As filed with the Securities and Exchange Commission on October 25, 1996
Registration No. 333-7775
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Securities And Exchange Commission
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMENDMENT NO. 1
PARAGON ACQUISITION COMPANY, INC.
(Exact Name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
13-3895049
(I.R.S. Employer Identification No.)
277 Park Avenue
New York, New York 10172
(212) 941-1400
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
6770 (a blank check company)
(Primary Standard
Industrial Classification
Code Number)
Mitchell A. Kuflik, President
Paragon Acquisition Company, Inc.
277 Park Avenue
New York, New York 10017
(212) 941-1400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies To:
Lane Altman & Owens LLP
101 Federal Street
Boston, Massachusetts 02110
Attn: Joseph F. Mazzella, Esq.
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<TABLE>
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CALCULATION OF REGISTRATION FEE
==========================================================================================================================
Proposed Proposed
Maximum Maximum
Amount to Offering Aggregate
Title of Each Class of be Price Per Offering Amount of
Securities to be Registered Registered Share Price(2) Registration Fee
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<S> <C> <C> <C> <C>
Shares of Common Stock, $.01 par value, to be
Distributed as a Dividend 514,191(1) $ .04(1)(2) $ 20,567.64(1) $ 7.09(1)
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Subscription Rights, no par value, exercisable to
purchase two (2) shares of Common Stock 3,414.191 -0- (1) $ -0- -0-
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Shares of Common Stock, $.01 par value, issuable upon
the exercise of Subscription Rights.............. 6,828,382 $1.00 $ 6,828,382.00 $2,354.61
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TOTAL............................................ $6,848,949.60 $2,361.70
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(1) Based upon the maximum number of shares of Common Stock of Paragon estimated to be distributed per share as a dividend. No
consideration will be paid for the Common Stock or for the Subscription Rights to be distributed as a dividend.
(2) Estimated solely for the purpose of calculating the registration fee. Represents the estimated book value of Paragon at the
time of the Distribution.
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PARAGON ACQUISITION COMPANY, INC.
CROSS REFERENCE SHEET
Between Items in Form S-1 and Prospectus
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Form S-1 Item Number and Caption Location or Caption in Prospectus
-------------------------------- ---------------------------------
<S> <C> <C>
1. Forepart of The Registration Statement and
Outside Front Cover Page of Prospectus................ Facing Page of the Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus......................................... Inside Front Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges.......................... Summary; Risk Factors; Not Applicable
4. Use of Proceeds........................................... Use of Proceeds
5. Determination of Offering Price........................... Not Applicable
6. Dilution ............................................... Dilution
7. Selling Security Holders.................................. Not Applicable
8. Plan of Distribution...................................... Outside Front Cover page; Summary;
Introduction; The Distribution
9. Description of Securities to be Registered................ Outside Front Cover Page; Summary; The
Distribution; Capitalization; Description of
Capital Stock
10. Interests of Named Experts and Counsel.................... Legal Counsel; Experts
11. Information with Respect to the Registrant................ Summary; Introduction; Risk Factors; The
Distribution; Relationship Between St.
Lawrence and Paragon After the Distribution;
Dividend Policy; Capitalization; Selected
Financial Data; Unaudited Pro Forma Financial
Statements; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities............ Not Applicable
</TABLE>
SUBJECT TO COMPLETION, dated October 25, 1996
PARAGON ACQUISITION COMPANY, INC.
514,191 Shares of Common Stock and Subscription
Rights to Purchase 6,828,382 Shares of Common Stock
Issuable upon Exercise of Subscription Rights
PROSPECTUS
This Prospectus is being furnished to holders of Common Stock of The
St. Lawrence Seaway Corporation ("St. Lawrence") by Paragon Acquisition Company,
Inc. ("Paragon") in connection with the distribution (the "Distribution") to
them of (i) 514,191 shares of Common Stock, par value $.01 per share (the
"Shares") of Paragon, and (ii) 514,191 non-transferable rights (the
"Subscription Rights") to purchase two (2) additional Shares of Paragon. See
"The Distribution.". In the Distribution, each St. Lawrence stockholder will
receive one Paragon Share and one Subscription Right for each share of St.
Lawrence common stock owned, or which is subject to exercisable options and
warrants, as of _____________, 1996 (the "Record Date"). The Shares were
purchased by St. Lawrence on October , 1996 for aggregate consideration of
$5,141. Neither St. Lawrence nor Paragon will receive any cash or other proceeds
from the Distribution, and St. Lawrence stockholders will not make any payment
for the Shares and Subscription Rights. Paragon may receive proceeds upon the
exercise of Subscription Rights in the future. See "The Distribution."
The balance of 2,900,000 (85%) of the currently outstanding Shares of
Paragon are owned by PAR Holding Company, LLC, a Delaware limited liability
company ("PAR Holding") and were acquired for a purchase price of $.05 per
share, or $150,000 (the "Initial Capital"). See "The Company" and "Certain
Transactions". The Initial Capital will be utilized for the costs of
organization of Paragon, the registration of the Shares and Subscription Rights,
and for general corporate purposes. This Prospectus, and the Registration
Statement of which it is a part, is also being used in connection with the
distribution to PAR Holding of one Subscription Right for each Share owned by
PAR Holding, or, a total of 2,900,000 Subscription Rights, exercisable on the
same terms and conditions as applicable to St. Lawrence stockholders. See "The
Distribution."
The Subscription Rights will not be exercisable until after Paragon has
identified and described a Business Combination (as defined herein) in a
post-effective amendment to this Prospectus (the "Post-Effective Amendment").
See "The Distribution - Escrow of Securities and Funds; Post-Effective
Amendment." If and when they become exercisable, the Subscription Rights will
entitle the holder thereof to purchase from Paragon two (2) authorized but
heretofore unissued Shares of Paragon for each Subscription Right held. The
purchase price under the Subscription Rights will be established by Paragon at
the time a Business Combination is identified in the Post-Effective Amendment,
and will be not more than $2.00 per Subscription Right. See "The Distribution -
Securities to be Distributed." Stockholders who fully exercise their
Subscription Rights (other than PAR Holding) will be entitled to the additional
privilege of subscribing, subject to certain limitations, for any Shares subject
to unexercised Subscription Rights. See "Over-Subscription Privilege."
THIS OFFERING WILL BE CONDUCTED IN ACCORDANCE WITH RULE 419 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"). THE SHARES, AND
ANY SHARES ISSUED UPON EXERCISE OF SUBSCRIPTION RIGHTS, WILL BE HELD IN ESCROW
AND ARE NON-TRANSFERABLE BY THE HOLDER THEREOF UNTIL AFTER THE COMPLETION OF A
BUSINESS COMBINATION (AS DEFINED HEREIN) IN COMPLIANCE WITH RULE 419. THE
SUBSCRIPTION RIGHTS SHALL ALSO BE HELD IN THE ESCROW ACCOUNT AND ARE
NON-TRANSFERABLE BY THEIR TERMS. WHILE HELD IN THE ESCROW ACCOUNT, THE SHARES
MAY NOT BE TRADED OR TRANSFERRED. (SEE "INVESTORS' RIGHTS AND SUBSTANTIVE
PROTECTION UNDER RULE 419"). THE NET PROCEEDS FROM THE EXERCISE OF THE
SUBSCRIPTION RIGHTS WILL REMAIN IN AN ESCROW ACCOUNT SUBJECT TO RELEASE UPON
CONSUMMATION OF A BUSINESS COMBINATION THAT HAS BEEN DESCRIBED IN A
POST-EFFECTIVE AMENDMENT. SEE "INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION
UNDER RULE 419."
The Distribution will be made as of the effective date of this
Prospectus (the "Distribution Date"). It is expected that certificates
evidencing Shares and Subscription Forms will be deposited into the escrow
account on or about _________________, 1996. There is no current public trading
market for the Shares and none is expected to develop, if at all, until after
the consummation of a Business Combination and the release of the Shares from
escrow.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. IN REVIEWING THIS PROSPECTUS,
YOU SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE CAPTION "RISK
FACTORS" ON PAGE 9 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING DISCOUNTS
MAXIMUM PRICE TO PUBLIC (1) AND COMMISSIONS PROCEEDS TO COMPANY
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<S> <C> <C> <C>
PER COMMON SHARE DISTRIBUTED AS
DIVIDEND $ 0.00 -0- $ 0.00
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PER EXERCISE OF SUBSCRIPTION RIGHT $ 2.00(2) -0- $ 2.00
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TOTAL $6,828,382.00 -0- $6,828,382.00
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(1) No consideration will be paid by St. Lawrence Stockholders in connection with the Distribution of the Shares and
the Subscription Rights.
(2) Based upon the maximum exercise price per Subscription Right.
</TABLE>
NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT. WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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The date of this Prospectus is __________, 1996.
PARAGON HAS MADE APPLICATION TO REGISTER THE DISTRIBUTION OF SHARES AND
SUBSCRIPTION RIGHTS IN THE STATE OF NEW YORK, HAS FILED A NOTICE OF EXEMPTION IN
THE STATE OF INDIANA, AND IS RELYING UPON SELF-EXECUTING EXEMPTIONS IN THE
STATES OF ALASKA, ALABAMA, ARIZONA, ARKANSAS, CONNECTICUT, FLORIDA, GEORGIA,
ILLINOIS, KANSAS, KENTUCKY, LOUISIANA, MARYLAND, MASSACHUSETTS, MICHIGAN,
MISSISSIPPI, MISSOURI, NEVADA, NEW JERSEY, NEW MEXICO, NORTH CAROLINA, OKLAHOMA,
OREGON, SOUTH CAROLINA, SOUTH DAKOTA, TENNESSEE, AND TEXAS (EACH OF THE
FOREGOING STATES, INCLUDING NEW YORK AND INDIANA, HEREINAFTER COLLECTIVELY
REFERRED TO AS THE "INITIAL DISTRIBUTION STATES"). IN ORDER TO RECEIVE SHARES
AND SUBSCRIPTION RIGHTS IN THE DISTRIBUTION, STOCKHOLDERS MUST BE RESIDENTS OF
THE INITIAL DISTRIBUTION STATES. PERSONS WHO ARE NOT RESIDENTS OF THE INITIAL
DISTRIBUTION STATES WILL NOT RECEIVE SHARES OR SUBSCRIPTION RIGHTS UNTIL
DISTRIBUTION TO SUCH PERSONS CAN BE MADE IN COMPLIANCE WITH STATE BLUE SKY LAWS
APPLICABLE TO SUCH PERSONS (SEE "RISK FACTORS-LIMITED STATE REGISTRATION;
RESTRICTED RESALES OF THE SECURITIES.") AS INDICATED ABOVE, THE COMPANY'S
OFFERING IS SUBJECT TO THE PROVISIONS OF RULE 419. WHILE HELD IN THE ESCROW
ACCOUNT, RULE 15G-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934 MAKES IT UNLAWFUL
FOR ANY PERSON TO SELL OR OFFER TO SELL THE DEPOSITED SECURITIES (OR ANY
INTEREST IN OR RELATED TO THE DEPOSITED SECURITIES). THUS, INVESTORS ARE
PROHIBITED FROM MAKING ANY ARRANGEMENTS TO SELL THE DEPOSITED SECURITIES UNTIL
THEY ARE RELEASED FROM THE ESCROW ACCOUNT (SEE "RISK FACTORS" AND "PROHIBITIONS
AGAINST SALE OF SECURITIES BEFORE RELEASE FROM ESCROW.") PURCHASERS OF SHARES IN
ANY SECONDARY TRADING MARKET WHICH MAY DEVELOP AFTER A BUSINESS COMBINATION HAS
BEEN CONSUMMATED AND THE SHARES RELEASED FROM ESCROW, MUST BE RESIDENTS OF THE
INITIAL DISTRIBUTION STATES.
AVAILABLE INFORMATION
Paragon has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-1 (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all of the
information contained in the Registration Statement. For further information
regarding Paragon and the securities offered hereby, reference is made to the
Registration Statement, including all exhibits and schedules thereto, which may
be inspected without charge at the public reference facilities of the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C.
20549. Each statement contained in this Prospectus with respect to a document
filed as an exhibit to the Registration Statement is qualified by reference to
the exhibit for a complete statement of its terms and conditions. After the
Distribution, Paragon will be subject to the informational requirements of the
Securities Exchange Act of 1934 ("Exchange Act") and in accordance therewith
will file reports and other information with the Securities and Exchange
Commission ("SEC"). Reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities of the
SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as
the following Regional Offices: 7 World Trade Center, Suite 1300, New York, N.Y.
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Ill.
60661-2511. Such material can also be inspected at the New York, Boston,
Midwest, Pacific and Philadelphia Stock Exchanges. Copies can be obtained by
mail at prescribed rates. Request should be directed to the SEC's Public
Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
Paragon intends to furnish its stockholders with annual reports containing
audited financial statements and such other reports as may be required by law.
iii
SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus and is qualified in its entirety by reference to, and should
be read in conjunction with, the detailed information and financial statements
contained herein. Capitalized terms not defined in this Summary are defined
elsewhere in this Prospectus.
DISTRIBUTED COMPANY Paragon Acquisition Company, Inc. ("Paragon")
was formed on June 19, 1996 to serve as a
vehicle to seek and effect a merger, exchange of
capital stock, asset acquisition or other
business combination (a "Business Combination")
with an operating business (a "Target
Business"). PAR Holding Company, LLC ("PAR
Holding") has contributed $150,000 to Paragon in
exchange for 2,900,000 shares of Common Stock
(the "Shares") which funds will be used for the
costs of the organization of Paragon, the
Distribution, the Registration Statement of
which this Prospectus is a part, and for general
corporate purposes. The owners and officers of
PAR Holding are the principal officers and
directors of Paragon, and, therefore, will be
principally responsible for seeking, evaluating
and consummating a Business Combination with a
Target Company.
DISTRIBUTING COMPANY On __________, 1996, The St. Lawrence Seaway
Corporation ("St. Lawrence") purchased 514,191
Shares of Paragon for a price of $.01 per Share,
and is distributing such Shares to St. Lawrence
stockholders to provide them with the
opportunity to participate in ownership of a
Target Business with which Paragon may effect a
Business Combination. (See "The Company -
Reasons for the Distribution".) After the
Distribution, St. Lawrence will continue to be a
publicly-owned company with operations and
management separate and independent from
Paragon.
BUSINESS PURPOSE OF PARAGON Paragon was established to acquire a Target
Business primarily located in the United States,
but its efforts will not be limited to a
particular industry. (See "The Company - Reasons
for the Distribution".) In seeking a Target
Business, Paragon will consider, without
limitation, businesses which (i) offer or
provide services or develop, manufacture or
distribute goods in the United States or abroad,
including, without limitation, in the following
areas: health care and health products,
educational services, environmental services,
consumer related products and services
(including amusement, food service and/or
recreational services), personal care services,
voice and data information processing and
transmission and related technology development,
(ii) is engaged in wholesale or retail
distribution, or (iii) engages in the financial
services or similar industries. Paragon has
agreed to the terms of the Distribution with the
purpose of expanding the number and diversity of
its shareholders and thereby make Paragon a more
attractive vehicle for a merger with a Target
Business. Paragon has no present plans,
proposals, agreements, understandings or
arrangements to acquire or merge with any
specific business or company, and it has not
identified any specific business or company for
investigation and evaluation. Paragon may, under
certain circumstances, seek to effect Business
Combinations with more than one Target Business.
SECURITIES TO BE DISTRIBUTED St. Lawrence will distribute to its stockholders
514,191 Shares of Paragon and 514,191
non-transferrable Subscription Rights.
Simultaneously with the distribution to St.
Lawrence stockholders, Paragon will distribute
1
2,900,000 non-transferrable Subscription Rights
to PAR Holding which currently owns 2,900,000
Shares of Paragon, which Subscription Rights are
identical in all terms and conditions to those
being distributed to St. Lawrence stockholders.
The Subscription Rights entitle the holder to
purchase two (2) Shares of Paragon for each
Subscription Right held for a purchase price to
be established by Paragon's Board of Directors
at the time a proposed Business Combination is
described in a Post-Effective Amendment, such
price to be not more than $2.00 per Subscription
Right (the "Subscription Price").
St. Lawrence stockholders will not be required
to pay any cash or other consideration for the
Shares or Subscription Rights received in the
Distribution, or take any other action in order
to receive the Shares and Subscription Rights.
The Distribution will not effect the number of
outstanding shares of St. Lawrence common stock
held by such stockholder. No vote of St.
Lawrence stockholders is required.
DISTRIBUTION CONDUCTED The Company is a blank check company and
IN COMPLIANCE WITH RULE 419 consequently this Distribution is being
conducted in compliance with Rule 419 under the
Securities Act of 1933. Accordingly, holders of
Paragon Shares and Subscription Rights have
certain rights and will receive the substantive
protection provided by the Rule. To that end,
the Shares distributed hereunder, Shares to be
acquired upon the exercise of Subscription
Rights, and the Subscription Rights
(hereinafter, the "Escrowed Securities") will
all be deposited into an escrow account until an
acquisition meeting specific criteria is
completed. The Subscription Rights are
non-transferrable and will either be exercised
or expire while held in escrow. The funds
received upon exercise of Subscription Rights
also will be deposited in an escrow account
("Escrowed Funds"). Before the Escrowed
Securities can be released to the Stockholders
and Escrowed Funds can be released to Paragon,
Paragon is required to update its registration
statement with a post-effective amendment; and,
within five days from the effective date
thereof, Paragon is required to furnish
Stockholders with the Prospectus produced
thereby containing the terms regarding the
exercise of Subscription Rights, the
Subscription Price and information regarding the
proposed acquisition candidate and its business,
including audited financial statements. In
accordance with Rule 419, Stockholders will have
no fewer than 20 and no more than 45 business
days from the effective date of the
post-effective amendment to decide to exercise
their Subscription Rights upon the terms set
forth in the post effective amendment. The right
of a Stockholder to exercise Subscription Rights
held by him or her will automatically expire
within said time frame. If Paragon does not
complete an acquisition meeting the specified
criteria, none of the Escrowed Securities will
be issued and Escrowed Funds, if any, will be
returned to subscribers. (See "Investors' Rights
and Substantive Protection under Rule 419" and
"The Distribution.")
DISTRIBUTION RATIO One Share and one Subscription Right for every
one share of St. Lawrence common stock, owned,
or subject to exercisable warrants or options,
as of the Record Date, and one Subscription
Right for every one share of Paragon owned by
PAR Holding.
2
DISTRIBUTION AGENT, TRANSFER Continental Stock Transfer and Trust Company
AGENT AND ESCROW AGENT Telephone: (212) 509-4000
FEDERAL INCOME TAX The receipt of Shares and Subscription Rights is
CONSEQUENCES expected to be taxable for federal income tax
purposes to the St. Lawrence stockholders. The
income tax considerations applicable to the
Distribution are discussed under "Federal Income
Tax Consequences of the Distribution."
RELATIONSHIP BETWEEN St. Lawrence will have no stock ownership in the
ST. LAWRENCE AND PARAGON Company after the Distribution except to the
AFTER THE DISTRIBUTION extent that certain Shares are not immediately
distributable to St. Lawrence stockholders
because of regulatory or other limitations. See
"Risk Factors-Limited State Registration;
Restricted Resales of Securities". In such
event, St. Lawrence will continue to hold such
Shares and will be treated, in all respects, the
same as any other stockholder of Paragon. It is
not expected that such ownership will be
material in amount, or will be material to St.
Lawrence.
PRINCIPAL STOCKHOLDERS After the Distribution St. Lawrence stockholders
will own 514,191 Shares of Paragon (15% of
Paragon Shares), and 514,191 Subscription Rights
to purchase an additional 1,028,382 Shares. PAR
Holding currently owns 2,900,000 Shares (85% of
Paragon Shares) and after the Distribution will
own 2,900,000 Subscription Rights to purchase an
additional 5,800,000 Shares.
RISK FACTORS The Shares and Subscription Rights distributed
hereby involve a high degree of risk. There is
no public market for the Shares and no public
market is expected to develop until such time,
if ever, that a Business Combination is
completed and the Shares are released from
escrow. There can be no assurance that a public
market will develop or continue for any
sustained period of time after completion of a
Business Combination. Other risk factors include
but are not limited to: Paragon's lack of
operating history and limited resources and
intense competition in selecting a Target
Business and effecting a Business Combination.
See "Risk Factors and "Use of Proceeds".
REPORTING OBLIGATIONS After the Distribution, Paragon will be subject
to the informational requirements of the
Securities Exchange Act of 1934 ("Exchange Act")
and in accordance therewith will file reports
and other information with the Securities and
Exchange Commission ("SEC"). Reports, proxy
statements and other information filed by the
Company can be inspected and copied at the
public reference facilities of the SEC,
Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following
Regional Offices: 7 World Trade Center, Suite
1300, New York, N.Y. 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago,
Ill. 60661-2511. Such material can also be
inspected at the New York, Boston, Midwest,
Pacific and Philadelphia Stock Exchanges. Copies
can be obtained by mail at prescribed rates.
Request should be directed to the SEC's Public
Reference Section, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549.
3
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the
more detailed financial statements appearing elsewhere in this Prospectus. This
information should be read in conjunction with such financial statements,
including the notes thereto.
June 30, 1996
-------------
Actual Pro Forma(1)
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Balance Sheet Data:
Working capital.................... $ 50,000 $130,141(2)
Total assets....................... $ 95,000 $175,141
Total liabilities.................. $ 25,000 $ 25,000
Stockholders equity................ $ 70,000 $150,141
(1) The effect of the exercise of Subscription Rights will be reflected in a
Post-Effective Amendment which will establish the purchase price under the
Subscription Rights.
(2) Gives effect to payment of a Subscription Receivable of $75,000 by PAR
Holding Company, LLC on October ___, 1996, and the purchase by St. Lawrence of
514,191 shares of Common Stock, $.01 par value for $5,141 in cash on October
___, 1996.
4
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF SECURITIES AND SUBSCRIPTION PROCEEDS INTO ESCROW
Rule 419 requires that the net proceeds received upon the exercise of
Subscription Rights (the "Escrowed Funds") and all Shares, Subscription Rights
and Shares issuable upon the exercise of Subscription Rights (the "Escrowed
Securities") be deposited into an escrow or trust account governed by an
agreement which contains certain terms and provisions specified by Rule 419.
Under Rule 419, the Escrowed Funds and Escrowed Securities will be released to
Paragon and to the Shareholders, respectively, only after Paragon has met the
following three basic conditions. First, Paragon must execute an agreement(s)
for an acquisition(s) meeting certain prescribed criteria. Second, Paragon must
file a post-effective amendment (the "Post-Effective Amendment") to its
registration statement which includes the terms upon which Subscription Rights
may be exercisable and contains certain conditions prescribed by Rule 419. The
Post-Effective Amendment must also contain information regarding the acquisition
candidate(s) and its business(es), including audited financial statements.
Third, Paragon must conduct the Subscription Period and satisfy all of the
prescribed conditions, including the condition that a minimum amount of proceeds
raised be used to complete the acquisition. After Paragon submits a signed
representation to the escrow agent that the requirements of Rule 419 have been
met and after the acquisition(s) is consummated, the escrow agent can release
the Escrowed Funds and Escrowed Securities.
Accordingly, Paragon has entered into an escrow agreement with
Continental Stock Transfer & Trust Company (the "Escrow Agent") which provides
that:
(1) The net proceeds from the exercise of Subscription Rights are to be
deposited into an escrow account maintained by the Escrow Agent upon receipt
from Subscribing Stockholders. The Escrowed Funds and interest or dividends
thereon, if any, are to be held for the sole benefit of the Stockholders and can
only be invested in bank deposits, in money market mutual funds or federal
government securities or securities for which the principal or interest is
guaranteed by the federal government.
