SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event report) January 12, 1996
PENNSYLVANIA 0-15864 95-4091769
- ----------------------------- --------------- -------------------
(State or other jurisdiction (Commission (Employer
of incorporation) File Number) Identification No.)
700 ABBOTT DRIVE, BROOMALL, PENNSYLVANIA 19008-4373
------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 610-328-1040
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
SCAN-GRAPHICS, INC.
ITEM #2
On December 29, 1995, an agreement was entered into between SCAN-GRAPHICS,
Inc., and the shareholders of Tangent Engineering, Inc., whereby SCAN-GRAPHICS,
Inc. acquired and the shareholders of Tangent Engineering, Inc. transferred all
the issued and outstanding stock in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a) (i) B of Code.
SCAN-GRAPHICS, Inc. and the shareholders of Tangent Engineering, Inc. adopted
the Plan of Reorganization per the attached Exhibit "AGREEMENT AND PLAN OF
REORGANIZATION."
ITEM #7
Audited Financial Statements of the acquired business will be filed within
60 days.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SCAN-GRAPHICS, INC.
BY: /s/ JOSEPH N. BATTISTA
----------------------------------
Joseph N. Battista
Vice President Finance
January 12, 1996
(Date)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
Agreement dated as of December 29, 1995 between Scangraphics, Inc., a
Pennsylvania corporation ("Scangraphics") and Robert J. Bornhofen and Ronald J.
Nowak ("Shareholders"), being the owners of record of all the issued and
outstanding stock of Tangent Engineering, Inc., a Colorado corporation
("Tangent").
RECITAL
Scangraphics wishes to acquire and the Shareholders wish to transfer
all the issued and outstanding stock of Tangent in a transaction intended to
qualify as a reorganization within the meaning of Section 368(a)(i)B of Code.
NOW, THEREFORE, Scangraphics and the Shareholders adopt this Plan of
Reorganization and agree as follows:
ARTICLE I
1.1 Number of Shares. The Shareholders agree to transfer to
Scangraphics a number of shares of common stock of Tangent, no par value, as
shown in paragraph 3.1(v) hereof, in exchange for an aggregate of one million
shares of voting common stock of Scangraphics $.001 par value per share, to be
issued at closing to the Shareholders in the numbers shown opposite their names
in paragraph 3.1(v) hereof.
1.2 Delivery of Certificates by Shareholders. A transfer of Tangent
shares by Shareholders will be effective by delivery to Scangraphics at the
Closing of certificates representing the transferred shares endorsed in blank or
accompanied by stock powers executed in blank, with all necessary transfer tax
and other revenue stamps, acquired at Shareholders' expense, affixed.
1.3 Further Assurances. At the Closing, the Shareholders will execute
such additional instruments and take such other action as Scangraphics may
request in order to effectively assign the transferred stock to Scangraphics and
confirm Scangraphics title thereto.
1.4 Changes in Scangraphics Capitalization. Between the dates hereof
and the closing, there shall be no changes in Scangraphics common stock, there
shall be no further common stock issued nor shall any common stock be purchased
by Scangraphics as treasury stock or for cancellation.
1.5 Lettered Stock and Registration. All shares of stock being issued
by Scangraphics to shareholders will be unregistered stock and such stock
certificates will contain appropriate legends regarding the same. Scangraphics
is, however, in the midst of preparing a registration statement on Form S-3
registering the stock and warrants of all stockholders and warrant holders of
Scangraphics whose stock and warrants are not currently registered.
<PAGE>
Such registration will take place and all stocks and warrants will be registered
within ninety (90) days after Scangraphics shall receive the necessary audited
financial statements of Tangent to complete the filing.
ARTICLE II
CLOSING
The Closing of the transaction contemplated hereby (the "Closing")
shall be held at the Offices of Dilworth, Paxson, Kalish & Kauffman, 3200 Mellon
Bank Center, 1735 Market Street, Philadelphia, PA 19103 at 9:00 A.M. on December
29, 1995 (the "Closing Date"), or at such other place as the parties hereto may
mutually agree in writing, time being of the essence.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Shareholders.
