Exhibit 10.6
SUBSCRIPTION AGREEMENT
1. Subscription. The undersigned (sometimes referred to herein as the
"Investor" or as "we") hereby subscribes for and agrees to purchase 800,000
shares ("Shares") of common stock ("Common Stock") of Paragon Sports Group,
Inc., a Delaware corporation (the "Company"), on the terms and conditions
described herein. The purchase price per Share is $50,000.
2. Background:
(a) Company is capitalized with an authorized capital of 25,000,000
shares of Common Stock (par value $0.001) and 5,000,000 shares of Preferred
Stock (the rights of which will be fixed by Company's Board of Directors at the
time of issuance thereof). All of the issued and outstanding shares of Company's
Common Stock have been duly and validly authorized and issued, are fully paid
and non-assessable, and are owned free and clear of any lien or encumbrance of
any kind whatsoever. No shares of Company's Common Stock or Preferred Stock are
reserved for issuance for any purpose whatsoever.
(b) (1) The audited financial statements of Company prepared by the
independent accounting firm of Xxxxx & Company for the period ended May 31, 2001
and the unaudited financial statements for the three month period ended August
31, 2001, as previously delivered to Investor, are true and correct in all
respects, reflect all liabilities of Company for the periods stated, and fairly
present the financial condition of Company for such periods, all in accordance
with generally accepted accounting principles consistently applied.
(2) The firm of Xxxxx & Company will be engaged to provide such
other audited or unaudited financial statements as may be required in connection
with a public offering of Company Common Stock as defined and described below.
(c) The financial statements of Company for the period ended May 31,
2001 and the unaudited financial statements for the three month period ended
August 31, 2001 reflect a total absence of indebtedness to any entity that may
be deemed to have been or be an affiliate of the Company. The term "affiliate"
shall include the members, managers and principals of Company and Continental
Sports Management, Inc., as well as any person, entity or firm that directly or
indirectly controls, is controlled by or is under common control with such named
entity. The term "affiliate" shall further be construed as it is defined in Rule
405 promulgated under the Securities Act of 1933, as amended.
3. Capitalization.
(a) The issued and outstanding shares of capital stock of Company
shall consist of 4,000,000 Shares of Common Stock, of which (1) 2,800,000 shares
have been allocated by the Company, (2) 800,000 Shares shall be issued to the
Investor, and (3) 400,000 Shares shall be reserved for sale to the public for
anticipated proceeds of $1,600,000 ("Offering").
(b) Company agrees that all proceeds received from the sale of the
400,000 Shares of Common Stock will be used solely and exclusively for working
capital purposes and that none of such proceeds will be used to liquidate,
offset or reduce any debts or obligations of Company to any affiliate thereof.
During the two-year period subsequent to receipt of such proceeds, and in
connection with every required filing by Company under the Securities and
Exchange Act of 1934 ("1934 Act"), Company will direct its auditors to confirm
specifically that no such payments have been made to any affiliate of Company.
4. Acceptance or Rejection of Subscription.
(a) We understand and agree that Company reserves the right to
reject this subscription for the Shares, in whole or in part, for any reason and
at any time prior to the Closing (as defined in Paragraph 5, below),
notwithstanding prior receipt by us of notice of acceptance of our subscription.
(b) In the event of the rejection of this subscription, our
subscription payment will be promptly returned to us without interest or
deduction and this Subscription Agreement shall have no force or effect. In the
event our subscription is accepted, the funds specified above shall be released
to Company.
5. Closing. The closing ("Closing") of the issuance of Shares of
Company Common Stock to Investor shall occur within seven (7) days of the date
hereof, after which date Investor may cancel this subscription and receive back
its entire subscription price.
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6. Disclosure.
(a) Because this Offering is being made in reliance upon the
exemption contained in Section 4(2) of the Securities Act of 1933 ("Securities
Act") and applicable state securities laws, the Shares are being sold without
registration under the Securities Act.
(b) We fully understand that the Shares are speculative investments
that involve a high degree of risk of loss of our entire investment. We fully
understand the nature of the risks involved in purchasing the Shares and are
qualified by our knowledge and experience to evaluate investments of this type.
We have carefully considered the potential risks relating to Company and
purchase of its Shares. We have had the opportunity to ask questions of and
receive answers from representatives of Company or persons acting on its behalf
concerning Company and the terms and conditions of a proposed investment in
Company and we have also had the opportunity to obtain additional information
necessary to verify the accuracy of information about Company. Accordingly, we
have independently evaluated the risks of purchasing the Shares.
