As filed with the Securities and Exchange Commission on July 1, 1996
Registration No. 333-3719
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
SCAN-GRAPHICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 95-4091769
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
700 Abbott Drive
Broomall, Pennsylvania 19008
(610) 328-1040
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
JOSEPH N. BATTISTA, JR.
Vice President-Finance, Chief Financial Officer
Scan-Graphics, Inc.
700 Abbott Drive
Broomall, Pennsylvania 19008
(610) 328-1040
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
JAY WEIL, ESQ.
Lowenthal, Landau, Fischer & Bring, P.C.
250 Park Avenue
New York, New York 10177
(212) 986-1116
Facsimile No. (212) 986-0604
Approximate Date of Proposed Sale to the Public: As soon as practicable after
this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
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 /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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 said Section 8(a),
may determine.
<PAGE>
SCAN-GRAPHICS, INC.
Cross Reference Sheet
<TABLE>
<CAPTION>
Form S-3 Item Nos. and Caption Prospectus Caption
- ------------------------------------------------------------- -------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus..................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover
Prospectus......................................... Pages
3. Summary Information, Risk Factors, and Ratio
of Earnings to Fixed Charges....................... The Company; Risk Factors
4. Use of Proceeds.................................... Use of Proceeds
5. Determination of Offering Price.................... *
6. Dilution........................................... *
7. Selling Security-Holders........................... Selling Shareholders
8. Plan of Distribution............................... Outside Front Cover Page; Plan of
Distribution
9. Description of Securities to be Registered......... Outside Front Cover Page of Prospectus;
Incorporation of Certain Documents By
Reference
10. Interests of Named Experts and Counsel............. *
11. Material Changes................................... Recent Developments
12. Incorporation of Certain Information by Incorporation of Certain Documents By
Reference.......................................... Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... *
</TABLE>
- ---------------------------
* Not applicable.
<PAGE>
PROSPECTUS
Subject to Completion, dated July 1, 1996
11,820,763 Shares
SCAN-GRAPHICS, INC.
Common Stock
($.001 Par Value)
------------------------------------
The shares offered hereby (the "Shares") consist of 1,472,083
outstanding shares of common stock, $.001 par value per share (the "Common
Stock") of Scan-Graphics, Inc., a Pennsylvania corporation (the "Company"), held
by certain persons who acquired Common Stock in private placements or who
acquired Common Stock upon the exercise of warrants or conversion of convertible
notes of the Company ("Convertible Notes"), 3,100,000 shares of Common Stock
issuable upon the conversion of outstanding shares of the Company's Class A
Convertible Preferred Stock Series C, par value $10.00 per share ("Series C
Stock"), 1,387,837 shares of Common Stock issuable upon the conversion of
certain outstanding Convertible Notes, and 5,860,843 shares of Common Stock
issuable upon the exercise of common stock purchase warrants ("Warrants"). The
number of shares of Common Stock being offered pursuant to this Prospectus by
the Selling Shareholders, including the number of shares issuable upon exercise
of the Warrants and conversion of Series C Stock and Convertible Notes,
represents approximately 110% of the total Common Stock outstanding as of June
25, 1996. See "Risk Factors -- Effect of Offering on Market Price of Common
Stock."
The Shares may be offered from time to time by the Selling
Shareholders identified herein. See "Selling Shareholders." The Selling
Shareholders offering Shares covered by this Prospectus include the Company's
Chief Executive Officer, other executive officers of the Company and its
subsidiaries and the Company's Directors. Except for the exercise price of the
Options and Warrants, the Company will not receive any part of the proceeds from
the sale of the Shares. All expenses of registration incurred in connection
herewith are being borne by the Company, but all selling and other expenses
incurred by the Selling Shareholders will be borne by the Selling Shareholders.
The Selling Shareholders have not advised the Company of any
specific plans for the distribution of the Shares covered by this Prospectus,
but it is anticipated that the Shares will be sold from time to time primarily
in transactions (which may include block transactions) on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System at the
market price then prevailing, although sales may also be made in negotiated
transactions or otherwise. The Selling Shareholders and the brokers and dealers
through whom sale of the Shares may be made may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended, and their
commission or discounts and other compensation may be regarded as underwriters'
compensation. See "Plan of Distribution."
The Company's Common Stock is traded in the over-the-counter
market and quoted on NASDAQ under the symbol "SCNG." On June 28, 1996, the
closing bid price of the Common Stock was $2 1/16.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 3.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is _________, 1996
<PAGE>
No dealer, salesman or other person has been authorized to
give any information or to make any representations, other than those contained
or incorporated by reference in this Prospectus, in connection with the offering
contained herein, and, if given or made, such information and representations
must not be relied upon as having been authorized by the Company or the Selling
Shareholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof.
A registration statement on Form S-3 in respect of the Shares
offered by this Prospectus (the "Registration Statement") has been filed with
the Securities and Exchange Commission (the "Commission"), 450 Fifth Street,
N.W., Washington, D.C. 20549, under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information
contained in such Registration Statement, certain portions of which have been
omitted herefrom pursuant to the rules and regulations of the Commission.
Accordingly, additional information concerning the Company and the Shares is
included in the Registration Statement, including the exhibits thereto, which
may be inspected at the Public Reference Section of the Commission.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports and other information with the Commission. These
reports, proxy statements and other information may be inspected and copied at
the public reference facility maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices: Northeast Regional Office, Suite 1300, 7 World Trade
Center, New York, New York 10048, and Midwest Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511. Copies of such material may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
3
<PAGE>
THE COMPANY
Scan-Graphics, Inc., a Pennsylvania corporation (the
"Company"), is a provider of Geographic Information Systems ("GIS") database
management software products and is a pioneer and leader in scanning and image
processing technology, large document scanners, backfile conversion services,
and imaging software and systems. The Company markets its products
internationally through systems integrators and distributors. The Company's
principal offices are located at 700 Abbott Drive, Broomall, Pennsylvania 19008,
and its telephone number at that address is (610) 328-1040.
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully by prospective investors in
evaluating the Company and its business before purchasing the Shares offered by
the Prospectus:
Effect of Offering on Market Price of Common Stock. The number
of shares of Common Stock being offered pursuant to this Prospectus by the
Selling Shareholders, including the number of shares issuable upon exercise of
the Warrants and conversion of the Series C Stock and Convertible Notes,
represents approximately 110% of the total Common Stock outstanding as of June
25, 1996. See "Selling Shareholders." Each Selling Shareholder intends to offer
its Common Stock at such time and in such manner as it deems appropriate. There
are no agreements between the Selling Shareholders and the Company with respect
to the sale of Common Stock, and the Company knows of no agreements among the
Selling Shareholders. The possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities. See "Plan of Distribution."
History of Operating Losses. The Company has a history of
losses. Other than for achieving a nominal net operating profit for the fiscal
year ended December 31, 1992, the Company has incurred net operating losses in
1988 and in each year thereafter. As of March 31, 1996, the Company had
accumulated losses (deficit) of approximately $9,422,000 and a positive net
worth of approximately $1,766,000. There are no material adverse trends known to
the Company which will continue to affect the Company's operations. The Company
has taken steps to improve its results from operations and financial condition
by acquiring Sedona GeoServices, Inc. ("Sedona") in July 1995 and Tangent
Engineering, Inc. ("Tangent") in December 1995, raising capital through the
private placement of its securities, expanding sales distribution channels for
its products and introducing new products into the market. There exist
uncertainties as to product acceptance and the potential market for the
Company's new products, including those of its subsidiaries, Sedona and Tangent,
and, as a result, there can be no assurance that the Company will be able to
reverse the operating loss trend or assure future profitability.
No Assurance of Active Public Market; Possible Volatility of
Stock Price; No Dividends. Prior to the date of this Prospectus, there has been
an active public market for the Company's Common Stock, but there can be no
assurance that an active public market will be sustained. Additionally, the
market price for the Company's Common Stock has been volatile. The Company has
not paid any cash dividends on its Common Stock and does not anticipate paying
any such dividends in the foreseeable future.
Need for Additional Funding. The Company will not receive any
of the proceeds from the sale of Shares by the Selling Shareholders. In the
event that some or all of the Warrants or outstanding options to purchase Common
Stock ("Options") were to be exercised, the Company would receive the net
proceeds upon such exercises. See "Use of Proceeds." The Company believes that
cash from operations along with the net proceeds from the exercise of the
Warrants and Options if any, together with cash in excess of $2,006,000 as of
June 28, 1996, will be sufficient to enable it to conduct its operations as
currently contemplated for a period of at least two years. However, in the event
that all or a portion of an aggregate $2,600,000 principal amount of outstanding
Convertible Notes and accrued interest thereon is not converted into Common
Stock at the option of the holders
4
<PAGE>
thereof on or prior to March 26, 1997, the Company may be required to raise
additional funds to pay the principal and interest of such unconverted
Convertible Notes. The Company also believes it may need to raise substantial
additional funds to support its long-term growth, in which case the Company may
seek additional funding through public or private sales of its securities,
including equity securities. There can be no assurance, however, that such
additional funds will be available when needed, or on terms acceptable to the
Company, if at all. See "History of Operating Losses."
Net Operating Loss Carryforwards. As of December 31, 1995, the
Company had net operating loss carryforwards ("NOLs") for federal income tax
purposes aggregating approximately $8.0 million. These NOLs, if unused, will
expire between 1998 and 2010. At December 31, 1995 the related deferred tax
asset amounts to approximately $3.7 million and has been entirely offset by a
valuation allowance of $3.7 million. As discussed above in "History of Operating
Losses," the Company has taken steps that it believes will improve its results
of operations, but there exist uncertainties as to product acceptance and the
potential market for its new products, and, as a result, there can be no
assurance that the Company will be able to reverse the operating loss trend or
assure future profitability. Also, Section 382 of the Internal Revenue Code of
1986, as amended (the "Code") imposes an annual limitation on the amount of
taxable income that may be offset by net operating loss carryforwards of a
corporation if the losses giving rise to the net operating loss carryforwards
were incurred before an "ownership change." The use by the Company of the NOLs
to offset future taxable income will be limited by Section 382 of the Code and
may be limited by other provisions of the Code. The Company believes that this
offering will not trigger an ownership change under Section 382. The Internal
Revenue Service may dispute the amount of the NOLs, may disagree with the
Company's interpretation of how Section 382 applies to limit its use of the NOLs
and may contend that limitations contained in the Code, other than those
discussed above, apply to the Company's NOLs. Therefore, no assurances can be
given with respect to the existence or potential use of the Company's NOLs.
NASDAQ Listing Requirements. For continued inclusion on the
NASDAQ System, the Company must meet certain qualification requirements. Among
these criteria are the following requirements: (1) the issue has at least two
registered and active market makers; (2) the Company has total assets of at
least $2 million; (3) the Company has capital and surplus of at least $1
million; (4) the minimum bid price per share is at least $1; (5) there are at
least 300 holders of the common stock; and (6) there are at least 100,000
publicly held shares with a market value of at least $200,000. The Company
currently meets the continued inclusion requirements of the NASDAQ System.
However, if the Company continues to suffer operating losses without additional
infusions of capital, of if NASDAQ raises its minimum listing requirements, the
Company may be subject to delisting of its Common Stock, which could have a
material adverse effect on the market price of the Common Stock.
Dependence on Key Personnel. The Company is dependent upon the
efforts, ability and experience of several key members of its management for the
successful operation and development of its business. In addition, the Company
believes that its future success will depend in large part upon its ability to
attract and retain technically qualified personnel with backgrounds in
engineering, software development, production and marketing. There can be no
assurance that the Company will be able to retain key employees. The loss of the
services of one or more key employees could have a material adverse effect on
the Company's business.
