i) any future termination payment to Mr. Blundell; (ii) any bonus
or incentive payments; and (iii) any sales of Common Stock of New
Paradigm directly or beneficially owned by Mr. Blundell, including
any Stock acquired through the exercise of options.
o Mr. Blundell was earlier (October 15,1997) granted 450,000 options
under the Executive Stock Option Plan at an exercise price of $0.16
per share (the market price on the date of issue), exercisable as
follows: 150,000 immediately; 150,000 if the average closing stock
price of the Common Stock exceeds 50 cents for 20 consecutive
business days, and 150,000 if the average closing stock price of the
Common Stock exceeds $1.00 for 20 consecutive business days.
On October 15, 1997, Mr. Matthew Fludgate, Secretary and Vice
President of the Company, was granted 50,000 options under the
Executive Stock Option Plan at an exercise price of $0.16 per share
(the market price on the date of issue).
On October 15, 1997, Mr. Michael Taylor and Mr. Daniel Gordon,
external Directors of the Company, were each granted 50,000 options to
purchase shares of Common Stock at an exercise price of $0.16 per
share (the market price on the date of issue).
2. Results of Operations
The Company's revenue from continuing operations decreased 9% from
$17,512 for the quarter ended September 30, 1996 to $15,947 for the
quarter ended September 30, 1997 due to the timing of customer
requirements for the Company's services. The Company's revenue from
continuing operations increased 165% from $18,287 for the six months
ending September 30, 1996 to $48,397 for the six months ending
September 30, 1997 due to the increase in customers and activity of
NPIL.
The Company's operating expenses fell 15% from $359,802 to $306,298
for the quarter ended September 30, 1997 compared to the quarter ended
September 30, 1996 and 40% from $875,849 for the six months ending
September 30, 1996 to $522,273 for the six months ending September 30,
1997. The decrease was primarily due to a decrease in the number of
administrative staff needed to support the operations of the business
following the sale of the discontinued operations.
The components of the operating expenses are as follows:
General and administrative costs decreased 4% from $228,366 for the
quarter ending September 30, 1996 to $219,408 for the quarter ending
September 30, 1997 and 39% from $549,678 for the six months ending
September 30, 1996 to $333,514 for the six months ending September 30,
1997. This was primarily due to a decrease in support staff and a
corresponding decrease in related supplies and services used.
Professional fees increased 27% from $31,171 for the quarter ending
September 30, 1996 to $39,669 for the quarter ending September 30,
1997. The higher professional fees for the quarter ended September 30,
1997 were due to an increase in the audit fee paid by the Company in
the quarter. The Company's Professional fees decreased 38% from
$108,901 for the six months ending September 30, 1996 to $67,746 for
the six months ending September 30, 1997. The reduced professional
fees for the six months ended September 30, 1996 were due to the lower
level of activity following the sale of the discontinued operations
Marketing costs decreased 93% from $51,865 for the quarter ended
September 30, 1996 to $3,390 for the quarter ended September 30, 1997
and 95% from $109,602 for the six months ending September 30, 1996 to
$5,837 for the six months ending September 30, 1997. The decreases
were due to the Company's decision to terminate its relationship with
its public relations firm and the reduced marketing activity following
the sale of the discontinued operations.
Occupancy costs fell 5% from $29,260 for the quarter ending September
30, 1996 to $27,849 for the quarter ending September 30, 1997. This is
due to the Company moving its New York offices on August 15, 1997 to a
smaller facility. The occupancy costs increased 23% from $70,533 to
$86,516 for the six months ending September 30, 1997 over the same
period in 1996. This was due to an increase in the Company's rent for
its New York offices for the first five months in the fiscal year.
The Company currently requires its overseas customers to pay in US
dollars and the vast majority of its expenses are in US dollars. The
Company does not presently engage in any hedging activities with
respect to foreign currency exchange rate risks.
This 10-QSB contains statements relating to future results of the
Company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties,
including but not limited to those described in the Company's Post-
Effective Amendment No. 2 on form S-3 to the Registration Statement on
Form SB-2 (registration no. 33-92988NY). Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company does not undertake any
obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this quarterly report on
Form 10-QSB:
Exhibit 10.23 Employment Agreements and Loan Agreement with Mark
Blundell dated November 13, 1997
Exhibit 11. Statement re: computation of per share earnings
(losses).
(b) The following reports have been filed on Form 8-K since August 14,
1997:
None.
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
March 31 September 30
1997 1997
(unaudited)
Assets
Current:
Cash and cash equivalents $ 328,168 $ 534,373
Accounts receivable 50,612 25,503
Other receivables and prepayments (Note 2) 32,487 142,596
------------ ------------
Total current assets 411,267 702,472
Property and equipment, less accumulated
depreciation and amortization 168,920 147,349
Investment in restricted common stock at
market value (Note 3) 14,759 8,420
Assets held for sale (Note 4) 691,491 0
Note Receivable (Note 4(a)) 0 278,970
Other assets, less accumulated amortization 71,266 1,674
------------ ------------
$ 1,357,703 $ 1,138,885
------------ ------------
Liabilities and Shareholders' Equity
Current:
Accounts payable and accrued expenses $ 806,690 $ 555,440
Loan payable (Note 4(b)) 550,000 0
Deferred rent payable 71,127 0
------------ ------------
Total current liabilities 1,427,817 555,440
Redeemable Series C Preferred Stock
authorized and outstanding - 800,000 at
redemption value 200,000 0
Shareholders' equity:
Common stock, $.01 par value - shares
authorized 50,000,000;
issued and outstanding 2,451,729
and 2,451,729 24,517 24,517
Additional paid-in capital 9,150,209 9,150,209
Unrealized loss on investment in
restricted common stock (Note 3) (335,241) (341,580)
Capital Deficit (9,109,599) (8,249,700)
------------ ------------
Total shareholders' equity (270,114) 583,446
------------ ------------
$ 1,357,703 $ 1,138,885
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
Consolidated Statements of Operations
<TABLE>
<S> <C> <C> <C> <C>
Three months Three months Six Months Six months
ended September ended September ended September ended September
30, 1996 30, 1997 30, 1996 30, 1997
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Consulting and web design 17,512 15,947 18,287 48,397
------ ------ ------ ------
17,512 15,947 18,287 48,397
Expenses:
General and administrative 228,366 219,408 549,678 333,514
Professional fees 31,171 39,669 108,901 67,746
Marketing 51,865 3,390 109,602 5,837
Occupancy (Note 5) 29,260 27,849 70,533 86,516
Depreciation and amortization 19,140 15,982 37,135 28,660
------ ------ ------ ------
359,802 306,298 875,849 522,273
------ ------ ------ ------
Loss from operations (342,290) (290,351) (857,562) (473,876)
Other income (expense):
Interest income 7,514 11,873 24,593 11,873
------ ------ ------ ------
Interest income 7,514 11,873 24,593 11,873
Net loss from continuing
operations (334,776) (278,478) (832,969) (462,003)
