-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VxtO5EHWVqcEo6nyCJF0W0SZWKti6Luo84+/TV0MPUQRE5u4xRT/O9j4uugpAn7u 4n0piHacyuI2X7+AnsMn/w== 0000903893-96-000877.txt : 19961028 0000903893-96-000877.hdr.sgml : 19961028 ACCESSION NUMBER: 0000903893-96-000877 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19961025 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARAGON ACQUISITION CO INC CENTRAL INDEX KEY: 0001017484 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-07775 FILM NUMBER: 96648173 BUSINESS ADDRESS: STREET 1: 277 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10172 BUSINESS PHONE: 2129411400 MAIL ADDRESS: STREET 1: 277 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10172 S-1/A 1 FORM S-1 As filed with the Securities and Exchange Commission on October 25, 1996 Registration No. 333-7775 - -------------------------------------------------------------------------------- Securities And Exchange Commission Washington, D.C. 20549 ---------- 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.
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 - -------------------------------------------------------------------------------------------------------------------------- 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) - -------------------------------------------------------------------------------------------------------------------------- Subscription Rights, no par value, exercisable to purchase two (2) shares of Common Stock 3,414.191 -0- (1) $ -0- -0- - -------------------------------------------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------------------------------------------- TOTAL............................................ $6,848,949.60 $2,361.70 - -------------------------------------------------------------------------------------------------------------------------- (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. - ----------------------
PARAGON ACQUISITION COMPANY, INC. CROSS REFERENCE SHEET Between Items in Form S-1 and Prospectus Pursuant to Item 501(b) of Regulation S-K
Form S-1 Item Number and Caption Location or Caption in Prospectus -------------------------------- --------------------------------- 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
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.
- -------------------------------------------------------------------------------------------------------------------- UNDERWRITING DISCOUNTS MAXIMUM PRICE TO PUBLIC (1) AND COMMISSIONS PROCEEDS TO COMPANY - -------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE DISTRIBUTED AS DIVIDEND $ 0.00 -0- $ 0.00 - -------------------------------------------------------------------------------------------------------------------- PER EXERCISE OF SUBSCRIPTION RIGHT $ 2.00(2) -0- $ 2.00 - -------------------------------------------------------------------------------------------------------------------- TOTAL $6,828,382.00 -0- $6,828,382.00 - -------------------------------------------------------------------------------------------------------------------- (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.
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. ---------- 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) ------ ------------ 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):
Actual Pro Forma ------ --------- 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 ======== ========
(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:
Name Age Position ---- --- -------- 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
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:
Percentage of Outstanding Amount and Shares of Common Stock(1) Nature of --------------------------------- Beneficial Before After Name and Address Ownership Distribution Distribution(1) ---------------- --------- ------------ --------------- 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)
(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
DEFICIT ACCUMULATED COMMON STOCK ADDITIONAL DURING THE TOTAL ---------------- SUBSCRIPTION PAID-IN DEVELOPMENT STOCKHOLDERS' SHARES AMOUNT RECEIVABLE CAPITAL STAGE EQUITY ------ ------ ---------- ------- ----- ------ 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 ========= ======= ======== ======== ======= =======
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 EX-3.1(I) 2 ARTICLES OF INCORPORATION 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. EX-3.1(I)(A) 3 CERTIFICATE OF AMENDMENT 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 EX-3.2 4 BY-LAWS OF PARAGON ACQUISITION COMPANY INC. 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 EX-4.2 5 SUBSCRIPTION RIGHTS 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
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: - ------------------------------ ---------------------------- --------------------------- ---------------------------- 100 100 200 $200 - ------------------------------ ---------------------------- --------------------------- ----------------------------
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 EX-10.1 6 ESCROW AGREEMENT 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. EX-10.2 7 SUBSCRIPTION AGENCY AGREEMENT 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 EX-10.3 8 BLUE SKY LOCK-UP LETTER AGREEMENT 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:________________________ EX-10.4 9 LOCK-UP ESCROW AGREEMENT 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- EX-99.24.1 10 CONSENT OF ACCOUNTANTS 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 EX-27 11 FINANCIAL DATA SCHEDULE
5 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. 6-MOS Jun-30-1996 Jun-30-1996 75,000 0 0 0 0 75,000 0 0 95,000 25,000 0 0 0 29,000 41,000 95,000 0 0 0 5,000 0 0 0 0 0 0 0 0 0 0 (0.00) (0.00)
EX-99.1 12 PROMISSORY NOTE 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 EX-99.2 13 SUBSCRIPTION AGREEMENT 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 -----END PRIVACY-ENHANCED MESSAGE-----