Exercise of Warrants and Options and Conversion of Series C
Stock and Convertible Notes. As of June 25, 1996, there were outstanding
Warrants to purchase 7,043,649 shares of Common Stock, of which Warrants to
purchase an aggregate of 4,580,323 shares of Common Stock were immediately
exercisable. The outstanding Warrants are exercisable at prices ranging from
$.375 to $4.00 per share. The weighted average exercise price of all outstanding
Warrants as of June 25, 1996 was approximately $2.44 per share. As of such date,
there were also outstanding Options to purchase 1,086,032 shares of Common
Stock, of which Options to purchase 936,032 shares of Common Stock were
immediately exercisable. All of these Options were issued to officers, directors
and employees of the Company and are exercisable at prices ranging from
approximately $.469 to $3.50 per share. The weighted average exercise price of
all Options outstanding as of June 25, 1996 was approximately $1.42 per share.
As of June 25, 1996 there were outstanding 125,000 shares of Series C Stock
having an aggregate liquidation preference of approximately $1,333,000, all of
which shares were subscribed for during the period from June to September in
1995. Commencing two years after the date it was subscribed and paid for each
outstanding
4
<PAGE>
share of Series C Stock is convertible into a number of shares of Common Stock
at a rate based upon 50% of the average quoted daily closing bid price of the
Common Stock for a period of 20 trading days immediately preceding the giving by
the holder to the Company of a notice of conversion, but the conversion rate
shall in no event be greater than one share of Common Stock for every $.50 of
liquidation preference of the Series C Stock or less than one share of Common
Stock for every $2.50 of liquidation preference of the Series C Stock. The
liquidation preference of the Series C Stock includes accrued and unpaid
dividends on such Series C Stock. Based upon an assumed conversion rate of one
share for every $.50 of liquidation preference, the shares of Series C Stock
outstanding as of June 25, 1996 will be convertible into an aggregate of
2,666,000 shares of Common Stock. Assuming no dividends are paid on such shares
for three years from the date of subscription and payment therefor and assuming
the same conversion rate, an aggregate of 3,100,000 of Common Stock would be
issuable in respect of such shares. As of June 25, 1996 there were outstanding
Convertible Notes in the aggregate principal amount of $2,600,000 which were
immediately convertible into Common Stock at a rate of one share of Common Stock
for an amount of principal and accrued interest of the Convertible Note equal to
the lesser of $3.00 or 65% of the average closing bid price of a share of Common
Stock during the five trading days immediately preceding the date of such
conversion. Based upon the average closing bid price of the Common Stock for the
five trading days preceding June 25, 1996, the entire outstanding principal of
the Convertible Notes was convertible into an aggregate of 1,975,308 shares of
Common Stock as of June 25, 1996. While outstanding Warrants and Options are
exercisable and the Series C Stock and Convertible Notes are convertible, the
holders thereof have the opportunity to profit from a rise in the market price
of the Common Stock. The Company may find it more difficult to raise additional
equity capital while the Warrants, Options, Series C Stock and Convertible Notes
are outstanding.
Technological Obsolescence. The Company maintains continuous
research and development programs with the goal of maintaining its software and
scanner products as technically strong competitive offerings to their respective
markets. The Company has incurred research and development expenses of
approximately $582,000, $783,000 and $770,000 which amounted to 11.7%, 15.5% and
20.1% of its total revenues for the years 1995, 1994 and 1993, respectively. The
Company anticipates research and development expenses of approximately 20% of
total revenue in 1996 and approximately 15% of total revenue in 1997. Although
the Company intends to continue its on-going research and development efforts,
the Company's competitors might succeed in developing technologies and products
that are more attractive than any that are being developed and marketed by the
Company or that would otherwise render the Company's technology and products
obsolete or noncompetitive.
Competition. The GIS, scanning and image processing industries
are highly competitive. The Company competes with a number of competitors, many
of which have substantially greater financial and marketing resources than the
Company. The Company offers an advanced line of GIS software and large format
scanners and imaging software through a variety of domestic and international
distribution channels. There can be no assurance that the Company will not
encounter competition in the future which will limit the Company's ability to
maintain and increase its position in the market for its products or otherwise
adversely affect the Company's business. The Company has only recently begun to
compete in the GIS software market and there can be no assurance that the
Company will be able to successfully compete with its more established
competitors.
USE OF PROCEEDS
In the event that all of the outstanding Warrants and Options
were to be exercised, the net proceeds to the Company upon such exercises,
estimated at approximately $18,700,000, would be used for product development,
sales and marketing expenses, working capital and for general corporate
purposes. The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholders.
Prior to expenditure, the net proceeds from the exercise of
the Warrants and Options will be invested in high grade short and intermediate
term interest bearing investments.
5
<PAGE>
RECENT DEVELOPMENTS
On March 27, 1996 the Company consummated the sale to certain
of the Selling Shareholders for an aggregate purchase price of $3,100,000, of an
aggregate of (a) $3,100,000 principal amount of the Company's 8% Convertible
Notes due March 26, 1997, (b) Warrants to purchase an aggregate of 1,400,005
Shares for $3.00 per Share (or, if less, the lowest price per Share at which any
conversion shall have occurred under any of the Convertible Notes) at any time
until March 26, 1999 and (c) Warrants to purchase an aggregate of 1,200,005
Shares for $4.00 per Share at any time until March 26, 1999. The net proceeds of
the sale of such securities are being used for working capital.
6
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth as of June 25, 1996,
information regarding the beneficial ownership of Common Stock held by the
Selling Shareholders who may resell the Shares pursuant to this Prospectus as of
such date, the number of Shares registered to permit sales from time to time by
such Selling Shareholders, and the total beneficial ownership of shares of
Common Stock if all such Shares so registered should be sold by the Selling
Shareholders.
<TABLE>
<CAPTION>
Total Number
of Shares to Total Number of
be Offered for Shares to be
Shares Beneficially Selling Beneficially Owned
Name of Selling Owned Prior to Shareholder's Upon Completion of
Shareholder Offering** Account** Offering (1)
- --------------------------------- --------------------------- ---------------------- ---------------------------
Number Percent
---------------------------
<S> <C> <C> <C> <C>
Andrew E. Trolio (2) 3,068,500(3) 611,000 2,457,500 11.6%
Howard L. Morgan (4) 179,308(5) 44,800 134,508 *
James C. Sargent (6) 106,308(7) 24,800 81,508 *
David S. Hirsch (8) 251,508(9) 112,000 139,508 *
Michael A. Mulshine (10) 405,068(11) 189,733 215,335 1.0%
William W. Rider & 99,200(12) 99,200 0 *
Sheryl S. Rider
*JTWROS*
David Green 99,200(12) 99,200 0 *
George Hooper 149,000(13) 124,000 25,000 *
Thomas J. Marquez 959,000(14) 744,000 215,000 1.0%
Thomas J. Marquez & 248,000(12) 248,000 0 *
Richard N. Mercurio,
Trustee, Marquez
Family
Trust
Richard N. Mercurio, 248,000(12) 248,000 0 *
Trustee Meredith Ann
Marquez, Present
Interest Trust
Paul Becker 25,800(15) 24,800 1,000 *
William J. Ritger (16) 230,800(17) 218,800 12,000 *
John L. Strauss 744,000(12) 744,000 0 *
Allan H. Thomas III (18) 110,000(19) 110,000 0 *
John Lammers (18) 110,000(19) 110,000 0 *
Daniel I. Ward (18) 110,000(19) 110,000 0 *
George Gray (20) 138,800(21) 110,000 28,800 *
Todd Rothermel (20) 125,000(21) 110,000 15,000 *
Kimberly Thomas (20) 120,000(22) 110,000 10,000 *
Lynn Bigelow (20) 120,000(22) 110,000 10,000 *
Tim Rimlinger (20) 120,000(22) 110,000 10,000 *
Doug Rubinstein (20) 120,000(22) 110,000 10,000 *
Andrew Field (20) 120,000(22) 110,000 10,000 *
Gregory B. Smith (20) 120,000(22) 110,000 10,000 *
C&F Global Enterprises, 222,500(19) 222,500 0 *
Inc. (23)
Osprey Partners (24) 567,180(25) 440,000 127,180 *
William C. Hubbard (26) 194,000(27) 174,000 20,000 *
7
<PAGE>
Sales Resources 95,000(19) 25,000 70,000 *
Consultants, Inc. (28)
Robert J. Bornhofen (29) 800,000(30) 800,000 0 *
Robert A. Garber (31) 300,000(19) 300,000 0 *
Ronald J. Nowak (32) 800,000(30) 800,000 0 *
Bryan Finkel (33) 200,000(19) 200,000 0 *
Killeba Holdings, S.A. 1,328,046(34) 1,328,046 0 *
Abraham S. Elias 46,481(35) 46,481 0 *
Mueller Trading LP 6,639(36) 6,639 0 *
Ruthy Halima 6,639(36) 6,639 0 *
Wolowitz Pension Fund 19,920(37) 19,920 0 *
Moshe Mueller 6,639(36) 6,639 0 *
Clifton Management & 6,639(36) 6,639 0 *
Trading Inc.
Samuel Shapiro 6,639(36) 6,639 0 *
OHR Somayach 33,200(38) 33,200 0 *
Tanenbaum Education
Center
Mirrer Yeshiva Central 33,200(38) 33,200 0 *
Institute
Rita Folger 66,402(39) 66,402 0 *
Seth Antine 13,280(40) 13,280 0 *
Mark Nordlicht 212,487(41) 212,487 0 *
Jules Nordlicht 332,012(42) 332,012 0 *
Chesed Avraham 132,805(43) 132,805 0 *
Mark Fisher 66,402(39) 66,402 0 *
Leonard J. Adams 66,402(39) 66,402 0 *
Wayne Saker 66,402(39) 66,402 0 *
Israel Trading Fund, Ltd. 199,207(44) 199,207 0 *
Yeshiva Beth Mikroh 66,402(39) 66,402 0 *
Dalton Trading, S.A. 531,218(45) 531,218 0 *
Reuven Dessler 66,402(39) 66,402 0 *
The NAIS Corp. 6,639(36) 6,639 0 *
American Stock Transfer 132,805(43) 132,805 0 *
& Trust Company
Laura Huberfeld/Naomi 664,023(46) 664,023 0 *
Bodner Partnership
</TABLE>
* Indicates less than 1%.
** Except as otherwise noted, all shares are beneficially owned, and sole
voting and investment power is held by the person named. Includes shares
issuable upon the conversion of any shares of Series C Stock (and accrued
dividends on such shares for three years from the date of issuance) held by
the person named at an assumed conversion rate which would result in the
maximum number of shares of Common Stock being issued upon such conversion
(not including adjustments in the conversion rate made as a result of
provisions of the Series C Stock intended to protect the holder against
dilution). Includes shares issuable upon the
8
<PAGE>
conversion of the principal (and accrued interest equal to 8% of the
original principal of a Convertible Note) of any Convertible Note held by
the person named at an assumed conversion rate of one share of Common Stock
for each $1.95 of outstanding principal and accrued interest of the
Convertible Note.
(1) Assumes the issuance and sale of all shares listed in the "Total Number of
Shares to be Offered for Selling Shareholder's Account" column. Also assumes
that none of the Selling Shareholders sell securities not listed in such
column or purchase additional securities.
(2) Mr. Trolio is Chairman of the Board, Chief Executive Officer, President and
a Director of the Company.