Net loss from discontinued
operations (413,364) (45,000) (880,828) (62,554)
Gain from sale of EDI division
(Note 3(a)) - - - 200,998
Gain from sale of COPERNICUS
(Note 5) - 1,183,456 - 1,183,456
------ ------ ------ ------
Net income (loss) (748,140) 859,978 (1,713,797) 859,897
------ ------ ------ ------
Net loss per share from
continuing operations $ (.14) $ (.11) $ (.36) $ (.19)
Net loss per share from
discontinued operations (.17) (.02) (.34) (.03)
Income per share from sale
of EDI division - - - .08
Income per share from sale of
COPERNICUS - .48 - .48
------ ------ ------ ------
Net income (loss) per share (.31) .35 (.70) .35
Weighted average common shares
outstanding 2,446,729 2,451,729 2,446,729 2,451,729
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries
<TABLE>
<S> <C> <C>
Six months Six months
ended September ended September
30, 1996 30, 1997
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income (loss) $ (1,689,104) $ 859,978
Adjustments to reconcile net
income (loss) to net cash used in
operating activities:
Depreciation and amortization 106,101 58,299
Gain on sale of assets - (1,384,455)
Issuance of Common Stock for services 50 -
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (13,277) 25,109
Other receivables and prepayments 30,345 (110,109)
Other assets - 69,592
Increase (decrease) in:
Accounts payable and accrued
expenses 123,987 (251,250)
Deferred revenue 39,250 -
Deferred rent - (71,127)
--------- -----------
Total adjustments 286,456 (1,663,941)
--------- -----------
Net cash used in operating activities (1,402,647) (803,963)
Cash flows from investing activities:
Purchases of property and equipment (42,598) (10,862)
COPERNICUS development costs (162,500) -
Patents, trademarks and
organization costs (54,799) -
--------- -----------
Net cash used in investing activities: (259,897) (10,862)
Cash flows from financing activities:
Note Receivable from sale of EDI - (278,970)
Redemption of Series C Preferred Stock - (200,000)
Proceeds from disposal of assets - 2,050,000
Repayment of debt - (550,000)
--------- -----------
Net cash from financing activities - 1,021,030
--------- -----------
Net increase (decrease) in cash
and cash equivalents (1,662,545) 206,205
Cash and cash equivalents,
beginning of period 2,017,472 328,168
--------- -----------
Cash and cash equivalents, end of period $ 354,927 $ 534,373
</TABLE>
See accompanying notes to consolidated financial statements
Note 1 -
The accompanying financial statements should be read in conjunction
with the Company's financial statements for the fiscal year ended
March 31, 1997 and the quarter ended June 30, 1997 together with the
accompanying notes included in the Company's 10-KSB for the fiscal
year ended March 31, 1997 and the Company's 10-QSB for the quarter
ended June 30, 1997. In the opinion of management, the interim
statements reflect all adjustments which are necessary for a fair
statement of the results of the interim periods presented. The interim
results are not necessarily indicative of the results for the full
year.
Note 2 -
As of September 30, 1997, this includes $100,000 held in escrow in
connection with the sale of the Company's COPERNICUS software product
(See Note 4(b)) . This money was released to the Company in full on
October 7, 1997.
Note 3 -
As of September 30, 1997 the Company owned 67,470 shares of Camelot
Corporation's ("Camelot") restricted common stock acquired in
connection with its sale of the Netphone(R) software package, which were
originally valued at $350,000. On September 30, 1997, the market value
of the Camelot Stock had decreased to $8,420 resulting in an
unrealized loss of $341,580 which has been reflected in shareholders'
equity. The unrealized loss for the quarter ended September 30, 1997
was $6,339. In November 1997 these shares were sold in a Rule 144
transaction for $9,065. This transaction realized a loss of $340,935.
Note 4 -
(a) EDI Sale -Until April 1, 1997, through its wholly owned
subsidiary, New Paradigm Commerce, Inc., ("NPC") (formerly New
Paradigm Golden Link), the Company operated a service bureau business
providing electronic data interchange ("EDI") services (the conveying
of business documents electronically). As of April 1, 1997, the
Company sold its EDI business to Custom Information Systems Corp. of
New York ("CIS") for $6,000 and a note receivable monthly over three
years with a face value of $355,000 and a present value of
approximately $300,000.
(b) COPERNICUS Sale - As of May 9, 1997 the Company entered into an
agreement to sell, subject to shareholder approval, the rights to
COPERNICUS and certain related assets to VIE Systems Inc., a Delaware
corporation ("VIE") for $2,050,000 in cash and a 5% royalty on future
COPERNICUS related license fees payable commencing after the first 12
months. Subject to VIE's approval, the Company will have the right to
enter into OEM agreements with VIE on commercially reasonable terms,
to incorporate COPERNICUS within future products which the Company may
develop or acquire. The sale of this asset was approved by the
Company's shareholders on July 23, 1997 and the transfer of the asset
occurred on the same date.
Note 5 -
On August 15, the Company assigned its lease to its premises at 733
Third Avenue, New York. The Company has moved its premises to 630
Third Avenue, New York, NY 10017 and currently the monthly occupancy
expense is $4,167.
Note 6 -
Subsequent events -
On October 15,1997, pursuant to Section 4(d) of the Restated
Certificate of Incorporation of the Company, the Company agreed to
create a Series D Convertible Preferred Stock, $0.01 par value (the
"Series D Preferred"). The Company further agreed to issue to several
of the employees of and a consultant to NPIL an aggregate of 50 shares
of Series D Redeemable Preferred stock, with the following principal
terms:
o The Series D Preferred has no right to vote on any matter
requiring the vote of the holders of the Common Stock. Holders of
Series D Preferred shall have the right to vote on any further
issue of Series D Preferred recommended by the Board of Directors
of the Company.
o The Series D Preferred is not entitled to any dividends or
other distribution on the Common Stock.
o Upon dissolution of the Company the holder of each share of
Series D Preferred is entitled to the same proportion of the
outstanding shares of Common Stock of NPIL as such shares of Series
D Preferred of the holder shall represent of the then total
outstanding shares of Series D Preferred.
o At any time following December 31, 1998 the holders of the
Series D Preferred may convert all of the Series D Preferred into
shares of the Company's Common Stock using the following formula
N=((V-$200,000)/(Dx2))/P where N is the number of shares of the
Company's Common Stock acquired by the holder, V is the value of
NPIL on the conversion date, D is the number of shares of Series D
Preferred issued and outstanding on the conversion date and P is
the value of the Common Stock of the Company, all as calculated
pursuant to the terms of the Amended Certificate of Incorporation.
500,000 shares of Common Stock of the Company have been reserved
for such a conversion.
o Should no conversion by the holders of the Series D Preferred
occur by December 31, 2000, the Company may redeem all of the
shares of the Series D Preferred for $1.00 per share.
o Upon termination of the holder's employment with the Company, the
Series D Preferred shall be converted pursuant to the above-stated
formula, except that in the event that the holder voluntarily
terminates employment or is terminated for cause, the Series D
Preferred shall be redeemable by the Company for $1.00 per share.