The Shareholders represent and warrant to Scangraphics that, except as
set forth in the Disclosure Schedule of the Shareholders in the form of Schedule
3.1 attached hereto:
(a) Organization and Qualification. Tangent is a Colorado
corporation duly organized, validly existing and in good standing
under the laws of Colorado. Tangent is duly licensed or qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions in which the properties and assets now owned or leased
by Tangent or nature of the business now conducted by it requires
Tangent to be so licensed or qualified and where the failure when
taken together with all other such failures would not have a Material
Adverse Effect on the business operations or financial conditions of
Tangent, and has listed all such foreign jurisdictions in the
Disclosure Schedule of the Shareholders.
(b) Authorization and Approval. The Shareholders have all
requisite power and authority to execute and deliver this Agreement
and the Conveyance Documents, to transfer the Shares to Scangraphics,
to consummate the transactions contemplated hereby and thereby and to
perform all the terms and conditions hereof to be performed by them.
The execution and delivery by the Shareholders of this Agreement and
the Conveyance Documents. The performance by the Shareholders of all
the terms and conditions hereof and thereof to be performed by them
and each of them and the consummation of the transactions contemplated
hereby and thereby have been duly authorized.
-2-
<PAGE>
This Agreement and the Conveyance Documents, when executed by the
Shareholders and Scangraphics, constitute or will constitute the
legal, valid and binding obligations of the Shareholders enforceable
against them in accordance with their respective terms.
(c) The authorized capital of Tangent consists of 1000 shares of
common stock having no par value. As of the date hereof, there are 720
shares of common stock issued and outstanding. All issued and
outstanding stock are duly authorized, validly issued, fully paid,
nonassessable, and are not subject to and were not issued in violation
of any preemptive rights. Eighty (80) Tangent shares are held by
Tangent in its Treasury unless Treasury shares have been eliminated by
law. Except as set forth in Section 3.1(c) of the Shareholders
Disclosure Schedule, there are no options, warrants, calls, rights,
subscriptions, convertible securities or other rights or agreements,
arrangements or commitments of any kind relating to the issued or
unissued capital stock of Tangent to issue transfer or sell any
securities of Tangent, or securities or other instruments convertible
into or exchangeable or exercisable for any securities of Tangent.
Except as set forth in Section 3.1(c) of Shareholders Disclosure
Schedule, there are no stockholder agreements, floating trust or other
agreements or understandings to which Tangent is a party or is bound
relating to the voting or transfer of any such shares nor are there
any such contract to which Shareholders are bound. There is no
outstanding contractual or obligations of Tangent to purchase, redeem
or otherwise acquire any shares of Tangent common stock or preferred
stock. Tangent does not have any equity investment in any corporation,
association, partnership, joint venture or any other entity other than
as set forth in Section 3.1(c) of Shareholders Disclosure Schedule.
(d) No Violation: Consents. This Agreement and the
execution and delivery hereof by the Shareholders do not, and the
fulfillment and compliance with the terms and conditions hereof and
the consummation of the transactions contemplated hereby will not:
(i) violate or conflict with or require any consent
under any provision of the articles of incorporation, bylaws
or equivalent governing instruments of Tangent;
(ii) violate or conflict with any provision of, or
require any filing, consent, authorization or approval
under, any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to or binding upon the
Shareholders or Tangent (assuming receipt of all
governmental consents and the making of all governmental
filings typically required or made after
-3-
<PAGE>
consummation of transactions of the nature contemplated by
this Agreement);
(iii) conflict with, result in a breach of, constitute
a default under (whether with notice or the lapse of time or
both), or accelerate or permit the acceleration of the
performance required by, or require any consent,
authorization or approval under (A) any mortgage, indenture,
loan or credit agreement or any other agreement or
instrument evidencing indebtedness for money borrowed to
which the Shareholders or Tangent are a party or by which
the Shareholders or Tangent are bound or to which any of
their assets or properties are subject; (B) any lease,
license, contract or other agreement or instrument to which
the Shareholders or Tangent are a party or by which they are
bound or to which any of their assets or properties is
subject or (C) any order, judgment or decree to which they
are a party or by which they are bound or to which they or
any of their assets or properties are subject; or
(iv) result in the creation or imposition of any Lien
upon the assets or properties of the Shareholders or
Tangent;
which violation, conflict, breach, default, acceleration, Lien or the failure to
make or obtain which filing, consent, authorization or approval will or might
reasonably be expected to have a Material Adverse Effect on the assets or
business of Tangent.