(3) Includes 112,860 shares held by Mr. Trolio's wife, as to all of which shares
Mr. Trolio disclaims beneficial ownership; 592,500 shares issuable upon
exercise of outstanding Warrants and 300,000 shares issuable upon exercise
of outstanding Options; 220,000 shares issuable upon exercise of outstanding
Warrants in the name of Lin Lea Corporation which is a company owned by Mr.
Trolio; and 500,000 shares issuable upon conversion of the Company's Class A
Convertible Preferred Stock Series A of which 280,000 shares and 220,000
shares are in the names of Mr. Trolio and Lin Lea Corporation, respectively;
and 496,000 shares issuable upon conversion of Series C Stock.
(4) Dr. Morgan is a Director of the Company
(5) Includes 57,222 shares issuable upon exercise of outstanding Options and
24,800 shares issuable upon conversion of Series C Stock.
(6) Mr. Sargent is a Director of the Company.
(7) Includes 71,508 shares issuable upon exercise of outstanding Options and
24,800 shares issuable upon conversion of Series C Stock.
(8) Mr. Hirsch is a Director of the Company.
(9) Includes 56,508 shares issuable upon exercise of outstanding Options, 50,000
shares issuable upon exercise of outstanding Warrants and 62,000 shares
issuable upon conversion of Series C Stock.
(10) Mr. Mulshine is Secretary and a Director of the Company.
(11) Includes 17,930 shares held jointly by Mr. Mulshine and his wife; 255,333
shares issuable upon exercise of outstanding Warrants; 44,286 shares
issuable upon exercise of outstanding Options; and 12,400 shares issuable
upon conversion of Series C Stock. Does not include 567,180 shares issuable
upon exercise of Warrants held by Osprey Partners of which Mr. Mulshine is
a principal.
(12) All of such shares are issuable upon conversion of Series C Stock.
(13) Includes 124,000 shares issuable upon conversion of Series C Stock.
(14) Includes 744,000 shares issuable upon conversion of Series C Stock.
(15) Includes 24,800 shares issuable upon conversion of Series C Stock.
(16) Mr. Ritger is a registered security analyst and is a principal of The
Research Works, Inc., an analyst firm which prepared and distributed two
analyst reports with regard to the Company pursuant to an agreement to
provide limited analyst coverage.
(17) Includes 82,000 shares issuable upon exercise of outstanding Warrants and
148,800 shares issuable upon conversion of Series C Stock.
9
<PAGE>
(18) The Selling Shareholder was a shareholder of Sedona GeoServices, Inc. at
the time of its acquisition by the Company in July 1995.
(19) All of such shares are issuable upon exercise of outstanding Warrants.
(20) The Selling Shareholder was a shareholder of Sedona GeoServices, Inc. at
the time of its acquisition by the Company in July 1995 and became an
employee of the Company at such time.
(21) Includes 110,000 shares issuable upon exercise of outstanding Warrants and
15,000 shares issuable upon exercise of outstanding Options.
(22) Includes 110,000 shares issuable upon exercise of outstanding Warrants and
10,000 shares issuable upon exercise of outstanding Options.
(23) C&F Global Enterprises, Inc. is a business and sales development firm that
has provided certain consulting services to the Company.
(24) Osprey Partners provided consulting and investment banking services to the
Company. Michael A. Mulshine, Secretary and a Director of the Company, is a
principal of Osprey Partners.
(25) Includes 684,363 shares issuable upon exercise of outstanding Warrants.
(26) Mr. Hubbard is an Executive Vice President of Marketing & Sales of the
Company.
(27) Includes 20,000 shares issuable upon exercise of outstanding Options and
81,000 shares issuable upon exercise of outstanding Warrants.
(28) Sales Resources Consultants, Inc. provided certain sales and business
consulting services to the Company.
(29) Mr. Bornhofen is a Vice President of Tangent, a subsidiary of the Company.
(30) Includes 300,000 shares issuable upon exercise of outstanding Warrants.
(31) Mr. Garber is Vice President and Chief Operating Officer of Tangent and a
director of the Company.
(32) Mr. Nowak is a Senior Vice President of Tangent.
(33) Mr. Finkel is a management consultant that has been retained by the
Company.
(34) Includes 224,763 shares issuable upon conversion of a Convertible Note in
the principal amount of $500,000 and 774,200 shares issuable upon exercise
of outstanding Warrants.
(35) Includes 19,385 shares issuable upon conversion of a Convertible Note in
the principal amount of $35,000 and 27,096 shares issuable upon exercise of
outstanding Warrants.
(36) Includes 2,769 shares issuable upon conversion of a Convertible Note in the
principal amount of $5,000 and 3,870 shares issuable upon exercise of
outstanding Warrants.
(37) Includes 8,308 shares issuable upon conversion of a Convertible Note in the
principal amount of $15,000 and 11,612 shares issuable upon exercise of
outstanding Warrants.
(38) Includes 13,846 shares issuable upon conversion of a Convertible Note in
the principal amount of $25,000 and 19,354 shares issuable upon exercise of
outstanding Warrants.
10
<PAGE>
(39) Includes 27,692 shares issuable upon conversion of a Convertible Note in
the principal amount of $50,000 and 38,710 shares issuable upon exercise of
outstanding Warrants.
(40) Includes 5,538 shares issuable upon conversion of a Convertible Note in the
principal amount of $10,000 and 7,742 shares issuable upon exercise of
outstanding Warrants.
(41) Includes 88,615 shares issuable upon conversion of a Convertible Note in
the principal amount of $160,000 and 123,872 shares issuable upon exercise
of outstanding Warrants.
(42) Includes 138,462 shares issuable upon conversion of a Convertible Note in
the principal amount of $250,000 and 193,550 shares issuable upon exercise
of outstanding Warrants.
(43) Includes 55,385 shares issuable upon conversion of a Convertible Note in
the principal amount of $100,000 and 77,420 shares issuable upon exercise
of outstanding Warrants.
(44) Includes 83,077 shares issuable upon conversion of a Convertible Note in
the principal amount of $150,000 and 116,130 shares issuable upon exercise
of outstanding Warrants.
(45) Includes 221,538 shares issuable upon conversion of a Convertible Note in
the principal amount of $400,000 and 309,680 shares issuable upon exercise
of outstanding Warrants.
(46) Includes 276,923 shares issuable upon conversion of a Convertible Note in
the principal amount of $500,000 and 387,100 shares issuable upon exercise
of outstanding Warrants.
PLAN OF DISTRIBUTION
During the period from June to September 1995 the Company
entered into Subscription Agreements with certain Selling Shareholders pursuant
to which the Company issued an aggregate of 125,000 shares of Series C Stock.
Under the Subscription Agreements the Company became obligated to register the
Common to be issued upon conversion of the Series C Stock. Similarly, under an
Agreement and Plan of Reorganization dated as of December 29, 1995 pursuant to
which the Company acquired all of the outstanding capital stock of Tangent
Engineering, Inc. the Company issued to certain other Selling Shareholders
Warrants to purchase the Company's Common Stock and agreed to register the
Common Stock to be issued upon exercise of such Warrants. In addition, in
connection with a private placement of Convertible Notes and Warrants completed
in April 1996 the Company became obligated to register the Common Stock to be
issued upon conversion of the Convertible Notes and exercise of the Warrants.
The remainder of the Common Stock covered in this Prospectus has been included
as a result of the exercise of piggy-back registration rights granted to certain
of the Selling Shareholders.
The Shares owned by or to be acquired by the Selling
Shareholders upon exercise of Options or Warrants may be sold from time to time
by the Selling Shareholders, or by pledgees, donees, transferees or other
successors in interest.
The Selling Shareholders may sell some or all of the Shares in
transactions involving broker-dealers, who may act as agent or acquire the
Shares as principal. Any broker-dealer participating in such transactions as
agent may receive commissions from the Selling Shareholders (and, if they act as
agent for the purchaser of such Shares, from such purchaser). Usual and
customary brokerage fees will be paid by the Selling Shareholders.
Broker-dealers may agree with the Selling Shareholders to sell a specified
number of Shares at a stipulated price per Share and, to the extent such a
broker-dealer is unable to do so acting as agent for the Selling Shareholders,
to purchase as principals any unsold Shares at the price required to fulfill the
respective broker- dealer's commitment to the Selling Shareholders.
Broker-dealers who acquire Shares as principals may thereafter resell such
Shares from time to time in transactions (which may involve cross and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at
11
<PAGE>
negotiated prices, and in connection with such resales may pay to or receive
from the purchases of such Shares commissions. The Selling Shareholders also may
sell some or all of the Shares directly to purchasers without the assistance of
any broker-dealer.
The Company is bearing all costs relating to the registration
of the Shares. Any commissions or other fees payable to broker-dealers in
connection with any sale of the Shares will be borne by the Selling Shareholders
or other party selling such Shares.
Upon the Company's being notified by the Selling Shareholders
that any material arrangement has been entered into with a broker-dealer or
underwriter for the sale of a material portion of the Shares covered by this
Prospectus, a post-effective amendment will be filed setting forth the name of
the participating broker-dealer(s) or underwriters, the number of Shares
involved, the price at which such Shares were sold by the Selling Shareholders,
the commissions paid or discounts or concessions allowed by the Selling
Shareholders to such broker-dealer(s) or underwriters, and where applicable,
that such broker-dealer(s) or underwriters did not conduct any investigation to
verify the information set out in this Prospectus. Any future offering via
broker-dealers or underwriters of a material portion of the Shares covered by
this Prospectus would be contingent upon the effectiveness of such
post-effective amendment and clearance by the National Association of Securities
Dealers, Inc. of the proposed underwriting compensation arrangements.
LEGAL OPINION
The validity of the Shares offered hereby will be passed upon
for the Company by Dilworth, Paxson, Kalish & Kauffman LLP.
EXPERTS
The financial statements and schedule incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP, and
Ehrhardt, Keefe, Steiner & Hottman P.C. independent certified public
accountants, to the extent and for the periods set forth in their reports
incorporated herein by reference, and are incorporated herein in reliance upon
such reports given upon the authority of said firms as experts in auditing and
accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the
Company with the Commission are incorporated by reference in this Prospectus.
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(b) The Company's Current Report on Form 8-K, dated January
12, 1996, as amended March 11, 1996.
(c) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
(d) All other reports pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), since the
end of the Company's fiscal year ended December 31, 1995.
(e) The description of the Company's Common Stock which is
contained in the Company's Registration Statement on Form 8-B filed under the
Exchange Act, including any amendment or reports filed for the purpose of
updating such description.
All reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
prior to the filing of a post-effective amendment which indicates that all
12
<PAGE>
securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents.
Any statement contained in a document, all or a portion of
which is incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained or incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom
this Prospectus is delivered a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written requests for copies should be directed to
Joseph N. Battista, Jr., Vice President and Chief Financial Officer,
Scan-Graphics, Inc., 700 Abbott Drive, Broomall, PA 19008.
13
<PAGE>
==========================================================
---------------------------
TABLE OF CONTENTS
Page
Available Information.............................. 2
The Company........................................ 3
Risk Factors....................................... 3
Use of Proceeds.................................... 5
Recent Developments................................ 6
Selling Shareholders............................... 7
Plan of Distribution .............................. 11
Legal Opinion...................................... 12
Experts............................................ 12
Incorporation of Certain
Documents by Reference............................. 12
---------------------------
==========================================================
========================================================
11,820,763 Shares
SCAN-GRAPHICS, INC.
Common Stock
---------------------------
PROSPECTUS
---------------------------
, 1996
========================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
Registration fee - Securities and Exchange Commission $12,228
Printing........................................................... 2,000
Accounting fees.................................................... 7,500
Legal fees......................................................... 22,000
Miscellaneous...................................................... 900
-------
Total......................................................... $44,628
- ---------------
* No portion of these expenses will be borne by the Selling Shareholders
Item 15. Indemnification of Directors and Officers.