(2) All Shares issued in connection with the Distribution, including
Shares issuable upon the exercise of Subscription Rights, and Shares issued with
respect to stock splits, stock dividends or similar rights are to be deposited
directly into the escrow account promptly upon issuance. The identities of the
Stockholders are to be included on the stock certificates and Subscription Forms
evidencing the Escrowed Securities. The Escrowed Securities held in the escrow
account are to remain as issued and deposited and are to be held for the sole
benefit of the Stockholders who retain the voting rights, if any, with respect
to the Escrowed Securities held in their names. The Escrowed Securities held in
the escrow account may not be transferred, disposed of nor any interest created
therein other than by will or the laws of descent and distribution, or pursuant
to a qualified domestic relations order as defined by the Internal Revenue Code
of 1986 or Table 1 of the Employee Retirement Income Security Act.
(3) The Subscription Rights held in the escrow account may be exercised
in accordance with their terms upon the filing of a post-effective amendment in
compliance with Rule 419; provided, however, that the securities received upon
exercise of the Subscription Rights together with any cash paid in connection
with the exercise are to be promptly deposited into the escrow account. The
Subscription Rights are non-transferrable by their terms and must either be
exercised or they will expire while held in escrow.
PRESCRIBED ACQUISITION CRITERIA
Rule 419 requires that before the Escrowed Funds and the Shares can be
released from escrow, Paragon must first execute an agreement to acquire Target
Business meeting certain specified criteria. The agreement must provide for the
acquisition of a business or assets for which the fair value of the business
represents at least 80% of the maximum proceeds to be received from the exercise
of the Subscription Rights.
5
POST EFFECTIVE AMENDMENT
Once the agreement governing the acquisition of a Target Business
meeting the above criteria has been executed, Rule 419 requires Paragon to
update its registration statement with a Post-Effective Amendment. The
Post-Effective Amendment must contain information about: (i) the proposed
acquisition candidate and its business, including audited financial statements;
and (ii) the terms upon which Subscription Rights can be exercised including the
Subscription Price which cannot exceed $2.00 per Subscription Right, and, the
use of the funds disbursed from the escrow account.
SUBSCRIPTION PERIOD
The Subscription Period will commence after the effective date of the
Post-Effective Amendment. In accordance with Rule 419, the terms of the
Subscription Period must include the following conditions:
(1) Each Stockholder will have no fewer than 20 and no more than 45
business days from the effective date of the Post-Effective Amendment to notify
Paragon in writing that the Stockholder elects to exercise his or her
Subscription Rights and, in the event they are exercising all of their
Subscription Rights, whether they elect to exercise the Over-Subscription
Privilege (which shall be defined below).
(2) If Paragon does not receive written notification from any
Stockholder within 45 business days following the effective date of the
Post-Effective Amendment, the Stockholder's right to elect to subscribe shall
terminate.
(3) The proposed Business Combination will be consummated only if
Stockholders subscribe for 80% of the maximum proceeds to be received from the
exercise of Subscription Rights.
(4) If the acquisition is not consummated within six months from the
date of the Post-Effective Amendment, the Escrowed Funds held in the escrow
account, if any, shall be returned to all Stockholders on a pro rata basis
within 5 business days by first class mail or other equally prompt means and
none of the Shares shall be released from the Escrow Account.
RELEASE OF ESCROWED SECURITIES AND ESCROWED FUNDS
The Shares and Escrowed Funds may be released from escrow and delivered
to Paragon and the Stockholders, respectively, after:
(1) The Escrow Agent has received a signed representation from Paragon
and any other evidence acceptable by the Escrow Agent that:
(a) Paragon has executed an agreement for the acquisition of a
Business for which the fair value of the business represents at least 80% of the
maximum proceeds to be received from the exercise of Subscription Rights and has
filed the required Post-Effective Amendment;
(b) The post-effective amendment has been declared effective
and that the Subscription Period has been completed.
(2) The acquisition of the business with a fair value of at least 80% of
the maximum proceeds to be received rom the exercise of the Subscription Rights
is consummated.
6
THE COMPANY
BACKGROUND AND REASONS FOR THE DISTRIBUTION
Paragon Acquisition Company, Inc. ("Paragon") was incorporated under
the laws of the State of Delaware on June 19, 1996 to seek a Business
Combination with a Target Business.
Prior to the Distribution, the sole stockholder of Paragon was PAR
Holding Company, Inc., a Delaware limited liability company organized for the
purpose of acquiring and holding a majority ownership position in Paragon. The
sole owners and principals of PAR Holding currently are Mitchell M. Kuflik,
Peter A. Hochfelder and Robert J. Sobel, who are also officers and directors of
Paragon (the "PAR Principals"). See "Management".
The PAR Principals will be primarily responsible for seeking, evaluating
and consummating any Business Combination. PAR Holding has invested $150,000 in
Paragon in exchange for 2,900,000 Shares and PAR Holding will receive 2,900,000
Subscription Rights exercisable upon the same terms and under the same
conditions as Subscription Rights being distributed to St. Lawrence
stockholders. St. Lawrence stockholders are not obligated to make any payments
to Paragon or to PAR Holding in exchange for the Shares to be received and
distributed in the Distribution. Paragon Stockholders are not obligated in the
future to make any payments under the Subscription Rights or otherwise, unless,
after they have had an opportunity to evaluate a proposed Target Business
described in a Post-Effective Amendment, they elect to exercise the Subscription
Rights distributed to them.
The purchase of Shares and Subscription Rights by St. Lawrence, and the
Distribution is being made by St. Lawrence for the purpose of distributing to
St. Lawrence stockholders an equity interest in Paragon without such
stockholders being required, either individually or directly, to contribute any
cash or other capital in exchange for such equity interest. The cash payment of
$5,142 by St. Lawrence in exchange for the Paragon Shares and Subscription
Rights to be distributed to St. Lawrence stockholders, was determined by St.
Lawrence to represent a nominal investment in light of the potential benefits to
St. Lawrence stockholders which may be available through their ownership of the
Shares, the possible exercise of Subscription Rights to purchase additional
Shares and the fact that PAR Holding has agreed to purchase a significant number
of Shares at a price substantially higher than the price paid by St. Lawrence.
St. Lawrence believes that by acquiring for St. Lawrence stockholders such
equity interest, and the right to acquire additional ownership on the same terms
as PAR Holding, St. Lawrence shareholders will thereby have an interest in a
greater number of vehicles available to effect a merger, acquisition or other
business combination, and therefore, an increased opportunity to benefit from
such transactions.
Paragon has agreed to the terms of the Distribution with the purpose of
expanding the number and diversity of its shareholders and thereby making
Paragon a more attractive vehicle for a merger with a Target Business.
BUSINESS OBJECTIVE OF PARAGON
Paragon intends to utilize the net proceeds from the exercise of the
Subscription Rights, if any, and bank borrowings or a combination thereof, if
necessary, in effecting a Business Combination. See "Use of Proceeds". Paragon
will seek to acquire a Target Business primarily located in the United States
but its efforts will not be limited to a particular industry. In seeking a
Target Business, Paragon will consider, without limitation, businesses which (i)
offer or provide services or develop, manufacture or distribute goods in the
United States or abroad, including, without limitation, in the following areas:
health care and health products, educational services, environmental services,
consumer related products and services (including food service, amusement and/or
recreational services), personal care services, voice and data information
processing and transmission and related technology development, (ii) is engaged
in wholesale or retail distribution or, (iii) engages in the financial services
or similar industries. Paragon has not had any negotiations with representatives
of any entity regarding a Business Combination. Paragon may, under certain
circumstances, seek to effect Business Combinations with more than one Target
Business.
7
None of the Company's officers, directors or their affiliates, have had
any negotiations or discussions, and there are no present plans, proposals,
arrangements or understanding, with any representatives of the owners of any
business or company regarding the possibility of an acquisition or merger
transaction contemplated in this Prospectus. (See "Proposed Business; General".)
Paragon's principal executive offices are located at 277 Park Avenue,
New York, 10017 and its telephone number is (212) 941-1400.
BUSINESS EXPERIENCE OF PARAGON MANAGEMENT AND USE OF CONSULTANTS
The PAR Principals are also the executive officers and directors of
Paragon. The PAR Principals have business experience which has provided them
with skills which Paragon believes will be helpful in evaluating potential
Target Businesses and negotiating a Business Combination. These individuals have
experience in evaluating investment opportunities and certain directors and
officers have served as managers of private investment partnerships for several
years. See "Management". Paragon may, from time to time, retain other persons or
representatives to assist in locating or evaluating a Target Business or
potential Business Combinations, but currently does not have any agreement or
understanding with any consultant or advisor to provide services in connection
with any future Business Combination. Paragon does not anticipate that it will
engage consultants or advisors specializing in business acquisitions or
reorganizations, although the possibility exists that management may find it to
be beneficial to the Company to retain the services of such a consultant in the
future. See "Risk Factors - Use of Consultants, Finders or Advisors", and
"Proposed Business - Limited Ability to Evaluate Target Business Management."
Compensation to a consultant or advisor may take various forms, including one
time cash payments, payments based on a percentage of revenues or product sales
volume, payments involving issuance of securities (including those of Paragon)
or any combination of these or other compensation arrangements. Management
cannot estimate the amount of fees that may be paid to any such consultant or
advisor, or for how long such advisor may be retained. None of the PAR
Principals have, in the past, used any particular consultant or advisor on a
regular basis for purposes similar to the business purposes of Paragon or is
currently recommending the use of any such consultant or advisor.
NO STOCKHOLDER APPROVAL OF BUSINESS COMBINATION
The stockholders of Paragon will, in all likelihood, neither receive nor
otherwise have the opportunity to evaluate any financial or other information
which will be made available to Paragon in connection with selecting a potential
Target Business, until after Paragon has entered into a definitive agreement to
effectuate a Business Combination and described in a Post-Effective Amendment.
As a result, stockholders of Paragon will be almost entirely dependent on the
judgment of management in connection with the selection of a Target Business and
the terms of any Business Combination.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval, such as where shares
of common stock are issued as consideration for the Target Business. In
addition, the form of Business Combination will have an impact upon the
availability of dissenters' rights (i.e., the right to receive fair payment with
respect to the Common Stock) to stockholders disapproving of the proposed
Business Combination. Under current Delaware law, only a merger or consolidation
may give rise to a stockholder vote and to dissenters' rights. The Delaware
General Corporation Law requires approval of certain mergers and consolidations
by a majority of the outstanding stock entitled to vote.
Even if stockholders of Paragon are afforded the right to approve a
Business Combination, no dissenters' rights to receive fair payment will be
available for stockholders if Paragon is to be the surviving corporation unless
the Certificate of Incorporation of Paragon is amended and as a result thereof:
(i) alters or abolishes any preferential right of such stock; (ii) creates,
alters or abolishes any provision or right in respect of the redemption of such
shares or any sinking fund for the redemption or purchase of such shares; (iii)
alters or abolishes any preemptive right of such holder to acquire shares or
other securities; or (iv) excludes or limits the right of such holder to vote on
any matter, except as such right may be limited by the voting rights given to
new shares then being authorized of any existing or new class.
8
RISK FACTORS
NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES
Paragon, organized on June 19, 1996, is a development stage company and
has not, as of the date hereof, attempted to seek a Business Combination.
Paragon has no operating history and, accordingly, there is only a limited basis
upon which to evaluate Paragon's prospects for achieving its intended business
objectives. To date, Paragon's efforts have been limited to organizational
activities and the preparation of this Prospectus. Paragon has limited resources
and has had no revenues to date. In addition, Paragon will not achieve any
revenues until, at the earliest, the consummation of a Business Combination.
Moreover, there can be no assurance that any Target Business, at the time of
Paragon's consummation of a Business Combination, or at any time thereafter,
will derive any material revenues from its operations or operate on a profitable
basis. See "Proposed Business."
UNSPECIFIED BUSINESS
Paragon Stockholders will be entirely dependent on the judgment of
management in connection with the selection of a Target Business. There can be
no assurance that determinations ultimately made by Paragon will permit Paragon
to achieve its business objectives. See "Use of Proceeds" and "Proposed
Business."
None of Paragon's officers, directors or their affiliates, have had any
negotiations or discussions, and there are no present plans, proposals,
arrangements or understanding, with any representatives of the owners of any
business or company regarding the possibility of an acquisition or merger
transaction contemplated in this Prospectus. See "Proposed Business".
SEEKING TO ACHIEVE PUBLIC TRADING MARKET THROUGH BUSINESS COMBINATION
While a prospective Target Business may deem a Business Combination with
Paragon desirable for various reasons, a Business Combination may involve the
acquisition of, or merger with, a company which does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself, including time delays, significant
expense, loss of voting control and compliance with various Federal and state
securities laws. Nonetheless, there can be no assurance that there will be an
active trading market for Paragon's securities following the completion of a
Business Combination or, if a market does develop, as to the market price for
Paragon's securities. See "No Assurance of a Public Market."
AUTHORIZATION OF ADDITIONAL SECURITIES
Paragon has no current plans for issuing or distributing additional
Shares, Subscription Rights or other securities after the Distribution, except
as may be issued in connection with a Business Combination. The issuance of such
additional securities approved by the Board of Directors, however, is not
limited and such issuance, including in any private placement may be considered
or approved by Paragon in the future as being necessary or desirable in
connection with seeking, implementing or as a result of a Business Combination,
raising proceeds to fund Paragon's operations, to attract or retain employees or
advisors or for other reasons not now known or contemplated. The issuance of
such additional securities may reduce or dilute the ownership interests of
Paragon Shares issued in the Distribution or pursuant to the exercise of
Subscription Rights.
LEVERAGE
Paragon may use borrowings or other debt financing to accomplish its
business purposes. In addition, a Target Business may be highly leveraged, or
consummation of a Business Combination may require the use of leverage. A
business acquired through a leveraged buy-out, i.e., financing the acquisition
of the business by borrowing on the assets of the business to be acquired, is
generally profitable only if the Company generates enough revenues to cover the
related debt and expenses. This practice could increase Paragon's exposure to
large losses. There can be no assurance that any business acquired through a
leveraged buy-out will generate
9
sufficient revenues to cover the related debt and expenses. The use of leverage
to consummate a Business Combination may reduce the ability of Paragon to incur
additional debt, make other acquisitions, or declare dividends, and may subject
Paragon's operations to strict financial controls and significant interest
expense. It may be expected that Paragon will have few, if any, opportunities to
utilize leverage in an acquisition. Even if Paragon is able to identify a
business where leverage may be used, there is no assurance that financing will
be available on terms acceptable to Paragon.
NO ASSURANCES OF A PUBLIC MARKET
Pursuant to Rule 419, all securities purchased in an offering by a blank
check company, as well as securities issued in connection with an offering to
underwriters, promoters or others as compensation or otherwise, must be placed
in the Rule 419 Escrow Account. These securities will not be released from
escrow until the consummation of a merger or acquisition as provided for in Rule
419. There is no present market for the Shares of Paragon and there is no
assurance that one may develop following the release of the Shares from the Rule
419 escrow account. Thus, Paragon Stockholders may find it difficult to sell
their Shares. To date, neither Paragon nor anyone acting on its behalf has taken
any affirmative steps to request or encourage any broker or dealer to act as a
market maker for Paragon's Common Stock. Further, there have been no discussions
or understandings, preliminary or otherwise, between Paragon or anyone acting on
its behalf and any market maker regarding the participation of any such market
maker in the future trading market, if any, for the Shares. Management of
Paragon has no intention of seeking a market maker for the Shares at any time
prior to the release of Shares from escrow. The officers of Paragon after the
consummation of a Business Combination may employ consultants or advisors to
obtain such market makers. Management expects that discussions in this area will
ultimately be initiated by the management of Paragon in control of the entity
after a Business Combination is consummated. There is no likelihood of any
active and liquid trading market for Paragon's Common Stock developing until a
Business Combination is consummated, if at all.
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION
The structure of a future transaction with a Target Business cannot be
determined at the present time and may take, for example, the form of a merger,
an exchange of stock or an asset acquisition. Paragon may also form one or more
subsidiary entities to effect a Business Combination and may, under certain
circumstances, distribute the securities of subsidiaries to Paragon
Stockholders. There cannot be any assurance that a market would develop for the
securities of any subsidiary distributed to Stockholders or, if it did, the
prices at which such securities might trade. The structure of a Business
Combination or the distribution of securities to stockholders may result in
taxation of Paragon, the Target Business or stockholders. See "Proposed
Business."
UNSPECIFIED INDUSTRY AND TARGET BUSINESS; UNASCERTAINABLE RISKS
While Paragon will target industries located in the United States,
Paragon has not selected any particular industry or Target Business in which to
concentrate its Business Combination efforts. None of Paragon's directors or its
executive officers have had any negotiations with any entity or representatives
of any entity regarding a Business Combination. To the extent that Paragon
effects a Business Combination with a financially unstable company or an entity
in its early stage of development or growth (including entities without
established records of revenues or income), Paragon will become subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, to the
extent that Paragon effects a Business Combination with an entity in an industry
characterized by a high level of risk, Paragon will become subject to the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
Target Business or industry, there can be no assurance that Paragon will
properly ascertain or assess all such risks. See "Proposed Business."
PROBABLE LACK OF BUSINESS DIVERSIFICATION
As a result of its limited resources, Paragon, in all likelihood, may
have the ability to effect only a single Business Combination. Accordingly, the
prospects for Paragon's success will be entirely dependent upon the
10
future performance of a single business. Unlike certain entities which have the
resources to consummate several Business Combinations of entities operating in
multiple industries or multiple segments of a single industry, it is highly
likely that Paragon will not have the resources to diversify its operations or
benefit from the possible spreading of risks or offsetting of losses. Paragon's
probable lack of diversification may subject Paragon to numerous economic,
competitive and regulatory developments, any or all of which may have a material
adverse impact upon the particular industry in which Paragon may operate
subsequent to a Business Combination. The prospects for Paragon's success may
become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of capital investment in and management assistance to the Target
Business by Paragon, there can be no assurance that the Target Business will
prove to be commercially viable. Paragon has no present intention of purchasing
or acquiring a minority interest in any Target Business. See "Use of Proceeds"
and "Proposed Business."
DEPENDENCE UPON BOARD OF DIRECTORS
The ability of Paragon to successfully effect a Business Combination
will be largely dependent upon the efforts of the PAR Principals.
Notwithstanding the significance of such persons, Paragon has not entered into
employment agreements or other understandings with any such personnel concerning
compensation or obtained any "key man" life insurance on their respective lives.
The loss of the services of such key personnel could have a material adverse
effect on Paragon's ability to successfully achieve its business objectives.
None of PAR Principals are required to commit even a substantial amount of their
time to the affairs of Paragon and, accordingly, such personnel may have
conflicts of interests in allocating management time among various business
activities. However, each officer and director of Paragon will devote such time
as he deems reasonably necessary to carry out the business and affairs of
Paragon, including the evaluation of potential Target Businesses and the
negotiation of a Business Combination, and, as a result, the amount of time
devoted to the business and affairs of Paragon may vary significantly, depending
upon, among other things, whether Paragon has identified a Target Business or is
engaged in active negotiation of a Business Combination. Paragon will rely upon
the expertise of such executive officers, and management does not anticipate
that it will hire additional personnel. However, if additional personnel were
required, there can be no assurance that Paragon will be able to retain such
necessary additional personnel. See "Proposed Business" and "Conflicts of
Interest."
TIME TO BE DEVOTED BY MANAGEMENT
The officers and directors of Paragon currently are employed or engaged
full time in other positions or activities and will devote only that amount of
time to the affairs of Paragon which they deem appropriate. The amount of time
devoted by management to the affairs of Paragon will depend on the number and
type of businesses under consideration at any given time. In the face of
competing demands for their time, it should be anticipated that the officers and
directors will grant priority to their full-time positions rather than the
business affairs of Paragon. Paragon estimates that the officers and directors
of Paragon may contribute an average of 25 hours per month to Paragon matters
until such time as a Target Business has been identified, and a significantly
greater amount once a Target Business is identified and a Business Combination
is negotiated and consummated. See "Management."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT
While Paragon's present management intends to scrutinize closely the
management of a prospective Target Business in connection with its evaluation of
the desirability of effecting a Business Combination with such Target Business,
there can be no assurance that Paragon's assessment of such management will
prove to be correct. While it is possible that certain of Paragon's directors or
its executive officers will remain associated in some capacities with Paragon
following a Business Combination, it is unlikely that any of them will devote a
substantial portion of their time to the affairs of Paragon subsequent thereto.
Moreover, there can be no assurance that such personnel will have significant
experience or knowledge relating to the operations of the Target Business
acquired by Paragon. Paragon may also seek to recruit additional personnel to
supplement the incumbent management of the Target Business. There can be no
assurance that Paragon will successfully recruit additional personnel or that
the additional personnel will have the requisite skills, knowledge or experience
necessary or desirable to enhance the incumbent management. In addition, there
can be no assurance
11
that the future management of Paragon will have the necessary skills,
qualifications or abilities to manage a public company embarking on a program of
business development. See "Proposed Business" and "Management."
USE OF CONSULTANTS, FINDERS AND ADVISORS
While it is not presently anticipated that the Company will engage
unaffiliated professional firms specializing in business acquisitions on
reorganizations, such firms may be retained if management deems it in the best
interest of Paragon. Compensation to a finder or business acquisition firm may
take various forms, including one-time cash payments, payments based on a
percentage of revenues or product sales volume, payments involving issuance of
equity securities (including those of Paragon), or any combination of these or
other compensation arrangements. See "Use of Proceeds," and "Proposed Business".
In connection with its investigation of a possible business and in order
to supplement the business experience of management, Paragon may employ
accountants, technical experts, appraisers, attorneys, or other consultants or
advisors. Furthermore, it is anticipated that such persons may be engaged by
Paragon on an independent basis without a continuing fiduciary or other
obligation to Paragon. Paragon has no arrangement or understanding to employ any
of its officers or directors as outside advisors. See "Proposed Business."
CONFLICTS OF INTEREST
Management is not involved with any blank check companies other than
Paragon and currently does not expect to organize, purchase or otherwise promote
any other companies with a structure and purposes similar to Paragon's, if at
all, until after Paragon identifies a Target Business with which it seeks to
effect a Business Combination. In the event Management's intention changes, or
they otherwise become affiliated with a blank check company, then conflicts of
interest may arise regarding competing searches for Business Combinations. In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present certain business opportunities to
such corporation. Accordingly, as a result of multiple business affiliations,
certain of Paragon's directors and its executive officers may have similar legal
obligations to present certain business opportunities to multiple entities.
There can be no assurance that any of the foregoing conflicts will be resolved
in favor of Paragon. See "Management."
POTENTIAL PROFIT TO BE RECEIVED BY MANAGEMENT
The executive officers and certain directors of Paragon, through PAR
Holding, currently own 85% of the Common Stock presently issued and outstanding.
The officers and directors paid an aggregate price of $150,000 for these Shares.
The PAR Principals may actively negotiate or otherwise consent to the purchase
of any portion of their Shares as a condition to or in connection with a
proposed merger or acquisition transaction. A premium may be paid on this stock
in connection with any such stock purchase transaction, and Paragon's Public
Stockholders will not receive any portion of the premium that may be paid.
Furthermore, Paragon's stockholders may not be afforded an opportunity to
approve or consent to any particular stock buy-out transaction. The fact that
such officers and directors may negotiate to receive such a premium means that
there is a potential for members of management to consider their own personal
pecuniary benefit rather than the best interests of Paragon's public
Stockholders. Such conduct may present management with conflicts of interest,
and, as a result of such conflicts, may possibly compromise management's state
law fiduciary duties to Paragon's stockholders. Paragon has not adopted any
policy for resolving such conflicts.
COMPETITION
Paragon expects to encounter intense competition from other entities
having business objectives similar to those of Paragon. Many of these entities,
including venture capital partnerships and corporations, blind pool companies,
large industrial and financial institutions, small business investment companies
and wealthy individuals, are well-established and have extensive experience in
connection with identifying and effecting Business Combinations directly or
through affiliates. Many of these competitors possess greater financial,
technical, human and other resources than Paragon and there can be no assurance
that Paragon will have the
12
ability to compete successfully. Paragon's financial resources will be limited
in comparison to those of many of its competitors. There can be no assurance
that such prospects will permit Paragon to achieve its stated business
objectives. See "Proposed Business."