7. Investor Representations and Warranties. We acknowledge, represent
and warrant to, and agree with, Company as follows:
(a) We are aware that our investment involves a high degree of risk;
(b) We acknowledge and are aware that there is no assurance as to
the future performance of Company;
(c) We acknowledge that there may be certain adverse tax
consequences to us in connection with our purchase of Shares, and Company has
advised us to seek the advice of experts in such areas prior to making this
investment;
(d) We are purchasing the Shares for our own account for investment
and not with a view to or for sale in connection with the distribution of the
Shares, nor with any present intention of selling or otherwise disposing of all
or any part of the foregoing securities, other than pursuant to an effective
Registration Statement as otherwise contemplated herein to be filed by Company
with the SEC. We agree that we must bear the entire economic risk of our
investment for an indefinite period of time because, among other reasons, the
Shares have not been registered under the Securities Act or under the securities
laws of any state and, therefore, cannot be resold, pledged, assigned or
otherwise disposed of unless they are subsequently registered under the
Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available. Furthermore, we hereby
acknowledge and agree that we will not sell, transfer, pledge, encumber, give or
otherwise dispose of, either publicly or privately, the Shares until the
Registration Statement is declared effective. We thereby authorize Company to
place a legend denoting the restrictions on the share certificates that may be
issued;
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(e) We are not a member of the National Association of Securities
Dealers, Inc. ("NASD"); we are not and have not, for a period of twelve (12)
months prior to the date of this Subscription Agreement, been affiliated or
associated with any company, firm, or other entity which is a member of the
NASD; and we do not own any stock or other interest in any member of the NASD
(other than interests acquired in open market purchases);
(f) We recognize that ownership of the Shares, as an investment,
involves a high degree of risk including, but not limited to, the risk of
economic losses from operations of Company and the total loss of our investment.
We acknowledge that no market for the Shares exists and none may develop in the
future and that we may find it impossible to liquidate our investment at any
time where it may be desirable to do so, or at any time. We believe that the
investment in the Shares is suitable for us based upon our investment objectives
and financial needs, and we have adequate means for providing for our current
financial needs and contingencies and have no need for liquidity with respect to
our investment in Company;
(g) We have been given access to such information regarding Company,
as we have requested, and have utilized such access to our satisfaction for the
purpose of obtaining information. We have either met with or been given
reasonable opportunity to meet with officers of Company for the purpose of
asking questions of and receiving answers from, such officers concerning the
terms and conditions of the offering of the Shares and business and operations
of Company and to obtain any additional information to the extent reasonably
available;
(h) We have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Shares and have obtained, in our judgment, sufficient information from
Company to evaluate the merits and risks of an investment in Company. We have
not utilized any person as a purchaser representative as defined in Regulation D
promulgated by the SEC pursuant to the Securities Act in connection with
evaluating such merits and risks;
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(i) We have relied solely upon our own investigation in making a
decision to invest in Company;
(j) We have received no representations or warranties from Company
or any of its respective officers, directors, employees or agents in respect of
our investment in Company and we have received no information (written or
otherwise) from them relating to Company or its business. We are not making our
investment as a result of or subsequent to: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising;
(k) We have had full opportunity to ask questions and to receive
satisfactory answers concerning the Offering and other matters pertaining to our
investment and all such questions have been answered to our full satisfaction;
(l) We have been provided an opportunity to obtain any additional
information concerning the Offering and Company and all other information to the
extent Company possesses such information or can acquire it without unreasonable
effort or expense;
(m) We can bear the entire economic risk of the investment in the
Shares for an indefinite period of time and we are knowledgeable about and
experienced in investments in the equity securities of non-publicly traded
companies, including early stage companies. We are acquiring the Shares for our
own account for investment purposes only and not with a view to the resale or
distribution of such securities within the meaning of the Securities Act, as
amended. We are not acting as an underwriter or a conduit for sale to the public
or to others of unregistered securities, directly or indirectly, on behalf of
Company or any person with respect to such securities;
(n) We understand that (1) the Shares have not been registered under
the Securities Act, or the securities law of certain states in reliance on
specific exemptions from registration, (2) no securities administrator of any
state or the federal government has recommended or endorsed this Offering or
made any finding or determination relating to the fairness of an investment in
Company and (3) Company is relying on our representations and agreements for the
purpose of determining whether this transaction meets the requirements of the
exemptions afforded by the Securities Act and certain state securities laws;
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(o) We understand that since neither the offer nor sale of the
Shares has been registered under the Securities Act, or the securities laws of
any state, the Shares may not be sold, assigned, pledged or otherwise disposed
of unless they are so registered or an exemption from such registration is
available; and
(p) We have been urged to seek independent advice from our
professional advisors relating to the suitability of an investment in Company in
view of our overall financial needs and with respect to the legal and tax
implications of such investment.