The Pennsylvania Business Corporation Law of 1988, as amended (the
"BCL"), permits a corporation to indemnify its directors and officers against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in connection with any
pending, threatened or completed action or proceeding, and permits such
indemnification against expenses (including attorney's fees) incurred by them in
connection with any pending, threatened or completed derivative action, if the
director or officer has acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. Pennsylvania law requires that a corporation
indemnify its directors and officers against expenses (including attorney's
fees) actually and reasonably incurred by them in connection with any action or
proceeding, including derivative actions, to the extent that such person has
been successful on the merits or otherwise in defense of the action or in
defense of any claim, issue or matter therein. Furthermore, Pennsylvania law
provides that expenses incurred in defending any action or proceeding may be
paid by the corporation in advance of the final disposition upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined that the director or officer is not entitled to be
indemnified by the corporation.
In Pennsylvania, the statutory provisions for indemnification and
advancement of expenses are non-exclusive with respect to any other rights, such
as contractual rights or under a by-law or vote of shareholders or disinterested
directors, to which a person seeking indemnification or advancement of expenses
may be entitled. Such contractual or other rights may, for example, under
Pennsylvania law, provide for indemnification against judgments, fines and
amounts paid in settlement incurred by the indemnified person in connection with
derivative actions. Pennsylvania law permits such derivative action
indemnification in any case except where the act or failure to act giving rise
to the claim for indemnification is determined by a court to have constituted
willful misconduct or recklessness.
II-1
<PAGE>
The provisions of Article VII of the Company's By-laws require or
authorize indemnification of officers and directors in all situations in which
it is not expressly prohibited by law. At the present time, the limitations on
indemnification would be dictated by the BCL and related legislation, which
prohibit indemnification where the conduct is determined by a court to
constitute willful misconduct or recklessness. Subject to these statutory
limitations, the By-laws specifically authorize indemnification against both
judgments and amounts paid in settlement of derivative suits. These provisions
also authorize indemnification for negligence or gross negligence and for
punitive damages and certain liabilities incurred under the federal securities
laws. The By-laws also prohibit indemnification attributable to receipt from the
Company of a personal benefit to which the recipient is not legally entitled.
Under the indemnification provisions of the By-laws a person who has
incurred an indemnifiable expense or liability would have a right to be
indemnified, and that right would be enforceable against the Company as long as
indemnification is not prohibited by law. To the extent indemnification is
permitted only for a portion of a liability, the By-laws also require the
Company to indemnify such portion.
Section 7.03 of the By-laws provides that the financial ability of a
person to be indemnified to repay an advance of indemnifiable expenses is not a
prerequisite to the making of the advance.
Section 7.06 of the By-laws provides that any dispute concerning a
person's right to indemnification or advancement of expenses thereunder will be
resolved only by arbitration by three persons, each of whom is required to have
been a director or executive officer of a corporation whose shares, during at
least one year of such service, were listed on the New York Stock Exchange or
the American Stock Exchange or were quoted on the NASDAQ system. The Company
also is obligated to pay the expenses (including attorney's fees) incurred by
any person who is successful in the arbitration. The arbitration provisions
effectively waive the Company's right to have a court determine the
unavailability of indemnification in cases involving willful misconduct or
recklessness.
Section 7.07 of the By-laws provides that in circumstances in which
indemnification is held to be unavailable, the Company must contribute to the
liabilities to which a director or officer may be subject in such proportion as
is appropriate to reflect the intent of the indemnification provisions of the
By-laws. Since the foregoing provisions purport to provide partial relief to
directors and officers in circumstances in which the law or public policy is
construed to prohibit indemnification, substantial uncertainties exist as to the
enforceability of the provisions in such circumstances.
Section 7.10 of the By-laws also contains provisions stating that the
indemnification rights thereunder are not exclusive of any other rights to which
the person may be entitled under any statute, agreement, vote of shareholders or
disinterested directors or other arrangement.
All future directors and officers of the Company automatically would
be entitled to the protections of the indemnification provisions of the By-laws
at the time they assume office.
II-2
<PAGE>
Pennsylvania law permits a corporation to purchase and maintain
insurance on behalf of any director or officer of the corporation against any
liability asserted against the director or officer and incurred in such
capacity, whether or not the corporation would have the power to indemnify the
director or officer against such liability. The directors and officers of the
Company are not currently covered as insureds under a directors' and officers'
liability insurance policy.
Item 16. Exhibits.
Number Description
- ------ -----------
*4.1 Articles of Incorporation. Incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K
dated June 15, 1992.
*4.2 By-laws. Incorporated by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K, dated June 15,
1992.
**4.3 Form of Subscription Agreement for Series C Stock.
4.4 Agreement and Plan of Reorganization dated as of December
29, 1995 between the Company, Robert J. Bornhofen and
Ronald J. Nowak. Incorporated by reference to the Exhibit
to the Company's Current Report on Form 8-K dated January
12, 1996.
**4.5 Form of Private Placement Purchase Agreement for
Convertible Notes and Warrants.
*5.1 Opinion of Dilworth, Paxson, Kalish & Kauffman LLP.
**23.1 Consent of BDO Seidman, LLP.
*23.3 Consent of Dilworth, Paxson, Kalish & Kauffman LLP is
included in Exhibit 5.1.
**23.2 Consent of Ehrhardt, Keefe, Steiner & Hottman P.C.
*24.1 Powers of Attorney (contained on signature page of
Registration Statement).
- ------------------------------------
* Previously filed
** Filed herewith
II-3
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes 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 this 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 this
Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in the Registration Statement including
(but not limited to) any addition of a managing underwriter, provided,
however, that he undertakings set forth in paragraphs (i) and (ii) above do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) The undersigned registrant hereby undertakes that, for the purpose
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relative to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities being
registered hereby which remain unsold at the termination of the offering.
(4) The undersigned registrant hereby undertakes that, for the purpose
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement 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.
(5) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver or cause to be
delivered to each person to whom the
II-4
<PAGE>
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.
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 Securities Act of 1933 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 is 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Broomall, Commonwealth of Pennsylvania, on July
, 1996.
SCAN-GRAPHICS, INC.
By: /s/Andrew E. Trolio
-------------------------------------
Andrew E. Trolio,
President, Chief Executive Officer
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 stated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------------- ----------------------------------------- --------------------------
<S> <C> <C>
/s/Andrew E. Trolio President and Chief July __, 1996
- -------------------------------------------- Executive Officer and
Andrew E. Trolio Chairman of the Board
* Vice President-Finance, July __, 1996
- -------------------------------------------- Chief Financial Officer
Joseph N. Battista, Jr. (Principal Financial and
Accounting Officer)
* Director and Secretary July __, 1996
- --------------------------------------------
Michael A. Mulshine
* Director July __, 1996
- --------------------------------------------
Howard L. Morgan
* Director July __, 1996
- --------------------------------------------
David S. Hirsch
* Director July __, 1996
- --------------------------------------------
James C. Sargent
* Director July __, 1996
- --------------------------------------------
Robert A. Garber
Director
- --------------------------------------------
R. Barry Borden
/s/Andrew E. Trolio July __, 1996
- --------------------------------------------
*Andrew E. Trolio
Attorney-in-fact
</TABLE>
Exhibit 4.3
SUBSCRIPTION AGREEMENT
June 7, 1995
Scan-Graphics, Inc.
700 Abbott Drive
Broomall, PA 19008
Re: Private Placement of 100 Units, each Unit consisting of
1,000 Shares of Cumulative Convertible Preferred Stock,
Class A/Series C, par value $10.00 per share (the "Class
A/Series C Preferred Stock"), of Scan-Graphics, Inc. (the
"Company") of the Company in the principal amount of
$10,000 per Unit. The Term Sheet attached hereto as
Exhibit A describes the detailed characteristics of this
transaction and the Class A/Series C Preferred Stock.
Gentlemen:
1. Subscription. The undersigned (the "Subscriber") hereby irrevocably
subscribes for and agrees to purchase for $10,000 per Unit the number of Units
(not less than one Unit) set forth on the signature page of this Agreement.
2. Tender of Cash Consideration. The Subscriber hereby tenders to the
Company a check payable to the order of "Scan-Graphics, Inc." in the amount of
the number of Units subscribed for multiplied by $10,000.
3. Acceptance or Rejection by the Company. Upon receipt, the Company
will review this Agreement for acceptance or rejection. If this subscription is
accepted, the Company will execute a copy of this Subscription Agreement and
return it to the Subscriber and thereafter, this Agreement shall become
effective, as between the Company and the Subscriber, and the subscription price
shall be paid to the Company. If this subscription is rejected, the subscription
price will be returned to the Subscriber as soon as possible, without interest
or deduction, and this subscription shall be rendered null and of no further
force and effect. The Company reserves the right in its sole and absolute
discretion to accept subscriptions for more than 100 Units, to accept
subscriptions for fractional Units and to reject any subscription, in whole or
in part.
4. Accredited Investor. The securities being offered pursuant to the
terms of this Subscription Agreement are only being offered to "accredited
investors" as those words are defined by Regulation D promulgated by the
Securities and Exchange Commission, effective April 15, 1982 - 47FR 11251, which
includes any natural person whose individual net worth or joint net worth with
that person's spouse at the time of his purchase of these securities exceeds
$1,000,000; any natural person who has an individual income in excess of
$200,000 in each of the last two most recent years or joint income with that
person's spouse in excess of $300,000, in each of those years and has a
reasonable expectation of reaching that same income level in the current year;
and any director or executive officer of the issuer of the securities being
hereby offered.
5. Acknowledgments, Representations and Covenants of the Subscriber.
(a) The Subscriber acknowledges that it is an "accredited investor" and
is purchasing the Units without being furnished any offering literature or
prospectus and that this transaction has not been scrutinized by the Securities
and Exchange Commission (the "Commission") or any officer of any jurisdiction.
(b) The Subscriber acknowledges that all documents, records and books
pertaining to this investment have been made available to the Subscriber and
understands that the books and records of the Company will be available prior to
its execution hereof, upon reasonable notice, for its inspection during
reasonable business hours at the Company's principal office.
(c) The Subscriber is aware of the risks associated with an investment
in the securities of the Company; and the Subscriber confirms that all
documents, records and books pertaining to this investment requested by the
Subscriber have been made available to such Subscriber and any persons retained
to advise it.
(d) The Subscriber further acknowledges, represents and warrants that
it understands that neither the Units, the Preferred Stock, nor the Common Stock
underlying the Preferred Stock has been registered under the Securities Act of
1933, as amended (the "Act"), or any state securities laws, and such securities
are being offered and sold under the exemption from registration provided by
Rule 504 promulgated by the Commission under the Act, as a limited offering not
to exceed $1,000,000.
6. Risk Factors. In addition to the information contained in this
Subscription Agreement and in the other documents, records and books pertaining
to this investment that have been made available to the Subscriber, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the securities offered hereby.
(a) Need for Working Capital. The Company has incurred a deficiency in
net cash flow from operating activities to date. The Company has been dependent
for the financing of its working capital requirements on private sales of its
securities to individual investors and groups of investors and the receipt of
proceeds from the exercise of stock options and warrants. The Company intends to
continue its practice of funding its working capital requirements through sales
of securities to the extent that it is unable to meet its working capital
requirements by generating sufficient income from operations.