Following the sale of Copernicus to VIE Systems Inc., Mr. Blundell,
the Company's President and Chief Executive Officer, gave formal
written notice of his intention to exercise the termination right
under his employment contract since this represented a transfer of
substantially all the assets of the Company. These termination rights
provided for the payment to Mr. Blundell of an amount not less than
$414,000. As the Company is not in a position to make such a payment
without seriously depleting the Company's limited cash reserves, the
compensation committee negotiated with Mr. Blundell to produce the
following settlement, which was entered into on November 13, 1997.
o Mr. Blundell waived his entitlement to any payment in respect of the
VIE transaction and entered into new three year employment contracts
with the Company and its Delaware subsidiary, New Paradigm
Acquisition I Co., Inc ("NPAC") at the same aggregate base salary
which provide a reduced termination benefit of 24 months
compensation in the event that his termination right is triggered
again by subsequent events. Mr. Blundell has waived $50,000 of base
salary for fiscal 1998 and until the Company reports a consolidated
pre-tax profit of not less than $75,000.
o In view of the fact the Company is contemplating a number of
acquisitions of companies with revenues in excess of $2.5 million,
the new contract provides that Mr. Blundell will not be entitled to
receive the bonus of $50,000 in the event that the Comapny's gross
revenues reach $2.5 million provided in his previous contract.
o In addition the change of control clause, which gives Mr. Blundell
certain termination rights would be amended to apply only in the
event that 40% of the Company were to be acquired rather than 25% as
at present.
o In order to retain Mr. Blundell's services in seeking acquisitions
NPAC entered into an employment agreement (as mentioned above) and a
loan agreement providing for a loan to Mr. Blundell of $114,000 at
an interest rate of 6%. The loan will be repaid by applying 60% of
(i) any future termination payment to Mr. Blundell; (ii) any bonus
or incentive payments; and (iii) any sales of Common Stock of New
Paradigm directly or beneficially owned by Mr. Blundell, including
any Stock acquired through the exercise of options.
o Mr. Blundell was earlier (October 15,1997) granted 450,000 options
under the Executive Stock Option Plan at an exercise price of $0.16
per share (the market price on the date of issue), exercisable as
follows: 150,000 immediately; 150,000 if the average closing stock
price of the Common Stock exceeds 50 cents for 20 consecutive
business days, and 150,000 if the average closing stock price of the
Common Stock exceeds $1.00 for 20 consecutive business days.
On October 15, 1997, Mr. Matthew Fludgate, Secretary and Vice
President of the Company was granted 50,000 options under the
Executive Stock Option Plan at an exercise price of $0.16 per share
(the market price on the date of issue).
On October 15, 1997, Mr. Michael Taylor and Mr. Daniel Gordon,
external Directors of the Company, were each granted 50,000 options to
purchase shares of Common Stock at an exercise price of $0.16 per
share (the market price on the date of issue).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NEW PARADIGM SOFTWARE CORP.
(Registrant)
Date: November 14, 1997 /s/ Mark
Blundell________________________
Mark Blundell
President & Chief Financial Officer
Date: November 14, 1997 /s/ Matthew
Fludgate_____________________
Matthew Fludgate
Vice President and Secretary
Exhibit 10.23
EMPLOYMENT AGREEMENT
AGREEMENT made this 13th day of November 1997 by and between NEW
PARADIGM SOFTWARE CORP., a New York Corporation, having its principal
place of business located at 630 Third Avenue, New York, NY 10017
(hereinafter referred to as "COMPANY") and MARK A. BLUNDELL residing
at 31 Nichols Road, Armonk, NY 10504 (hereinafter referred to as
"EXECUTIVE").
WITNESSETH
WHEREAS, the COMPANY is a public reporting company engaged in the
development and marketing of Internet products and services, and
intends to make acquisitions;
WHEREAS, the EXECUTIVE is President, Chief Executive Officer and
a Director of the COMPANY;
WHEREAS, in the opinion of the Board of Directors of COMPANY, the
success of the business operations of COMPANY is contingent upon the
performance of the EXECUTIVE and the continued employment of the
EXECUTIVE;
WHEREAS, Section 13 of the EXECUTIVE's agreement with the COMPANY
dated July 14, 1993, provided that upon the transfer of substantially
all of the COMPANY's assets, the COMPANY shall accept the EXECUTIVE's
resignation and shall pay the EXECUTIVE certain termination benefits
being not less than $414,000 in cash and certain other benefits
(referred to collectively herein as "Termination Benefits");
WHEREAS, the sale by the Company of the Copernicus Products and
its related assets to VIE Systems, Inc. on July 23, 1997 constituted a
transfer of substantially all of the COMPANY's assets; and EXECUTIVE
tendered his resignation obligating the COMPANY to pay such
Termination Benefits;
WHEREAS, the COMPANY is not in a position to pay the Termination
Benefits to the EXECUTIVE;
WHEREAS, in the interest of the COMPANY, the EXECUTIVE has
agreed to waive the Termination Benefits and enter into this
agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
CONDITIONS HEREAFTER SET FORTH, THE PARTIES AGREE AS FOLLOWS:
1. The EXECUTIVE waives his right to receive any and all
termination benefits currently owed to him by the COMPANY and its
affiliates, including but not limited to any and all Termination
Benefits.
2. The COMPANY does hereby employ, engage and hire the EXECUTIVE
as President and Chief Executive Officer of the COMPANY for a period
of three (3) years from the date hereof and such period shall be
automatically extended by one (1) year on the third and each
subsequent anniversary of the date hereof unless ninety (90) days
advance written notice is given by COMPANY to EXECUTIVE or by
EXECUTIVE to COMPANY ("Employment Period").
3. The EXECUTIVE agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talent,
perform all of the duties that may be required of and from him
pursuant to the expressed and implicit terms hereof.
4. (a) The COMPANY shall pay the EXECUTIVE a minimum base salary
of One Hundred and Fifty Thousand Dollars ($150,000) per year
("Minimum Base Salary") in equal semi-monthly installments. During
the term of this Employment Agreement, EXECUTIVE's base salary shall
be reviewed at least annually; the first such review shall be no later
than September 30, 1998. Such review shall be conducted by the Board
of Directors of the COMPANY, or a committee designated by the Board
of Directors, and such Board or committee may increase, but not
decrease said salary.
(b) Additionally, EXECUTIVE shall be further entitled to an
expense allowance of $4,000 per month. EXECUTIVE further understands
and recognizes that he will be responsible for tax on this amount
unless he keeps and maintains adequate records of expenses and
allowances.
5. The COMPANY shall pay or reimburse EXECUTIVE for all
reasonable travel and other business expenses incurred by EXECUTIVE in
performing his obligations under this Employment Agreement. The
COMPANY further agrees to furnish EXECUTIVE with a private office and
such other assistance and accommodations as shall be suitable to the
character of EXECUTIVE's position with the COMPANY and adequate for
the performance of his duties hereunder.
6. EXECUTIVE shall receive the use of a company car or a Seven
Hundred and Fifty Dollars ($750.00) per month allowance to be applied
by EXECUTIVE as the EXECUTIVE deems appropriate.
7. COMPANY has granted EXECUTIVE options to purchase shares of
the COMPANY's Common Stock at the dates and amounts as shown in
Exhibit A.
8. EXECUTIVE expressly agrees that he will not during the term
hereof, be interested directly or indirectly in any form fashion or
manner, as a partner, officer, director, stockholder, advisor or
executive in any other business similar to the business of COMPANY
other than affiliates of the COMPANY unless agreed to by COMPANY.