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that Paragon succeeds in effecting a Business Combination,
Paragon will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing, technical,
human and other resources than the initial competitors in the industry. The
degree of competition characterizing the industry of any prospective Target
Business cannot presently be ascertained. There can be no assurance that,
subsequent to a Business Combination, Paragon will have the resources to compete
in the industry of the Target Business effectively, especially to the extent
that the Target Business is in a high-growth industry. See "Proposed Business."
POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET BUSINESS
There currently are no limitations on Paragon's ability to borrow or
otherwise raise funds to increase the amount of capital available to Paragon to
effect a Business Combination. However, Paragon's limited resources and lack of
operating history will make it difficult to borrow funds. The amount and nature
of any borrowings by Paragon will depend on numerous considerations, including
Paragon's capital requirements, Paragon's perceived ability to meet debt service
on any such borrowings and the then prevailing conditions in the financial
markets, as well as general economic conditions. There can be no assurance that
debt financing, if required or sought would be available on terms deemed to be
commercially acceptable by and in the best interests of Paragon. The inability
of Paragon to borrow funds required to effect or facilitate a Business
Combination or to provide funds for an additional infusion of capital into a
Target Business, may have a material adverse effect on Paragon's financial
condition and future prospects. Additionally, to the extent that debt financing
ultimately proves to be available, any borrowings may subject Paragon to various
risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Target Business may have already incurred borrowings
and, therefore, all the risks inherent thereto. See "Use of Proceeds" and
"Proposed Business."
DETERMINATION OF TERMS OF THE DISTRIBUTION
The terms of the Distribution, including the price to be paid by St.
Lawrence in exchange for Paragon Shares and Subscription Rights, and the terms
of the Subscription Rights, were determined by the Board of Directors of Paragon
and proposed to, and accepted by, St. Lawrence. Such terms were based upon
several factors, including the number of St. Lawrence stockholders, the absence
of a Paragon operating business, the small amount of capital available for
Paragon's operations, and the experience of Paragon's management. The terms of
the Distribution should not be considered indicative of the value of the Shares
after the Distribution or after the consummation of any Business Combination.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be within the
definitional scope of certain provisions of the Investment Company Act. Paragon
believes that its anticipated principal activities, which will involve acquiring
control of an operating company, will not subject Paragon to regulation under
the Investment Company Act. Nevertheless, there can be no assurance that Paragon
will not be deemed to be an investment company, particularly during the period
prior to a Business Combination. If Paragon is deemed to be an investment
company, Paragon may become subject to certain restrictions relating to
Paragon's activities, including restrictions on the nature of its investments
and the issuance of securities. In addition, the Investment Company Act imposes
certain
13
requirements on companies deemed to be within its regulatory scope including
registration as an investment company, adoption of a specific form of corporate
structure and compliance with certain burdensome reporting, record keeping,
voting, proxy, disclosure and other rules and regulations. In the event of the
characterization of Paragon as an investment company, the failure by Paragon to
satisfy such regulatory requirements, whether on a timely basis or at all,
would, under certain circumstances, have a material adverse effect on Paragon.
DIVIDENDS UNLIKELY
Paragon does not expect to pay dividends prior to the consummation of a
Business Combination. The payment of dividends after any such Business
Combination, if any, will be contingent upon Paragon's revenues and earnings, if
any, capital requirements and general financial condition subsequent to
consummation of a Business Combination. The payment of any dividends subsequent
to a Business Combination will be within the discretion of Paragon's then Board
of Directors. Paragon presently intends to retain all earnings, if any, for use
in Paragon's business operations and accordingly, the Board does not anticipate
declaring any dividends in the foreseeable future. See "Description of
Securities-Dividends."
CONTROL BY PRESENT STOCKHOLDERS
Upon consummation of this Distribution, St. Lawrence stockholders will
own approximately 15% of the issued and outstanding Shares of Paragon, and PAR
Holding will own approximately 85% of the issued and outstanding Shares of
Paragon. Accordingly, PAR Holding will be in a position to elect all of
Paragon's directors, approve amendments to Paragon's Certificate of
Incorporation, and otherwise direct the affairs of Paragon. See "Principal
Stockholders" and "Description of Securities."
LIMITED STATE REGISTRATION; RESTRICTED RESALES OF THE SECURITIES.
Paragon has made application to register the Distribution of Shares, the
non-transferable Subscription Rights and the Shares underlying the Subscription
Rights in the State of New York, has filed a notice of exemption for the
Distribution and exercise of Subscription Rights in the State of Indiana and is
relying upon a self executing exemption for the Distribution and exercise of
Subscription Rights in the States of Alabama, Alaska, Arizona, Arkansas,
Connecticut, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Maryland,
Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico,
North Carolina, Oklahoma, Oregon, South Carolina, South Dakota Tennessee, Texas,
Virginia, Washington and Wisconsin. In addition, Paragon will make an effort to
obtain an exemption from registration of the Distribution in the States of
California, Colorado, Ohio and Pennsylvania. Shares and Subscription Rights
which are not distributable to St. Lawrence Shareholders because of restrictions
applicable under the blue sky laws of such shareholders state of residence will
be held by St. Lawrence in a separate lock-up escrow account maintained by the
Escrow Agent pursuant to the terms and conditions of a Blue Sky Lock-Up Letter
Agreement between St. Lawrence, Paragon and the Escrow Agent (the "Lock-Up
Agreement"). Pursuant to the terms of the Lock-Up Agreement, St. Lawrence will
hold the Shares and Subscription Rights to which the St. Lawrence Stockholders
would have been entitled, in the lock-up escrow account and Paragon will take
reasonable efforts to obtain an exemption from registration of the Distribution
to the St. Lawrence Stockholders.
While the Shares are held in the lock-up escrow account, St. Lawrence
agrees not to sell, pledge, hypothecate or otherwise dispose of the Shares for a
period of two (2) years following effectiveness of the Registration Statement of
which this Prospectus is a part. St. Lawrence will not exercise any Subscription
Rights that are held by it in the lock-up escrow account and such Subscription
Rights will expire if they do not become distributable prior to the consummation
of a Business Combination.
In the event St. Lawrence receives notification from Paragon that
registration or an exemption has been obtained for the distribution of any or
all of the Shares held in the lock-up escrow account, then such Shares shall be
registered in your name and either distributed directly to you (if a Business
Combination has occured) or deposited into the Rule 419 Escrow Account pending
distribution upon satisfaction of the terms and conditions described in this
Prospectus.
In the event Paragon cannot obtain registration or an exemption from
registration of the Shares held in the lock-up escrow account within two years,
then St. Lawrence shall have the right, in its sole discretion and subject to
the restrictions contained in this Prospectus, and applicable federal and state
laws, to sell or otherwise dispose of the Shares. Any proceeds received from
such disposition shall be paid over to the St. Lawrence Stockholders who did not
receive Shares in the Distribution.
While held in the Escrow Account, Rule 15g-8 under the Securities
Exchange Act of 1934 makes it unlawful for any person to sell or offer to sell
the Shares (or any interest in or relating thereto). Thus, Stockholders are
prohibited from making any arrangements to sell the Shares distributed and the
Shares received upon the exercise of the Subscription Rights. The Subscription
Rights are, by their terms, non-transferable and will therefore either be
exercised or will expire while held in escrow.
Several states currently will permit secondary market sales of these
securities, upon release from escrow, (i) if certain financial and other
information with respect to Paragon is published in a recognized securities
manual, (ii) after a certain period has elapsed from the date of this
Prospectus, or (iii) pursuant to exemptions applicable to certain institutional
investors. However, Paragon does not expect to be able to be listed in any
recognized securities manual until after the consummation of the first Business
Combination, if at all. Paragon
14
will seek to obtain qualification for resales of the Shares in as many
jurisdictions as possible, or to qualify the Shares for exemptions which will
permit their resale, and to advise Paragon shareholders of resale limitations in
the Post-Effective Amendment that describes a Target Business and proposed
Business Combination.
15
THE DISTRIBUTION
SECURITIES TO BE DISTRIBUTED
Based upon 514,191 Shares of Common Stock of St. Lawrence which are
issued and outstanding or subject to exercisable options and warrants as of
______________, 1996 (the "Record Date"), St. Lawrence will distribute to its
stockholders 514,191 Shares of Paragon and 514,191 Subscription Rights entitling
the holder thereof to subscribe for two (2) additional Shares at a price to be
determined by the Paragon Board of Directors, but in no event more than $2.00
per Subscription Right (the "Subscription Price"). Each Record Date stockholder
of St. Lawrence is being issued one (1) Share of Paragon and one (1)
Subscription Right for each share of common stock of St. Lawrence owned on the
Record Date. The number of Shares and Subscription Rights to be issued to each
stockholder will be rounded down to the nearest whole number of shares and no
fractional Shares or Subscription Rights will be distributed. In the
Distribution, PAR Holding will also be issued 2,900,000 Subscription Rights
representing one (1) Subscription Right for each share of Paragon Common Stock
owned as of the Record Date, which Subscription Rights are identical in all
terms and conditions to those being distributed to St. Lawrence stockholders.
The Shares distributed to St. Lawrence shareholders will be fully paid
for and nonassessable, and the holders thereof will not be entitled to
preemptive rights. The Subscription Rights are non-transferrable and entitle a
stockholder to acquire at the Subscription Price, two (2) Shares for each
Subscription Right held. Subscription Rights will not be exercisable until after
a Post-Effective Amendment describing a Target Business and a proposed Business
Combination is delivered to holders and then may be exercised at any time during
the Subscription Period (as defined herein).
In addition, any Paragon Stockholder who fully exercises all
Subscription Rights distributed to him or her shall be entitled at the same time
to elect to subscribe for Shares which were not otherwise subscribed for by
other holders of Subscription Rights (the "Over-Subscription Privilege"). Shares
acquired through such Over- Subscription Privilege are subject to allocation or
increase, which is more fully discussed below under "Over- Subscription
Privilege."
No Stockholder of St. Lawrence will be required to pay any cash or other
consideration for the Shares or Subscription Rights received in the Distribution
or to surrender or exchange shares of St. Lawrence Common Stock or to take any
other action in order to receive the Shares and Subscription Rights. The
Distribution will not affect the number of, or the rights attaching to,
outstanding shares of St. Lawrence common stock. No vote of St. Lawrence
stockholders is required or sought in connection with the Distribution.
The terms of the Distribution, including the price to be paid by St.
Lawrence in exchange for Paragon Shares and Subscription Rights, and the terms
of the Subscription Rights, were determined by the Board of Directors of Paragon
and proposed to, and accepted by, St. Lawrence. Such terms were based upon
several factors, including the number of St. Lawrence stockholders, the absence
of a Paragon operating business, the small amount of capital available for
Paragon's operations, and the experience of Management. The terms of the
Distribution should not be considered indicative of the value of the Shares
after the Distribution or after the consummation of any Business Combination.
ESCROW OF SECURITIES AND FUNDS; POST-EFFECTIVE AMENDMENT
Rule 419 requires that the Shares to be distributed, the Subscription
Rights, the Shares to be received upon the exercise of Subscription Rights
(collectively, the "Escrowed Securities"), and all funds received upon the
exercise of Subscription Rights (the "Escrowed Funds") be deposited into an
escrow or trust account governed by an agreement which contains certain terms
and provisions specified by the Rule. Under Rule 419, the Escrowed Funds and
Escrowed Securities will be released to Paragon and to the Stockholders,
respectively, only after Paragon has met the following three basic conditions.
First, Paragon must execute an agreement for an acquisition meeting certain
prescribed criteria. Second, Paragon must file a Post-Effective Amendment to its
registration statement which includes the terms upon which Subscription rights
may be exercisable and contains certain conditions prescribed by Rule 419. The
Post-Effective Amendment must also contain information
16
regarding the acquisition candidate and its business, including audited
financial statements. Third, Paragon must conduct the Subscription Period and
satisfy all of the prescribed conditions, including the condition that a certain
minimum number of stockholders elect to exercise their Subscription Rights.
After Paragon submits a signed representation to the Escrow Agent that the
requirements of Rule 419 have been met and after the acquisition is consummated,
the Escrow Agent can release the Shares and Escrowed Funds.
Accordingly, Paragon has entered into an escrow agreement with
Continental Stock Transfer & Trust Company (the "Escrow Agent") which provides
that:
(1) The net proceeds from the exercise of Subscription Rights are to be
deposited into an escrow account maintained by the Escrow Agent upon receipt of
the Subscription Price from subscribing stockholders. The Escrowed Funds and
interest or dividends thereon, if any, are to be held for the sole benefit of
the Stockholders and can only be invested in bank deposits, in money market
mutual funds or federal government securities.
(2) All securities issued in connection with the Distribution, including
Shares issuable upon the exercise of Subscription Rights and securities issued
with respect to stock splits, stock dividends or similar rights, are to be
deposited directly into the escrow account promptly upon issuance. The
identities of the Stockholders are to be included on the stock certificates and
Subscription Forms evidencing the Escrowed Securities. The Escrowed Securities
held in the escrow account are to remain as issued and deposited and are to be
held for the sole benefit of the Stockholders who retain the voting rights, if
any, with respect to the Escrowed Securities held in their names. The Escrowed
Securities held in the escrow account may not be transferred, disposed of nor
any interest created therein other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986 or Table 1 of the Employee Retirement Income
Security Act.
(3) The Subscription Rights held in the escrow account may be exercised
in accordance with their terms upon the filing of a Post-Effective Amendment in
compliance with Rule 419; provided, however, that the Shares received upon
exercise of the Subscription Rights together with any cash paid in connection
with the exercise are to be promptly deposited into the escrow account. The
Subscription Rights are non-transferrable by their terms and must be exercised
or they will expire while held in escrow.
INFORMATION TO BE PROVIDED PURSUANT TO RULE 419
Rule 419 requires that before the Escrowed Funds and the Shares held in
escrow can be released, Paragon must first execute an agreement to acquire an
acquisition candidate meeting certain specified criteria. The agreement must
provide for the acquisition of a business or assets for which the fair value of
the business represents at least 80% of the maximum proceeds to be received from
the exercise of the Subscription Rights.
In the event Paragon identifies a proposed Business Combination meeting
the above criteria which requires the investment of funds by the Company,
Paragon will take steps necessary to activate the Subscription Rights. In
connection therewith, the Board of Directors will determine a Subscription Price
(as described below) and, pursuant to the requirements of Rule 419, Paragon will
file a Post-Effective Amendment to this Prospectus describing a Target Business,
or assets that will constitute the business (or a line of business). See
"Proposed Business". The Post-Effective Amendment will contain information about
the Target Business and its business(es), including audited financial
statements. Within five business days after the effective date of the
Post-Effective Amendment, the Escrow Agent will send by first class mail or
other equally prompt means, to each holder of Subscription Rights, a copy of the
Prospectus contained in the Post-Effective Amendment and any amendment or
supplement thereto along with Subscription Forms.
SUBSCRIPTION PRICE
The Subscription Price per Share will be determined by the Paragon Board
of Directors at the time a Business Combination is described in a Post-Effective
Amendment and will not in any event exceed $2.00 per Subscription Right. Such
price will be determined based on several factors, including funds necessary to
17
consummate the Business Combination, expenses of such transaction, operating
expenses and working capital needs of the Company after consummation of the
Business Combination.
SUBSCRIPTION PERIOD
The Subscription Period will commence after the effective date of the
Post-Effective Amendment. In accordance with Rule 419, the exercise of
Subscription Rights will be subject to the following conditions:
(1) Each Stockholder will have no fewer than 20 and no more than 45
business days from the effective date of the post-effective amendment to notify
Paragon in writing that the Stockholder elects to exercise his or her
Subscription Rights and in the event they are exercising all of their
Subscription Rights, whether they elect to exercise the Over-Subscription
Privilege.
(2) If Paragon does not receive written notification from any
Stockholder within 45 business days following the effective date of the
Post-Effective Amendment, the Stockholder's right to elect to subscribe shall
terminate.
(3) The acquisition will be consummated only if Stockholders
representing 80% of the proceeds to be received from the exercise of
Subscription Rights elect to subscribe.
(4) If the acquisition is not consummated within six months from the
date of the Post-Effective Amendment, the Escrowed Funds held in the escrow
account, if any, shall be returned to all Stockholders on a pro rata basis
within 5 business days by first class mail or other equally prompt means and
none of the Shares shall be released from the Escrow Account.
RELEASE OF ESCROWED SECURITIES AND ESCROWED FUNDS
The Escrowed Funds and Shares held in escrow may be released to Paragon
and the Stockholders, respectively, after:
(1) The Escrow Agent has received a signed representation from Paragon
and any other evidence acceptable by the Escrow Agent that:
(a) Paragon has executed an agreement for the acquisition of a
Business for which the fair value of the business represents at least 80% of the
maximum proceeds received from the exercise of Subscription Rights and has filed
the required Post-Effective Amendment; and
(b) The Post-Effective Amendment has been declared effective, that
the Subscription Period has been completed.
(2) The acquisition of the business with a fair value of at least 80% of
the maximum proceeds received from the exercise of the Subscription Rights is
consummated.
DISTRIBUTION AGENT
The Distribution Agent for Paragon is Continental Stock Transfer & Trust
Company, which will receive, for its administrative, processing, invoicing and
other services, a fee of $__________ and reimbursement for all out-of-pocket
expenses related to the subscription for Shares. The Distribution Agent is also
Paragon's transfer agent and escrow agent. Stockholders may contact the
Distribution Agent at (212) 509-4000.
OVER-SUBSCRIPTION PRIVILEGE
If some Stockholders of Paragon do not exercise all of the Subscription
Rights issued to them, then any Shares for which Subscription Rights have not
been exercised will be offered by means of the Over- Subscription Privilege to
those stockholders of Paragon who have exercised all of the Subscription Rights
issued
18
to them and who elect at the time they subscribe, to acquire additional Shares.
Stockholders who exercise all of the Subscription Rights issued to them will be
asked to indicate on the Subscription Form how many Shares they wish to acquire
through the Over-Subscription Privilege. There is no limit to the number of
Shares that may be requested through the Over-Subscription Privilege. If
sufficient Shares remain in excess of those for which Subscription Rights are
exercised, then all requests for additional Shares will be honored in full.
All requests to purchase Shares pursuant to the Over- Subscription
Privilege are subject to allocation. To the extent that there are not sufficient
Shares to honor all over- subscriptions, the available Shares will be allocated
pro-rata among those Stockholders of Paragon who over-subscribe based on the
number of Subscription Rights originally issued. The percentage of remaining
Shares each over-subscribing Stockholder may acquire may be rounded up or down
to result in delivery of whole Shares. The allocation process may involve a
series of allocations in order to ensure that the total number of Shares
available for over-subscriptions are distributed on a pro rata basis.
LISTING AND TRADING OF THE SHARES
No current public trading market for the Shares of Paragon exists. The
Subscription Rights are non-transferable. Therefore, only the underlying Shares,
and not the Subscription Rights, will be freely transferable upon release from
escrow. The extent of the market for the Shares and the prices at which the
Shares may trade after the Distribution cannot be predicted. See "Risk Factors -
Restricted Resales of the Securities under State Securities"; "Blue Sky Laws."
Once released from escrow, the Shares distributed to St. Lawrence
stockholders will be freely transferable, except for Shares received by persons
who may be deemed to be "affiliates" of Paragon under the Securities Act of
1933, as amended (the "Securities Act"). Persons who may be deemed to be
affiliates of Paragon after the Distribution generally include individuals or
entities that control, are controlled by or are under common control with
Paragon, and includes the directors and principal executive officers of Paragon
as well as any principal stockholder of Paragon. Persons who are affiliates of
Paragon will be permitted to sell Shares only pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act, such as the exceptions afforded
by Section 4(2) of the Securities Act and Rule 144 thereunder. It is not
expected that Rule 144 will be available for the sale of Shares by affiliates of
Paragon until 90 days after the effectiveness of Paragon's Registration
Statement on Form 8-A registering the Shares under the Securities Exchange Act
of 1934 (the "Exchange Act").
RESULTS OF THE DISTRIBUTION
After the Distribution, Paragon will be an independent, public company.
Immediately after the Distribution, Paragon expects to have approximately
__________ holders of record of the Shares and approximately 3,414,191 Shares
outstanding, based on the number of record stockholders and outstanding shares
of St. Lawrence common stock and the number of warrants or options to acquire
shares of St. Lawrence common stock exercisable as of _______________, 1996, and
the distribution ratio of one Share for every one share of St. Lawrence common
stock. The actual number of Shares to be distributed will be determined as of
the Record Date. The Distribution will not affect the number of outstanding
shares of St. Lawrence common stock or any rights of St. Lawrence stockholders.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
St. Lawrence has not requested nor does it intend to request a ruling
from the Internal Revenue Service as to the federal income tax consequence of
the Distribution. However, based on the facts of the proposed transaction, it is
the opinion of management of St. Lawrence that the transaction will not qualify
as a "tax free" spin off under Section 355 of the Internal Revenue Code of 1986,
as amended. Rather, the transaction is presumed to be a taxable Distribution to
which Section 301 applies. The amount of the Distribution will be its fair
market value and will be taxable as a dividend to the extent of current or
accumulated earnings and profits of St. Lawrence. Notwithstanding the presumed
taxability of the transaction, management is also of the opinion
19
it will have only minimal impact on the taxable income of any stockholder of St.
Lawrence for the reasons set forth below. Since Paragon is a development stage
company and has not commenced operations, it is not expected to have earnings or
profits as of the date of the Distribution. Furthermore, because there is no
public market for the Shares, the fair market value of the shares and hence the
amount of the Distribution, will probably be minimal on the date of
Distribution. The net book value of Paragon on the date of the Distribution is
expected to be approximately $.02 per share. This is per share the probable
amount of the taxable value of the Distribution per share.
This discussion is limited to domestic non-corporate stockholders of
Paragon who hold Shares as "capital assets" within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). The 1986 Act has
increased the maximum effective tax rate on long-term capital gains of
individuals for taxable years beginning after December 31, 1987, and has
eliminated any preferential tax rate for such long-term capital gains for
taxable years beginning after December 31, 1987. The Federal Income Tax
consequences to corporate shareholders, foreign shareholders and shareholders
having special status under the Code may vary from those set forth below.
The foregoing sets forth the opinion of management. St. Lawrence will
distribute a Form 1099 or similar form to its stockholders which will also be
filed with the Internal Revenue Service basing the amount of the Distribution as
received by each stockholder on the net book value of Paragon on the date of
distribution. The Internal Revenue Service is not bound thereby and no assurance
exists that it will concur with the position of management regarding the value
of the stock or other matters herein discussed. Specifically, it is possible
that the Internal Revenue Service may assert that a substantially higher fair
market value existed for the stock on the date of Distribution. If the Internal
Revenue Service were to successfully assert that a substantially higher value
should be placed on the amount of the Distribution, the taxation of the
transaction to Paragon and its stockholders would be based on such higher value.
In such event, the tax impact would increase significantly and would not be
minimal. St. Lawrence would recognize gain to the extent the value placed on the
amount of the Distribution exceeded its adjusted basis in the stock (which
approximates the net book value of Paragon). The Stockholders of St. Lawrence
would be taxed on the amount so determined for the distribution as a dividend to
the extent of any current year or accumulated earnings and profits of St.
Lawrence and would recognize gain on the balance of the Distribution to the
extent it exceeded their adjusted basis in Paragon's shares owned by them.
The state, local and foreign tax consequences of the Distribution may
vary from jurisdiction or jurisdiction. Accordingly, each Stockholder of Paragon
is advised to consult his/her personal advisor.
PROPOSED BUSINESS
INTRODUCTION
Paragon was formed in June 19, 1996 to serve as a vehicle to effect a
Business Combination with a Target Business which Paragon believes has
significant growth potential. Paragon intends to utilize the net proceeds from
the exercise of the Subscription Rights, equity securities, debt securities,
bank borrowings or a combination thereof in effecting a Business Combination.