(b) Dilution. As of April 17, 1995, the Company had outstanding 500,000
shares of Class A Convertible Preferred Stock Series A, par value $2.00 per
share, and 8,718,812 shares of Common Stock, par value $0.001 per share. In the
event the all of the Units being offered herein are purchased, and all shares of
Preferred Stock underlying these Units are converted to common stock at the
minimum conversions price of $0.50 per share, such conversion would result in
the issuance of 2,000,000 shares of common stock, or a 17.8% dilution of the
current shares issued and outstanding.
7. Acknowledgments, Representations and Covenants of the Company. By
its acceptance of this subscription, the Company hereby acknowledges, represents
and warrants to the Subscriber as follows:
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has all requisite corporate power and authority to own and lease its
properties, to carry on its business as presently conducted and as proposed to
be conducted and to carry out the transactions contemplated hereby. The Company
is qualified as a foreign corporation in all jurisdictions wherein the character
of the property owned or leased or the nature of the activities conducted by it
makes such qualification necessary.
(b) Capitalization.
(i) The authorized capital stock of the Company as of the date
hereof consists of 50,000,000 shares of Common Stock, $.001 par value per share
and 500,000 shares Cumulative Convertible Preferred Class A/Series A, $2.00 par
value per share (the "Class A/Series A Preferred Stock"), and Cumulative
Convertible Preferred Stock Class A/Series C, $10.00 par value per share (the
"Class A/Series C Preferred Stock"). The number of shares of Common Stock, Class
A/Series A Preferred Stock, and Class A/Series C Preferred Stock that will be
issued and outstanding or reserved for issuance after the sale of all 100 Units
will not exceed 8,718,812, 500,000, and 100,000 shares, respectively. All of the
issued and outstanding shares of Common Stock, Class A/Series A Preferred Stock,
and Class A/Series C Preferred Stock have been duly authorized and validly
issued and are fully paid and nonassessable.
(ii) Upon consummation of the sale of the Unit(s) to the Subscriber
there will be (x) no preemptive or similar rights to purchase or otherwise
acquire shares of capital stock of the Company; (y) no agreement, restriction or
encumbrance (such as a right of first refusal, right of first offer, etc.) with
respect to the sale or voting of any shares of the Company's capital stock
(whether outstanding or issuable upon conversion or exercise of outstanding
securities); and (z) no obligation on the part of the Company (contingent or
other) to purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or make any distribution in respect thereof, except that
the Company shall pay an annual Dividend, paid quarterly in the amount of 8% of
the principal amount of the Units. Additionally, each Unit shall represent the
equivalent of 20,000 shares of Common Stock in voting power in matters brought
before the Shareholders.
(c) Equity Investments The Company does not presently have any
subsidiaries, nor does it presently own any capital stock or other proprietary
interest, directly or indirectly, in any corporation, association, trust,
partnership, joint venture or other entity.
(d) Financial Statements. The audited balance sheet of the Company at
December 31, 1994 (the "Balance Sheet") and the related statement of income,
accumulated deficit and cash flow for the year then ended (together with the
notes thereto, if any): (A) are in accordance with the books and records of the
Company; (B) are complete and correct in all material respects; (C) present
fairly the financial position and results of operations of the Company as of the
date and for the period indicated; and (D) have been prepared in accordance with
generally accepted accounting principles consistently applied.
(e) Absence of Undisclosed Liabilities. Except as reflected at December
31, 1994, except for obligations incurred in the normal course of business which
are not required to be reflected, reserved against, accrued for, or otherwise
disclosed on the Balance Sheet in order for the Balance Sheet to fairly present
the financial condition of the Company at December 31, 1994, in accordance with
generally accepted accounting principles (i) the Company had no liabilities of
any nature (matured or unmatured, fixed or, to the best knowledge of the
Company, contingent), which, individually or in the aggregate are material to
the Company, which were not provided for on the Balance Sheet, and (ii) all
reserves established by the Company and set forth on the Balance Sheet were
adequate in all material respects. There are no undisclosed loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
("Statement No. 5) issued by the Financial Accounting Standards Board in March,
1975) which are not adequately provided for in the Balance Sheet as required by
Statement No. 5.
(f) Absence of Changes. Since December 31, 1994, there has not been (i)
any material adverse change in the financial condition, results of operations,
assets, liabilities or business of the Company taken as a whole, (ii) any
liabilities or obligations, which, individually or in the aggregate, are
material to the Company, of any nature whatsoever (contingent or otherwise)
incurred by the Company, other than current liabilities or obligations incurred
in the ordinary course of business, (iii) any cancellation of any debts or
claims held by the Company, in either case having a value in excess of $10,000
individually or $25,000 in the aggregate, (iv) for any payment of dividends on,
or other distributions with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Company, or any agreement
or commitment therefor, (v) any issuance of any stock, bonds or other securities
of the Company except as contemplated by this Agreement, (vi) any sale,
assignment, transfer or other disposition (other than in the ordinary course of
business) of any tangible or intangible assets of the Company, having a value in
excess of $10,000 individually or $25,000 in the aggregate, (vii) any loan by
the Company to any officer, director, employee or stockholder of the Company, or
any agreement or commitment therefor, other than travel advances or other
advances not in excess of $500 as to any such person or $25,000 as to all such
persons, (viii) any extraordinary increase, direct or indirect, in the
compensation paid or payable to any officer, director, employee or agent of the
Company or (ix) any change in the accounting methods or practices followed by
the Company or any change in depreciation or amortization policies or rates
theretofore adopted.
(g) Burdensome Restrictions. The Company is not obligated under any
contract or agreement or subject to any charter or other corporate restriction
which, as of the date hereof, materially and adversely affects its business,
properties, assets or condition (financial or otherwise).
(h) Patents, Trademarks, Etc. The Company owns or has a license to use
the patents, trademarks, trade names, servicemarks, copyrights and licenses,
without any known conflict with the rights of others, necessary or used in the
conduct of the Company's business as now conducted and as presently proposed to
be conducted. No person has made or, to the best knowledge of the Company,
threatened to make any claim or claims that the operation of the Company are in
violation or infringement of any patent, patent license, trade name, trademark,
servicemark, brandmark, brand name, copyright, know-how or other proprietary or
trade rights of any third party; and the Company does not know of any basis for
any such claim or claims which, singly or in the aggregate, would have a
material adverse effect on the Company.
(i) Litigation. There are no asserted actions, suits, claims,
investigations or legal or administrative or arbitration proceedings pending,
or, to the best knowledge of the Company, threatened against or affecting the
Company, whether at law or in equity, whether civil or criminal in nature or
whether before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which has or might have a material adverse effect on the Company's
financial condition or business; and the Company does not know, or have any
reason to know, of any basis for any such action, suit, claim, investigation or
proceeding. There are no orders, judgments or decrees of any court or
governmental agency which, to the best knowledge of the Company, apply to the
Company.
(j) No Defaults. The Company is not in default (i) under its
Certificate of Incorporation or its By-Laws, in each case as amended, (ii) under
any material indenture, mortgage, lease agreement, license, contract, purchase
order or other instrument to which the Company is a party or by which it or any
of its property is bound or affected or (iii) to the best knowledge of the
Company with respect to any order, writ, injunction or decree of any court or
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. To the best
knowledge of the Company, there exists no condition, event or act which
constitutes, or which after notice, lapse of time or both could constitute, such
a default.
(k) Employment of Officers, Employees and Consultants. To the best
knowledge of the Company, no third party has the right to assert any valid claim
against the Company with respect to (i) the continued employment by, or
association with, the Company of any of the present officers, key employees of
or consultants to the Company (collectively, the "Designated Persons"), or (ii)
the use by the Company or any of the Designated Persons in connection with their
activities for or on behalf of the Company of any information which the Company
or any of the Designated Persons would be prohibited from using under any prior
agreements or arrangements or any laws applicable to unfair competition, trade
secrets or proprietary information and where such prohibition would be
materially detrimental to the business of the Company. There are no
controversies known to the Company between the Company and any employees which
might reasonably be expected to materially and adversely affect the conduct of
the business of the Company or any unresolved labor union grievances or unfair
labor practices or labor arbitration proceedings pending or threatened relating
to the Company and, to the best knowledge of the Company, there are not any
organizational efforts presently being made or threatened involving any of the
Company's employees.
(l) Taxes. The Company has filed, or had duly and timely filed on its
behalf, or will file all Federal, state, local and foreign tax returns that are
required to be filed by it (or with respect to it) on or prior to the
consummation of the sale of the Unit(s) to the Subscriber, the failure to file
which would have a material and adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Company, and all such
returns are true and complete. The Company has paid or made adequate provision
for the payment of all taxes, assessments and other governmental charges
pursuant to such returns with respect to the periods covered by such returns or
pursuant to any assessments received by it (or proposed assessments of which the
Company has received actual notice) or which it is obligated to withhold from
amounts owing to any employee, creditor or third party. The provisions for taxes
on the Balance Sheet as of December 31, 1994 are sufficient for the payment of
all accrued and unpaid Federal, state, local and foreign taxes, assessments and
other governmental charges (including any penalties, interest and fines with
respect thereto).
(m) Compliance. The Company has obtained (or has applied for and has no
reason to believe and does not believe it will not obtain in due course) all
governmental approvals, authorizations, consents, licenses and permits necessary
or required to conduct its business as presently conducted, the failure to
obtain which would have a material and adverse effect on the business,
properties or assets or condition (financial or otherwise) of the Company. The
Company, to the best of its knowledge, is presently and at all times since
inception has been in all material respects in compliance with all Federal,
state, local or foreign laws, ordinances, regulations and orders (including,
without limitation, those relating to environmental protection, occupational
safety and health, Federal securities laws, equal employment opportunity,
consumer protection, credit reporting, "truth-in-lending", warranties and trade
practices) applicable to its business, the failure to comply with which could
reasonably be expected to have a material adverse effect on the Company; and all
such licenses and permits are in full force and effect and no material
violations exist in respect of any such licenses or permits and no proceeding is
pending or, to the best knowledge of the Company, are threatened, seeking to
revoke or limit any thereof. To the best knowledge of the Company, the real
properties owned or leased by the Company are used and operated in compliance
and conformity with all applicable leases, contracts, commitments, licenses and
permits, where the failure so to comply and conform would, in the aggregate,
materially adversely affect the operations or condition (financial or other) of
the Company.
(n) Authorization of Agreement. The execution, delivery and performance
of this Agreement by the Company has been duly authorized by all requisite
corporate action, and this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
The execution, delivery and performance by the Company of this Agreement will
not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-Laws of the Company, or any
provision of any indenture, agreement or other instrument by which the Company
or its respective properties or assets is bound or affected, or in conflict
with, or will result in a breach of or constitute (with due notice or lapse of
time of both) a default under any such indenture, agreement or other instrument,
or will result in the creation of imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the properties or assets of the Company or
the Subsidiary.
(o) Offerees. The offer, sale and issuance of the Common Stock in
conformity with the terms of the Agreement constitute transactions exempt from
Section 5 of the Act and from any applicable state qualification or registration
requirements.
(p) No Consent or Approval Required. (i) No consent of any person and
(ii) except for approvals required under state securities or blue sky laws (all
of which have been obtained), no consent, approval or authorization of, or
declaration to or filing with, any governmental or regulatory authority is
required for the valid authorization, execution and delivery by the Company of
this Agreement, or for the valid authorization, issuance and delivery of the
Units to the Subscriber pursuant to this Agreement other than those consents,
approvals, authorizations, declarations or filings which have been obtained or
made, as the case may be.