Nothing herein contained shall, however, limit the rights of the
EXECUTIVE to own up to 5% of the capital stock or other securities of
any corporation whose stock or securities are publicly owned or
regularly traded on a public exchange or in the over-the-counter
market. This paragraph 8, is not intended to restrict EXECUTIVE from
profits or revenues resulting from any publications, lectures, tours,
or consulting which EXECUTIVE undertakes in his own time or with
permission from the COMPANY, provided that such work does not conflict
with the interests of the COMPANY.
9. EXECUTIVE hereby agrees to be bound by the Confidentiality and
Non-Compete Covenant, a copy of which is annexed hereto and made a
part of hereof and marked Exhibit "B".
10. The payments provided for elsewhere in this Employment
Agreement are in addition to any benefits to which EXECUTIVE may be,
or may become entitled under any group hospitalization, health, dental
care, or sick-leave plan, life or other insurance or death benefit
plan, travel or accident insurance, auto allowance or auto lease plan,
or executive contingent compensation plan, including, without
limitation, capital accumulation and termination pay programs,
restricted or stock purchase plan, stock option plan, retirement
income or pension plan, or other present or future group executive
benefit plan or program of the COMPANY for which key executives are or
shall become eligible, and EXECUTIVE shall be eligible to receive
during the period of his employment under this Employment Agreement,
all benefits and emoluments for which key executives are eligible
under every such plan or program to the extent permissible taking to
account the relative position of the EXECUTIVE under the general terms
and provisions of such plans or programs and in accordance with the
provisions thereof.
11. (a) In the event of the disability (as hereinafter defined)
of EXECUTIVE, the COMPANY shall, continue to pay EXECUTIVE the monthly
compensation provided in Section 4 hereof during the period of his
disability; provided however, that, in the event the EXECUTIVE is
disabled for a continuous period exceeding twelve (12) calendar
months, the COMPANY may, at its election, terminate this Employment
Agreement, in which event EXECUTIVE shall be entitled to receive the
benefits described in paragraph 12(c) and 12(d).
As used in this Employment Agreement, the term "disability" shall
mean the inability of EXECUTIVE to perform all or substantially all of
his duties under this Employment Agreement as determined by an
independent physician selected with the approval of the COMPANY and
the EXECUTIVE.
(b) During the period EXECUTIVE shall be entitled to receive
payments under paragraph 4, 5, and 6 above, to the extent that he is
physically and mentally able to do so, he shall furnish information
and assistance to the COMPANY and comply with the provisions of
Paragraph 9 hereof.
(c) In the event of the death of EXECUTIVE either during his
disability or otherwise during the term of this Agreement, the COMPANY
shall pay, or cause to be paid, to EXECUTIVE's designated beneficiary
or beneficiaries or legal representative a death benefit of
$1,000,000.00 Such death benefit may be payable in one lump cash sum
or installments, as determined by the COMPANY, taking into account any
request of EXECUTIVE and his beneficiary or beneficiaries. The
COMPANY may purchase one or more term or other life or similar
insurance policies in amounts to provide for its obligations under
this Paragraph 11(c), and if no adverse tax consequences would result
to EXECUTIVE and his designated beneficiary or beneficiaries, the
ownership of said policy or policies shall be transferred to
EXECUTIVE, such transfer to constitute, to the extent of such
transfer, compliance with the COMPANY's obligations under this
Paragraph 11(c).
12. (a) The EXECUTIVE's employment shall not be terminated
without good cause shown. Dismissal for Cause is limited to material,
willful and intentional misconduct on the part of the EXECUTIVE
("Cause"). Under no circumstances shall EXECUTIVE be terminated if
EXECUTIVE reasonably claims that an act is a breach of his fiduciary
responsibilities.
(b) Upon the occurrence of any event described in clauses (i) -
(v) below, EXECUTIVE shall have the right to elect to terminate his
employment under this Employment Agreement by resignation upon not
less than ten (10) days prior written notice, given within a
reasonable period of time not to exceed, except in the case of a
continuing breach, ninety (90) days after the event giving rises to
said right to elect. The events are as follows: (i) the COMPANY's
failure to elect or re-elect or to appoint or re-appoint EXECUTIVE to
the offices of President, Chief Executive Officer and Director; or
(ii) material change by the COMPANY in the EXECUTIVE's functions,
duties or responsibilities which change would cause EXECUTIVE's
position with the COMPANY to become less responsible or important and
any such material change shall be deemed a continuing breach of this
Employment Agreement; (iii) liquidation, dissolution, consolidation,
acquisition or merger of the COMPANY or transfer of all or
substantially all of its assets; (iv) if the COMPANY requires
EXECUTIVE to work at a facility outside Manhattan or Westchester
County, New York, except by mutual agreement; or (v) other breach of
this Employment Agreement by the COMPANY.
(c) Upon the occurrence of any event of resignation as in 12(b),
the COMPANY shall pay the EXECUTIVE immediately, or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate
as the case may be, as severance pay or liquidated damages, or both,
for the period described below a sum equal to the total of the highest
monthly rate of salary paid to EXECUTIVE at any time under this
Agreement, the Expense Allowance set out in Paragraph 4 hereof and the
Car Allowance set out in Paragraph 6 hereof. Such payments shall be
calculated for a period of twenty-four (24) months.
(d) Upon the occurrence of an event of resignation as in 12(b),
any unvested options under the Executive Stock Option Plan provided by
COMPANY pursuant to Exhibit "A" (or any other incentive plan) will
become fully vested.
(e) In the event EXECUTIVE's employment ceases due to the
expiration of this Employment Agreement upon notice by the COMPANY to
EXECUTIVE pursuant to paragraph 2 hereof, COMPANY shall pay EXECUTIVE,
or in the event of his subsequent death, his beneficiaries or estate,
as the case may be, an additional severance pay or liquidated damages
or both, Two Hundred and Fifty Thousand Dollars ($250,000)
("Severance"), provided, however, that the COMPANY shall first pay
that portion of said Severance to SUBSIDIARY which represents the sum
of the outstanding balance of the loan by SUBSIDIARY to EXECUTIVE
("Loan"), if any, which amount shall be applied to the repayment of
such Loan pursuant to the terms of the loan agreement between the
EXECUTIVE and SUBSIDIARY, with the balance of such Severance, if any,
to be paid to EXECUTIVE in one lump sum cash payment, no later than
the first anniversary date of the cessation of said employment, or in
monthly installments (not to exceed twelve (12) months) as EXECUTIVE
may so determine.
13. In the event of a merger, acquisition or consolidation of
the COMPANY with any corporation or a change in the control of the
COMPANY, the EXECUTIVE may at any time, but no later than ninety (90)
days after consummation of such merger, acquisition, consolidation or
change of control, elect to have his employment relationship with the
COMPANY terminated, in which event EXECUTIVE shall be entitled to
receive the benefits described in Paragraphs 10, 12(c) and 12(d). For
purposes of this paragraph, "change of control" shall be deemed to
have occurred, without limitation, if and when (i) any person (as that
term is used in Sections 13(d) and 14(d) (2) of the Securities and
Exchange Act of 1934), other than a person who at the time of
execution of this Agreement is a shareholder of the COMPANY, is or
becomes a beneficial owner, directly or indirectly, of securities of
the COMPANY representing forty (40%) percent or more of the combined
voting power of the COMPANY's then outstanding securities; or (ii)
there shall occur a sale of all, or a substantial part, of the assets
of the COMPANY. Notwithstanding anything in the foregoing to the
contrary, no change in the control of the COMPANY shall be deemed to
have occurred for purposes of this Employment Agreement by virtue of
any transaction which results in the EXECUTIVE, or a group of persons
which includes the EXECUTIVE, acquiring, directly or indirectly, more
than forty (40%) percent of the combined voting power of the COMPANY's
outstanding securities.