Paragon's efforts in identifying a prospective Target Business will be limited
to businesses primarily located in the United States. Paragon has not had any
negotiations with representatives of any entity regarding a Business
Combination. Paragon may effect a Business Combination with a Target Business
which may be financially unstable or in its early stages of development or
growth.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS
Paragon will seek to acquire a Target Business primarily located in the
United States but its efforts will not be limited to a particular industry. In
seeking a Target Business, Paragon will consider, without limitation, businesses
which (i) offer or provide services or develop, manufacture or distribute goods
in the United States or abroad, including, without limitation, in the following
areas: health care and health products, educational
20
services, environmental services, consumer related products and services
(including amusement and/or recreational services), personal care services,
voice and data information processing and transmission and related technology
development, (ii) is engaged in wholesale or retail distribution, or (iii)
engages in the financial services or similar industries. None of Paragon's
directors or its executive officers has had any negotiations with any entity or
representatives of any entity regarding a Business Combination. To the extent
that Paragon effects a Business Combination with a financially unstable company
or an entity in its early stage of development or growth (including entities
without established records of revenues or income), Paragon will become subject
to numerous risks inherent in the business and operations of financially
unstable and early stage or potential emerging growth companies. In addition, to
the extent that Paragon effects a Business Combination with an entity in an
industry characterized by a high level of risk, Paragon will become subject to
the currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
Target Business or industry, there can be no assurance that Paragon will
properly ascertain or assess all such risks.
PROBABLE LACK OF BUSINESS DIVERSIFICATION
As a result of the limited resources of Paragon, Paragon, in all
likelihood, will have the ability to effect only a single Business Combination.
Accordingly, the prospects for Paragon's success will be entirely dependent upon
the future performance of a single business. Unlike certain entities which have
the resources to consummate several Business Combinations of entities operating
in multiple industries or multiple segments of a single industry, it is highly
likely that Paragon will not have the resources to diversify its operations or
benefit from the possible spreading of risks or offsetting of losses. Paragon's
probable lack of diversification may subject Paragon to numerous economic,
competitive and regulatory developments, any or all of which may have a material
adverse impact upon the particular industry in which Paragon may operate
subsequent to a Business Combination. The prospects for Paragon's success may
become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of capital investment in and management assistance to the Target
Business by Paragon, there can be no assurance that the Target Business will
prove to be commercially viable. Paragon has no present intention of purchasing
or acquiring a minority interest in any Target Business.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATION
The Stockholders of Paragon will, in all likelihood, neither receive
nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to Paragon in connection with selecting
potential a Target Business until after Paragon has entered into a definitive
agreement to effectuate a Business Combination. As a result, Stockholders of
Paragon will be almost entirely dependent on the judgment of management in
connection with the selection of a Target Business and the terms of any Business
Combination.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval, such as where shares
of common stock are issued as consideration for the Target Business. In
addition, the form of Business Combination will have an impact upon the
availability of dissenters' rights (i.e., the right to receive fair payment with
respect to the Common Stock) to stockholders disapproving of the proposed
Business Combination. Under current Delaware law, only a merger or consolidation
may give rise to a stockholder vote and to dissenters' rights. The Delaware
General Corporation Law requires approval of certain mergers and consolidations
by a majority of the outstanding stock entitled to vote.
Even if investors are afforded the right to approve a Business
Combination, no dissenters' rights to receive fair payment will be available for
stockholders if Paragon is to be the surviving corporation unless the
Certificate of Incorporation of Paragon is amended and as a result thereof: (i)
alters or abolishes any preferential right of such stock; (ii) creates, alters
or abolishes any provision or right in respect of the redemption of such shares
or any sinking fund for the redemption or purchase of such shares; (iii) alters
or abolishes any preemptive right of such holder to acquire shares or other
securities; or (iv) excludes or limits the right of such holder to
21
vote on any matter, except as such right may be limited by the voting rights
given to new shares then being authorized of any existing or new class.
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT
Paragon's present management intends to scrutinize closely the
management of a prospective Target Business in connection with its evaluation of
the desirability of effecting a Business Combination with such Target Business,
there can be no assurance that Paragon's assessment of such management will
prove to be correct, especially in light of the possible inexperience of current
key personnel of Paragon in evaluating certain types of businesses. While it is
possible that certain of Paragon's directors or its executive officers will
remain associated in some capacities with Paragon following a Business
Combination, it is unlikely that any of them will devote a substantial portion
of their time to the affairs of Paragon subsequent thereto. Moreover, there can
be no assurance that such personnel will have significant experience or
knowledge relating to the operations of the Target Business acquired by Paragon.
Paragon may also seek to recruit additional personnel to supplement the
incumbent management of the Target Business. There can be no assurance that
Paragon will successfully recruit additional personnel or that the additional
personnel will have the requisite skills, knowledge or experience necessary or
desirable to enhance the incumbent management. In addition there can be no
assurance that the future management of Paragon will have the necessary skills,
qualifications or abilities to manage a public Company embarking on a program of
business development. See "Proposed Business" and "Management."
COMPETITION
Paragon expects to encounter intense competition from other entities
having business objectives similar to those of Paragon. Many of these entities,
including venture capital partnerships and corporations, blind pool companies,
large industrial and financial institutions, small business investment companies
and wealthy individuals, are well-established and have extensive experience in
connection with identifying and effecting Business Combinations directly or
through affiliates. Many of these competitors possess greater financial,
technical, human and other resources than Paragon and there can be no assurance
that Paragon will have the ability to compete successfully. Paragon's financial
resources will be limited in comparison to those of many of its competitors.
This inherent competitive limitation may compel Paragon to select certain less
attractive Business Combination prospects. There can be no assurance that such
prospects will permit Paragon to achieve its stated business objectives. See
"Proposed Business."
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS COMBINATION
Management of Paragon will have substantial flexibility in identifying
and selecting a prospective Target Business. As a result, stockholders of
Paragon will be almost entirely dependent on the judgment of management in
connection with the selection of a Target Business. In evaluating a prospective
Target Business, management will consider, among other factors, the following:
(i) costs associated with effecting the Business Combination; (ii) equity
interest in and opportunity for control of the Target Business; (iii) growth
potential of the Target Business; (iv) experience and skill of management and
availability of additional personnel of the Target Business; (v) capital
requirements of the Target Business; (vi) competitive position of the Target
Business; (vii) stage of development of the Target Business; (viii) degree of
current or potential market acceptance of the Target Business; (ix) proprietary
features and degree of intellectual property or other protection of the Target
Business; and (x) the regulatory environment in which the Target Business
operates.
The foregoing criteria are not intended to be exhaustive and any
evaluation relating to the merits of a particular Target Business will be based,
to the extent relevant, on the above factors as well as other considerations
deemed relevant by management in connection with effecting a Business
Combination consistent with Paragon's business objectives.
In connection with Paragon's acquisition of a business, the executive
officers and certain directors of Paragon may, as a negotiated element of the
acquisitions, sell a portion or all of the Shares of Paragon held by them at a
significant premium over their original investment in Paragon. As a result of
such sales, affiliates of
22
the entity participating in the business reorganization with Paragon would
acquire a higher percentage of equity ownership in Paragon. Although the
Paragon's present Stockholders did not acquire their Shares with a view towards
any subsequent sale in connection with a Business Combination, it is not unusual
for affiliates of the entity participating in the Business Combination to
negotiate to purchase shares held by the present stockholders in order to reduce
the number of "restricted securities" held by persons no longer affiliated with
Paragon and thereby reduce the potential adverse impact on the public market in
the Shares that could result from substantial sales of such Shares after the
restrictions no longer apply. Public Stockholders will not receive any portion
of the premium that may be paid in the foregoing circumstances. Furthermore,
Paragon's Stockholders may not be afforded an opportunity to approve or consent
to any particular stock buy-out transaction. See Management Conflicts of
Interest".
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state "blue sky" and corporation laws) cannot presently be ascertained with
any degree of certainty. Paragon's executive officers and its directors intend
to devote only a small portion of their time to the affairs of Paragon and,
accordingly, consummation of a Business Combination may require a greater period
of time than if Paragon's management devoted their full time to Paragon's
affairs. However, each officer and director of Paragon will devote such time as
they deem reasonably necessary to carry out the business and affairs of Paragon,
including the evaluation of potential Target Business and the negotiation of a
Business Combination and, as a result, the amount of time devoted to the
business and affairs of Paragon may vary significantly depending upon, among
other things, whether Paragon has identified a Target Business or is engaged in
active negotiation of a Business Combination.
Paragon anticipates that various prospective Target Businesses will be
brought to its attention from various non- affiliated sources, including
securities broker-dealers, investment bankers, venture capitalists, bankers,
other members of the financial community and affiliated sources, including,
possibly, Paragon's executive officer, and directors and their affiliates.
Paragon may elect to publish advertisements in financial or trade publications
seeking potential business acquisitions. While Paragon does not presently
anticipate engaging the services of professional firms that specialize in
finding business acquisitions on any formal basis, Paragon may engage such firms
in the future, to which event Paragon may pay a finder's fee or other
compensation.
As a general rule, federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. Paragon will
evaluate the possible tax consequences of any prospective Business Combination
and will endeavor to structure the Business Combination so as to achieve the
most favorable tax treatment to Paragon, the Target Business and their
respective stockholders. There can be no assurance that the Internal Revenue
Service or relevant state tax authorities will ultimately assent to Paragon's
tax treatment of a particular consummated Business Combination. To the extent
that the Internal Revenue Service or any relevant state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to Paragon, the Target
Business and their respective stockholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
Although Paragon has no commitments as of the date of this Prospectus
to issue any shares of Common Stock other than as described in this Prospectus,
Paragon may issue a substantial number of additional shares in connection with a
Business Combination. To the extent that such additional shares are issued,
dilution to the interests of Paragon's Stockholders may occur. Additionally, if
a substantial number of shares of Common Stock are issued in connection with a
Business Combination, a change in control of Paragon may occur which may affect,
among other things, Paragon's ability to utilize net operating loss carry
forwards, if any.
There currently are no limitations on Paragon's ability to borrow funds
to effect a Business Combination. However, Paragon's limited resources and lack
of operating history may make it difficult to borrow funds. The amount and
nature of any borrowings by Paragon will depend on numerous considerations,
23
including Paragon's capital requirements, potential lenders evaluation of
Paragon's ability to meet debt service on borrowings and the then prevailing
conditions in the financial markets, as well as general economic conditions.
Paragon does not have any arrangements with any bank or financial institution to
secure additional financing and there can be no assurance that such arrangements
if required or otherwise sought, would be available on terms commercially
acceptable or otherwise in the best interests of Paragon. The inability of
Paragon to borrow funds required to effect or facilitate a Business Combination,
or to provide funds for an additional infusion of capital into a Target
Business, may have a material adverse effect on Paragon's financial condition
and future prospects, including the ability to effect a Business Combination. To
the extent that debt financing ultimately proves to be available, any borrowings
may subject Paragon to various risks traditionally associated with indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. Furthermore, a Target Business may have already
incurred debt financing and, therefore, all the risks inherent thereto.
In implementing a structure for a particular Business Combination,
Paragon may become a party to a merger, consolidation, or other reorganization
with another corporation or entity, joint venture, license, purchase and sale of
assets, or purchase and sale of stock, the exact nature of which cannot now be
predicted. Notwithstanding the above, Paragon does not intend to participate in
a business through the purchase of minority stock positions. On the consummation
of a transaction, it is likely that the present management and Stockholders of
Paragon will not be in control of Paragon. In addition, a majority or all of
Paragon's directors and officers may, as part of the terms of the Business
Combination transaction, resign and be replaced by new directors and officers
without a vote of Paragon's Stockholders.
FACILITIES
Paragon will use the offices of PAR Holding Company, LLC, located at
277 Park Ave, New York, NY 10017, a limited liability company controlled by
Paragon's officers.
EMPLOYEES
As of the date of this Prospectus, Paragon does not have any employees.
USE OF PROCEEDS
The net proceeds payable to Paragon upon the exercise of Subscription
Rights will be held in an interest-bearing escrow account maintained by
Continental Stock Transfer & Trust Company, subject to release to Paragon upon
written notification by Paragon of its need for all or substantially all of the
Escrowed Funds for the purpose of facilitating the consummation of a Business
Combination. If a Business Combination is not consummated within 6 months from
the completion of the Subscription Period, the Escrowed Funds shall be returned
by first class mail or equally prompt means to all subscribing stockholders,
together with interest earned thereon on a pro-rata basis.
Paragon will use the Escrowed Funds together with the interest earned
thereon principally in connection with consummating the Business Combination.
Paragon has no present intention of purchasing a minority interest in any Target
Business. Paragon does not have discretionary access to income with respect to
the monies in the Escrow Account. Stockholders of Paragon will not receive any
distribution of income or have any ability to direct the use or distribution of
such income.
To the extent that Shares of Paragon are used as consideration to
effect a Business Combination, the balance of the net proceeds from the exercise
of the Subscription Rights not theretofore expended will be used to finance the
operations of the Target Business, and for other purposes described in the
Post-Effective Amendment. Paragon has not incurred any debt in connection with
its organizational activities. Accordingly, no portion of the proceeds are being
used to repay debt. No compensation will be paid to any officer or director
until after the consummation of a Business Combination. Since the role of
present management after a Business
24
Combination is uncertain, Paragon has no ability to determine what remuneration,
if any, will be paid to such persons after a Business Combination.
The Escrowed Funds will be invested in general debt obligations of the
United States Government or other high- quality, short-term interest-bearing
investments, provided, however, that Paragon may attempt not to invest such net
proceeds in a manner which may result in Paragon being deemed to be an
investment company under the Investment Company Act. In the event a Business
Combination is not consummated in the time allowed, the Escrowed Funds and the
interest income derived from investment of such net proceeds will be returned on
a pro rata basis, to each subscribing stockholder within five business days
thereafter by first class mail or other equally prompt means.
DILUTION
The difference between the Subscription Price per share of Common Stock
(through the exercise of the Subscription Rights) and the pro forma net tangible
book value per share of the Common Stock of Paragon after the Subscription
constitutes dilution to investors of Paragon. Net tangible book value per share
is determined by dividing the net tangible book value of Paragon (total tangible
assets less total liabilities) by the number of outstanding shares of Common
Stock.
On June 30, 1996, Paragon had 2,900,000 Shares of Common Stock
outstanding and a net tangible book value of $50,000 or $.017 per share. Giving
effect to the issuance of 514,191 Shares of Common Stock on October ___, 1996 to
St. Lawrence for $.01 per share and the payment of the $75,000 Subscription
Receivable by PAR Holding on October ___, 1996 , as of October ___, 1996,
Paragon had 3,414,191 shares of Common Stock outstanding and a net tangible book
value of $130,141 or $.038 per share.
The Distribution by St. Lawrence of the 514,191 Shares to St. Lawrence
stockholders will not have an effect on the net tangible book value of Paragon.
Dilution from the exercise of Subscription Rights will occur only in the event
the Board of Directors of Paragon establish a Subscription Price per share of
less than $.038. The dilutive effect to Paragon stockholders of the exercise of
Subscription Rights will be reflected in a Post- Effective Amendment which will
establish the purchase price per share under the Subscription Rights. The Board
of Directors of Paragon does not anticipate setting a Subscription Price per
share of less than $.045 and therefore, the estimated net proceeds from the
exercise of Subscription Rights will likely result in an immediate increase in
net tangible book value per share.
25
CAPITALIZATION
The following table sets forth the capitalization of Paragon at June
30, 1996 and as adjusted to give effect to the Distribution of the Share(s):
<TABLE>
<CAPTION>
Actual Pro Forma
------ ---------
<S> <C> <C>
Stockholders' equity
Preferred Stock, $.01 par
value, 1,000,000 Shares
authorized; none issued
or outstanding 0 0
Common Stock $.01 par
value, 20,000,000 shares
authorized, 2,900,000 shares
issued and outstanding,
3,414,191 shares issued and
outstanding, as adjusted(2) $ 29,000 $ 34,141(2)
Subscription Receivable (75,000) 0
Additional Paid In Capital 121,000 121,000
Deficit accumulated during the
development stage (5,000) (5,000)
-------- --------
Total stockholders' equity $ 70,000 $150,141
======== ========
</TABLE>
(1) The effect of the exercise of Subscription Rights will be reflected in a
post-effective amendment which will establish the purchase price under the
Subscription Rights.
(2) Gives effect to the purchase by St. Lawrence of 514,191 shares of Common
Stock of Paragon for a total purchase price of $5,141 on October ___, 1996 and,
the payment by PAR Holding of the Subscription Receivable on October ___, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Paragon is a newly organized development stage company, the objective
of which is to acquire an operating business in the United States. To date,
Paragon's efforts have been limited to organizational activities.
In June 1996, the Company issued 2,900,000 shares of its Common Stock
for a purchase price of $75,000 in cash and a Promissory Note for $75,000
originally due on or before July 31, 1996. Such Promissory Note was subsequently
modified to provide for payment on demand by Paragon, in whole or in part, in
amounts to pay expenses associates with the Distribution. The Promissory Note
was paid in full on _______ ______, 1996. On October ____, 1996, the Company
issued 514,191 shares of Common Stock for an aggregate purchase price of
$5,141.00.
Substantially all of Paragon's working capital needs subsequent to this
offering will be attributable to the identification, evaluation and selections
of a Target Business and, structuring, negotiating and consummating a Business
Combination. Such working capital needs are expected to be satisfied from the
$155,141 received by Paragon from PAR Holding and St. Lawrence.
26
MANAGEMENT
The officers and directors of Paragon, and further information
concerning them are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mitchell A. Kuflik 33 President, Assistant Secretary, Director
Peter A. Hochfelder 34 Vice President, Treasurer, Director
Robert J. Sobel 33 Vice President, Director
Joseph F. Mazzella 43 Secretary, Director
</TABLE>
Mitchell A. Kuflik has been President, Assistant Secretary and a
Director of the Company since its inception. Mr. Kuflik has been Vice President
and Secretary of Brahman Securities, Inc., an institutional brokerage firm since
December, 1987; Vice President of Brahman Capital Corp., an investment banking
firm since 1990; and a general partner of Brahman Partners, a private limited
partnership, since 1991. All of such entities are located in New York. Mr.
Kuflik also serves as a director of Covenant Insurance Company, a privately-held
company in Cambridge Massachusetts. Mr. Kuflik earned an A.B. in Economics from
Harvard University in 1984.
Peter A. Hochfelder has been a Vice President, Treasurer and Director
of the Company since inception. Mr. Hochfelder has been Vice President and
Treasurer of Brahman Securities, Inc., an institutional brokerage firm since
December, 1987; President of Brahman Capital Corp., an investment banking firm
since 1990; and a general partner of Brahman Partners, a private limited
partnership, since 1991. All of such entities are located in New York. Mr.
Hochfelder earned a B.S. degree in Economics from the University of Pennsylvania
in 1984.
Robert J. Sobel has been a Vice President and a Director of the Company
since inception. Mr. Sobel has served as President of Brahman Securities, Inc.,
an institutional securities firm since 1987; Vice President of Brahman Capital
Corp., an investment banking firm since 1990; and a general partner of Brahman
Partners, a private investment partnership, since 1991. All of such entities are
located in New York. Mr. Sobel earned a bachelor's degree with a major in
International Relations and a concentration at the Wharton School of Business
from the University of Pennsylvania in 1985.
Joseph F. Mazzella has been Secretary and a Director of the Company
since inception. Since 1985, Mr. Mazzella has been a partner at the law firm of
Lane Altman & Owens LLP in Boston, Massachusetts. Prior to joining Lane Altman &
Owens LLP in 1980, Mr. Mazzella was an attorney with the Securities and Exchange
Commission. Mr. Mazzella serves as a Director and Chairman of the Compensation
Committee of Alliant Techsystems Inc., a NYSE listed company. Mr. Mazzella
received a B.S. degree from the College of the City of New York in 1974 and
received his law degree from Rutgers University School of Law in 1977.
MANAGEMENT REMUNERATION
No director or officer of Paragon has received any cash compensation
from the Company since its inception for services rendered. Prior to the
consummation of a Business Combination, none of the Company's officers or
directors will receive any compensation except that the Company may reimburse
such officers or directors for any out-of-pocket expenses incurred in connection
with activities on behalf of the Company. None of the Company's officers or
directors will receive any consulting or finder's fees or other compensation in
connection with introducing the Company to, or evaluating, a Target Business or
consummating a Business Combination. A law firm of which Joseph F. Mazzella, a
director of Paragon, is a partner has performed services in connection the
Distribution and may do so in connection with a Business Combination. Paragon
has no plan, agreement, or understanding, express or implied, with any officer,
director, or promoter, or their affiliates or associates, regarding the issuance
to such persons of any authorized and unissued Share of Paragon,
27
and Paragon is unaware of any circumstance under which Shares would be issued to
such persons. There is no understanding between Paragon and any of its present
stockholders regarding the sale of a portion or all of the Shares currently held
by them in connection with any future participation by Paragon in a business.
There are no other plans, understandings, or arrangements whereby any of
Paragon's officers, directors, principal stockholders, or promoters, or any of
their affiliates or associates, would receive funds, stock or other assets in
connection with Paragon's participation in a business. No advances have been
made or contemplated by Paragon to any of its officers, directors, principal
stockholders, or promoters, or any of their affiliates or associates.
ADVISORS AND FINDERS FEES
There are no current plans to engage a finder or consultant to identify
a Target Business. If such advisors, were used however, compensation to a finder
or business acquisition firm may take various forms, including one-time cash
payments, payments based on a percentage of revenues or product sales volume,
payments involving issuance of securities (including those of Paragon), or any
combination of these or other compensation arrangements. Consequently, Paragon
is currently unable to predict the cost of utilizing such services, but
estimates that any fees for such services paid in cash will not exceed 10% of
the gross proceeds of this offering and/or equity securities (not debt) equal to
10% of the amount of the securities issued by Paragon to acquire a business. The
board of directors has not accepted any policies regarding the use of advisors,
their identities or possible compensation, including any policy prohibiting the
payment, either directly or indirectly, of any finder's fee or similar
compensation to any person who has served as an officer or director of Paragon
prior to the acquisition.
CONFLICTS OF INTEREST
Each of the officers and directors of Paragon has other professional
and business interests to which he devotes his primary attentions.
Paragon has no arrangement, understanding, or intention to enter into
any transaction or participate in any business venture with any officer,
director, or principal stockholder or with any firm or business organization
with which they are affiliated, whether by reason of stock ownership, position
as officer or director, or otherwise.
In connection with Paragon's acquisition of a business, Paragon's
present stockholders, including officers and directors, may, as a negotiated
element of the acquisition, sell a portion or all of the Shares held by them at
a significant premium over their original investment. A conflict of interest is
inherent in this situation since Paragon's officers and directors will be
negotiating for the acquisition on behalf of Paragon and for sale of their
Shares for their own respective accounts. Management has not adopted any policy
for resolving the foregoing potential conflicts, should they arise.
A conflict of interest may arise between management's personal
pecuniary interests and its fiduciary duty to the stockholders of Paragon.
Investors should note that the present stockholders of Paragon will own
approximately 85% of Paragon after the Distribution is completed and would
therefore have continuing control of the company. Further, management's interest
in their own pecuniary benefits may at some point compromise their fiduciary
duty to Paragon's stockholders. No proceeds from this offering will be used to
purchase directly or indirectly any shares of the Common stock owned by
management or any present stockholder, director or promoter. See "Management".
OTHER BLANK CHECK COMPANIES
Management has not been and is not involved with any blank check
companies other than Paragon and currently does not expect to organize, purchase
or otherwise promote any other companies with a structure and purposes similar
to Paragon's, if at all, until after Paragon identifies a Target Business with
which it seeks to effect a Business Combination. In the event Management's
intention changes, or they otherwise become
28
affiliated with a blank check company, then conflicts of interest may arise
regarding competing searches for Business Combinations.