8. Survival of Acknowledgments, Representations, Warranties and
Covenants. The Subscriber agrees that the acknowledgments, representations,
warranties and covenants made in Section 4 hereof shall survive any purchase by
it of the Units, as well as, investigation made by it or any acceptance or
rejection of this subscription. The Company agrees that the acknowledgments,
representations, warranties and covenants made by it in Section 5 hereof shall
survive the execution and delivery of this Agreement and the issuance, sale and
delivery of the Units pursuant hereto, except that the representations made
herein shall expire two (2) years after the date hereof.
9. Representation and Warranty by Subscribers other than Individuals.
If the Subscriber is other than an individual the Subscriber hereby represents
that it is a [insert form of legal entity] ______________________ with full
power to enter into this Agreement and this Agreement has been duly authorized
by all necessary action of the Subscriber.
10. Agreement not Transferable. The Subscriber understands that it may
not transfer or assign this Agreement or any of its rights hereunder.
11. Execution of Further Documentation. The Subscriber agrees to
execute any and all further documents necessary or advisable, in the sole
discretion of the Company, in connection with its proposed purchase of the
Unit(s).
12. Irrevocability of Subscription. The Subscriber agrees that it may
not cancel, terminate or revoke this Agreement, which Agreement shall be binding
upon the Subscriber's successors and assigns.
13. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing, and shall be delivered by hand or mailed by overnight mail,
registered or certified mail, return receipt requested, postage prepaid, to the
Subscriber or to the Company, at the respective addresses set forth herein.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania applicable to contracts made
in that State.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof, and may be amended only by a
written agreement executed by the party to be bound thereby.
<PAGE>
Signature Page for Subscription Agreement
Dated: __________________________ ___________________________
Subscriber's Signature
Subscriber's Name: ______________________________________________________
Number of Units subscribed for: _________________________________________
Total Amount of Subscription: ___________________________________________
Social Security or Tax I.D. No.: ________________________________________
Residence Address: ______________________________________________________
Mailing Address: ________________________________________________________
Accepted by the Company, this ____ day of _______, 1995.
BY: ______________________________
Scan-Graphics, Inc.
<PAGE>
TERM SHEET
Company:
Scan-Graphics, Inc. (the "Company")
Investor:
__________________________________________ (the "Investor")
Facility:
Cumulative Convertible Preferred Stock, Class A/Series C.
Purpose:
Working capital for production, marketing and acquisition for
the expansion of the Company's product offerings.
Amount:
Up to $1,000,000 in the form of one hundred (100) Units at
$10,000 per Unit.
Cumulative Dividend:
8% annual dividend, paid quarterly.
Conversion Price:
50% of "Market Price" (i.e. 50% discount) average for the 20
trading days preceding notice of conversion, but not less than
$0.50 per share or more than $2.50 per share of Common Stock.
Market Price shall be the Closing Bid price for the day.
Conversion Period:
Investor shall have the right to convert all or any part of
the Investors holdings of Cumulative Convertible Preferred
Stock, Class A/Series C (the "Preferred Stock") to common
stock at any time after 24 months from the date of issue.
Registration of Conversion Shares:
The Company shall amend its registration filing with the
Securities and Exchange Commission, such that the shares of
common stock underlying the Preferred Stock shall, immediately
upon issuance, be freely tradable by Investor.
Right to Require Conversion:
The Company shall have the right to require the Investor to
convert all or any part of the Preferred Stock into common
stock at the Conversion Price specified above upon 30 days
written notice to Investor at any time after 36 months from
date of issue provided; (1) the Conversion Shares are freely
tradable by Investor immediately upon conversion to common
stock, and (2) such common stock shall then be traded on
NASDAQ or another national securities exchange.
Conditions Precedent:
Standard, as reasonably established by Investor, including,
but not limited to, (1) agreements containing provisions usual
to these types of transactions and in all other respects
satisfactory to Investor; (2) satisfaction by Investor (and
accountants or other professional representatives chosen by
Investor) with all internal records and financial statements
of the Company and results of due diligence investigation; (3)
opinions of counsel; and (4) no material adverse change.
Indemnification:
The company will hold Investor and its officers and investors
harmless from any and all damages or liabilities arising in
connection with this proposed financing.
Please initial each page and sign to signify your acceptance of this commitment
to purchase _________ Units of Preferred Stock.
Scangraphics, Inc. Investor
- ---------------------------- --------------------------
Signature Signature
- ---------------------------- --------------------------
Title Title
- ---------------------------- --------------------------
Date Date
Exhibit 4.5
PRIVATE PLACEMENT PURCHASE AGREEMENT
March 27, 1996
Scan-Graphics, Inc.
700 Abbott Drive
Broomall, PA 19008
Re: Purchase of Units
Gentlemen:
1. The undersigned ("Subscriber") has reviewed the filings which
Scan-Graphics, Inc. (the "Company") has made with the Securities Exchange
Commission during the past 12 months. The Company represents and warrants to the
Subscriber that all such filings are correct and accurate in all material
respects and in all material respects state all facts necessary to make such
filings not misleading. Subscriber has had the opportunity to discuss the
Company's affairs with the Company's officers.
2. (a) The Company hereby sells to Subscriber, and Subscriber hereby
purchases from the Company the number of Units set forth opposite its name
below. The purchase price of each Unit is $50,000, and is payable in cash
concurrently with the execution and delivery hereof.
(b) Each Unit consist of one Convertible Note in the principal amount
of $50,000 (a "Note"), one Class A warrant (an "A Warrant") to purchase 19,355
shares of common stock of the Company ("Common Stock") and one Class B warrant
(a "B Warrant") to purchase 19,355 shares of Common Stock. The A Warrant and the
B Warrant are collectively referred to as the "Warrants." The Note and the
Warrants are in the forms of Exhibits A, B and C annexed hereto.
(c) The principal and accrued interest of each Note is convertible into
shares of common stock of the Company at a per share price equal to the lesser
of (1) $3 per share or (2) 65% of the average closing bid price of a share of
common stock during the five trading days immediately preceding the date of such
conversion. If Subscriber owns in the aggregate Notes in the principal amount of
$250,000 or less, such Notes shall be convertible in whole but not in part. If
Subscriber owns more than $250,000 in aggregate principal amount of Notes, all
such Notes shall be convertible at Subscriber's option from time to time in
whole, or in remaining whole, or in parts of not less than $250,000 aggregate
principal amount.
(d) The Notes are payable on March 26, 1997 and accrue interest at the
annual rate of 8% per annum, provided that if the registration statement
hereinafter referred to is not effective by the 121st day after the date hereof,
then, in addition to the Subscriber's other remedies:
<PAGE>
(i) the interest rate under the Notes shall be increased to 12% per
annum (or, if less, the highest rate permitted by law) until the
registration statement is declared effective, and
(ii) at Subscriber's option, the Notes shall not be repaid, by the
Company and shall remain convertible and accrue interest, until
such date as is designated by Subscriber but not later than 180
days after the effectiveness of the registration statement,
and provided further, that if the registration statement hereinafter referred to
is not effective by the 180th day after the date hereof, then, in addition to
the Subscriber's other remedies, the interest rate under the Notes shall be
further increased to 18% per annum (or, if less, the highest rate permitted by
law) until the registration statement is declared effective.
(e) The term "Purchasers" as used herein means subscribers who in the
aggregate are on this day purchasing Notes in the aggregate principal amount of
$3,100,000 under agreements of the same tenor as this Agreement.
(f) The Company will pay to Mueller Trading Company a $100,000 finder's
fee in respect of the sale of the Units hereunder.
3. (a) The Company will utilize its diligent efforts to file, on or
before the 30th day after the date of this Agreement or as soon thereafter as is
possible with such diligent efforts, a registration statement on Form S-3 or
Form S-1 (the "Registration Statement") for public sale by Subscribers of the
shares which are issuable on conversion of the Notes and on exercise of the A
Warrants and the B Warrants. The shares to be covered by the Registration
Statement are collectively referred to as the "registered shares."
(b) The Company shall use its diligent efforts to cause the
Registration Statement to become effective not later that 90 days after the date
of filing, and to remain effective for two years. The registration shall be
accompanied by blue sky clearances in such states as Subscriber may reasonably
request. The Company will not issue or commit to issue any shares of capital
stock or securities convertible into capital stock (other than upon exercise of
options or warrants issued heretofore), or borrow any money in public or private
financings, until the close of business on the 45th business day after the date
on which the Registration Statement is first declared effective.
(c) The Company shall pay all expenses of the registration hereunder,
other than Subscriber's underwriting discounts.
(d) The Company shall supply to Subscriber a reasonable number of
copies of all registration materials and prospectuses. The Company and
Subscriber shall execute and deliver to each other indemnity agreements which
are conventional in registered offerings of this type. The Subscriber shall
reasonably cooperate with the Company in the preparation and filing of the
Registration Statement and appropriate amendments thereof.
<PAGE>
(e) Subscriber may transfer a proportionate part of its registration
rights to a limited number of permitted transferees of the Units or portions
thereof.
4. (a) Subscriber represents and warrants that it is purchasing the
Units solely for investment solely for its own account and not with a view to or
for the resale or distribution thereof except as permitted under the
Registration Statement.
(b) Subscriber understands that it may sell or otherwise transfer the
Units or the shares issuable on conversion of the Notes or the Warrants only if
such transaction is duly registered under the Securities Act of 1933, as
amended, under the Registration Statement or otherwise, or if Subscriber shall
have received the favorable opinion of counsel to the holder, which opinion
shall be reasonably satisfactory to counsel to the Company, to the effect that
such sale or other transfer may be made in the absence of registration under the
Securities Act of 1933, as amended, and registration or qualification in every
applicable state. The certificates representing the aforesaid securities will be
legended to reflect these restrictions, and stop transfer instructions will
apply. Subscriber realizes that the Units are not a liquid investment.
5. (a) Subscriber has not relied upon the advice of a "Purchaser
Representative" (as defined in Regulation D of the Securities Act) in evaluating
the risks and merits of this investment. Subscriber has the knowledge and
experience to evaluate the Company and the risks and merits relating thereto.
(b) Subscriber represents and warrants that Subscriber is an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated pursuant to the Securities Act of 1933, as amended, and shall be
such on the date any shares are issued to the holder; Subscriber acknowledges
that Subscriber is able to bear the economic risk of losing Subscriber's entire
investment in the shares and understands that an investment in the Company
involves substantial risks; Subscriber has the power and authority to enter into
this agreement, and the execution and delivery of, and performance under this
agreement shall not conflict with any rule, regulation, judgment or agreement
applicable to the Subscriber; and Subscriber has invested in previous
transactions involving restricted securities.
6. This Agreement may not be changed or terminated except by written
agreement. It shall be binding on the parties and on their personal
representatives and permitted assigns. It sets forth all agreements of the
parties. It shall be enforceable by decrees of specific performance (without
posting bond or other security) as well as by other available remedies.
7. This Agreement shall be governed by, and construed in accordance
with, the laws of Pennsylvania. The federal and state courts sitting in the City
of Philadelphia shall have exclusive jurisdiction over all matters relating to
this Agreement. Trial by jury is expressly waived.
8. All notices, requests, services of process, consents, and other
communications under this Agreement shall be in writing and shall be deemed to
have been delivered (i) on the date personally delivered or (ii) one day after
properly sent by Federal Express, addressed to the respective parties at their
address set forth in this Agreement or (iii) one day after transmitted by
facsimile so long as a
<PAGE>
confirmation copy is simultaneously forwarded by Federal Express, in each case
addressed to the respective parties at their address set forth in this
Agreement. Either party hereto may designate a different address by providing
written notice of such new address to the other party hereto as provided above.
9. Each party hereto shall be responsible for its own expenses with
regard to the negotiation and execution of this Agreement.