14. In the event of termination without Cause (as herein defined)
of the EXECUTIVE during the Employment Period, the EXECUTIVE may
elect, within ninety (90) days after such termination, to be paid
immediately a lump sum severance allowance, in an amount equivalent to
the total of his Minimum Base Salary payments, the Expense Allowance
and the Car Allowance for the remainder of the contract or twenty four
(24) calendar months, which ever is the greater, together with a
reasonable estimate of any bonus or incentive payments which would
have been paid to EXECUTIVE in this period.
15. It is expressly agreed that COMPANY shall pay a portion (as
specified in the Loan Agreement between SUBSIDIARY and EXECUTIVE
("Loan Agreement")) of any bonus and termination payment under
paragraphs 12, 13 or 14 hereof to New Paradigm Acquisition I Co., Inc.
("SUBSIDIARY") to the extent needed to repay the loan which the
SUBSIDIARY has extended to EXECUTIVE on the terms set out in the Loan
Agreement, and the EXECUTIVE hereby assigns such proportion of such
payments to the SUBSIDIARY.
16. This Employment Agreement contains the total and entire
agreement between the parties and shall as of the effective date
hereof, supersede any and all other agreements between the parties.
All prior understandings and/or agreements between the parties are
hereby deemed superseded and incorporated into the provisions of this
Employment Agreement. The parties acknowledge and agree that neither
of them has made any representations that are not specifically set
forth therein and each of the parties hereto acknowledge that he or it
has relied upon his or its own judgment in entering the same.
17. The parties hereto do further agree that no waiver or
modification of this Employment Agreement or of any covenant,
condition or limitation herein contained, shall be valid, unless in
writing and duly executed by the party to be charged therewith and
that no evidence of any proceedings or litigation between either or
the parties arising out of or affecting this agreement or the rights
or obligations of any party hereunder shall be valid and binding
unless such waiver or modification is in writing, duly executed, and
the parties further agree that the provisions of this paragraph may
not be waived except as herein set forth.
18. The parties hereto agree that it is their intention and
covenant that this Employment Agreement and the performance hereunder
shall be construed in accordance with and under the laws of the State
of New York and that the terms hereof may be enforced in any court of
competent jurisdiction in any action for specific performance which
may be instituted under this Employment Agreement.
19. The parties agree that in the event of any dispute arising
out of this Employment Agreement, they will submit to the jurisdiction
of the New York Supreme Court, New York County.
20. All notices required or permitted to be given by either
party hereunder shall be in writing and sent by facsimile or mailed by
registered mail, return receipt requested or equivalent to the other
party addressed as follows:
If to COMPANY:
The Compensation Committee
New Paradigm Software Corp.
630 Third Avenue
New York, NY 10017
or as amended by COMPANY in written notice to EXECUTIVE.
If to EXECUTIVE:
Mark Blundell
31 Nichols Road
Armonk, NY 10504
or as amended by EXECUTIVE in written notice to COMPANY.
Any notice mailed as provided above shall be deemed completed on
the date of receipt.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day, month and year first above written.
NEW PARADIGM SOFTWARE CORP.
__________________________________
BY:
__________________________________
MARK A. BLUNDELL
Exhibit A
Date of Amount Exercise Price Plan
Grant
- ----------------------------------------------------------------------
4/26/95 18,666 4.50 ESOP
11/29/95 20,000 5.125 ESOP
10/9/96 149,999 1.25 EXSOP
10/15 /97 150,000 0.16 EXSOP
(a) 150,000 0.16 EXSOP
(b) 150,000 0.16 EXSOP
Note - ESOP options are subject to the terms and conditions as listed
in the Employee Stock Option Plan as amended, EXSOP options are
subject to the terms and conditions of the Executive Stock Option Plan
as amended.
(a) To be granted if the average share price of the Common Stock for
20 consecutive business days exceeds $.50
(b) To be granted if the average share price of the Common Stock for
20 consecutive business days exceeds $1.00
EXHIBIT B
CONFIDENTIALITY AND NON-COMPETE COVENANT
The Undersigned, MARK A. BLUNDELL ("EXECUTIVE"), hereby
covenants, warrants and agrees that in consideration of NEW PARADIGM
SOFTWARE CORP. ("COMPANY") entering into a contract of employment by
and between the undersigned and COMPANY that all information,
processes, plans, customer lists, methods of operation and other
related information, which information is material to the business of
the COMPANY, will be held strictly confidential and only utilized
during the course of employment at the COMPANY. The undersigned
further is aware that the COMPANY is relying on the within
representation in permitting and allowing the undersigning access to
information and that said information is considered proprietary and
the property of the COMPANY with the further understanding and
agreement that in no event will said proprietary information be
utilized except with the express written consent of the COMPANY.
During the course of EXECUTIVE's employment except in furtherance
of his duties under the terms and conditions of this contract, the
EXECUTIVE further specifically agrees he will not at any time, in any
fashion, form or manner, either directly or indirectly, divulge,
disclose or communicate to any person, firm, or corporation, in any
matter, whatsoever, any information of any kind, nature or description
concerning any material matters affecting or relating to the business
of the COMPANY, including without limiting the generality of the
foregoing, any of its customers, its manner of operations, its plans,
processes, programs, or other data of any kind, nature or description
without regard to whether any or all of the foregoing matter shall be
deemed confidential, material or important, that the parties hereto
stipulating that as between them the same are important, material,
confidential and gravely affect the effective and successful conduct
of the business of the COMPANY and its good will and that any breach
of the terms of this paragraph is a material breach thereof, except
where the EXECUTIVE shall be acting on behalf of the COMPANY.
EXECUTIVE specifically understands and agrees that the knowledge
of customer activities, information and related matters concerning
COMPANY and its customers are proprietary and are deemed the property
of COMPANY and that prior to the expiration or termination of the
within agreement and for a period of one year thereafter, EXECUTIVE
understands and agrees that said proprietary information shall not be
utilized by EXECUTIVE in connection with the COMPANY's existing
customers without COMPANY's consent. In addition thereto, EXECUTIVE
recognizes and agrees that should there be any violation of the within
covenant that EXECUTIVE consents to the jurisdiction of the New York
State Supreme Court, New York County, for any action requesting
injunctive relief and damages insofar as COMPANY is concerned should
EXECUTIVE violate any part of the within covenant.
EXECUTIVE further understands and agrees that COMPANY in entering
into the within agreement is relying upon EXECUTIVE's representation
and warranty that all trade secret and other proprietary information
of COMPANY will be kept strictly confidential by EXECUTIVE and not
utilized by EXECUTIVE in any manner whatsoever other than on COMPANY's
behalf and during the course of EXECUTIVE's employment with COMPANY.