8. Indemnification. We hereby agree to indemnify and hold harmless
Company and its officers, directors, shareholders, employees, agents, and
attorneys against any and all losses, claims, demands, liabilities, and expenses
(including reasonable legal or other expenses, including reasonable attorneys'
fees) incurred by each such person in connection with defending or investigating
any such claims or liabilities, whether or not resulting in any liability to
such person, to which any such indemnified party may become subject under the
Securities Act, under any other statute, at common law or otherwise, insofar as
such losses, claims, demands, liabilities, and expenses (a) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
made by us and contained in this Subscription Agreement or (b) arise out of or
are based upon any breach by us of any representation, warranty or agreement
made by us contained herein.
9. Severability. In the event any parts of this Subscription Agreement
are found to be void, the remaining provisions of this Subscription Agreement
shall nevertheless be binding with the same effect as though the void parts were
deleted.
10. Choice of Law and Jurisdiction. This Subscription Agreement will be
deemed to have been made and delivered in New York City and will be governed as
to validity, interpretation, construction, effect and in all other respects by
the internal laws of the State of New York. Company and the undersigned (i)
agree that any legal suit, action or proceeding arising out of or relating to
this Subscription Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, and (ii) irrevocably consent to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. Company and the undersigned further agree and
acknowledge service of any and all process which may be served in any such suit
action or proceeding brought in the New York State Supreme Court, County of New
York, or in the United States District Court for the Southern District of New
York and agree that service of process upon it mailed by certified mail to its
address shall be deemed in every respect effective service of process upon it in
any suit, action or proceeding.
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11. Counterparts. This Subscription Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
12. Benefits. This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto.
13. Notices and Addresses. All notices, offers, acceptance and any
other acts under this Subscription Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addresses in
person, by Federal Express or similar courier delivery, by facsimile delivery
or, if mailed postage prepaid, by Certified Mail, return receipt requested, as
follows:
If to Investor: Attention: Xxxxx Xxxxx, President
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
If to Company: Xxxx Xxxxxxx, President
Paragon Sports Group, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
or to such other address as any of them, by notice to the others may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
14. Oral Evidence. This Subscription Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior oral and written agreements between the parties hereto with
respect to the subject matter hereof. This Subscription Agreement may not be
changed, waived, discharged, or terminated orally but, rather, only by a
statement in writing signed by the party or parties against which enforcement or
the change, waiver, discharge or termination is sought.
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15. Section Heading. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part, any of the terms or
provisions of this Subscription Agreement.
16. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall survive the
delivery of, and the payment for, the Shares.
17. Legend. The undersigned consents to the placement of a legend on
any certificate or other document evidencing the Shares, which legend shall be
in substantially the following form:
"The securities which are represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act"). The securities have been acquired for investment purposes
only and not with a view to distribution or resale, and may not be
sold, transferred, made subject to a security interest, mortgaged,
pledged, hypothecated or otherwise disposed unless and until
registered under the Act or an opinion of counsel for Company is
received that registration is not required under such Act or an
exemption from registration us available."
18. Acceptance of Subscription. Company may accept this Subscription
Agreement at any time for all or any portion of the Shares subscribed for by
executing a copy hereof as provided and notifying us within seven (7) days from
the date hereof.
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I,___________________________ , the ________________________of Biofarm, Inc.
("Investor"), a Nevada corporation, hereby certify that I am empowered and duly
authorized by the Investor to execute this Subscription Agreement and to
purchase the Shares, and certify further that this Subscription Agreement has
been duly and validly executed on behalf of the Investor and constitutes a legal
and binding obligation of the Investor.
IN WITNESS WHEREOF, Investor, by its authorized officer, has executed
this Subscription Agreement as of the 4th day of October, 2001.
BIOFARM, INC.
BY: /s/ Xxxxx Xxxxx
--------------------
(authorized officer)
President
SUBSCRIPTION ACCEPTED:
Paragon Sports Group, Inc. (a Delaware corporation)
BY: /s/ Xxxx Xxxxxxx
-----------------
Chairman and CEO
Dated: As of October 4, 2001
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