SUBSCRIBER:
signature: ________________________________________
type or print name: _______________________________
Address: __________________________________________
Fax No. ___________________________________________
Social Security No: _______________________________
Number of Units: __________________________________
AGREED: ___________________________________________
SCAN-GRAPHICS, INC.
By: _______________________________________________
<PAGE>
EXHIBIT A
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED, DISPOSED OF OR OFFERED FOR SALE, IN
WHOLE OR IN PART, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THAT ACT COVERING THIS NOTE AND/OR THE COMMON STOCK ISSUABLE UPON CONVERSION
THEREOF, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SCAN-GRAPHICS,
INC., THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
$ ________________ Note: ____________
CONVERTIBLE NOTE
(the "Note")
SCAN-GRAPHICS, INC.
SCAN-GRAPHICS, INC., a Pennsylvania corporation (hereinafter called the
"Corporation"), for value received, hereby promises to pay to the order
___________________________________ (hereinafter the "Holder") the principal sum
of $_____________ on March 26,1997, together with interest accruing at the rate
of 8% per annum and payable at maturity arid upon conversion. Principal and
interest shall be payable at the address of the Holder.
1. The Notes.
1.1 This Note is one of a duly authorized issue of Convertible Notes of the
Corporation (designated herein as the "Notes"), and is being issued under
Private Placement Purchase Agreements of similar tenor between the Corporation
and the Holder (the "Subscription Agreement"). The Holders of the Notes are
referred to herein collectively as "Purchasers."
2. Conversion Rights.
2.1 The principal and accrued interest of each Note is convertible into number
of shares (the "Conversion Shares") of the Corporation's common stock (the
"Common Stock") equal to the amount converted divided by the Conversion Price.
The Conversion Price means a per share price equal to the lesser of (l) $3.00
per share or (2) 65% of the average closing bid price of a share of common stock
during the five trading days immediately preceding the date of such conversion.
If Holder owns in the aggregate Notes in the principal amount of $250,000 or
less, such Notes shall be convertible in whole but not in part. If Holder owns
more than $250,000 in aggregate principal amount of Notes, the Notes shall be
convertible from time to time in whole or in remaining whole or in parts of not
less than $250,000 aggregate principal amount.
2.2 In the event that the Holder elects to exercise its conversion rights
hereunder, it shall give to the Corporation written notice of such election and
shall surrender this Note to the Corporation for cancellation against payment of
interest accrued through the date of conversion unless the Holder has also
converted such interest. Notice may be given by facsimile. Conversion shall be
effective upon notice so long as the Corporation receives the surrendered Note
within 10 business days after the date of such notice.
2.3 The Corporation shall at all times reserve and keep available out of its
authorized and unissued common shares, solely for issuance upon the conversion
of the Note as herein provided, such number or common shares as shall from time
to time be issuable upon the conversion of the Note.
3. Adjustments to Conversion Rights.
3.1 In case the Corporation shall issue common stock as a dividend upon common
stock or in payment of a dividend thereon, shall subdivide the number of
outstanding shares of its common stock into a greater number of shares or shall
contract the number of outstanding shares of its common stock into a lesser
number of shares, the number of Conversion Shares to which the Holder is
entitled to receive pursuant to Section 2 shall be adjusted, effective at the
close of business on the date such common shares are to be issued, so that the
Conversion Shares shall be equal to the product obtained by multiplying the
Conversion Shares in effect immediately prior to the close of business on such
date by a fraction, the denominator of which shall be the number of shares of
common stock outstanding immediately prior to such dividend, subdivision, or
contraction, and the numerator of which shall be the number of shares of common
stock outstanding immediately after such dividend, subdivision or contraction.
3.2 If any capital reorganization or reclassification of the common stock, or
consolidation, or merger of the Corporation with or into another corporation, or
the sale or conveyance of all or substantially all of its assets to another
corporation shall be effected, then, as a condition precedent of such
reorganization or sale, the following provision shall be made: The Holder of the
Note shall from and after the date of such reorganization or sale have the right
to receive (in lieu of the shares of common stock of the Corporation immediately
theretofore receivable with respect to such Note, upon the exercise of
conversion rights), such shares of stock, securities or assets as would have
been issued or payable with respect to or in exchange for the number of
outstanding shares or such common stock immediately theretofore receivable with
respect to such Note. In any such case, appropriate provision shall be made with
respect to the rights and interests of the Holders to the end that such
conversion rights (including, without limitation, provisions for appropriate
adjustments) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise thereof.
4. Registration Rights and Certain Remedies. The Subscription Agreements provide
for the filing by the Company of a registration statement for the sale of the
shares issuable on conversion of this Note. Notwithstanding anything to the
contrary set forth herein: if the registration statement hereinafter referred to
is not effective by the 121st day after the date hereof, then, in addition to
the Holder's other remedies if the registration statement hereinafter referred
to is not effective by the 121st day after the date hereof; then, in addition to
the Holder's other remedies:
(i) the interest rate under the Notes shall be increased to 12% per
annum (or, if less, the highest rate permitted by law) until the
registration statement is declared effective, and
(ii) at Holder's option, the Notes shall not be repaid, by the Company
and shall remain convertible and accrue interest, until such date as is
designated by Holder but not later than 180 days after the
effectiveness of the registration statement,
and provided further, that if the registration statement hereinafter referred to
is not effective by the 180th day after the date hereof, then, in addition to
the Holder's other remedies, the interest rate under the Notes shall be further
increased to 18% per annum (or, if less, the highest rate permitted by law)
until the registration statement is declared effective.
4A. Purchase for Investment. The Holder, by acceptance hereof, acknowledges that
the Note (and the Common Stock into which the Note is convertible) has not been
registered under the Act, covenants and agrees with the Corporation that such
Holder is taking and holding this Note (and the Common Stock into which the Note
is convertible) for investment purposes and not with a view to, or for sale in
connection with, a distribution thereof and that this Note (and the Common Stock
into which the Note is convertible) may not be assigned, hypothecated or
otherwise disposed of in the absence of an effective registration statement
under the Act or an opinion of counsel for the Holder, which counsel shall be
reasonably satisfactory to the Corporation, to the effect that such disposition
is in compliance with the Act, and represents and warrants that such Holder is
an "accredited investor" that such Holder has, or with his representative has,
such knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks in respect of this Note (and the Common Stock
into which the Note is convertible) and is able to bear the economic risk of
such investment.
5. Events of Default and Acceleration of the Note.
5.1 An "event of default" with respect to this Note shall exist if any of the
following shall occur:
(a) The Corporation shall breach or fail to comply with any provision of this
Note and such breach or failure shall continue for thirty (30) days after
written notice by any Holder or any Note to the Corporation.
(b) A receiver, liquidator or trustee of the Corporation or of a substantial
part of its properties shall be appointed by court order and such order shall
remain in effect for more than sixty (60) days; or the Corporation shall be
adjudicated bankrupt or insolvent; or a substantial part of the property of the
Corporation shall be sequestered by court order and such order shall remain in
effect for more than sixty (60) days; or a petition to reorganize the
Corporation under any bankruptcy, reorganization or insolvency law shall be
filed against the Corporation and shall not be dismissed within sixty (60) days
after such filing.
(c) The Corporation shall file a petition in voluntary bankruptcy or request
reorganization or under any provision of any bankruptcy, reorganization or
insolvency law, or shall consent to the filing of any petition against it under
any such law.
(d) The Corporation shall make an assignment for the benefit of its creditors,
or admit in writing its inability to pay its debts generally as they become due,
or consent to the appointment of a receiver, trustee or liquidator of the
Corporation, or of all or any substantial part of its properties.
5.2 If an event of default shall occur, the Holder may, in addition to such
Holder's other remedies, by written notice to the Corporation, declare the
principal amount of this Note, together with all interest accrued thereon, to be
due and payable immediately. Upon any such declaration, such amount shall become
immediately due and payable and the holder shall have all such rights and
remedies provided for under the terms of this Note.
6. Miscellaneous.
6.1 All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telegram, recognized
overnight mail carrier, telex or other standard form of telecommunications, or
by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows: (a) if to the Holder, to such address as such Holder shall
furnish to the Corporation in accordance with this Section, or (b) if to the
Corporation, to it at its headquarters office, or to such other address as the
Corporation shall furnish to the Holder in accordance with this Section.
6.2 THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE.
6.3 The Corporation waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand.
6.4 If any provision of this Note shall for any reason be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this Note shall be construed as if such invalid or
unenforceable provision had never been contained herein.
6.5 The waiver of any event of default or the failure of the Holder to exercise
any right or remedy to which it may be entitled shall not be deemed a waiver of
any subsequent event of default or of the Holder's right to exercise that or any
other right or remedy to which the Holder is entitled.
6.6 The Holder of this Note shall be entitled to recover his legal and other
costs of collecting on this Note, and such costs shall be deemed added to the
principal amount of this Note.
6.7 In addition to all other remedies to which the Holder may be entitled
hereunder, Holder shall also be entitled to decrees of specific performance
without posting bond or other security.
IN WITNESS WHEREOF, the Corporation has caused this Note to be duly executed on
the date first written above.
ATTEST: SCAN-GRAPHICS, INC.
By: _______________________________ By: ______________________
Name: _____________________________ Name: ____________________
<PAGE>
Exhibit B
Neither this Warrant nor the shares of Common Stock issuable on exercise of this
Warrant have been registered under the Securities Act of 1933. None of such
securities may be transferred in the absence of registration under such Act or
an opinion of counsel to the effect that such registration is not required.
SCAN-GRAPHICS, INC.
CLASS A WARRANT Number: ________
DATED: _____________
Number of Shares: ___________
Holder: _____________________
Address: ____________________
____________________
THIS CERTIFIES THAT the Holder is entitled to purchase from
Scan-Graphics, Inc., a Pennsylvania corporation (hereinafter called the
"Company"), at the Exercise Price per share the number of shares of the
Company's common stock set forth above ("Common Stock"). The Exercise Price
means $3 per share or, if less, the lowest price per share at which any
conversion (whether by Holder or others) shall theretofore have occurred under
the Convertible Notes issued by the Company on the date of this Warrant.
However, this Warrant may be exercised whether or not any such conversion shall
have occurred, and if no such conversion shall have occurred the Exercise Price
shall be $3 per share.
1. All rights granted under this Warrant shall expire on March 26,
1999, and no shares of Common Stock may be acquired under this Warrant from and
after such date.
2. This Warrant and the Common Stock issuable on exercise of this
Warrant (the "Underlying Shares") may be transferred, sold, assigned or
hypothecated, only if registered by the Company under the Securities Act of 1933
(the "Act") or if the Company has received from counsel to the Company a written
opinion to the effect that registration of the Warrant or the Underlying Shares
is not necessary in connection with such transfer, sale, assignment or
hypothecation. The Warrant and the Underlying Shares shall be appropriately
legended to reflect this restriction arid stop transfer instructions shall
apply. The Holder shall through its counsel provide such information as is
reasonably necessary in connection with such opinion.
3. The holder of this Warrant is entitled to certain registration
rights under an agreement of even date herewith.
4. (a) Any permitted assignment of this Warrant shall be effected by
the Holder by (i) executing the form of assignment at the end hereof, (ii)
surrendering the Warrant for cancellation at the office of the Company,
accompanied by the opinion of counsel to the Company referred to above; and
(iii) unless in connection with an effective registration statement which covers
the sale of this Warrant and or the shares underlying the Warrant, delivery to
the Company of a statement by the transferee (in a form acceptable to the
Company and its counsel) that such Warrant is being acquired by the Holder for
investment and not with a view to its distribution or resale; whereupon the
Company shall issue, in the name or names specified by the Holder (including the
Holder) new Warrants representing in the aggregate rights to purchase the same
number of Shares as are purchasable under the Warrant surrendered. Such Warrants
shall be exercisable immediately upon any such assignment of the number of
Warrants assigned. The transferor will pay all relevant transfer taxes.