____________________
Mark Blundell
EMPLOYMENT AGREEMENT
AGREEMENT made this 13th day of November 1997 by and between NEW
PARADIGM ACQUISITION I CO., INC., a Delaware Corporation, having its
principal place of business located at 630 Third Avenue, New York, NY
10017 (hereinafter referred to as "COMPANY") and MARK A. BLUNDELL
residing at 31 Nichols Road, Armonk, NY 10504 (hereinafter referred to
as "EXECUTIVE").
WITNESSETH
WHEREAS, the COMPANY is a wholly owned subsidiary of New Paradigm
Software Corp. (hereinafter referred to as the "Parent Company")
engaged in the business of seeking and making acquisitions;
WHEREAS, the EXECUTIVE is President, Chief Executive Officer and
a Director of the COMPANY, and
WHEREAS, in the opinion of the Board of Directors of COMPANY, the
success of the business operations of COMPANY is contingent upon the
performance of the EXECUTIVE and the continued employment of the
EXECUTIVE:
WHEREAS, in the interest of the COMPANY, the EXECUTIVE has
agreed to waive his right to receive any and all termination benefits
currently owed to the EXECUTIVE by the COMPANY and its affiliates and
enter into this agreement and the Loan Agreement dated the date hereof
providing for a Loan from the COMPANY to the EXECUTIVE ("Loan
Agreement") under the terms specified in Exhibit A hereto attached in
the amount of One Hundred Fourteen Thousand U.S. Dollars ($114,000.00
US)
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
CONDITIONS HEREAFTER SET FORTH, THE PARTIES AGREE AS FOLLOWS:
1. The COMPANY does hereby employ, engage and hire the EXECUTIVE
as President and Chief Executive Officer of the COMPANY for a period
of three (3) years from the date hereof and such period shall be
automatically extended by one year on the third and each subsequent
anniversary of the date hereof unless ninety (90) days advance written
notice is given by COMPANY to EXECUTIVE or by EXECUTIVE to COMPANY
("Employment Period").
2. The EXECUTIVE agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talent,
perform all of the duties that may be required of and from him
pursuant to the expressed and implicit terms hereof.
3. (a) The COMPANY shall pay the EXECUTIVE a minimum base salary
of Fifty Thousand Dollars ($50,000) per year ("Minimum Base Salary")
in equal semi-monthly installments. During the term of this
Agreement, EXECUTIVE's base salary shall be reviewed at least
annually; the first such review shall be no later than September 30,
1998. Such review shall be conducted by the Board of Directors of the
COMPANY, or a committee designated by the Board of Directors, and
such Board or committee may increase, but not decrease said salary.
4. The COMPANY shall pay or reimburse EXECUTIVE for all
reasonable travel and other business expenses incurred by EXECUTIVE in
performing his obligations under this Agreement.
5. EXECUTIVE agrees to waive his right to receive any and all
termination benefits currently owed to him by the COMPANY and its
affiliates, including, but not limited to, the Parent Company.
6. EXECUTIVE expressly agrees that he will not during the term
hereof, be interested directly or indirectly in any form fashion or
manner, as a partner, officer, director, stockholder, advisor or
executive in any other business similar to the business of COMPANY,
other than affiliates of the COMPANY, unless agreed to by COMPANY.
Nothing herein contained, shall however, limit the rights of the
EXECUTIVE to own up to 5% of the capital stock or other securities of
any corporation whose stock or securities are publicly owned or
regularly traded on a public exchange or in the over-the-counter
market. This paragraph 6, is not intended to restrict EXECUTIVE from
profits or revenues resulting from any publications, lectures, tours,
or consulting which EXECUTIVE undertakes in his own time or with
permission from the COMPANY, provided that such work does not conflict
with the interests of the COMPANY.
7. (a) In the event of the disability (as hereinafter defined) of
EXECUTIVE, the COMPANY shall, continue to pay EXECUTIVE the monthly
compensation provided in Section 3 hereof during the period of his
disability; provided however, that, in the event the EXECUTIVE is
disabled for a continuous period exceeding twelve (12) calendar
months, the COMPANY may, at its election, terminate this Agreement, in
which event EXECUTIVE shall be entitled to receive the benefits
described in paragraph 8(c).
As used in this Agreement, the term "disability" shall mean the
inability of EXECUTIVE to perform all or substantially all of his
duties under this Agreement as determined by an independent physician
selected with the approval of the COMPANY and the EXECUTIVE.
(b) During the period EXECUTIVE shall be entitled to receive
payments under paragraph 4 above, to the extent that he is physically
and mentally able to do so, he shall furnish information and
assistance to the COMPANY.
8. (a) The EXECUTIVE's employment shall not be terminated
without good cause shown. Dismissal for cause is limited to material,
willful and intentional misconduct on the part of the EXECUTIVE
("Cause"). Under no circumstances shall EXECUTIVE be terminated if
EXECUTIVE reasonably claims that an act is a breach of his fiduciary
responsibilities.
(b) Upon the occurrence of any event described in clauses (i) -
(v) below, EXECUTIVE shall have the right to elect to terminate his
employment under this Employment Agreement by resignation upon not
less than ten (10) days prior written notice, given within a
reasonable period of time not to exceed, except in the case of a
continuing breach, ninety (90) days after the event giving rises to
said right to elect. The events are as follows: (i) the COMPANY's or
the Parent Company's failure to elect or re-elect or to appoint or re-
appoint EXECUTIVE to the offices of President, Chief Executive Officer
and Director; or (ii) material change by the COMPANY or the Parent
Company in the EXECUTIVE's functions, duties or responsibilities which
change would cause EXECUTIVE's position with the COMPANY or in the
Parent Company to become less responsible or important and any such
material change shall be deemed a continuing breach of this Employment
Agreement; (iii) liquidation, dissolution, consolidation, acquisition
or merger of the COMPANY or the Parent Company or transfer of all or
substantially all of its assets; (iv) if the COMPANY or the Parent
Company requires EXECUTIVE to work at a facility outside Manhattan or
Westchester County, New York, except by mutual agreement; or (v) other
breach of this Agreement by the COMPANY.
(c) Upon the occurrence of any event of resignation as in 8(b),
the COMPANY shall pay the EXECUTIVE immediately, or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate
as the case may be, as severance pay or liquidated damages, or both,
for a period of twenty-four (24) months a sum equal to the total of
the highest monthly rate of salary paid to EXECUTIVE at any time under
this Employment Agreement calculated.
9. In the event of a merger, acquisition or consolidation of the
Parent Company with any corporation or a change in the control of the
Parent Company, the EXECUTIVE may at any time, but no later than
ninety (90) days after consummation of such merger, acquisition,
consolidation or change of control, elect to have his employment
relationship with the COMPANY terminated, in which event EXECUTIVE
shall be entitled to receive the benefits described in Paragraph 8(c).
For purposes of this paragraph, "change of control" shall be deemed to
have occurred, without limitation, if and when (i) any person (as that
term is used in Sections 13(d) and 14(d) (2) of the Securities and
Exchange Act of 1934), other than a person who at the time of
execution of this Employment Agreement is a shareholder of the Parent
Company, is or becomes a beneficial owner, directly or indirectly, of
securities of the Parent Company representing forty (40%) percent or
more of the combined voting power of the Parent Company's then
outstanding securities; or (ii) there shall occur a sale of all, or a
substantial part, of the assets of the Parent Company.