PRINCIPAL STOCKHOLDERS
As of the date of this Prospectus, PAR Holding and St. Lawrence are the
only shareholders of the Company. The following table sets forth information on
______________, 1996 and as adjusted to reflect the Distribution of Shares based
on information obtained from the persons named below, with respect to beneficial
ownership of Shares of Common Stock by (i) each person known by the Company to
be the owner of more than 5% of the outstanding shares of Common Stock, (ii)
each director and (iii) all executive officers and directors as a group:
<TABLE>
<CAPTION>
Percentage of Outstanding
Amount and Shares of Common Stock(1)
Nature of ---------------------------------
Beneficial Before After
Name and Address Ownership Distribution Distribution(1)
---------------- --------- ------------ ---------------
<S> <C> <C> <C>
PAR Holding Company, LLC 2,900,000 85% 85%
277 Park Avenue
New York, NY 10017
St. Lawrence Seaway Corporation 514,191 15% 0
520 N. Meridian Street
Suite 818
Indianapolis, IN 46204
Mitchell A. Kuflik(2) 2,900,000(3) 85% 85%
Peter A. Hochfelder(2) 2,900,000(3) 85% 85%
Robert J. Sobel(2) 2,900,000(3) 85% 85%
All executive officers and
directors as a group 2,900,000 85% 85%
(3 persons)
</TABLE>
(1) The effect of the exercise of Subscription Rights will be reflected in a
post-effective amendment.
(2) Each of the individuals listed has an address in care of Paragon.
(3) Ownership by Messrs. Kuflik, Hochfelder and Sobel is indirect as a result of
their membership interest in PAR Holding, LLC. Messrs. Kuflik, Hochfelder and
Sobel disclaim individual beneficial ownership of any Common Stock of Paragon.
Certain Transactions
In June 1996, Paragon issued 2,900,000 shares of its Common Stock, $.01
par value, to PAR Holding for a purchase price of $150,000, consisting of
$75,000 in cash and a Promissory Note for $75,000 originally due on July 31,
1996. Such Promissory Note was subsequently modified to provide for payment on
demand of Paragon, in whole or in part, in amounts to pay expenses associated
with the Distribution. The Promissory Note was paid in full on ____________,
1996. On ____________, 1996, Paragon issued 514,191 Shares of its Common Stock,
$.01 par value, to St. Lawrence for a purchase price of $5,141 in cash.
29
DESCRIPTION OF CAPITAL STOCK
Paragon was organized as a Delaware corporation on June 19, 1996 with
original authorization to issue up to 100,000 shares of Common Stock and
1,000,000,000 shares of Preferred Stock. In order to reduce certain annual state
filing fees, in June, 1996 Paragon's authorized capital was reduced to
20,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000
shares of preferred stock, par value $.01 per share (the "Preferred Stock"). The
following statements relating to the capital stock of Paragon are summaries and
do not purport to be complete. Reference is made to the more detailed provisions
of, and such statements are qualified in their entirety by reference to, the
Certificate of Incorporation (the "Certificate") and the By-laws of Paragon,
copies of which are filed as exhibits to the Registration Statement of which
this Prospectus is a part.
COMMON STOCK
Holders of Common Stock will be entitled to one vote per share with
respect to all matters required by law to be submitted to holders of Common
Stock. The Common Stock will not have cumulative voting rights. The Certificate
provides that any action required to be taken or that may be taken at an annual
or special meeting of stockholders may be taken by written consent in lieu of a
meeting of stockholders.
Subject to the prior rights of holders of Preferred Stock, if any,
holders of the Common Stock will be entitled to receive such dividends as may be
lawfully declared by the Board of Directors of Paragon. See "Dividend Policy."
Upon any dissolution, liquidation or winding up of Paragon, whether voluntary or
involuntary, holders of the Common Stock are entitled to share ratably in all
assets remaining after the liquidation payments have been made on all
outstanding shares of Preferred Stock, if any.
Upon the Distribution, the shares of the Common Stock offered hereby
will be fully paid and nonassessable. The Common Stock will not have any
preemptive, subscription or conversion rights (except for the Subscription
Rights defined herein). Under Paragon's Certificate, the Board of Directors of
Paragon has the authority to issue additional shares of Common Stock. Paragon
believes that the Board's ability to issue additional shares of Common Stock
could facilitate certain financings and acquisitions and provide a means for
meeting other corporate needs that might arise. The authorized but unissued
shares of Common Stock will be available for issuance without further action by
Paragon's stockholders, unless stockholder action is required by applicable law
or the rules of any stock exchange or system on which the Common Stock may then
be listed. The Board's ability to issue additional shares of Common Stock could,
under certain circumstances, either impede or facilitate the completion of a
merger, tender offer or other takeover attempt.
SUBSCRIPTION RIGHTS
Paragon will issue and distribute one non-transferrable Subscription
Right for each share of Common Stock to be distributed to stockholders of St.
Lawrence pursuant to the Distribution. Until a Subscription Right is exercised
pursuant to the terms of the Distribution, the holder thereof, as such, will
have no rights as a stockholder of Paragon, including the right to vote or
receive dividends. Each Subscription Right entitles the holder thereof to
subscribe for and purchase from Paragon two (2) authorized but heretofore
unissued shares of Paragon's common stock for each Subscription Right held. The
Subscription Rights will be evidenced by Subscription Forms. Stockholders who
fully exercise their Subscription Rights will be entitled to the additional
privilege of subscribing, subject to certain limitations and subject to
allocation or increase, for any Shares not acquired by exercise of Subscription
Rights (the "Over-Subscription Privilege"). No fractional Subscription Rights
will be issued and no fractional shares will be issued upon exercise of
Subscription Rights. Subscription Rights are non-transferable and will not be
admitted for trading or quotation on any exchange and therefore may not be
purchased or sold. Subscription Rights must be exercised within the Subscription
Period or they will expire at the end of such period. Only persons who are
stockholders of Paragon on the Record Date may hold Subscription Rights.
30
PREFERRED STOCK
Paragon is authorized to issue up to 1,000,000 shares of Preferred
Stock without further stockholder approval. The shares of Preferred Stock may be
issued in one or more series, with the number of shares of each series and the
rights, preferences and limitations of each series to be determined by the Board
of Directors. Among the specific matters that may be determined by the Board of
Directors are dividend rights, if any, redemption rights, if any, the terms of a
sinking or purchase fund, if any, the amount payable in the event of any
voluntary liquidation, dissolution or winding up of the affairs of Paragon,
conversion rights, if any, and voting powers, if any.
The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might impede
a business combination by including class voting rights that would enable the
holder to block such a transaction, or facilitate a business combination by
including voting rights that would provide a required percentage vote of the
stockholders. In addition, under certain circumstances, the issuance of
Preferred Stock could adversely affect the voting power of the holders of the
Common Stock. Although the Board of Directors is required to make any
determination to issue such stock based on its judgment as to the best interests
of the stockholders of Paragon, the Board of Directors could act in a manner
that would discourage an acquisition attempt or other transaction that some, or
a majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
market price of such stock. The Board of Directors does not at present intend to
seek stockholder approval prior to any issuance of currently authorized stock,
unless otherwise required by law or stock exchange rules. Paragon has no present
plans to issue any Preferred Stock.
DIVIDENDS
Paragon does not expect to pay dividends prior to the consummation of a
Business Combination. Future dividends, if any, will be contingent upon
Paragon's revenues and earnings, if any, capital requirements and governmental
financial conditions subsequent to the consummation of a Business Combination.
The payment of dividends subsequent to a Business Combination will be within the
discretion of Paragon's then Board of Directors. Paragon presently intends to
retain all earnings, if any, for use in Paragon's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future.
LEGAL MATTERS
The legality of the securities being registered by this Registration
Statement is being passed upon by Lane Altman & Owens LLP, of which Joseph F.
Mazzella, a Director of the Company is a partner.
EXPERTS
The financial statements included in this Prospectus have been audited
by BDO Seidman, LLP, independent certified public accountants, to the extent and
for the period set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in accounting and auditing.
31
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
JUNE 30, 1996
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants....................... F-2
Financial Statements:
Balance Sheet............................................................ F-3
Statement of Operations.................................................. F-4
Statement of Stockholders' Equity........................................ F-5
Statement of Cash Flows.................................................. F-6
Notes to Financial Statements........................................ F-7, F-8
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Paragon Acquisition Company, Inc.
New York, NY
We have audited the accompanying balance sheet of Paragon Acquisition
Company, Inc. (a corporation in the development stage) as of June 30, 1996, and
the related statements of operations, stockholders' equity and cash flows for
the period from June 19, 1996 (inception) to June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Paragon Acquisition
Company at June 30, 1996, and the results of its operations and its cash flows
for the period from June 19, 1996 (inception) to June 30, 1996 in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
July 1, 1996
F-2
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
JUNE 30, 1996
ASSETS
Current Assets - Cash................................................ $75,000
-------
Deferred registration costs.......................................... 20,000
------
$95,000
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities - Accounts payable and accrued expenses.......... $25,000
-------
Commitment (Note 4)
Stockholders' equity (Notes 2, 5 and 6):
Preferred stock, $.01 par value shares - authorized 10,000,000;
none issued ............................................. -
Common stock, $.01 par value shares - authorized 20,000,000:
outstanding 2,900,000....................................... 29,000
Subscription receivable........................................ (75,000)
Additional paid-in capital..................................... 121,000
Deficit accumulated during the development stage............... (5,000)
-------
Total stockholders' equity..................................... $70,000
-------
Total Liabilities and Stockholders' Equity $95,000
=======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-3
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
PERIOD FROM JUNE 19, 1996 (INCEPTION) TO JUNE 30, 1996
General and administrative expenses............................. $5,000
---------
Net loss for the period......................................... $5,000
=========
Net Loss per Share.............................................. ($0.00)
---------
Weighted average Common Shares outstanding....................... 2,900,000
=========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-4
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JUNE 19, 1996 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE TOTAL
---------------- SUBSCRIPTION PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE CAPITAL STAGE EQUITY
------ ------ ---------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Issuance of founders' shares.... 2,900,000 $29,000 ($75,000) $121,000 - $75,000
Net loss for the period......... - - - - ($5,000) (5.000)
--------- ------- -------- -------- ------- -------
Balance June 30, 1996........... 2,900,000 $29,000 ($75,000) $121,000 ($5,000) $70,000
========= ======= ======== ======== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-5
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
PERIOD FROM JUNE 19, 1996 (INCEPTION) TO JUNE 30, 1996
Cash flows from operating activities:
Net loss.................................................. $ (5,000)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in accrued expenses......................... $ 5,000
---------
Net cash used in operating
activities......................................... -0-
--------
Cash flows from financing activities:
Proceeds from sale of common stock to
founding stockholders................................... 75,000
--------
Net cash provided by financing
activities......................................... 75,000
--------
Net Increase in cash................................. 75,000
Cash, beginning of period................................. -0-
--------
Cash, end of period....................................... $ 75,000
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- The Company received a note for subscribed Common Stock amounting to
$75,000, which is a non-cash financing activity.
- The Company incurred $20,000 in deferred registration costs (and
related accounts payable) which is a non-cash financing activity.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-6
PARAGON ACQUISITION COMPANY, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109
("FAS 109), "Accounting for Income Taxes." FAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. The Company has net operating
loss carry forwards of approximately $5,000 available to reduce any future
income taxes. The tax benefit of these losses, approximately $2,000 has been
offset by a valuation allowance due to the uncertainty of its realization.
Deferred Registration Costs
As of June 30, 1996, the Company has incurred deferred registration
costs of $20,000 relating to expenses incurred in connection with the Proposed
Distribution (see Note 2). Upon consummation of this Proposed Distribution, the
deferred registration costs will be charged to equity. Should the Proposed
Distribution prove to be unsuccessful, these deferred costs, as well as
additional expenses to be incurred, will be charged to operations.
Net Loss Per Share
Net loss per common share is computed on the basis of the weighted
average number of common shares outstanding during the period.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Organization and Business Operations. Paragon Acquisition Company,
Inc. (the "Company") was incorporated in Delaware on June 19, 1996 to serve as a
vehicle to effect a merger, exchange of capital stock, asset acquisition or
other business combination the "Business Combination") with an operating
business (the "Target Business"). At June 30, 1996, the Company had not yet
commenced any formal business operations and all activity to date relates to the
Company's formation and proposed fund raising. The Company's fiscal year end is
December 31.
The Company's ability to commence operations is contingent upon its
ability to identify a prospective Target Business and raise the capital it will
require through the issuance of equity securities, debt securities, bank
borrowings or a combination thereof. The Company intends to obtain adequate
financial resources through the registration of a distribution of shares of its
Common Stock and Subscription Rights to its shareholders the ("Proposed
Distribution"). The Subscription Rights will entitle the holder to purchase two
(2) shares of Common Stock of the Company for each Subscription Right held for a
purchase price to be determined by the Company's Board of Directors at the time
a Business Combination is identified, such price to be not more than $2.00 per
Subscription Right.
F-7
Subscription Rights will not be exercisable until after a
Post-Effective Amendment to the Form S-1 Registration Statement to be filed by
the Company with the Securities and Exchange Commission describes a Business
Combination, establishes the Subscription Price and the number of Subscription
Rights which may be exercised in such Subscription Period and specifies the
Subscription Period established by the Company. The Shares to be distributed to
the shareholders, the Subscription Rights and any Shares issuable upon exercise
of Subscription Rights will be held in escrow and may not be sold or transferred
until the Company has consummated a Business Combination. After the Business
Combination is consummated, the Shares will be released from escrow.
Due to the terms of the Proposed Distribution, the Company has not
established a time period within which to exercise the Subscription Rights as
such exercise is dependent upon the identification of a Target Business. The
Company anticipates that, due to the time constraints imposed on the management
of the Company, it is not possible to predict the length of the identification
process.
3. Proposed Distributions. The Proposed Distributions call for the
Company to register the 514,191 shares of Common Stock being distributed to the
stockholders of St. Lawrence Seaway Corporation (a public corporation who will
distribute the stock to its shareholders) and 6,828,382 shares of Common Stock
for issuance upon the exercise of the Subscription Rights. The Subscription
Price will be established by the Board of Directors and will be no more than
$2.00 per Subscription Right.
4. Commitment. The Company presently occupies office space provided by
a stockholder. Such stockholder has agreed that, until the acquisition of a
Target Business by the Company, it will make such office space, as well as
certain office and secretarial service, available to the Company, as may be
required by the Company from time to time at no charge.
5. Preferred Stock. The Company is authorized to issue 1,000,000 shares
of preferred stock with such designations, voting and other rights and
preferences as may be determined from time to time by the Board of Directors.
6. Common Stock. On June 25, 1996 the company issued 2,900,000 shares
of Common Stock, par value $.01 per share, to PAR Holding Co., LLC for a
consideration of $75,000 in cash and a promissory note of $75,000 due July 31,
1996 (aggregate of $150,000). During July 1996, the Company intends to issue a
further 514,191 shares of Common Stock, par value $.01 per share, to St.
Lawrence Seaway Corporation for a total consideration of $5,141.
F-8
================================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations may not
be relied on as having been authorized by the Company or by any of the
Underwriters. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an implication that there has
been no change in the affairs of the Company since the date hereof. This
Prospectus does not constitute an offer to sell, or solicitation of any offer to
buy, by any person in any jurisdiction in which it is unlawful for any such
person to make such offer or solicitation. Neither the delivery of this
Prospectus nor any offer, solicitation or sale made hereunder, shall under any
circumstances create any implication that the information herein is correct as
of any time subsequent to the date of the Prospectus.
------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary.............................
The Company....................................
Risk Factors...................................
Use of Proceeds................................
Dilution.......................................
Capitalization.................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..................................
Proposed Business..............................
Management.....................................
Certain Transactions...........................
Principal Stockholders.........................
Description of Securities......................
Shares Eligible for Future Sale................
Underwriting...................................
Legal Matters..................................
Experts........................................
Additional Information.........................
Index to Financial Statements..................
Until 90 days after the release of the registered securities from the Escrow
Account, all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligations of dealers to deliver a
Prospectus when Acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
PARAGON ACQUISITION COMPANY, INC.
514,191 Shares of
Common Stock and
Subscription Rights to
Purchase 6,828,382 shares
of Common Stock
-------------
PROSPECTUS
-------------
____________ ____, 1996
================================================================================
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
Filing Fee - Securities and Exchange Commission $ 2,363.47
Fees and Expenses of Accountants 5,000.00
Fees and Expenses of Counsel 50,000.00
Blue Sky Fees and Expenses 10,000.00
Printing and Engraving Expenses 15,000.00
Transfer and Escrow Agent Fees 5,000.00
Miscellaneous Expenses 5,000.00
----------
Total $92,363.47
==========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Paragon is incorporated in Delaware. Under Section 145 of the General
Corporation Law of the State of Delaware, a Delaware corporation has the power,
under specified circumstances, to indemnify its directors, officers, employees
and agents in connection with actions, suits or proceedings brought against them
by a third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against expenses
incurred in any action, suit or proceeding. Article Eighth of the Certificate of
Incorporation and Article VII, Section 7.7 of the By-laws of Paragon provide for
indemnification of directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware. Reference is made to the
Certificate of Incorporation of Paragon, filed as Exhibit 3.1 hereto and the
Certificate of Amendment of the Certificate of Incorporation, filed as Exhibit
3.1(i)(a) hereto.
Section 102(b)(7) of the General Corporation Law of the State of
Delaware provides that a certificate of incorporation may contain a provision
eliminating the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, or dividends on, capital stock) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Ninth of Paragon's Certificate of
Incorporation contains such a provision.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On June 25, 1996, Paragon issued 2,900,000 shares of Common Stock par
value $.01 per share to PAR Holding Company, LLC, a Delaware limited liability
company, for a consideration of $75,000 in cash and a $75,000 promissory note in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. Immediately prior to effectiveness of this Registration
Statement, it is expected that Paragon will issue 514,191 shares of Common
Stock, par value $.01 per share to The St. Lawrence Seaway Corporation, an
Indiana corporation ("St. Lawrence") for a total consideration of $5,141. Such
Shares will be distributed to St. Lawrence stockholders pursuant to this
Registration Statement.
II-1
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1(i) Certificate of Incorporation of the Company
3.1(i)(a) Certificate of Amendment of Certificate of Incorporation
3.1(ii) By-Laws of the Company (includes description of Common Stock)
4.1 Form of Common Stock Certificate (included in Exhibit 3.2)
4.2 Form of Subscription Form
5. Opinion of Lane Altman & Owens LLP*
10.1 Form of Escrow Agreement
10.2 Form of Subscription Agency Agreement
10.3 Form of Blue Sky Lock-Up Letter Agreement
10.4 Form of Lock-Up Escrow Agreement
24.1 Consent of BDO Seidman, LLP
24.2 Consent of Lane Altman & Owens, LLP (to be included in Exhibit 5)*
25. Power of Attorney (included at page II-4)
27. Financial Data Schedule
99.1 Promissory Note
99.2 Subscription Agreement
- --------------
*To be filed by Amendment.
(b) The following financial statement schedules are included in this
Registration Statement.
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement;
II-2
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the
time it was declared effective.
(ii) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and the State of New York, on the 25th day of October, 1996.
Paragon Acquisition Company, Inc.
By:
Mitchell A. Kuflik, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Robert Sobel, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
to act, without the other, for him and in his name, place and stead, in any and
all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as full to all
intents and purposes as he might or could be in person, hereby ratifying and
confirmation all that said attorneys-in-fact and agents, or any of them, their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Mitchell A. Kuflik President, Assistant Secretary October 25, 1996
- --------------------------- and Director
Mitchell A. Kuflik
/s/ Peter A. Hochfelder Vice President, Treasurer and October 25, 1996
- --------------------------- Director
Peter A. Hochfelder
/s/ Robert J. Sobel Vice President and Director October 25, 1996
- ---------------------------
Robert J. Sobel
/s/ Joseph F. Mazzella Secretary and Director October 25, 1996
- ---------------------------
Joseph F. Mazzella
II-4
EXHIBIT INDEX
3.1(i) Certificate of Incorporation of the Company
3.1(i)(a) Certificate of Amendment of Certificate of Incorporation
3.2 By-Laws of the Company (includes description of Common Stock)
4.1 Form of Common Stock Certificate (included in Exhibit 3.2)
4.2 Form of Subscription Form
5. Opinion of Lane Altman & Owens*
10.1 Form of Escrow Agreement
10.2 Form of Subscription Agency Agreement
10.3 Form of Blue Sky Lock-Up Letter Agreement
10.4 Form of Lock-Up Escrow Agreement
24.1 Consent of BDO Seidman, LLP
24.2 Consent of Lane Altman & Owens, LLP (to be included in Exhibit 5)
25. Power of Attorney (included at page II-4)
27. Financial Data Schedule
99.1 Promissory Note
99.1(i) Amendment to Promissory Note
99.2 Subscription Agreement
99.2(ii) Amendment to Subscription Agreement.
*To be filed by Amendment
II-5
EXHIBIT 3.1(i)
CERTIFICATE OF INCORPORATION
OF
PARAGON ACQUISITION COMPANY, INC.
FIRST. The name of the corporation (the "Corporation") shall be:
Paragon Acquisition Company, Inc.
SECOND. The Corporation's registered office in the State of Delaware is
to be located at 1013 Centre Road, Wilmington, Delaware 19805-1297, County of
New Castle; and the name of the registered agent of the corporation in the State
of Delaware at such address is The Prentice-Hall Corporation System, Inc.
THIRD. The purpose or purposes of the Corporation shall be to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have the authority to issue is One Hundred One Million (101,000,000) shares,
consisting of One Hundred Million (100,000,000) shares of Common Stock having a
par value of $.01 per share and One Million (1,000,000) shares of Preferred
Stock having a par value of $. O1 per share.
FIFTH. The name and address of the incorporator of the Corporation is
Joseph F. Mazzella, Esq., Lane Altman & Owens LLP, 101 Federal Street, Boston,
Massachusetts 02110.
SIXTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation.
SEVENTH. Members of the Board of Directors of the Corporation may be
elected either by written ballot or by voice vote.
EIGHTH. The Corporation shall indemnify and hold harmless to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as
amended from time to time, all persons whom it may indemnify and hold harmless
pursuant thereto.
NINTH. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the directors
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for
any transaction from which the director derived an improper persona1 benefit.
IN WITNESS WHEREOF, The undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this Certificate of Incorporation
this 19th day of June, 1996.
EXHIBIT 3.1(I)(A)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PARAGON ACQUISITION COMPANY, INC.
Paragon Acquisition Company, Inc., a corporation organized and existing
under the Laws of the State of Delaware (the "Corporation"), does hereby
certify:
FIRST: That, as of the date of this Certificate, the Corporation has not
received any payment for any of its stock or elected any officers or directors;
and
SECOND: That, by unanimous written consent of the Sole Incorporator, the
following resolution, which sets forth a proposed amendment to the Certificate
of Incorporation of the Company was duly adopted and declared to be advisable.
The Resolution setting forth the proposed amendment is as follows:
RESOLVED: That the total number of Common Stock, $.01 par value, that the
Company shall have the authority to issue is hereby decreased from 100,000,000
shares to 20,000,000 shares; and that the Certificate of Incorporation of the
Corporation be amended by changing Article Fourth thereof so that, as amended,
said Article Fourth shall be and read as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have the authority to issue shall be
Twenty-One Million (21,000,000) shares consisting of Twenty
Million (20,000,000) shares of Common Stock having a par
value of $.01 per share and One Million (1,000,000) shares of
Preferred Stock having a par value of $.01 per share."
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 241 of the General Corporations Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this certificate to be signed by its sole incorporator,
this 24th day of June, 1996.
By: /s/ Joseph F. Mazzella
--------------------------------------
Joseph F. Mazzella, Sole Incorporator
EXHIBIT 3.2
BY-LAWS
OF
PARAGON ACQUISITION COMPANY, INC.