(e) No Default. The Shareholders and Tangent are not in
default under, and no condition exists that with notice or lapse of
time or both would constitute a default under, (i) any mortgage, loan
or credit agreement, indenture, evidence of indebtedness or other
instrument evidencing borrowed money to which they are a party or by
which they or any of their assets properties are bound or to which any
of their assets or properties are subject; (ii) any judgment, order or
injunction of any court, arbitrator or governmental agency or (iii) any
other agreement, contract, lease, license or other instrument, which
default or potential default in any such case will or might reasonably
be expected to have a Material Adverse Effect.
(f) Compliance with Laws. To the best of their knowledge, the
Shareholders and Tangent are not in violation of any law, regulation,
order, judgment or decree of any federal or state court or governmental
authority applicable to their respective businesses and operations,
which violation would or might reasonably be expected to have a
Material Adverse Effect on the business or assets of Tangent.
-4-
<PAGE>
(g) Financial Statements.
(i) Attached hereto as Exhibit A are true and
complete copies of the Balance Sheets, Income and Loss
Statements, Cash Flow Statements and all footnotes of Tangent
(collectively, the "Financial Statements" of Tangent) which
have been tendered by the Shareholders to Scangraphics prior
to the execution of this Agreement.
(A) 1993 Financial Statements.
(B) 1994 Financial Statements.
(C) November 30, 1995 Financial Statements.
(ii) The Financial Statements have been prepared in
conformity with generally accepted accounting principles,
applied on a consistent basis during the periods involved and
each presents fairly the results of operations and changes of
financial condition of Tangent for the period presented
therein, as the case may be. Except to the extent set forth on
the Tangent balance sheets or in Section 3.1(g) of Tangent's
Disclosure Schedule, Tangent has no liabilities or obligations
(whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due)
except liabilities and obligations incurred since the date of
Tangent's balance sheet of November 30, 1995 in the ordinary
course of business, consistent with past practices, that are
not in the aggregate, material to Tangent taken as a whole.
(h) Title to Assets. Tangent will have at Closing, good,
marketable and indefeasible title to all the Assets listed on the
Financial Statements, in each case free and clear of all Liens, except
for the liens specifically listed in Shareholders Disclosure Schedule.
Tangent has not received any written notice of any material adverse
claim that has not been satisfied with respect to its title to any
material Permit, right-of-way, easement or lease on or under which
their facilities are located. With respect to any real or personal
property leased to Tangent for use in the Business. the terms "title to
all the assets" shall be construed to mean ownership of such lease
rather than title to the property. Tangent enjoys peaceful and
undisturbed possession under all material Permits or leases under which
the Business is operating, and all such Permits and leases are valid.
subsisting and in full force and effect. It is understood, however,
that Tangent owns many intangible assets and trade secrets involving
its processes, operations and business, and while not listed on the
financial statements, all such intangible properties are part of the
assets of Tangent and there shall be no disclosure of such tangible to
any third
-5-
<PAGE>
person except in the ordinary course of business consistent
with past practices.