Replacement Warrants shall bear the same legend as is borne by this Warrant.
5. The term "Holder" should be deemed to include any permitted record
transferee of this Warrant.
6. The Company covenants and agrees that all shares of Common Stock
which may be issued upon exercise hereof will, upon issuance, be duly and
validly issued, fully paid and non-assessable and no personal liability will
attach to the Holder thereof. The Company further covenants and agrees that,
during the periods within which this Warrant may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of
Common Stock for issuance upon exercise of this Warrant and all other Warrants.
7. This Warrant shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company.
8. In the event that as a result of reorganization, merger.
consolidation, liquidation, recapitalization, stock split, combination of shares
or stock dividends payable with respect to such Common Stock, the outstanding
shares of Common Stock of the Company are at any time increased or decreased or
changed into or exchanged for a different number or kind of share or other
security of the Company or of another corporation, then appropriate adjustments
in the number and kind of such securities then subject to this Warrant shall be
made effective as of the date of such occurrence so that the position of the
Holder upon exercise will be the same as it would have been had it owned
immediately prior to the occurrence of such events the Common Stock subject to
this Warrant. Such adjustment shall be made successively whenever any event
listed above shall occur and the Company will notify the Holder of the Warrant
of each such adjustment. Any fraction of a share resulting from any adjustment
shall be eliminated and the price per share of the remaining shares subject to
this Warrant adjusted accordingly.
9. The rights represented by this Warrant may be exercised at any time
within the period above specified by (i) surrender of this Warrant (with the
purchase form at the end hereof properly executed) at the principal executive
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the Holder at the address of the Holder
appearing on the books of the Company); (ii) payment to the Company of the
Exercise Price for the number of Shares specified in the above-mentioned
purchase form together with applicable stock transfer taxes, if any; and (iii)
unless in connection with an effective registration statement which covers the
sale of the shares underlying the Warrant, the delivery to the Company of a
statement by the Holder (in a form acceptable to the Company and its counsel)
that such Shares are being acquired by the Holder for investment and not with a
view to their distribution or resale.
The certificates for the Common Stock so purchased shall be delivered
to the holder within a reasonable time, not exceeding ten (10) business days
after all requisite documentation has been provided, after the rights
represented by this Warrant shall have been so exercised, and shall bear a
restrictive legend with respect to any applicable securities laws.
10. This Warrant shall be governed by and construed in accordance will
the laws of the State of Pennsylvania. The federal and state courts in the city
of Philadelphia shall have exclusive jurisdiction over this instrument and the
enforcement thereof. Service of process shall be effective if by certified mail,
return receipt requested. All notices shall be in writing and shall be deemed
given upon receipt by the party to whom addressed. This instrument shall be
enforceable by decrees of specific performances as well as other remedies.
IN WITNESS WHEREOF, Scan-Graphics, Inc. has caused this Warrant to be
signed by its duly authorized officers under Its corporate seal, and to be dated
as of the date set forth above.
SCAN-GRAPHICS, INC.
By:
------------------------------------
Andrew E. Trolio, President
(Apply Corporate Seal)
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned the Holder of the foregoing Warrant, hereby irrevocably
elects to exercise the purchase rights represented by such Warrant for, and to
purchase thereunder, _______________ shares of no par value Common Stock and
herewith makes payment of $_________________ thereof, and requests that the
certificates for shares of Common Stock be issued in the name(s) of, and
delivered to
________________________________________________________________________ whose
address(es) is (are)
_________________________________________________________________
Dated: _____________________ , 19______
Holder: _________________________
SSN/TIN: ________________________
Address: ________________________
________________________
________________________
________________________
<PAGE>
TRANSFER FORM
(To be signed only upon exercise of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________________________________ the
right to purchase shares of Common Stock represented by the foregoing Warrant to
the extent of ____________ shares of Common Stock, appoints ____________________
_____________________ attorney to transfer such rights on the books of
______________________ with full power of substitution in the premises.
Dated: _______________________ , 19____
Holder: _________________________
SSN/TIN: ________________________
Address: ________________________
________________________
________________________
________________________
<PAGE>
Exhibit C
Neither this Warrant nor the shares of Common Stock issuable on exercise of this
Warrant have been registered under the Securities Act of 1933. None of such
securities may be transferred in the absence of registration under such Act or
an opinion of counsel to the effect that such registration is not required.
SCAN-GRAPHICS, INC.
CLASS B WARRANT Number: ___________
DATED: ________________________
Number of Shares: ________________
Holder: ________________________
Address: _________________________
_________________________
THIS CERTIFIES THAT the Holder is entitled to purchase from
Scan-Graphics, Inc., a Pennsylvania corporation (hereinafter called the
"Company"), at the Exercise Price per share the number of shares of the
Company's common stock set forth above ("Common Stock"). The Exercise Price
means $4 per share.
1. All rights granted under this Warrant shall expire on March 26,
1999, and no shares of Common Stock may be acquired under this Warrant from and
after such date.
2. This Warrant and the Common Stock issuable on exercise of this
Warrant (the "Underlying Shares") may be transferred, sold, assigned or
hypothecated, only if registered by the Company under the Securities Act of 1933
(the "Act") or if the Company has received from counsel to the Company a written
opinion to the effect that registration of the Warrant or the Underlying Shares
is not necessary in connection with such transfer, sale, assignment or
hypothecation. The Warrant and the Underlying Shares shall be appropriately
legended to reflect this restriction arid stop transfer instructions shall
apply. The Holder shall through its counsel provide such information as is
reasonably necessary in connection with such opinion.
3. The Holder of this Warrant is entitled to certain registration
rights under an agreement of even date herewith.
4. (a) Any permitted assignment of this Warrant shall be effected by
the Holder by (i) executing the form of assignment at the end hereof, (ii)
surrendering the Warrant for cancellation at the office of the Company,
accompanied by the opinion of counsel to the Company referred to above; and
(iii) unless in connection with an effective registration statement which covers
the sale of this Warrant and or the shares underlying the Warrant, delivery to
the Company of a statement by the transferee (in a form acceptable to the
Company and its counsel) that such Warrant is being acquired by the Holder for
investment and not with a view to its distribution or resale; whereupon the
Company shall issue, in the name or names specified by the Holder (including the
Holder) new Warrants representing in the aggregate rights to purchase the same
number of Shares as are purchasable under the Warrant surrendered. Such Warrants
shall be exercisable immediately upon any such assignment of the number of
Warrants assigned. The transferor will pay all relevant transfer taxes.
Replacement Warrants shall bear the same legend as is borne by this Warrant.
5. The term "Holder" should be deemed to include any permitted record
transferee of this Warrant.
6. The Company covenants and agrees that all shares of Common Stock
which may be issued upon exercise hereof will, upon issuance, be duly and
validly issued, fully paid and non-assessable and no personal liability will
attach to the Holder thereof. The Company further covenants and agrees that,
during the periods within which this Warrant may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of
Common Stock for issuance upon exercise of this Warrant and all other Warrants.
7. This Warrant shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company.
8. In the event that as a result of reorganization, merger.
consolidation, liquidation, recapitalization, stock split, combination of shares
or stock dividends payable with respect to such Common Stock, the outstanding
shares of Common Stock of the Company are at any time increased or decreased or
changed into or exchanged for a different number or kind of share or other
security of the Company or of another corporation, then appropriate adjustments
in the number and kind of such securities then subject to this Warrant shall be
made effective as of the date of such occurrence so that the position of the
Holder upon exercise will be the same as it would have been had it owned
immediately prior to the occurrence of such events the Common Stock subject to
this Warrant. Such adjustment shall be made successively whenever any event
listed above shall occur and the Company will notify the Holder of the Warrant
of each such adjustment. Any fraction of a share resulting from any adjustment
shall be eliminated and the price per share of the remaining shares subject to
this Warrant adjusted accordingly.
9. The rights represented by this Warrant may be exercised at any time
within the period above specified by (i) surrender of this Warrant (with the
purchase form at the end hereof properly executed) at the principal executive
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the Holder at the address of the Holder
appearing on the books of the Company); (ii) payment to the Company of the
Exercise Price for the number of Shares specified in the above-mentioned
purchase form together with applicable stock transfer taxes, if any; and (iii)
unless in connection with an effective registration statement which covers the
sale of the shares underlying the Warrant, the delivery to the Company of a
statement by the Holder (in a form acceptable to the Company and its counsel)
that such Shares are being acquired by the Holder for investment and not with a
view to their distribution or resale.
The certificates for the Common Stock so purchased shall be
delivered to the holder within a reasonable time, not exceeding ten (10)
business days after all requisite documentation has been provided, after the
rights represented by this Warrant shall have been so exercised, and shall bear
a restrictive legend with respect to any applicable securities laws.
10. This Warrant shall be governed by and construed in accordance will
the laws of the State of Pennsylvania. The federal and state courts in the city
of Philadelphia shall have exclusive jurisdiction over this instrument and the
enforcement thereof. Service of process shall be effective if by certified mail,
return receipt requested. All notices shall be in writing and shall be deemed
given upon receipt by the party to whom addressed. This instrument shall be
enforceable by decrees of specific performances as well as other remedies.
IN WITNESS WHEREOF, Scan-Graphics, Inc. has caused this Warrant to be
signed by its duly authorized officers under Its corporate seal, and to be dated
as of the date set forth above.
SCAN-GRAPHICS, INC.
By:
------------------------------------
Andrew E. Trolio, President
(Apply Corporate Seal)
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned the Holder of the foregoing Warrant, hereby irrevocably
elects to exercise the purchase rights represented by such Warrant for, and to
purchase thereunder, _______________ shares of no par value Common Stock and
herewith makes payment of $_________________ thereof, and requests that the
certificates for shares of Common Stock be issued in the name(s) of, and
delivered to
________________________________________________________________________ whose
address(es) is (are)
- ------------------------------------------------------------------------
Dated: _______________________ , 19____
Holder: _________________________
SSN/TIN: ________________________
Address: ________________________
________________________
________________________
________________________
<PAGE>
TRANSFER FORM
(To be signed only upon exercise of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________________________________ the
right to purchase shares of Common Stock represented by the foregoing Warrant to
the extent of ____________ shares of Common Stock, appoints ____________________
_____________________ attorney to transfer such rights on the books of
______________________ with full power of substitution in the premises.
Dated: _______________________ , 19____
Holder: _________________________
SSN/TIN: ________________________
Address: ________________________
________________________
________________________
________________________
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Scan-Graphics, Inc
Broomall, Pennsylvania
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of Form S-3 of our report
dated March 8, 1996, except for Note 18, as to which the date is March 30, 1996,
relating to the consolidated financial statements and schedule appearing in
Scan-Graphics, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
----------------------
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
June 27, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of Scan-Graphics, Inc. on Amendment No. 1 to Form S-3 (Registration No.
333-3719) of our report on Tangent Engineering, Inc. and Subsidiary dated March
4, 1996 included in the Annual Report on Form 10-K of Scan-Graphics, Inc. for
the year ended December 31, 1995. We also consent to the reference to our firm
under the caption "Experts" in such Registration Statement.
/s/ Ehrhardt Keefe Steiner & Hottman PC
----------------------------------------
Ehrhardt Keefe Steiner & Hottman PC
June 27, 1996
Denver, Colorado