Notwithstanding anything in the foregoing to the contrary, no change
in the control of the Parent Company shall be deemed to have occurred
for purposes of this Employment Agreement by virtue of any transaction
which results in the EXECUTIVE, or a group of persons which includes
the EXECUTIVE, acquiring, directly or indirectly, more than forty
(40%) percent of the combined voting power of the Parent Company's
outstanding securities.
10. In the event of termination without Cause (as herein defined)
of the EXECUTIVE during the Employment Period, the EXECUTIVE may
elect, within ninety (90) days after such termination, to be paid
immediately a lump sum severance allowance, in an amount equivalent to
the total of his Minimum Base Salary payments for the remainder of the
contract or twenty four (24) calendar months, which ever is the
greater, together with a reasonable estimate of any bonus or incentive
payments which would have been paid to EXECUTIVE in this period.
11. The COMPANY shall herewith make a loan to the EXECUTIVE on the
terms and conditions stated in the Loan Agreement attached hereto as
Exhibit A. It is expressly agreed that COMPANY shall apply a portion
(as specified in the Loan Agreement) of any bonus and termination
payment under paragraphs 8, 9 or 10 hereof to the extent needed to
repay the loan which the COMPANY has extended to EXECUTIVE on the
terms set out in Exhibit A and EXECUTIVE hereby assigns such
proportion of such payments to the COMPANY.
12 This Employment Agreement and the Loan Agreement contain the
total and entire agreement between the parties and shall as of the
effective date hereof, supersede any and all other agreements between
the parties. All prior understandings and/or agreements between the
parties are hereby deemed superseded and incorporated into the
provisions of this Agreement. The parties acknowledge and agree that
neither of them has made any representations that are not specifically
set forth herein and each of the parties hereto acknowledge that he or
it has relied upon his or its own judgment in entering the same.
13. The parties hereto do further agree that no waiver or
modification of this Agreement or of any covenant, condition or
limitation herein contained, shall be valid, unless in writing and
duly executed by the party to be charged therewith and that no
evidence of any proceedings or litigation between either or the
parties arising out of or affecting this Agreement or the rights or
obligations of any party hereunder shall be valid and binding unless
such waiver or modification is in writing, duly executed, and the
parties further agree that the provisions of this paragraph may not be
waived except as herein set forth.
14. The parties hereto agree that it is their intention and
covenant that this Employment Agreement and the performance hereunder
shall be construed in accordance with and under the laws of the State
of Delaware and that the terms hereof may be enforced in any court of
competent jurisdiction in any action for specific performance which
may be instituted under this Agreement.
15. All notices required or permitted to be given by either
party hereunder shall be in writing and sent by facsimile or mailed by
registered mail, return receipt requested or equivalent to the other
party addressed as follows:
If to COMPANY:
New Paradigm Acquisition I Co., Inc.
c/o The Compensation Committee
New Paradigm Software Corp.
630 Third Avenue
New York, NY 10017
or as amended by COMPANY in written notice to EXECUTIVE.
If to EXECUTIVE:
Mark Blundell
31 Nichols Road
Armonk, NY 10504
or as amended by EXECUTIVE in written notice to COMPANY.
Any notice mailed as provided above shall be deemed completed on
the date of receipt.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day, month and year first above written.
NEW PARADIGM ACQUISITION I CO., INC.
__________________________________
BY:
__________________________________
MARK BLUNDELL
31 Nichols Road
Armonk
New York
10504
November 13, 1997
TO: BOARD OF NEW PARADIGM ACQUISITION I Co., Inc.
c/o The Compensation Committee
New Paradigm Software Corp.
630 Third Avenue
New York, NY
10017
Dear Sirs:
Re: Waiver of Minimum Base Salary
I hereby waive $50,000 per annum of my Minimum Base Salary from New
Paradigm Acquisition I Co., Inc., for at least the fiscal year 1998,
and until such time as New Paradigm Software Corp. on a consolidated
basis together with its subsidiaries, including New Paradigm
Acquisition I Co., Inc. first reports a consolidated pretax profit for
a fiscal year which, but for this payment would have exceeded $75,000.
At that time, the $50,000 for that year will become immediately due
and payable and henceforth regular payments will take place at the
full rate.
Very truly yours,
Mark Blundell
Exhibit A
LOAN AGREEMENT
This Loan Agreement made this thirteenth day of November, 1997 by and
between NEW PARADIGM ACQUISITION I CO., INC., a Delaware Corporation
(the "Company") and MARK BLUNDELL residing at 31 Nichols Raod, Armonk,
New York, 10504 ("Borrower")
WHEREAS, the Company has entered into an Employment Agreement with the
Borrower on the date hereof providing for a loan pursuant to the terms
hereof;
NOW, THEREFORE, IN CONSIDERATION OF MUTUAL COVENANTS AND CONDITIONS
SET FORTH HEREIN, THE PARTIES AGREE AS FOLLOWS:
1. Loan. Company hereby Loans to Borrower and Borrower
hereby borrows from Company the sum of One Hundred and Fourteen
Thousand Dollars ($114,000.00) ("Principal Amount") at an annual
interest rate of six percent (6%), such interest to be calculated on
the basis of a three hundred and sixty five (365) day year and added
to the Principal Amount of the Loan ("Loan") to be repaid pursuant to
Paragraph 2. hereof.
2. Repayment.
This Loan shall be repaid as follows:
2.1 Bonuses. Should the Company or New Paradigm
Software Corp. the "Parent Company") choose to grant Borrower any
bonuses or incentives to be paid in cash, the Company and/or the
Parent Company shall apply sixty percent (60%) of any such bonuses or
incentives first toward accrued interest and secondly toward the
unpaid outstanding principal of this Loan. The Borrower hereby
assigns 60% of any such bonuses or incentives awarded by the Parent
Company to the Company.
2.2 Future Termination Payments. Should the Borrower
be entitled to a payment from the Company in respect of any
termination or expiration of his employment contract under the
conditions set forth in the Borrower's employment contract with the
Company dated November 13, 1997 as amended from time to time or to a
payment from the Parent Company under the conditions set forth in a
further employment agreement of the same date between the Parent
Company and the Borrower ( collectively the "Employment Contracts"),
any payment due will first be applied to pay the accrued interest and
secondly to any outstanding principal on this Loan. The Borrower
hereby assigns any such amounts to the Company. The balance of such
termination payment shall then be paid to Borrower.
2.3 Stock Sales. Should the Borrower sell any Common
Stock of the Parent Company which the Borrower either directly owns,
or beneficially owns through an entity and cash is distributed to the
Borrower, from time to time, including any stock issued as a result of
warrant or option exercise by the Borrower, the Borrower must, within
five (5) business days of receipt of funds from such sale, pay to the
Company sixty percent (60%) of any proceeds first toward the payment
of the accrued interest, if any, and second any outstanding principal
balance of this Loan. The Borrower further agrees to immediately give
notice to the Company of any such sales of Common Stock.
2.4 Termination of Employment. In the event (i)
Borrower's employment with the Company or Parent Company is terminated
for Cause as defined in his Employment Contracts; or (ii) Borrower
voluntarily terminates his employment with the Company or Parent
Company as provided in Paragraph 4.1 (d) below, the Loan and all
amounts due hereunder shall become immediately due and payable.