ARTICLE I
OFFICES
Section 1.1 Delaware Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at 1013 Centre Road,
Wilmington, Delaware 19805-1297.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and outside of the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1 Annual Meeting. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before said meeting shall be held on such
date and at such hour and place, within or outside of the State of Delaware, as
shall be fixed by the Board of Directors with respect to each such meeting and
as shall be stated in the notice thereof. Members of the Board of Directors may
be elected either by written ballot or by voice vote.
Section 2.2 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning at least
5% in amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Special meetings of the stockholders may be
held at such time and place, within or outside of the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2.3 Notice of Meetings. Except as otherwise provided or
permitted by law or by the Certificate of Incorporation or these By-laws,
written notice of all meetings of stockholders, stating the date, place and hour
and, in general terms only, the purpose or purposes thereof, shall be given by
the President or a Vice President or the Secretary or an Assistant Secretary to
each stockholder of record entitled to vote in respect of the business to be
transacted thereat, either by serving such notice upon him personally or by
mailing or
1
telegraphing the same to him at his address as it appears on the records of the
Corporation, at least ten days but not more than sixty days before the date of
the meeting, and the Secretary or any Assistant Secretary or the transfer agent
or agents of the Corporation shall make affidavit as to the giving of such
notice.
Section 2.4. Quorum and Adjournments. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
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 at the meeting.
Section 2.5 Voting of Shares. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the Certificate of Incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question. Unless otherwise provided in the Certificate of Incorporation each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such person.
Section 2.6 Proxies. At any meeting of stockholders or whenever the
stockholders express consent or dissent to corporate action in writing without a
meeting, each stockholder entitled to vote any shares on any matter to be voted
upon at such meeting or in a written expression of such consent or dissent may
exercise such voting right either in person or by proxy appointed by an
instrument in writing, which shall be filed with the secretary of the meeting
before being voted or with the written evidence of the consent or dissent, which
shall be delivered to the Secretary of the Corporation for filing with the
minutes of proceedings of stockholders of the Corporation. Such proxies shall
entitle the holders thereof to vote at any adjournment of such meeting (unless a
new record date is set by the Board of Directors), but shall not be valid after
the final adjournment thereof. All questions regarding the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided by two inspectors of election who shall be appointed by the Board of
Directors or, if not so appointed, then by the presiding officer of the meeting.
No proxy shall be voted on after three years from its date unless said proxy
provides for a longer period.
2
Section 2.7 Voting List of Stockholders. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list 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 2.8 Conduct of Meetings. Each meeting of stockholders shall be
presided over by the President or, in his absence, by a Vice President thereunto
designated by the President or by the Board of Directors, or in the absence of
the President and a Vice President so designated, by any other person selected
to preside by vote of the holders of a majority of the outstanding stock present
in person or by proxy and entitled to vote at the meeting. The Secretary, or in
his absence an Assistant Secretary, or in the absence of both the Secretary and
an Assistant Secretary any person designated by the person presiding at the
meeting, shall act as secretary of the meeting.
Section 2.9 Consent in Lieu of Meeting. Unless otherwise provided in
the Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, 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 3.1 Powers of the Board of Directors. The business and affairs
of the Corporation shall be managed by or under the direction of its Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-laws directed or required to be exercised or done
by the stockholders.
Section 3.2 Number, Election and Term. The number of directors which
shall
3
constitute the whole Board shall be not less than one (1) nor more than fifteen
(15) persons. The first Board shall consist of four members. Thereafter, the
exact number of directors within the minimum and maximum limits above specified,
shall be fixed from time to time by the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of Directors. Directors
need not be stockholders. The number of directors may be increased or decreased
by action of the Board of Directors. Each director shall be elected to serve
until the next annual meeting of stockholders and shall hold office until a
successor is duly elected and qualified subject to the provisions of Section 3.3
hereof.
Section 3.3 Removal; Resignation. Subject to the rights of the holders
of any series of preferred stock then outstanding, any director, or the entire
Board of Directors, may be removed from office at any time, with or without
cause, but only by the affirmative vote of the holders of at least two-thirds of
the voting power of all of the outstanding shares of stock of the Corporation
entitled to vote for the election of directors.
Any director may resign at any time by giving written notice to the
Board of Directors or to the President or to the Secretary of the Corporation,
and any member of any committee may resign at any time by giving notice either
as aforesaid or to the committee of which he is a member or to the chairman
thereof. Any such resignation shall take effect at the time specified therein
or, if the time be not specified, upon receipt thereof and unless otherwise
specified therein, acceptance of such resignation shall not be necessary to make
it effective.
Section 3.4 Vacancies and Newly Created Directorships. Subject to the
rights of the holders of any series of preferred stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a majority vote of the directors then in office, and
directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which they have been elected
expires. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Section 3.5 Regular Meetings; Notice. Regular meetings of the Board of
Directors shall be held at such time and place, either within or outside of the
State of Delaware, as may be determined by resolution of the Board of Directors.
No notice of a regular meeting need be given and any business may be transacted
at a regular meeting held as aforesaid.
Section 3.6 Special Meetings. Special meetings of the Board of
Directors may, unless otherwise expressly provided by law, be called from time
to time by the President, or any Vice President, or by a written call signed by
any one or more directors and filed with the Secretary. Each special meeting of
the Board shall be held at such time and place, either within or outside of the
State of Delaware, as shall be designated in the notice of such meeting.
4
Section 3.7 Notice of Special Meetings. Notice of a special meeting of
the Board of Directors, stating the place, date and hour thereof, shall, except
as otherwise expressly provided by law or as provided in Article V of these
By-laws, be given by mailing or telegraphing the same to each director at his
residence or business address at any time on or before the second day before the
day of the meeting or by delivering the same to him personally or by faxing the
same to him personally at his residence or business address not later than the
day before the day of the meeting, unless, in case of exigency, the President,
or in his absence a Vice President or the Secretary, shall prescribe a shorter
notice to each director at his residence or business address. Except as
otherwise required by law or these By-laws, no notice or waiver of notice of a
special meeting of the Board need state the purposes or purposes of such meeting
and any business may be transacted thereat.
Section 3.8 Quorum and Voting. At all meetings of the Board a majority
of the directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Except as otherwise provided by law, by the Certificate of Incorporation or by
these By-laws, when a quorum is present at any meeting of the Board of
Directors, a majority of the directors present at such meeting shall decide any
question brought before such meeting and the action of such majority shall be
deemed to be the action of the Board.
Section 3.9 Conduct of Meetings. Each meeting of the Board of Directors
shall be presided over by the President, or in his absence, by any director
selected to preside by vote of a majority of the directors present. The
Secretary, or in his absence, an Assistant Secretary, or in the absence of both
the Secretary and an Assistant Secretary, any person designated by the person
presiding over the meeting, shall act as secretary of the meeting.
Section 3.10 Consent in Lieu of Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, 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 all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 3.11 Conference Telephone Meetings. Unless otherwise restricted
by the Certificate of Incorporation or these By-laws, the Board of Directors, or
any committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
5
Section 3.12 Committees. The Board of Directors may, by resolution or
resolutions adopted by a majority of the entire Board, designate one or more
committees. Except as otherwise provided by these By-laws, each committee shall
consist of one 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 a member of a committee, the
member or members thereof present at any 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, 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 or
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 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. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
Section 3.13 Compensation of Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
6
Section 4.1 Number and Election. The officers of the Corporation shall
be chosen by the Board of Directors and shall be a president, a secretary and a
treasurer. The Board of Directors may also choose one or more vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
officers may be held by the same person, unless the Certificate of Incorporation
or these By-laws otherwise provide.
The Board of Directors at its first meeting after each annual meeting
of stockholders shall choose a president, a secretary and a treasurer.
Section 4.2 Other Officers and Agents. The Board of Directors may
appoint such other officers and agents as it shall deem necessary 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.
Section 4.3 Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.4 Term of Office; Removal; Resignation. The officers of the
Corporation shall hold office until their successors are chosen and qualified.
Any officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. Any officer or agent of the Corporation may, subject to contrary
provision in any applicable contract, resign at any time by giving written
notice to the Board of Directors or to the President of the Corporation. Any
such resignation shall take effect at the time specified therein or,if the time
be not specified, upon receipt thereof and unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective.
Section 4.5 Vacancies. If the office of the President, any Vice
President, the Secretary or the Treasurer, or of any other officer or agent or
member of any committee, becomes vacant at any time by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
such vacancy or vacancies shall be filled by the Board of Directors.
Section 4.6 The President. The president shall be the chief executive
officer of the Corporation, shall preside at all meetings of the stockholders
and the Board of Directors, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by
7
the Board of Directors to some other officer or agent of the Corporation.
Section 4.7 The Vice Presidents. In the absence of the president or in
the event of his inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 4.8 The Secretary and Assistant Secretary. The secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or president, under whose supervision he
shall be. He shall have custody of the corporate seal of the Corporation and he,
or an assistant secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his signature
or by the signature of such assistant secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature.
The assistant secretary, or if there be more than one, the assistant
secretaries in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election) shall, in the absence
of the secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 4.9 The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the president and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, 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 (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory
8
to the Board of Directors for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE V
NOTICES
Section 5.1 Manner of Giving. Whenever, under the provisions of the
statutes, the Certificate of Incorporation or these By-laws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 5.2 Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation or 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
CAPITAL STOCK
For purposes of this Article VI, unless otherwise defined herein,
capitalized terms shall have the meaning set forth in that certain Prospectus of
the Corporation (the "Prospectus") to be furnished to the holders of common
stock of The St. Lawrence Seaway Corporation (the "St.
Lawrence Stockholders").
Section 6.1 Description of Capital Stock.
(a) Common Stock - Holders of Common Stock shall be entitled to
one vote per share with respect to all matters required by law
to be submitted to holders of
9
Common Stock. The Common Stock will not have cumulative voting
rights. Subject to the prior rights of holders of Preferred
Stock, if any, holders of the Common Stock will be entitled to
receive such dividends as may be lawfully declared by the
Board of Directors of the Corporation. Upon any dissolution,
liquidation or winding up of the Corporation, whether
voluntary or involuntary, holders of the Common Stock are
entitled to share ratably in all assets remaining after the
liquidation payments have been made on all outstanding shares
of Preferred Stock, if any.
(b) Preferred Stock - The shares of Preferred Stock may be issued
in one or more series, with the number of shares of each
series and the rights, preferences and limitations of each
series to be determined by the Board of Directors. Among the
specific matters that may be determined by the Board of
Directors are dividend rights, if any, redemption rights, if
any, the terms of a sinking or purchase fund, if any, the
amount payable in the event of any voluntary liquidation,
dissolution or winding up of the affairs of the Corporation,
conversion rights, if any, and voting powers, if any.
Section 6.2 Form and Issuance. Every holder of stock in the Corporation
shall be entitled to have a certificate. Certificates of stock shall be issued
in such form as may be approved by the Board of Directors and shall be signed
by, or in the name of the Corporation by, the chairman or vice-chairman of the
Board of Directors, or the president or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
Any of or all the signatures on the certificate may be facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 6.3 Lost, Stolen and Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
10
Section 6.4 Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. The Board of Directors shall have power and
authority to make such other rules and regulations or amendments thereto as they
may deem expedient concerning the issue, registration and transfer of
certificates of stock and may appoint transfer agents and registrars thereof.
Section 6.5 Fixing 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 other lawful action, the Board of Directors may fix, in
advance, a record 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 of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6.6 Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1 Stockholder Rights. Subject to the provisions of the
General Corporation Law of Delaware, no special rights or duties among the
stockholders inter se or between any stockholder and the Corporation shall arise
by virtue of the number of stockholders of the Corporation, the absence of a
ready market for the sale of its capital stock or the existence of stockholder
participation in the management of the Corporation. In furtherance, and not in
limitation, of the foregoing:
(a) The Corporation may purchase or redeem shares of its capital
stock from any stockholder without offering other stockholders
an equal opportunity to have their shares purchased or
redeemed by the Corporation;
11
(b) The status of a stockholder of the Corporation shall confer no
right to be elected a director of the Corporation;
(c) Except as otherwise provided by written agreement, the status
of stockholder of the Corporation shall confer no right to be
employed by the Corporation in any capacity or to receive any
salary from the Corporation, or in the event that such
employment should exist or such salary should be paid, the
status of stockholder of the Corporation shall confer no right
to the continuation of such employment or salary; and
(d) The Board of Directors of the Corporation shall have full and
absolute discretion to determine whether to declare dividends
upon the capital stock of the Corporation from funds legally
available therefor or to refrain from declaring such
dividends; the status of stockholder of the Corporation shall
confer no right to require that any dividends be declared.
Section 7.2 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 7.3 Annual Statement. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
Section 7.4 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 7.5 Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it to be impressed
or affixed or reproduced or otherwise.
12
Section 7.6 Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 7.7 Indemnification. The Corporation shall indemnify and hold
harmless to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as amended from time to time, all person whom it may
indemnify and hold harmless pursuant thereto. Neither the amendment nor repeal
of this provision, nor the adoption of any provisions of the Certificate of
Incorporation inconsistent with this provision, shall eliminate or reduce the
effect of this provision in respect of any matter occurring, or any cause of
action, suit or claim that arises prior to such amendment, repeal or adoption of
an inconsistent provision.
Section 7.8 Amendments. These By-laws may be altered, amended or
repealed or new By-laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal By-laws is conferred upon the Board of Directors by
the Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-laws.
13
EXHIBIT 4.2
THIS OFFER EXPIRES AT 5:00 P.M. EASTERN STANDARD TIME ON ___________*
PARAGON ACQUISITION COMPANY, INC.
SUBSCRIPTION RIGHTS
Subscription Form
Dear Stockholder:
As a stockholder of St. Lawrence Seaway Corporation, Inc. ("St. Lawrence"), on
___________, 1996, the Record Date for Paragon's distribution of its shares of
Common Stock, par value, $.01 per share and non-transferable rights (the
"Subscription Rights"), you have been issued Subscription Rights equal to the
number of shares of common stock held by you on the Record Date. You are
entitled to exercise your Subscription Rights to purchase two (2) additional
shares of Paragon for every one (1) Subscription Right held at a Subscription
Price per share to be set by Paragon in a prospectus contained in a
post-effective amendment to Paragon's Registration Statement which shall be
filed in accordance with and upon the terms and conditions set forth in the
Company's Prospectus dated _____________, 1996 (the "Prospectus"). The terms and
conditions of the Subscription Rights and the Subscription Period as set forth
in the Prospectus are incorporated herein by reference. Capitalized terms not
defined herein have the meanings attributed to them in the Prospectus.
In accordance with the Over-Subscription Privilege, as a Record Date
stockholder, you are also entitled to subscribe for additional shares of Common
Stock of Paragon if all subscriptions have been filled and you have elected to
fully exercise all Subscription Rights issued to you. If there are insufficient
shares of Common Stock remaining to satisfy all requests pursuant to the
Over-Subscription Privilege, the available shares will be allocated in
proportion to the number of Subscription Rights originally issued to you.
SAMPLE CALCULATION OF THE SUBSCRIPTION
<TABLE>
<CAPTION>
For example, the
Number of Subscription Subscription Price is
Rights multiplied by two $1.00 per Share or $2.00
Number of shares of St. = number of Shares per Subscription Right.
Lawrence owned on the Number of Subscription available to you under In this example, if the
Record Date: Rights issued: the Subscription: full Subscription was
exercised, the total
Estimated Subscription
Price would be:
- ------------------------------ ---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
100 100 200 $200
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
HOW TO EXERCISE SUBSCRIPTION RIGHTS
In order to Exercise your Subscription Rights, you must either (a) complete and
sign this Subscription Form and return it together with payment of the
Subscription Price, or (b) present a properly completed Notice of Guaranteed
Delivery, in either case to the Subscription Agent, Continental Stock Transfer &
Trust Company, before 5:00 p.m. Eastern Standard Time, on ___________, 1996*
(the "Expiration Date").
By Mail or Express Mail
By Hand or Overnight Courier
--------------------------------------
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, NY 10004
Attn: Compliance Department
FULL PAYMENT OF THE ESTIMATED SUBSCRIPTION PRICE PER SHARE FOR ALL SHARES
SUBSCRIBED FOR PURSUANT TO BOTH THE SUBSCRIPTION AND THE OVER-SUBSCRIPTION
PRIVILEGE MUST ACCOMPANY THIS SUBSCRIPTION FORM AND MUST BE MADE PAYABLE IN
UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE
UNITED STATES AND MADE PAYABLE TO PARAGON ACQUISITION COMPANY, INC.
ALTERNATIVELY, IF A NOTICE OF GUARANTEED DELIVERY IS USED, FULL PAYMENT, AS
DESCRIBED IN THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE
SUBSCRIPTION AGENT NO LATER THAN THE THIRD (3rd) BUSINESS DAY FOLLOWING THE
EXPIRATION DATE. PLEASE SEE "PAYMENT FOR SHARES" IN THE PROSPECTUS FOR
ADDITIONAL INFORMATION.
THESE SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE.
*UNLESS EXTENDED
2
In order to exercise your Subscription Rights, you must complete Parts 1 and 2
below. Complete Part 2 only if applicable.
PART 1: If you choose to subscribe for Shares, please complete the following:
/ / I wish to subscribe for the following number of shares pursuant to
the Subscription:
______________ x $______ per Share = $____________
number of shares
/ / I wish to exercise my Over-Subscription Privilege (*):
______________ x $______ per Share = $____________
number of
additional shares
AMOUNT ENCLOSED $____________
(*) You can only over-subscribe if you have fully exercised your Subscription.
There is no limit as to the number of Shares you may subscribe for pursuant to
the Over-Subscription Privilege. If there are insufficient Shares available to
satisfy all requests, the Shares will be allocated in proportion to the number
of Subscription Rights originally issued to you.
- --------------------------------------------------------------------------------
Signature of stockholder(s):
Printed Name: _______________________ Telephone number: ( )__________________
Please note that all stock certificates and refund checks, if any, will be
delivered to the address of record, which is the address to which the materials
for this offering were delivered. If you wish to change the address of record,
please provide separate written instructions, sign the instructions, and deliver
them to the Subscription Agent.
- --------------------------------------------------------------------------------
PART 2: The following broker-dealer is hereby designated as having been
instrumental in the exercise of the rights hereby exercised:
FIRM: ________________________________________________________________________
REPRESENTATIVE NAME: __________________________________________________________
REPRESENTATIVE NUMBER: ________________________________________________________
3
EXHIBIT 10.1
ESCROW AGREEMENT (PUBLIC OFFERING)
AGREEMENT made this ____ day of __________, 1996, by and between
Paragon Acquisition Company, Inc. (the "Issuer") and Continental Stock Transfer
& Trust Company, with offices at 2 Broadway, New York, NY 10004 (the "Escrow
Agent").
W I T N E S S E T H:
WHEREAS, the Issuer has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering a proposed public distribution of its securities
(collectively, the "Securities", and individually, a "Share" and a "Subscription
Right") as described on the Information Sheet (defined herein) attached to this
Agreement; and
WHEREAS, the Distribution is being conducted in accordance with Rule
419 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"); and
WHEREAS, the Issuer proposes to establish an escrow account with the
Escrow Agent in connection with the Distribution and the Escrow Agent is willing
to establish such escrow account on the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Information Sheet. Each capitalized term not otherwise defined in
this Agreement shall have the meaning set forth for such term on the Information
Sheet which is attached to this Agreement and is incorporated by reference
herein and made a part hereof (the "Information Sheet").
2. Establishment of Escrow Account.
2.1 The parties hereto shall establish an interest-bearing escrow
account at the office of the Escrow Agent, and bearing the designation, set
forth on the Information Sheet (the "Escrow Account").
2.2 On or before the date of the initial deposit of Securities into the
Escrow Account pursuant to this Agreement, the Issuer shall notify the Escrow
Agent in writing of the effective date of the Registration Statement (the
"Effective Date") and the Escrow Agent shall not be required to accept any
Securities for deposit in the Escrow Account prior to its receipt of such
notification.
2.3 The Subscription Period, which shall be deemed to commence on the
effective date of the Post-Effective Amendment, shall consist of the number of
calendar days or business days set forth on the Information Sheet. The last day
of the Subscription Period is referenced to herein as the "Expiration Date".
After the Expiration Date, the Issuer shall not deposit, and the Escrow Agent
shall not accept, any additional amounts representing payments by subscribing
stockholders.
3. Deposit of Securities and Subscription Proceeds into Escrow Account.
3.1 All Securities issued in connection with the Distribution,
including Shares issuable upon the exercise of Subscription Rights and Shares
issued with respect to stock splits, stock dividends or similar rights, shall be
deposited directly into the escrow account promptly upon issuance (the
"Deposited Securities"). The Deposited Securities held in the escrow account are
to remain as issued and deposited and are to be held for the sole benefit of the
stockholders who retain the voting rights, if any, with respect to the Deposited
Securities held in their name. No transfer or other disposition of Deposited
Securities held in the Escrow Account or any interest related to such Securities
shall be permitted, other than by will or the laws of descent and distribution,
or pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, without an opinion of counsel to Paragon
that all of the conditions of this Escrow Agreement have been satisfied.
3.2 Stockholders of Paragon who exercise their Subscription Rights will
be required to send payment to the Escrow Agent, acting as Subscription Agent
pursuant to that certain Subscription Agency Agreement dated ________, 1996,
between the Issuer and Continental Stock Transfer & Trust Company. Upon receipt,
the Subscription Proceeds shall promptly be deposited with the Escrow Agent (the
"Deposited Proceeds"). Stockholders of Paragon who exercise their Subscription
Rights may choose between the following methods of payment:
(i) Stockholders whose Shares are held by a Nominee must
exercise their Subscription Rights by contacting their Nominees, who can
arrange, on a Stockholder's behalf, to guarantee delivery of a properly
completed and executed Subscription Form and full payment to the Escrow Agent by
the close of business on the third (3rd) business day after the Expiration Date;
or
(ii) Stockholders whose Shares of Paragon are held in their
own name ("Record Owners") may send payment for the Shares acquired pursuant to
the exercise of Subscription Rights, together with a completed Subscription Form
directly to the Escrow Agent. To be accepted, such payment, together with the
completed Subscription Form must be received by the Escrow Agent prior to 5:00
p.m. Eastern Standard Time on the Expiration Date. All payments by a stockholder
must be made in United States dollars by money order or check drawn on a bank
located in the United States of America.
The Deposited Proceeds and interest or dividends thereon, if
any, shall be held for the sole benefit of the Paragon Stockholders.
3.3 The Deposited Proceeds shall be invested in either:
(a) an obligation that constitutes a "deposit" as that term is
defined in Section (3)(1) of the Federal Deposit Insurance Act;
(b) securities of any open-end investment company registered
under the Investment Company Act of 1940 that holds itself out as a money market
fund meeting the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of Rule
2a-7 under the Investment Company Act; or
(c) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.
3.4 Simultaneously with the receipt and deposit of Deposited Proceeds
into the Escrow Account, the Escrow Agent shall inform the Issuer by
confirmation slip or other writing of the name and address of the prospective
subscriber, the number of Shares subscribed for by such Stockholder, and the
aggregate dollar amount of such subscription (collectively, the "Subscription
Information").
3.5 Interest or dividends earned on the Deposited Proceeds, if any,
shall be held in the Escrow Account until the Deposited Proceeds are released in
accordance with the provisions of Section 4 of the Escrow Agreement. If the
Deposited Proceeds are released to a Stockholder, the Stockholder shall receive
interest or dividends earned, if any, on such Deposited Proceeds up to the date
of release. If the Deposited Proceeds held in the Escrow Account are released to
the Issuer, any interest or dividends earned on such funds up to the date of
release may be released to the Issuer.
3.6 The Subscription Rights may be exercised in accordance with their
terms, provided, however, that the Common Stock received upon exercise, together
with any cash or other consideration paid in connection with the exercise, is
promptly deposited into the Escrow Account.
3.7 The Escrow Agent shall refund any portion of the Deposited Proceeds
prior to disbursement of the Deposited Proceeds in accordance with Section 4
hereof upon instructions in writing signed by the Issuer.