(i) Absence of Certain Changes. Except as disclosed to
Scangraphics in this Agreement, the Financial Statement or in
any other exhibit or schedule this Agreement, since November
30, 1995, there has not been:
(i) any Material Adverse Change;
(ii) any damage, destruction or loss suffered by the
Business or with respect to the Assets, whether covered by
insurance or not, that has had, or might reasonably be
expected to have a Material Adverse Effect;
(iii) any material change by Tangent in accounting
methods or principles applicable to the Business or the Assets
that would be required to be disclosed under generally
accepted accounting principles, consistently applied with past
practices of Tangent;
(iv) any sale, lease or other disposition of
properties and assets of the Tangent included in the Assets or
used in the Business, other than those in the ordinary course
of business consistent with past practices;
(v) any borrowing of funds, agreement to borrow funds
or guaranty by Tangent affecting or relating to the Assets or
the Business, or any termination or material amendment of any
evidence of indebtedness, contract, agreement. deed, mortgage,
lease, license or other instrument to which Tangent is bound
or by which any of it or its assets or properties is bound or
to which any of its assets or properties is subject other than
in the ordinary course of business consistent with past
practices;
(vi) the creation or imposition of any Lien on any of
the assets, tangible or intangible, of Tangent that constitute
part of the Assets or are used in the Business:
(vii) any other changes in the assets, liabilities,
financial condition or prospects of Tangent affecting or
relating to the Assets or the Business, except for changes in
the ordinary course of business consistent with past
practices; or
(viii) any contract, commitment or agreement to do
any of the foregoing.
-6-
<PAGE>
(j) Contracts, Agreements, Plans and Commitments. The
Disclosure Schedule of the Shareholders sets forth a true and complete
list of all contracts, agreements, leases, guaranties, plans and
commitments of the following nature to which Tangent is a party or by
which it or any of its assets or properties is bound or to which any of
its assets or properties are subject as of the date hereof that affect
or relate in any way to the Assets or the Business:
(i) any contract, commitment or agreement involving
in excess of $25,000 in any one year, including, but not
limited to, the items listed in Sections 3.1(j) (ii) -
(xix);
(ii) any indenture, trust, loan agreement, promissory
note or other contract or obligation, including any guarantee,
under which the Shareholders or Tangent have outstanding
indebtedness, obligation or liability for borrowed money;
(iii) any lease or sublease for the use or occupancy
of real property;
(iv) any agreement that restricts the right of
Tangent to engage in any type of business;
(v) any agreement by Tangent of surety, guarantee
or indemnification;
(vi) any contract or commitment for capital
expenditures or the acquisition or construction of fixed
assets;
(vii) any license or royalty agreement;
(viii) any contract which grants to any person a
preferential right to purchase any of the assets of the
Tangent;
(ix) any contract, agreement or commitment with
respect to the discharge or removal of Materials of
Environmental Concern:
(x) any contract or agreement with consultants
which is not terminable upon 30 days' notice or less;
(xi) any contract which continues (including any
renewals or extensions) more than one year from the date of
such contract:
(xii) a list of all of Tangent's names or
tradenames;
-7-
<PAGE>
There is no course of dealing, waiver, side agreement, arrangement or
understanding applicable to any such contract or agreement or list of Tangent
not disclosed therein or in the Shareholders Disclosure Schedule that has had or
might reasonably be expect to have a Material Adverse Effect. True, correct and
complete copies of all such written contracts or agreements or lists together
with all amendments thereto, have been made available by the Shareholders to
Scangraphics for review by Scangraphics.
(k) Litigation. To the best of Shareholders knowledge, there
are no actions, claims, suits, investigations, inquiries or proceedings
pending or, to the Shareholders' knowledge, threatened against Tangent
or any of its assets or properties with respect to the Assets or the
Business in any court or before any federal. state or other
governmental department, commission, agency or other instrumentality or
before any arbitrator, or which is contemplated being brought by
Tangent. To the best of Shareholders knowledge, Tangent is in
compliance with all statues, rules and regulations applicable to it,
the Assets or the Business, except where the failure to so comply could
not have a Material Adverse Effect.
(l) Insurance. Section 3.1(j) of Shareholders Disclosure
Schedule sets forth a complete and accurate list of insurance policies
maintained by Tangent, identifying in each case: (i) the name of the
insurance company; (ii) the nature and limits of the coverage; (iii)
the annual premiums paid therefor; and (iv] the coverage period
applicable thereto. All such insurance policies are in full force and
effect and provide for coverages which are usual and customary in the
business of Tangent as to amount and scope. Tangent has properly paid
or will pay all premiums due under such policies of insurance on or
prior to the Closing. Tangent is not aware of any coverage dispute or
claim under or relating to any of such policies.