Notwithstanding anything to the contrary herein contained,
the Principal Amount of this Loan may be paid at any time or from time
to time in whole or in part, on five days' prior notice and without
penalty or premium.
3. Transferability.
3.1 Restrictions. This Loan may not be sold or
transferred in whole or in part except (i) to an affiliate which is a
majority owned subsidiary of the Parent Company, or (ii) with written
consent of the Borrower.
3.2 Notices to Subsequent Lender. If this Loan shall
have been transferred to another lender pursuant to this Section 3 and
such lender shall have designated in writing the address to which
communications with respect to this Loan shall be mailed, all notices,
certificates, requests, statements and other documents required or
permitted to be delivered to the lender by any provision hereof shall
also be delivered to such lender.
3.4 Persons Deemed Lenders. Prior to due notice of
transfer, the Borrower may treat the person whose name has most
recently been notified to the Borrower as the lender of this Loan for
the purpose of receiving payment of this Loan and for all other
purposes whatsoever, whether or not this Loan shall be overdue, and
the Borrower shall not be affected by notice to the contrary.
4. Events of Default and Remedies.
4.1 Events of Default. An "Event of Default" shall
occur if:
(a) Payment of Loan. The Borrower defaults in
the payment of this Loan pursuant to the terms set out in Section 2,
when and as the same shall become due and payable; or
(b) Performance of Covenants and Conditions of
Loan. The Borrower fails to comply with any of the covenants,
conditions or agreements set forth in this Loan, provided such default
shall continue for a period of thirty (30) days after receipt of
written notice to the Borrower from the Lender of the Loan stating the
specific default or defaults; or
(c) Bankruptcy, Insolvency, etc. The Borrower
shall file or consent by answer or otherwise to the entry of an order
for relief or approving a petition for relief or arrangement or any
other petition in bankruptcy, or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or shall make an assignment for
the benefit of his creditors, or shall consent to the appointment of a
receiver, trustee or other officer with similar powers of himself or
of any substantial part of his property, or shall be adjudicated a
bankrupt or insolvent, or shall take action for the purpose of any of
the foregoing; or if a court or governmental authority of competent
jurisdiction shall enter an order appointing a custodian, receiver,
trustee or other officer with similar powers with respect to the
Borrower or any substantial part of his property, or constituting an
order for relief or approving a petition for relief or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding up or liquidation of the Borrower, provided that
any such order or petition is not dismissed within sixty (60) days.;
(d) The Borrower is dismissed for Cause (as
defined in the Employment Contracts), or terminates his employment
with the Parent Company voluntarily other than as provided in
paragraphs 12 (b), 13 or 14 of the employment contract with the Parent
Company, or terminates his employment with the Company voluntarily
other than as provided in paragraphs 8(b), 9, or 10 of his employment
contract with the Company.
4.2 Remedies. If an Event of Default shall occur and
be continuing, then the lender may by notice to the Borrower declare
all unpaid principal and any accrued interest on the Loan to be due
and payable immediately. If an Event of Default pursuant to Section
4.1(c) shall occur, the unpaid principal on the Loan shall be due and
payable immediately without any declaration or other act on the part
of the lender. Should the Company continue to be the lender of this
Loan, the Company may also, in its sole discretion, choose to
terminate all options to acquire common stock in the Company that the
Borrower may own in the Event of Default.
4.3 Costs of Collection. Should the indebtedness
represented by this Loan or any part hereof be collected in any
proceeding, or if this Loan should be placed in the hands of attorneys
for collection after default, the Borrower agrees to pay as an
additional obligation under this Loan, in addition to the Principal
Amount and any accrued interest due and payable on this Loan, all
reasonable costs of collecting this Loan, including reasonable
attorneys' fees.
5. Modification. Parties agreed that no waiver or
modification of this Loan shall be valid unless in writing and duly
executed by the parties to be charged therewith.
6. Notice. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally, telegraphed or sent by certified, registered, or express
mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed or, if mailed, five days after the date of
deposit in the United States mail, as follows:
(i) if to the Borrower to the address set forth below or to
such other address as the Borrower may designate by notice
to the Lender:
Mr. Mark Blundell
31 Nichols Road,
Armonk, NY 10504
(ii) if to the Lender, to the address set forth below or to such
other address as the Lender may designate by notice to the Borrower:
New Paradigm Acquisition I Co., Inc.
c/o the Compensation Committee
New Paradigm Software Corp.
630 Third Avenue
New York, New York 10017
With a copy to:
Curto Barton & Alesi P.C.
Suite One North Five
One Huntington Quadrangle
Melville, New York 11747
Attn:Joseph Glynn, Esq.
7. Successors and Assigns; Governing Law; Submission to
Jurisdiction. (a) This Loan and the obligations hereunder shall be
binding upon the successors and assigns of the Borrower and shall
inure to the benefit of the Lender and its respective successors and
permitted assigns.
(b) THIS LOAN AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
8. Waiver of Demand. The Borrower does hereby waive
presentment, demand, protest, notice of protest and notice of non-
payment or dishonor of this Loan.
9. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR IN CONNECTION WITH THIS LOAN OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
* * * * *
IN WITNESS WHEREOF, the Borrower has signed this Loan
Agreement and has caused this Agreement to be duly notorized and to be
dated as of the date first above written.
Signed and Sworn before me this thirteenth day of November, 1997
NEW PARADIGM ACQUISITION I CO., INC.
By:____________________________________
:
Mark A. Blundell
ACKNOWLEDGEMENT OF MARK BLUNDELL
STATE OF NEW YORK )
)SS.:
COUNTY OF )
On the thirteenth day of November, 1997, before me
personally came MARK BLUNDELL, to me known, who, being by me duly
sworn, did depose and say that he resides at 31 Nichols Road, Armonk,
NY described in and who executed the foregoing instrument; that he is
the individual who signed the foregoing agreement, and acknowledged
that he executed same.
____________________________________________
NOTARY PUBLIC
ACKNOWLEDGEMENT FOR COMPANY
STATE OF NEW YORK )
)SS.:
COUNTY OF )
On the thirteenth day of November, 1997, before me
personally came , to me known, who, being by
me duly sworn, did depose and say that he is the of
, the corporation described in and which executed the
foregoing instrument; that he is the individual who sigend the
foregoing document, and that he so signed by order of the board of
directors of said corporation.
____________________________________________
NOTARY PUBLIC
EXHIBIT 11
COMPUTATION OF NET LOSS PER SHARE
Weighted Average # of shares
Description
---------------------------------------------------------------------
7/1/96 (beginning of Quarter) 2,451,729
9/30/96 (end of Quarter) 2,451,729
----------
Weighted Average 2,451,729
__________
Net Income 859,978
__________
Income/share .35
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 534,373
<SECURITIES> 8,420
<RECEIVABLES> 25,503
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 702,472
<PP&E> 147,349
<DEPRECIATION> 15,982
<TOTAL-ASSETS> 1,138,885
<CURRENT-LIABILITIES> 555,440
<BONDS> 0
0
0
<COMMON> 24,517
<OTHER-SE> 583,446
<TOTAL-LIABILITY-AND-EQUITY> 1,138,885
<SALES> 0
<TOTAL-REVENUES> 15,947
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 306,298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 859,978
<INCOME-TAX> 0
<INCOME-CONTINUING> 859,978
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 859,978
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