4. Disbursement from the Escrow Account.
4.1 The Deposited Proceeds may be released to the Company and the
Shares delivered to the Stockholders only at the same time as or after:
(a) the Escrow Agent has received a signed representation from
the Issuer, together with an opinion of counsel that the following requirements
have already been met:
(1) Execution of an agreement(s) for the acquisition(s)
of a business(es) or
assets that will constitute the business (or a line of business) of the Company
and for which the fair value of the business(es) or net assets to be acquired
represents at least 80 percent of the maximum Deposited Proceeds received from
the exercise or conversion of the Subscription Rights; and
(2) the Issuer shall have filed a post-effective
amendment that discloses information about the proposed acquisition and
candidate(s) and its business(es), including audited financial statements of the
Issuer and the Target Business, the terms upon which the Subscription Rights can
be exercised, including the Subscription Price which cannot exceed $2.00 per
Subscription Right, and use of Funds disbursed from the Escrow Account.
(3) Within five business days after the effective date
of the post-effective amendment, the Issuer shall have sent by first class mail
or other equally prompt means, to each Stockholder whose Shares are held in
escrow, a copy of the prospectus contained in the post-effective amendment and
any amendment or supplement thereto;
(4) Each Stockholder shall have had no fewer than 20
business days and no more than 45 business days from the effective date of the
post-effective amendment to notify the Company in writing that the Stockholder
elected to exercise his or her Subscription Rights. If the Company has not
received such written notification by the 45th business day following the
effective date of the post-effective amendment, the Stockholder's right to elect
to subscribe shall terminate;
(b) The acquisition(s) meeting the criteria set forth in this
paragraph will be consummated only if a minimum number of Stockholders
representing 80% of the maximum proceeds to be received from the exercise of
Subscription Rights elects to subscribe.
If a consummated acquisition(s) meeting the requirements of
this section has not occurred by a date 6 months after the Expiration Date, the
Deposited Funds shall be returned by first class mail or equally prompt means to
the subscribing Stockholders within five business days following that date.
4.2 In the event that at the close of regular banking hours on the 5th
day following the Expiration Date less than 80% of the maximum Subscription
Proceeds shall have been received by the Escrow Agent, the Escrow Agent shall
promptly refund to each prospective subscribing Stockholder the amount of
payment received from such Stockholder held in escrow without interest thereon
or deduction therefrom, and the Escrow Agent shall notify the Issuer of its
distribution of the Deposited Proceeds.
4.3 In the event that at any time up to the close of banking hours on
the 5th business day following the Expiration Date, 80% or more of the maximum
Subscription Proceeds shall have been received by the Escrow Agent, the Escrow
Agent shall notify the Issuer of such fact in writing within a reasonable time
thereafter. The Escrow Agent shall hold the Deposited Proceeds until the events
described in Section 4.1 of this Escrow Agreement take place.
4.4 Upon disbursement of the Deposited Proceeds and the Shares held in
escrow pursuant to the terms of this Section 4, the Escrow Agent shall be
relieved of all further obligations and released from all liability under this
Agreement. It is expressly agreed and understood that in no event shall the
aggregate amount of payments made by the Escrow Agent exceed the amount of the
Deposited Proceeds.
5. Rights, Duties and Responsibilities of Escrow Agent.
It is understood and agreed that the duties of the Escrow Agent are
purely ministerial in nature, and that:
5.1 The Escrow Agent shall not be responsible for the performance by
the Issuer of its obligations under this Agreement.
5.2 The Escrow Agent shall not be required to accept from the Issuer or
any subscribing Stockholder any Subscription Information unless such
Subscription Information is accompanied by checks or money orders, Notices of
Guaranteed Delivery, nor shall the Escrow Agent be required to keep records of
any information with respect to payments deposited by the Issuer, except as to
the amount of such payments; however, the Escrow Agent shall notify the Issuer
within a reasonable time of any discrepancy between the amount delivered to the
Escrow Agent therewith. Such amount need not be accepted for deposit in the
Escrow Account until such discrepancy has been resolved.
5.3 The Escrow Agent shall be under no duty or responsibility to
enforce collection of any check delivered to it hereunder. The Escrow Agent,
within a reasonable time, shall return to the Issuer any check received which is
dishonored, together with the Subscription Information, if any, which
accompanied such check.
5.4 The Escrow Agent shall be entitled to rely upon the accuracy, act
in reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature instrument or other document which is given
to the Escrow Agent pursuant to this Agreement without the necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document. The Escrow Agent
must, however, determine for itself whether the conditions permitting the
release of the funds in the Escrow Account have been met.
5.5 In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
Escrow Account, the Deposited Securities or the Deposited Proceeds which, in its
sole determination, are in conflict either with other instructions received by
it or with any provision of this Agreement, the Escrow Agent, at its sole
option, may deposit the Deposited Securities and the Deposited Proceeds (and any
other amounts that thereafter become part of the Deposited Proceeds) with the
registry of a court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow Agent of the
Deposited Securities and the Deposited Proceeds with the
registry of any court, the Escrow Agent shall be relieved of all further
obligations and released from all liability hereunder.
5.6 The Escrow Agent shall not be liable for any action taken or
omitted hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct. The Escrow Agent
shall be entitled to consult with counsel of its own choosing and shall not be
liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel.
5.7 The Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Deposited
Securities or the Deposited Proceeds or any part thereof or to file any
financing statement under the Uniform Commercial Code with respect to the
Deposited Securities or the Deposited Proceeds or any part thereof.
6. Amendment; Resignation. This Agreement may be altered or amended
only with the written consent of the Issuer and the Escrow Agent. The Escrow
Agent may resign for any reason upon seven (7) business days written notice to
the Issuer. Should the Escrow Agent resign as herein provided, it shall not be
required to accept any deposit, make any disbursement or otherwise dispose of
the Deposited Securities or the Deposited Proceeds, but its only duty shall be
to hold the Deposited Securities or the Deposited Proceeds for a period of not
more than ten (10) business days following the effective date of such
resignation, at which time (a) if a successor escrow agent shall have been
appointed and written notice thereof (including the name and address of such
successor escrow agent) shall have been given to the resigning Escrow Agent by
the Issuer and such successor escrow agent, the resigning Escrow Agent shall pay
over to the successor escrow agent the Deposited Securities and Deposited
Proceeds, less any portion thereof previously paid out in accordance with this
Agreement, or (b) if the resigning Escrow Agent shall not have received written
notice signed by the Issuer and a successor escrow agent, then the resigning
Escrow Agent shall promptly refund the Deposited Proceeds to each subscribing
Stockholder without interest thereon or deduction therefrom, shall promptly
forward the Deposited Securities to Issuer and shall notify the Issuer in
writing of its liquidation and distribution of the Deposited Proceeds;
whereupon, in either case, the Escrow Agent shall be relieved of all further
obligations and released from all liability under this Agreement. Without
limiting the provisions of Section 8 hereof, the resigning Escrow Agent shall be
entitled to be reimbursed by the Issuer for any expenses incurred in connection
with its resignation, transfer of the Deposited Securities and Deposited
Proceeds to a successor Escrow Agent or distribution of the Deposited Securities
and Deposited Proceeds pursuant to this Section 6.
7. Representations and Warranties. The Issuer hereby represents and
warrants to the Escrow Agent that:
7.1 No party other than the Issuer hereto and any subscribing
Stockholders have, or shall have any lien, claim or security interest in the
Deposited Securities or the Deposited Proceeds or any part thereof.
7.2 No financing statement under the Uniform Commercial Code is on file
in any
jurisdiction claiming a security interest in or describing (whether specifically
or generally) the Deposited Securities or the Deposited Proceeds or any part
thereof.
7.3 The Subscription Information submitted with each deposit shall, at
the time of submission and at the time of the disbursement of the Deposited
Proceeds, be deemed a representation and warranty that such deposit represents a
bona fide sale to the subscribing Stockholder described therein of the amount of
Shares set forth in such Subscription Information.
7.4 All of the information contained in the Information Sheet is, as of
the date hereof and will be, at the time of any disbursement of the Deposited
Securities or the Deposited Proceeds, true and correct.
8. Fees and Expenses. The Escrow Agent shall be entitled to the Escrow
Agent Fee set forth in the Information Sheet, payable upon execution of this
Agreement. In addition, the Issuer agrees to reimburse the Escrow Agent for any
reasonable expenses incurred in connection with this Agreement, including, but
not limited to, reasonable counsel fees, but not including the review of this
Agreement.
9. Indemnification and Contribution.
9.1 The Issuer (the "Indemnitor") agrees to indemnify the Escrow Agent
and its officers, directors ,employees, agents and shareholders (jointly and
severally the "Indemnitees") against, and hold them harmless of and from, any
and all loss, liability, cost, damage and expense, including, without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the gross negligence or willful misconduct of the Indemnitees.
9.2 If the indemnification provided for in this Section 9 is
applicable, but for any reason held to be unavailable, the Indemnitor shall
contribute such amounts as are just and equitable to pay, or to reimburse the
Indemnitees for, the aggregate of any and all losses, liabilities, costs,
damages and expenses, including counsel fees, actually incurred by the
Indemnitees as a result of or in connection with, and any amount paid in
settlement of any action, claim or proceeding arising out of or relating in any
way to any actions or omissions of the Indemnitor.
9.3 Any Indemnitee which proposes to assert the right to be indemnified
under this Section 9, promptly after receipt of notice of commencement of any
action, suit or proceeding against such Indemnitee in respect of which a claim
is to be made against the Indemnitor under this Section 9, will notify the
Indemnitor of the commencement of such action, suit or proceeding, enclosing a
copy of all papers served, but the omission so to notify the Indemnitor of any
such action, suit or proceeding shall not relieve the Indemnitor from any
liability which they may have to any Indemnitee otherwise than under this
Section 9. In case any such action, suit or proceeding shall be brought against
any Indemnitee and it shall notify the Indemnitor of the
commencement thereof, the Indemnitor shall be entitled to participate in and, to
the extent that they shall wish, to assume the defense thereof, with counsel
satisfactory to such Indemnitee. The Indemnitee shall have the right to employ
its counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such Indemnitee unless (i) the employment of counsel by
such Indemnitee has been authorized by the Indemnitor, (ii) the Indemnitee shall
have concluded reasonably that there may be a conflict of interest between the
Indemnitor and the Indemnitee in the conduct of the defense of such action (in
which case the Indemnitor shall not have the right to direct the defense of such
action on behalf of the Indemnitee) or (iii) the Indemnitor in fact shall not
have employed counsel to assume the defense of such action , in each of which
cases the fees and expenses of counsel shall be borne by the Indemnitor.
9.4 The Indemnitor agrees to provide the Indemnitees with copies of all
registration statements pre- and post-effective amendments to such registration
statements including exhibits, whether filed with the SEC prior to or subsequent
to the disbursement of the Deposited Securities and the Deposited Proceeds.
9.5 The provisions of this Section 9 shall survive any termination of
this Agreement, whether by disbursement of the Deposited Securities and the
Deposited Proceeds, resignation of the Escrow Agent or otherwise.
10. Governing Law and Assignment. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of its rights
under this Agreement or with respect to the Deposited Securities and the
Deposited Proceeds shall be void as against the Escrow Agent unless:
(a) written notice thereof shall be given to the Escrow Agent;
and
(b) the Escrow Agent shall have consented in writing to such
assignment or transfer.
11. Notices. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, and Addressed, if to the
Issuer, at its address set forth on the Information Sheet, and if to the Escrow
Agent, Continental Stock Transfer & Trust Company, 2 Broadway, 19th Floor, New
York, NY 10004, Attn: Compliance Department.
12. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
13. Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular, or plural as the context
may require.
14. Captions. All captions are for convenience only and shall not limit
or define the term thereof.
15. Execution in Several Counterparts. This Agreement may be executed
in several counterparts or by separate instruments and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
herein.
16. Entire Account. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection herewith.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
PARAGON ACQUISITION COMPANY, INC.:
By:________________________________
Name:______________________________
Title:_____________________________
CONTINENTAL STOCK TRANSFER &
TRUST CO.:
By:________________________________
Name:______________________________
Title:_____________________________
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
ESCROW AGREEMENT INFORMATION SHEET
1. The Issuer
Name: Paragon Acquisition Company, Inc.
Address: 277 Park Avenue
New York, New York 10017
State of incorporation or organization: Delaware
2. The Securities
(a) Common Stock, $.01 par value of Paragon.
(b) Non-transferable Subscription Rights, entitling registered
holder to acquire two shares of Common Stock for each
Subscription Right at a price to be set and determined by the
Issuer at the time the Subscription Rights become available.
3. Plan of Distribution of the Securities
Distribution of Common Stock and Subscription Rights to occur upon
effectiveness of Registration Statement. Subscription Period to
commence upon distribution to registered holders of Subscription Rights
of Prospectus contained in Post-Effective Amendment to Registration
Statement. Subscription Period shall not be less than 20 nor more than
45 days from the date of the effectiveness of the Post-Effective
Amendment.
4. Escrow Agent Fees
The Escrow Agent shall receive a base fee of $1500.00 for establishing
the Escrow Account. The Escrow Agent shall receive a fee of $.10 plus
$.03 per enclosure, exclusive of postage and stationary, for a mailing
to Stockholders notifying them of the Distribution. The Escrow Agent
shall receive $2.50 for each certificate printed and distributed.
EXHIBIT 10.2
SUBSCRIPTION AGENCY AGREEMENT
SUBSCRIPTION AGENCY AGREEMENT, dated as of ______________, 1996 (the
"Agreement") by and between Paragon Acquisition Company, Inc., a Delaware
corporation (the "Company") and Continental Stock Transfer & Trust Company (the
"Subscription Agent").
W I T N E S S E T H:
WHEREAS, the Company has duly authorized the creation of an issue of
Subscription Rights to be evidenced by forms substantially in the form of
Exhibit A hereto ("Subscription Forms"), each Subscription Right entitling the
registered holder thereof to purchase, subject to the provisions of the
Subscription Forms and this Agreement, one share of the Common Stock, $.01 par
value, of the Company (the "Common Stock"); and
WHEREAS, the Company desires the Subscription Agent to act on behalf of
the Company, and the Subscription Agent is willing so to act, in connection with
the issuance of the Subscription Forms and exercise of the Subscription Rights;
and
WHEREAS, the Company and the Subscription Agent desire to set forth in
this Agreement the terms and conditions upon which the Subscription Forms shall
be issued and the Subscription Rights exercised, and to provide for the rights
of the holders of Subscription Rights;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the Company and the Subscription Agent agree as
follows:
ARTICLE I
Issuance and Exercise of Subscription Rights
Section 1.01. The Company hereby appoints the Subscription Agent to act
on behalf of the Company in accordance with the provisions hereinafter set forth
in this Agreement, and the Subscription Agent hereby accepts such appointment
and agrees to perform the same in accordance with such provisions.
Section 1.02. The Subscription Forms shall be issued in registered form
only and shall be non-transferable. The text of the Subscription Forms shall be
substantially in the form of Exhibit A hereto, which text is hereby incorporated
into this Agreement by reference as though fully set forth herein. Each
Subscription Form shall evidence the right, subject to the provisions of this
Agreement and of such Subscription Form, to purchase the number of fully paid
and non-assessable shares of Common Stock stated therein.
1
Section 1.03. Upon the written order of the Company, signed by the
President or any Vice President and the Secretary, Treasurer, Assistant
Secretary of Assistant Treasurer of the Company, the Subscription Agent shall
register Subscription Rights in the names and denominations specified in said
order, and will countersign Subscription Forms evidencing the same in accordance
with said order. Each Subscription Form shall be executed on behalf of the
Company by the manual or facsimile signature of the President or any Vice
President of the Company, under its corporate seal, affixed or facsimile,
attested by the manual or facsimile signature of the Secretary or an Assistant
Secretary of the Company and shall be countersigned manually by the Subscription
Agent. The Subscription Forms shall not be valid for any purpose unless so
countersigned. In case any officer whose facsimile ceased to be such before such
Subscription Form is issued, it may be issued with the same effect as if such
officer had not ceased to be such at the date of issuance.
Section 1.04. The term "Subscription Holder" as used herein shall mean
any person in whose name at the time any Subscription Right shall be registered
upon the books to be maintained by the Subscription Agent for that purpose.
ARTICLE II
Subscription Price, Duration and Exercise of Subscription Rights
Section 2.01. The Subscription Period shall commence after the
effective date of a post- effective amendment to the Company's Prospectus dated
__________, 1996 (the "Post-Effective Amendment"). Upon written notice from the
Company that the Post-Effective Amendment is effective, the Subscription Agent
shall mail the Subscription Forms to the Subscription Holders. Each Subscription
Holder shall have no fewer than 20 and no more than 45 business days from the
effective date of the Post-Effective Amendment to exercise his or her
Subscription Rights.
Section 2.02. Subject to the provisions of Section 4.01 and paragraph
(4) of Section 4.03, Subscription Rights may be exercised at any time during the
Subscription Period.
Subscription Rights not exercised during the Subscription Period shall
become void and all rights thereunder and all rights in respect thereof under
this Agreement shall cease at the end of such period.
Section 2.03. (1) The Subscription Holder may exercise a Subscription
Right upon delivery of the Subscription Form, with the exercise form thereon
duly executed to the Subscription Agent at its corporate office, together with
the Subscription Price for each share of Common Stock to be purchased.
(2) Upon receipt of a duly executed Subscription Form
accompanied by payment of the aggregate Subscription Price for the shares of
Common Stock for which the Subscription Price is then being exercised, the
Subscription Agent shall requisition from the transfer agent certificates for
the total number of shares of Common stock for which the Subscription Price is
being exercised in such names and denominations as are required for
2
delivery to the Subscription Holder, and the Subscription Agent shall thereupon
deliver such certificate and payment into an escrow account in accordance with
that certain Escrow Agreement dated ___________, 1996, by and between the
Company and Continental Stock Transfer & Trust Company, (the "Escrow Agent").
(3) The Company covenants and agrees that it will
pay, when due and payable, any and all taxes which may be payable in respect to
the issue of Subscription Rights, or the issue of any shares of Common Stock
upon the exercise of Subscription Rights.
(4) The Subscription Agent shall account promptly to
the Company with respect to the Subscription Rights exercised and currently
account to the Company for moneys received by the Subscription Agent for the
purchase of shares of Common Stock upon the exercise of the Subscription Rights.
ARTICLE III
Other Provisions Relating to Rights of Subscription Holders
Section 3.01. No Subscription Holder, as such, shall be entitled to
vote or receive dividends or be deemed the holder of shares of Common Stock for
any purpose, nor shall anything contained in any Subscription Form be construed
to confer upon any Subscription Holder, as such, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
action by the Company or any right to vote, give or withhold consent to any
action by the Company (whether upon any recapitalization, issue of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings or
other action affecting shareholders or receive dividends until such Subscription
Rights shall have been exercised and the shares of Common Stock purchasable upon
the exercise thereof shall have become deliverable as provided in this
Agreement.
Section 3.02. (1) The Company covenants and agrees that at all times it
shall reserve and keep available for exercise of Subscription Rights such number
of authorized shares of Common Stock as shall be required to permit the exercise
in full of all outstanding Subscription Rights and that it will make available
to the Escrow Agent from time to time a number of duly executed certificates
representing shares of Common Stock sufficient thereof.
(2) The Company covenants that all shares of Common
Stock issued on exercise of Subscription Rights will be validly issued,
fully-paid, non-assessable and free of preemptive rights, and that if the taking
of any action would cause an adjustment in the Subscription Price so that the
exercise of a Subscription Right while such Subscription Price is in effect
would cause a share of Common Stock to be issued at a price below its then par
value, the Company will take such action as may, in the opinion of counsel, be
necessary in order that upon exercise of the Subscription Rights it may validly
and legally issue shares of Common Stock that are fully paid, non-assessable and
free of preemptive rights.
3
(4) The Company will from time to time, furnish the
Subscription Agent with current Prospectuses meeting the requirements of the Act
in sufficient quantity to permit the Subscription Agent to deliver a Prospectus
to each registered holder of a Subscription Form upon delivery thereof. The
Company further agrees to pay all fees, costs and expenses in connection with
the preparation and delivery to the Subscription Agent of the Prospectus and to
immediately notify the Subscription Agent in the event that (i) the Commission
shall have issued or threatened to issue any order preventing or suspending the
use of the Prospectus or suspending or revoking the exemption upon which such
Prospectus was based; (ii) at any time the Prospectus shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) for any reason it shall be necessary to amend or supplement the Prospectus
in order to comply with the Act.
Section 3.03. Anything contained herein to the contrary
notwithstanding, the Company shall not be required to issue any fraction of a
share of Common Stock in connection with the exercise of any Subscription Right.
Section 3.04. Any notice to Subscription Holders shall be deemed given
or made by the Company if sent by mail, first class or registered, postage
prepaid, addressed to the Subscription Holders at their last known addresses as
they shall appear on the register maintained by the Subscription.
ARTICLE IV
Concerning the Subscription Agent and Other Matters
Section 4.01. The Company will from time to time promptly pay, subject
to the provisions of Section 2.03, all taxes and charges that may be imposed
upon the Company or the Subscription Agent in respect of the issuance or
delivery of shares of Common Stock upon the exercise of the Subscription Rights.
Section 4.02. (1) The Subscription Agent, or any successor to it
hereafter appointed, may resign its duties and be discharged from all further
duties and liabilities hereunder after giving two weeks notice in writing to the
Company in accordance with the provisions of Section 4.03. If the office of the
Subscription Agent becomes vacant by resignation or incapacity to act or
otherwise, the Company shall appoint in writing a successor Subscription Agent
in place of the Subscription Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Subscription
Agent, then the Subscription Agent may apply to any court of competent
jurisdiction for the appointment of a successor Subscription Agent. Any
successor Subscription Agent, whether appointed by the Company or by such a
court, shall be a corporation, firm or entity having its principal office in the
United States of America, organized in good standing and doing business under
the laws of the United States of America, or any state hereof, and authorized
under such laws to exercise corporate trust or corporate agency powers and
subject to supervision or examination by Federal or State authority and having a
combined capital and surplus of not less than $35,000. The combined capital and
surplus of any such
4
successor Subscription Agent shall be deemed to be the combined capital and
surplus set forth in the most recent report of its condition published at least
annually pursuant to law or to the requirements of a Federal or State
supervising or examining authority. After appointment, any successor
Subscription Agent shall be vested with all authority, powers, rights,
immunities, duties and obligations of its predecessor Subscription Agent with
like effect as if originally named as Subscription Agent hereunder, without any
further act or deed; but the former Subscription Agent shall deliver and
transfer to its successor any property at the time held by it hereunder and, if
for any reason it becomes necessary or appropriate, the predecessor Subscription
Agent shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Subscription Agent hereunder; and, upon request
of any successor Subscription Agent, the Company shall make, execute,
acknowledge and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Subscription Agent all
such authority, powers, rights, immunities, duties and obligation. Not later
than the effective date of any such appointment, the Company shall give notice
thereof to the predecessor Subscription Agent and each transfer agent for the
Common Stock, and shall forthwith give notice thereof to the Subscription
Holders in accordance with the provisions of Section 4.05. Failure to give such
notice, or any defect therein, shall not affect the validity of the appointment
of the successor Subscription Agent.
Section 4.03. The Company agrees (i) that it will pay the Subscription
Agent reasonable compensation for its services hereunder and will reimburse the
Subscription Agent upon demand for all expenditures that the Subscription Agent
may reasonably incur in the execution of its duties hereunder; and (ii) that it
will perform, execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Subscription
Agent for the carrying out or performing of the provisions of this Agreement.