(m) Employee Benefit: Labor Matters.
(i) For purposes of this Section 3.1(m), the term
"Plan" shall mean any stock purchase, stock option, pension,
profit-sharing, bonus, deferred compensation, incentive
compensation, commission, severance or termination pay,
hospitalization, medical, dental, life or other insurance, or
supplemental unemployment benefits plan or agreement or policy
or contract or other arrangement providing employment-related
compensation or benefits to any officer, consultant, director,
annuitant, employee, former employee, retiree or independent
contractor of Tangent (other than directors' and officers'
liability policies), whether or not insured.
-8-
<PAGE>
including without limitation "employee benefit plans" as
defined in ERISA and the rule and regulations thereunder.
(ii) Each Plan is listed on the Disclosure Schedule
of Shareholders. No Plan is or has been (A) covered by Title
IV of ERISA. (B) subject to the minimum funding requirements
of Section 412 of the Code, (C) a "multi-employer plan" as
defined in Section 3(37) of ERISA or (D) a voluntary
employees' beneficiary association within the meaning of
Section 501 (c) (9) of the Code. Each Plan intended to be
qualified under Section 401(a) of the Code is designated as a
tax-qualified plan on the Disclosure Schedule of Shareholders
and is so qualified.
(iii) The Shareholders have heretofore been made
available for review by Scangraphics true and correct copies
of the following:
(A) each written Plan, all amendments
thereto as of the date hereof and all current summary
plan descriptions provided to employees regarding the
Plans;
(B) a complete description of each other
Plan;
(C) each trust agreement and annuity
contract (or any other funding instruments), and each
insurance contract, pertaining to any of the Plans,
including all amendments to such documents to the date
hereof;
(D) the most recent Internal Revenue Service
Form 5500 for each Plan; and
(E) the most recent determination letter
issued by the IRS with respect to any Plan qualified under
Section 401(a) of the Code.
(iv) Each Plan has been maintained and administered
in compliance with its terms and provisions and all applicable
laws. All obligations of Tangent with respect to each Plan
have been paid or performed, and no Plan has been reduced or
modified or rendered not due by reason of any extension,
whether at the request of Tangent or otherwise. Tangent has no
commitment or obligation to establish or adopt any new or
additional Plans or to materially increase the benefits under
any existing Plan. No person has engaged in any prohibited
transaction (within the meaning of Section 4975 of the Code or
Section 406 of ERISA). Tangent has no obligation to make any
payments which would be "excess parachute payments" 'under
Section 280G of the Code. Neither Tangent nor any Plan
provides for the continuation of medical or health
-9-
<PAGE>
benefits or death benefits after an employee's termination of
employment (including retirement) except for continuation
coverage required pursuant to Section 4980B of the Code and
Part 6 of Title I of ERISA and the regulations thereunder.
Tangent is not a party to any collective bargaining agreement
or labor contract.
(v) The consummation of the transactions contemplated
by this Agreement will not (A) entitle any current or former
employee of Tangent to severance pay, employment compensation
or any other payment, benefit or award or (B) accelerate the
time of payment or vesting, or increase the amount of any
benefit, award (including stock options, restricted stock and
similar awards) or compensation due any such employee or
former employee.
(vi) There are no pending, threatened or anticipated
claims against Tangent or any of the Plans by any employee,
former employee or retiree or beneficiary covered under any
such Plan, or these involving any such Plan (other than
routine claims for benefits).
(vii) All contributions required by law or required
in accordance with the terms of the qualified plans have been
made or prior to the closing will have been made.
(viii) Tangent does not have present or future
liability to former employees or their dependents, survivors
or beneficiaries in connection with or arising out of any
plan, compensation arrangement or practice which Tangent
contributed prior to the date hereof, and Tangent has not
maintained, adopted or contributed to any plan that provides
benefits to or payments to former employees or their
dependents, survivors or beneficiaries except for the benefit
plans set forth in the Tangent's Disclosure Schedule.
(n) Employees: Employment Contracts.
