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Gad Threatens Board of Paragon With Further Litigation

EASTON, PA / / June 27, 2025 / Paragon Technologies (OTC PINK:PGNT) announces that it is in receipt of a letter from Mr. Hesham "Sham" Gad's counsel threatening new litigation against the company and its directors.

"This action by Mr. Gad shows exactly what we have been pointing out to shareholders," stated Mr. Tim Eriksen, chairman of the Nominating and Corporate Governance Committee. "It is clear that Mr. Gad has not changed and will use company resources to achieve his personal goals."

At a board meeting held on June 27, 2025, the board approved the purchase of a tail D&O policy in order to protect the company. After evaluating the situation, the Board, excluding Mr. Gad, determined that, given Mr. Gad's demonstrated willingness to use litigation to deplete company resources, totaling millions of dollars to date, purchasing the tail D&O policy was in the best interests of the company and its stockholders. For instance, he could have easily settled the bylaw litigation after the bylaws were changed in December 2024. Instead, he caused the company to spend millions of dollars because he apparently wasn't satisfied with simply having the bylaws repealed and sought to have Mr. Jacobs and Mr. Weiser found to have breached their fiduciary duty. The only possible benefit from these actions was personal - creating a false narrative for his proxy fight.

To further his personal agenda and again create a false narrative, we believe Mr. Gad concocted a false entrenchment theory regarding the rights plan passed by independent directors to bring charges of breach of fiduciary duty against them. We know that the board acted on the advice of the experienced Delaware counsel who informed the board that it would likely be a breach of fiduciary duty to not adopt the rights plan. They made it clear - directors have a fiduciary duty to prevent a creeping takeover, which was clearly taking place.

We believe Gad's slate of nominees lack public company board experience, appear to be ignorant of their duties and Delaware law (based on Mr. Ting's public comments), will likely not be independent, possibly vindictive, and if victorious, presumably led by someone willing to lie and waste corporate resources for personal benefit.

The board believes that Gad breached his duties knowing he lacked work authorization and misclassifying himself as an independent contractor. Add to that, his misappropriation of funds, his lack of transparency with his board and his repeated lying and misrepresentations about his immigration status. Clearly Mr. Gad has no regard for the shareholders of Paragon.

Thus, the board believes that the company faces significant litigation risk for past and potential future actions by Mr. Gad. Directors have a duty to act in the best interest of the company and its stockholders. They have a duty to protect the company from risks. Due to the company facing an elevated risk of shareholder lawsuits based on past and potential future actions by Mr. Gad and Mr. Gad's unwillingness to communicate to the Board his views on the appropriate level of coverage for the company should he win the proxy contest, we had a duty to act versus potentially leaving it up to an incoming inexperienced board. As we saw with Mr. Gad's litigation against the company, legal bills can mount quickly.

Since the end of 2024, the company has had a layered policy in place providing an aggregate of $5 million in coverage. Prior to that, the company had only $1 million in coverage, which Mr. Gad stated he believed was "sufficient," yet the past year has shown it was woefully inadequate. The tail policy will provide three years of non-cancellable coverage of $4 million at an average annual net cost of less than $200,000, which is comparable to the annual cost of the current coverage in place since the end of 2024.

Subsequent to approving the policy, Mr. Gad had his counsel send the board a letter falsely accusing the board of not giving proper notice of a board meeting, claiming the policy costs three times its actual amount, was a material transaction forbidden in the settlement agreement, was designed to protect directors (when it was actually about protecting the company), and that it was a violation of the directors' fiduciary duty, which it clearly isn't. Mr. Eriksen noted, "Mr. Gad's response to not getting what he wants shows precisely why the company and its shareholders need to be protected. He immediately inflated the costs of the policy threefold, fabricated a rationale, threatened litigation against directors, and wasted company resources knowing full well the company would have to pay both sides in resolving the matter. The only way to stop this madness is to not allow Mr. Gad to regain control of Paragon."

We urge shareholders to vote the WHITE proxy card. The future of Paragon is at stake. The deadline to vote or change your vote is Sunday, June 29, 2025.

About Paragon Technologies

Paragon Technologies, Inc. is a holding company owning subsidiaries that engage in diverse business activities, including material handling, distribution, real estate, and investments. For additional information please visit: .

Investor Relations Contact:

Alliance Advisors IR
[email protected]

SOURCE: Paragon Technologies Inc.