Section 4.04. The Subscription Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by which the Company, by its acceptance hereof, shall be bound:
A. The statements contained herein and in the Subscription
Forms shall be taken as statements of the Company, and the Subscription Agent
assumes no responsibility for the correctness of any of the same except such as
described by the Subscription Agent or action taken or to be taken by it. The
Subscription Agent assumes no responsibility with respect to the execution,
delivery or distribution of Subscription Forms except as herein provided;
B. The Subscription Agent shall not be responsible for any
failure of the Company to comply with any of the covenants contained in this
Agreement or in the Subscription Forms, nor shall it at any time be under any
duty or responsibility to any Subscription Holder, to make or cause to be made
any adjustment of the Subscription Price or of the shares of Common Stock, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments when made, or with
respect to the method employed in making same;
5
C. The Subscription Agent may consult with its counsel or
other counsel satisfactory to it (including counsel for the Company) and the
opinion of such counsel shall be full and complete authorization in respect to
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel, provided the Subscription Agent
shall have exercised reasonable care in the selection of such counsel;
D. The Subscription Agent shall incur no liability or
responsibility to the Company or to any Subscription Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
E. The Subscription Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more registered
Subscription Holders shall furnish the Subscription Agent with reasonable
security and indemnity for any costs and expenses which may be incurred. All
rights of action under this Agreement or under any of the Subscription Rights
may be enforced by the Subscription Agent without the possession of any of the
Subscription Forms or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the
Subscription Agent may be brought in its name as Subscription Agent, and any
recovery of judgment shall be for the ratable benefit of the registered holders
of the Subscription Rights, as their respective rights or interests may appear;
F. The Subscription Agent shall act hereunder solely as agent
and its duties shall be determined solely by the provisions hereof. The
Subscription Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
willful misconduct;
G. The Subscription Agent shall not be under any
responsibility with respect to the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Subscription Agent)
or in respect of the validity or execution of any Subscription Form (except its
countersignature thereof). The Subscription Agent shall act by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or other securities, property or cash
to be issued pursuant to this Agreement or any Subscription Forms or as to
whether any shares of Common Stock or other securities or property will when
issued be validly issued, fully paid and non-assessable or as to the
Subscription Price or the number of, kind or amount of shares of Common Stock or
other securities, other property or cash issuable upon exercise of any
Subscription Rights;
H. The Subscription Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the President and Vice President, the Treasurer or the Secretary of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and shall not be liable for any action taken or suffered to be taken by
it in good faith in accordance with instructions of any such officer or in good
faith reliance upon any statement signed by any one of such officers of the
Company with
6
respect to any fact or matter (unless other evidence in respect thereof is
herein prescribed) which may be deemed to be conclusively proved and established
by such signed statement;
I. The Subscription Agent shall cancel any Subscription Form
delivered to it for exercise, in whole or in part, and shall deliver to the
Company from time to time, or otherwise dispose of, such canceled Subscription
Form in a manner specified in writing by the Company; and
J. The Company agrees to indemnify the Subscription Agent for,
and to hold it harmless against, any loss, liability or expense, including
judgments, costs and counsel fees, for anything done or omitted by the
Subscription Agent arising out of or in connection with this Agreement, except
as a result of the Subscription Agent's negligence or bad faith.
Section 4.05. The Subscription Agent may, without the consent or
concurrence of the Subscription Holder, by supplemental agreement or otherwise,
concur with the Company in making any changes or corrections in this Agreement
that it shall have been advised by counsel (who may be counsel for the Company)
are required to cure any ambiguity or to correct any defective or inconsistent
provision or clerical omission or mistake or manifest error herein contained, or
to confer additional rights upon the Subscription Holders.
Section 4.06. All covenants and provisions of this Agreement by or for
the benefit of the Company or the Subscription Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
Section 4.07. Forthwith upon the appointment after the date hereof of
any transfer agent other than Continental Stock Transfer & Trust Company, or if
any subsequent transfer agent for the Common stock, the Company will file with
the Subscription Agent a statement setting forth the name and address of such
transfer agent.
Section 4.08. Any notice or demand authorized by this Agreement to be
given or made by the Subscription Agent or by the holder of any Subscription
Right to or on the Company shall be sufficiently given or made or sent by
registered mail, postage prepaid, addressed (until another address is filed in
writing by the Company with the Subscription Agent) as follows:
PARAGON ACQUISITION COMPANY, INC.
277 PARK AVENUE
NEW YORK, NEW YORK 10172
7
Any notice or demand authorized by this Agreement to be given or made by the
holder of any Subscription Right or by the Company to or on the Subscription
Agent shall be sufficiently given or made or sent by registered mail, postage
prepaid, addressed (until another address is filed in writing by the
Subscription Agent with the Company), as follows:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
2 BROADWAY, 19TH FLOOR
NEW YORK, NY 10004
ATTN: COMPLIANCE DEPARTMENT
Any notice or demand authorized by this Agreement to be given or made by the
Company or the Subscription Agent to or on the Subscription Holders shall be
given in accordance with the provisions of Section 3.04.
Section 4.09. The validity, interpretation and performance of this
Agreement shall be governed by the law of the State of New York.
Section 4.10. Nothing in this Agreement expressed and nothing that may
be implied from any of the provisions hereof is intended or shall be construed
to confer upon, or give to any person or corporation other than the parties
hereto and the Subscription Holders any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the parties hereto and their successors and of the Subscription
Holders.
Section 4.11. A copy of this Agreement shall be available at all
reasonable times at the business offices of the Subscription Agent for
inspection by any Subscription Holder.
Section 4.12. The Article headings herein are for convenience only and
are not part of this Agreement and shall not affect the interpretation
Section 4.13. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original.
8
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective seals as of the day and year first above
written.
ATTEST: PARAGON ACQUISITION COMPANY, INC.
_____________________________ By: _______________________________
Name:_______________________________
Title: _____________________________
ATTEST:
_____________________________ By: _______________________________
Name:_______________________________
Title: _____________________________
9
EXHIBIT 10.3
BLUE SKY LOCK-UP LETTER AGREEMENT
St. Lawrence Stockholder
________________________
________________________
Dear Stockholder:
We would like to inform you that Paragon Acquisition Company, Inc,
("Paragon"), a company in which The St. Lawrence Seaway Corporation ("St.
Lawrence") owns 514,191 shares, has filed a registration statement with the
Securities and Exchange Commission (the "Commission") registering the
distribution (the "Distribution") of one share of Paragon $.01 par value Common
Stock (the "Shares") and one right to subscribe for two (2) additional Shares of
Paragon (the "Subscription Rights") to St. Lawrence stockholders for each share
of St. Lawrence stock owned on _____, 1996 (the "Record Date"). The Distribution
to St. Lawrence Stockholders is being made by St. Lawrence for the purpose of
providing to St. Lawrence Stockholders an equity interest in Paragon without
such Stockholder being required to contribute any cash or other capital in
exchange for such equity interest. St. Lawrence Stockholders will not be
required to make any payments for the Shares or Subscription Rights. In
addition, the Distribution of Paragon Shares and Subscription Rights will not
effect any of your rights as a Stockholder in St. Lawrence. The Distribution is
more fully described in the enclosed prospectus contained in the registration
statement.
Paragon is a "blank check" company which does not yet have a specific
operating business; its business purpose is to go out and acquire an operating
business. Because Paragon is a "blank check" company, the securities division of
__________ (the "State") will not approve the registration or an exemption from
registration of the Distribution to St. Lawrence Stockholders located in the
State. Consequently, although you are a holder of ______ shares of St. Lawrence
as of the Record Date, St. Lawrence is not permitted to distribute to you
Paragon Shares and Subscription Rights.
Pursuant to this letter however, St. Lawrence will hold the Shares and
Subscription Rights to which you would have been entitled in a separate account
maintained by Continental Stock Transfer & Trust Company (the "Escrow Agent")
and Paragon agrees to undertake reasonable efforts to obtain an exemption from
registration of the distribution of those Shares to you. While the Shares are
held in the escrow account in St. Lawrence's name, you will not be entitled to
vote or direct the voting of the Shares, receive dividends or any other
distributions
related to the Shares or exercise any other rights incident to ownership of the
Shares. St. Lawrence shall have the sole voting power and the right to receive
any dividends or distributions associated with the Shares while the Shares are
registered in St. Lawrence's name. St. Lawrence agrees not to sell, pledge,
hypothecate or otherwise dispose of the Shares for a period of two (2) years
from the date the Shares are placed into the escrow account. St. Lawrence will
not exercise any Subscription Rights that are held by it subject to this Letter
Agreement, and such Subscription Rights will expire if they do not become
distributable to you prior to the consummation of a Business Combination, as
described in the enclosed Prospectus.
In the event St. Lawrence receives notification from Paragon that
registration or an exemption has been obtained for the distribution of the
Shares to you, then St. Lawrence shall instruct the Escrow Agent to prepare and
replace the Shares held by St. Lawrence subject to this Letter Agreement with
Paragon Shares recorded in your name and those Shares shall either: (i) be
placed into the "Rule 419 Escrow Account" established by Paragon with
Continental Stock Transfer & Trust Co. in accordance with the terms and
conditions described in the enclosed Prospectus, or (ii) in the event all of the
conditions for release of the Shares from the Rule 419 Escrow Account have been
satisfied, then the Shares shall be released from the Escrow Account and
delivered directly to you.
In the event Paragon cannot obtain registration or an exemption from
registration of the distribution of the Shares to you within 2 years from the
date the Shares are placed into the escrow account, then St. Lawrence shall have
the right, in its sole discretion and subject to the restrictions contained in
the Prospectus, and applicable federal and state securities laws, to sell or
otherwise dispose of the Shares. St. Lawrence agrees to remit any proceeds
received from the sale or disposition of such securities to you.
Should you have any questions regarding this letter or the terms of the
Distribution described in the enclosed summary, please feel free to contact M
.______________ at Continental Stock Transfer & Trust Company at (212) 509-4000,
ext. ___or Frederick P. Callori at Lane Altman & Owens LLP, counsel to Paragon
at (617) 345-9800.
The St. Lawrence Seaway
Corporation
By:__________________________
Name:________________________
Title:_______________________
Acknowledged and agreed to by:
Paragon Acquisition
Company, Inc
By:___________________________
Name:_________________________
Title:________________________
EXHIBIT 10.4
LOCK-UP ESCROW AGREEMENT
AGREEMENT made this ____ day of __________, 1996, by and among The St.
Lawrence Seaway Corporation ("St. Lawrence"), Paragon Acquisition Company, Inc.
("Paragon") and Continental Stock Transfer & Trust Company, with offices at 2
Broadway, New York, NY 10004 (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Paragon, a company in which St. Lawrence owns 514,191 shares,
has filed a registration statement with the Securities and Exchange Commission
(the "Commission") registering the distribution (the "Distribution") of one
share of Paragon $.01 par value Common Stock (the "Shares") and one right to
subscribe for two (2) additional Shares of Paragon (the "Subscription Rights")
to St. Lawrence stockholders for each share of St. Lawrence stock owned on
_____, 1996; and
WHEREAS, the Distribution is being conducted in accordance with Rule
419 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"); and
WHEREAS, the securities division of the States listed on Annex A
hereto, as amend (collectively, the "States" and individually, the "State") will
not approve the registration or an exemption from registration of the
Distribution to St. Lawrence stockholders located within the States; and
WHEREAS, St. Lawrence agrees to hold the Shares with Subscription
Rights (the "Lock-up Securities") to which you would have been entitled in a
separate account maintained by the Escrow Agent upon the terms and conditions
set forth herein and in the Blue Sky Lock-up Letter Agreements it has entered
into with certain stockholders located within the States (collectively referred
to as the "Lock-up Agreement"); and
WHEREAS, In accordance with the terms of the Lock-up Agreement, Paragon
agrees to undertake reasonable efforts to obtain an exemption from registration
of the distribution of the Shares to St. Lawrence stockholders within the
States; and
WHEREAS, St. Lawrence proposes to establish a lock-up escrow account
with the Escrow Agent in connection with the Lock-up Agreement and the Escrow
Agent is willing to establish such escrow account on the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Establishment of Escrow Account. The parties hereto shall establish
an escrow account at the office of the Escrow Agent Escrow Account.
3. Deposit of Lock-up Securities into Escrow Account. All Lock-up
Securities issued to St. Lawrence, including any securities issued with respect
to stock splits, stock dividends or similar rights, shall be deposited directly
into the escrow account promptly upon issuance, together with the name and
address of the St. Lawrence stockholder who would have received the Lock-up
Securities if the Distribution had been approved (the "St. Lawrence
Stockholder"). The Lock-up Securities held in the escrow account are to remain
as issued and deposited and St. Lawrence shall have the sole voting power and,
subject to Paragraph 4 hereof, sole dispositive power with respect to such
securities. The St. Lawrence Stockholder shall have no voting or dispositive
power over the Lock-up Securities while held in the escrow account.
4. Lock-up Period. Except as provided in Paragraph __ hereof, the
Lock-up Securities shall remain in the escrow account, and St. Lawrence agrees
not to sell, pledge, hypothecate or otherwise dispose of the Lock-up Securities
for a period of two (2) years from the date the Lock-up Securities are placed
into the escrow account.
5. Legend. During the term of the Lock-up Agreement and while held in
the escrow account, the Lock-up Securities shall contain the following legend:
"The interest in the securities represented by this certificate is
subject to restrictions contained in a certain Blue Sky Lock-Up Letter Agreement
and cannot be transferred or otherwise disposed of without an opinion of counsel
satisfactory to Paragon's transfer agent that the conditions contained therein
and all applicable federal and state securities laws have been satisfied."
6. Disbursement of Securities from the Escrow Account.
(a) Upon written notification from St. Lawrence and Paragon that
registration or an exemption has been obtained for the distribution of the
Lock-up Securities to stockholders within a State, the Escrow Agent shall
prepare and replace the Lock-up Securities held by St. Lawrence with Paragon
securities recorded in the stockholders' name and those securities shall be
released from the escrow account and delivered to the stockholders.
(b) In the event Paragon cannot obtain registration or an exemption
from registration of the distribution of any of the Lock-up Securities within 2
years from the date the Lock-up Securities are placed into the escrow account,
then St. Lawrence shall have the right, in its sole discretion and subject to
applicable federal and state securities laws, to sell or otherwise dispose of
such securities free from any restrictions contained in the Lock-up Agreement;
provided however, that any proceeds to be received from the sale or disposition
of such securities shall be sent to the Escrow Agent (the "Proceeds"). Upon
receipt, the Escrow Agent shall promptly deliver the Proceeds to the St.
Lawrence Stockholder.
-2-
(c) Dividends earned on the Lock-up Securities, if any, shall be held
in the Escrow Account until the Lock-up Securities are released in accordance
with the provisions of this Paragraph 6. Once the Lock-up Securities are
released from the escrow account pursuant to either Sub-Paragraph (a) or (b)
hereof, the St. Lawrence Stockholder shall receive any dividends earned on the
Lock-up Securities up to the date of release.
7. Rights, Duties and Responsibilities of Escrow Agent. It is
understood and agreed that the duties of the Escrow Agent are purely ministerial
in nature, and that:
(a) The Escrow Agent shall not be responsible for the performance by
St. Lawrence or Paragon of its obligations under this Agreement.
(b) The Escrow Agent shall be under no duty or responsibility to
enforce collection of any check delivered to it hereunder. The Escrow Agent,
within a reasonable time, shall return to St. Lawrence any check received which
is dishonored.
(c) The Escrow Agent shall be entitled to rely upon the accuracy, act
in reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature instrument or other document which is given
to the Escrow Agent pursuant to this Agreement without the necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document. The Escrow Agent
must, however, determine for itself whether the conditions permitting the
release of the Lock-up Securities and/or Proceeds in the escrow account have
been met.
(d) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
escrow account, the Lock-up Securities or the Proceeds which, in its sole
determination, are in conflict either with other instructions received by it or
with any provision of this Agreement, the Escrow Agent, at its sole option, may
deposit the Lock-up Securities and/or the Proceeds (and any other amounts that
thereafter become part of the Proceeds) with the registry of a court of
competent jurisdiction in a proceeding to which all parties in interest are
joined. Upon the deposit by the Escrow Agent of the Lock-up Securities and the
Proceeds with the registry of any court, the Escrow Agent shall be relieved of
all further obligations and released from all liability hereunder.
(e) The Escrow Agent shall not be liable for any action taken or
omitted hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct. The Escrow Agent
shall be entitled to consult with counsel of its own choosing and shall not be
liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel.
(f) The Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Lock-up Securities
or the Proceeds or any part thereof or to
-3-
file any financing statement under the Uniform Commercial Code with respect to
the Lock-up Securities or the Proceeds or any part thereof.
(g) The Escrow Agent may resign hereunder: (i)(A) at any time with the
unanimous consent of St. Lawrence and Paragon and upon the appointment of a
substitute escrow agent by St. Lawrence or Paragon, or (B) upon fourteen (14)
days' written notice to St. Lawrence and Paragon, or (ii) upon petitioning of a
court of competent jurisdiction seeking the appointment by such court of a
substitute escrow agent and the acceptance by the substitute escrow agent of
such appointment;
(h) Should any conflict or controversy arise between or among St.
Lawrence and/or Paragon and the Escrow Agent with respect to (i) this Agreement,
or (ii) the Lock-up Securities and/or the Proceeds held hereunder, and a
substitute escrow agent is not appointed pursuant to clause (g) above within 14
days of written request to resign from the Escrow Agent, the Escrow Agent shall
have the right to institute a Bill of Interpleader in any court of competent
jurisdiction to determine the rights of the parties hereto. Should a Bill of
Interpleader be instituted in any manner whatsoever on account of this
Agreement, the non-prevailing party shall pay the Escrow Agent its reasonable
attorneys' fees and any other disbursements, expenses, losses, costs or damages
in connection with or resulting from such litigation; and
(i) St. Lawrence and Paragon, jointly and severally, agree to indemnify
and hold the Escrow Agent harmless from all claims, losses, costs, damages,
expenses including, reasonable attorneys' fees that are incurred by the Escrow
Agent arising from acts or omissions of the Escrow Agent in performance of or
pursuant to this Agreement; provided, however, that the Escrow Agent shall not
be entitled to indemnification for gross negligence or willful misconduct..
8. Governing Law and Assignment. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto and their respective successors and assigns.
9. Notices. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, and addressed:
If to the Escrow Agent:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, NY 10004
Attn: Compliance Department.
-4-
If to St. Lawrence:
320 N. Meridian St, Suite 818
Indianapolis, Indiana 46206
Attn: Jack Brown
If to Paragon:
Paragon Acquisition Company, Inc.
277 Park Avenue
New York, New York 10172
Attn: Mitchell A. Kuflik, President
10. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
11. Captions. All captions are for convenience only and shall not limit
or define the term thereof.
12. Execution in Several Counterparts. This Agreement may be executed
in several counterparts or by separate instruments and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
herein.
-5-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
PARAGON ACQUISITION COMPANY, INC.:
By:_______________________________
Name:_____________________________
Title:____________________________
THE ST. LAWRENCE SEAWAY CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
CONTINENTAL STOCK TRANSFER & TRUST CO.:
By:_______________________________
Name:_____________________________
Title:____________________________
Name: ____________________________
Title:____________________________
-6-
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Paragon Acquisition Company, Inc.
New York, NY
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated July 1, 1996, relating to the
financial statements of Paragon Acquisition Company, Inc. for the period ended
June 30, 1996, which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, NY
July 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-END> Jun-30-1996
<CASH> 75,000
<SECURITIES> 0
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<TOTAL-COSTS> 5,000
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</TABLE>
EXHIBIT 99.1
PROMISSORY NOTE
$75,000.00 June 25, 1996
New York, NY
In connection with the purchase of the Common Stock of Paragon Acquisition
Company, Inc. pursuant to the terms of a certain Subscription Agreement dated
June 25, 1996 (a copy of which is attached hereto), the undersigned, PAR Holding
Company, LLC, a Delaware limited liability company, promises to pay to the order
of Paragon Acquisition Company, Inc., a Delaware corporation with a business
address of 277 Park Avenue, New York 10172, the sum of Seventy Five Thousand and
00/100 Dollars ($75,000.00), with interest compounding monthly at the annual
rate of five and one half (5.5%) on before July 31, 1996.
Demand, presentment, protest, notice of protest and notice of dishonor are
hereby waived.
This Note shall be governed by and construed in accordance with the laws of
the state of New York.
WITNESS: PAR Holding Company, LLC
/s/ Jill Ganey By /s/ Mitchell A. Kuflik
- --------------------------- -----------------------------
Managing Member
Exhibit 99.1(i)
AMENDMENT TO
PROMISSORY NOTE
The Promissory Note of Par Holding Company, LLC dated June 25, 1996 is
hereby amended in its entirety as follows:
"$75,000.00 June 25, 1996
New York, NY
In connection with the purchase of the Common Stock of Paragon Acquisition
Company, Inc. pursuant to the terms of a certain Subscription Agreement dated
June 25, 1996 (a copy of which is attached hereto), the undersigned, PAR Holding
Company, LLC, a Delaware limited liability company, promises to pay to the order
of Paragon Acquisition Company, Inc., a Delaware corporation with a business
address of 277 Park Avenue, New York 10172, the sum of Seventy Five Thousand and
00/100 Dollars ($75,000.00), with interest compounding monthly at the annual
rate of five and one half (5.5%) on demand.
This Note shall be governed by and construed in accordance with the laws of
the state of New York."
WITNESS: PAR Holding Company, LLC
/s/ illegible By /s/ Robert Sobel
- ----------------------------- ---------------------------------
Managing Member
WITNESS: Paragon Acquisition Company, Inc.
/s/ illegible By /s/ Mitchell Kuflik
- ----------------------------- ---------------------------------
President
EXHIBIT 99.2
SUBSCRIPTION AGREEMENT
Paragon Acquisition Company, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, (the "Corporation"), hereby
agrees to issue and sell to PAR Holding Company, LLC (the "LLC") and the LLC
hereby agrees to purchase from the Corporation, 2,900,000 shares of the
Corporation's Common Stock, $.01 par value, for a total amount of $150,000. Said
consideration shall be payable as follows:
(i) $75,000 upon execution of this Agreement, and (ii) the issuance of
a promissory note for $75,000 payable on or before July 31, 1996. Upon receipt
of the aforesaid consideration, the Corporation shall deliver to the LLC a
certificate representing, in the aggregate, the shares of the Corporation's
Common Stock to be issued and sold as set forth above.
The LLC hereby represents that it is acquiring such shares for
investment purposes and not with a view to the resale or distribution thereof.
IN WITNESS WHEREOF, each of the parties has caused this subscription
agreement to be executed on the 25th day of June, 1996.
Paragon Acquisition Company, Inc.
By: /s/ Mitchell Kuflik
------------------------------------
Mitchell Kuflik, President
PAR Holding Company, LLC
By: /s/ Robert Sobel
------------------------------------
Robert Sobel, Managing Member
Exhibit 99.2(i)
AMENDMENT TO
SUBSCRIPTION AGREEMENT
The Subscription Agreement by and between Paragon Acquisition Company,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware, (the "Corporation"), and PAR Holding Company, LLC (the "LLC"), dated
the 25th day of June, 1996, is hereby amended in its entirety as follows:
"Paragon Acquisition Company, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, (the "Corporation"), hereby
agrees to issue and sell to PAR Holding Company, LLC (the "LLC") and the LLC
hereby agrees to purchase from the Corporation, 2,900,000 shares of the
Corporation's Common Stock, $.01 par value, for a total amount of $150,000. Said
consideration shall be payable as follows:
(i) $75,000 upon execution of this Agreement, and (ii) the issuance of
a promissory note for $75,000 payable on demand. Upon receipt of the aforesaid
consideration, the Corporation shall deliver to the LLC a certificate
representing, in the aggregate, the shares of the Corporation's Common Stock to
be issued and sold as set forth above.
The LLC hereby represents that it is acquiring such shares for
investment purposes and not with a view to the resale or distribution thereof."
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed as of the 14th day of July, 1996.
By: /s/ Mitchell Kuflik
------------------------------------
Mitchell Kuflik, President
PAR Holding Company, LLC
By: /s/ Robert Sobel
------------------------------------
Robert Sobel, Managing Member