(i) Except as listed in the Shareholders Disclosure
Schedule or elsewhere in this Agreement, Scangraphics shall
have no obligation to the Shareholders or Tangent, or any
officers or employees of the Shareholders or Tangent, whether
current or former, with respect to the continuation of
employment of or benefits for any such officers or employees.
(ii) The Disclosure Schedule of Shareholders lists
each management or employment contract or contract for
personal services between the Shareholders or Tangent and any
officer, consultant, director, employee or other person or
entity.
-10-
<PAGE>
(iii) A true and complete copy of each management or
employment contract or contract for personal services and a
complete description of any understanding or commitment
between the Shareholders or Tangent and any officer.
consultant, director, employee or independent contractor has
been made available to Scangraphics for review.
(iv) Except as disclosed in Shareholders Disclosure
Schedule (a) Tangent is not in violation of any applicable
laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, nor is Tangent or
any of its subsidiaries in any unfair labor practice, except
where such violations and unfair labor practice, individually
or in the aggregate, would not have a material adverse effect
on the business, operations, or financial conditions of
Tangent taken as a whole; (b) Tangent has no contacts with any
labor unions; (c) no charges are pending before the Equal
Employment Opportunity Commission or any state or local agency
responsible for the prevention of unlawful employment
practices; and (d) all employees of Tangent are, except as set
forth in Shareholders Disclosure Schedule, at will employees,
none of whom have contracts except as set forth herein.
(o) Books and Records. On or prior to the Closing Date. the
Shareholders shall, if requested, deliver to Scangraphics all
files, reports, feasibility studies, strategic planning
documents, financial forecasts, lease files, financial records
and other records, including tax records that relate to the
Assets or the Business. The "Backlog and High Probability
Prospects Report" which is attached hereto as Section 3.1 of
the Disclosure Schedule of Shareholders is warranted to be
reasonably representative of Tangent's correct Backlog and
Sales Prospects.
(p) Intellectual Property Rights. Tangent has no
patents, patent applications, trademarks (whether
registered or not), trademark applications, trade names,
service marks, copyrights or copyright registration
applications relating to or used in the Assets or the
Business except as listed in the Disclosure Schedule of
the Shareholders.
(q) Environmental Matters.
(i) Tangent is in compliance with all Environmental
Laws applicable to the Assets or the Business.
(ii) There is no Environmental Claim pending or. to
the knowledge of the Shareholders, threatened against the
-11-
<PAGE>
Tangent or the Business, that does or would affect or relate
to the Business or the Assets.
(iii) There are no past or present actions,
activities, circumstances, conditions, events or
incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any
Materials of Environmental Concern, that could form the
basis of any Environmental Claim against Tangent that
might reasonably be expected to affect or relate to the
Business or the Assets.
(r) Full and Prompt Disclosure. A list of the written
information provided by Shareholders to Scangraphics is set
forth in Shareholders' Disclosure Statement. None of such
written information furnished to Scangraphics by the
Shareholders or any of its affiliates. representatives or
agents in connection with the Business, the Assets, this
Agreement or the transactions contemplated hereby contains any
untrue statement of a material fact.
(s) Taxes.
(i) The Shareholders have caused, or will have caused
by the Closing Date, to be timely filed with the appropriate
federal, foreign, state, local and other governmental
authorities all returns, information returns or statements and
reports with respect to taxes of Tangent required to be filed
on or before December 31, 1995. Tangent has paid, or will have
paid by the Closing Date, all Taxes shown to be due on such
returns or reports.
(ii) No Tax Liens exist against Tangent, and the
Shareholders have no reason to expect that any Tax Lien will
arise, with respect to the Shares or Assets, except for Liens
imposed by law and incurred in the ordinary course of business
for obligations not yet due.
(t) Government Licenses and Permits. Tangent possesses, and
effective as of Closing will possess, all Permits necessary
for the ownership, use, operation and maintenance of the
Assets and the Business as they currently are being operated.
Tangent is in compliance with the Permits and all orders,
judgments and decrees applicable to the ownership, use,
maintenance or operation of the Assets or the Business.
(u) Brokers. No broker, finder or investment banker is
entitled to any brokerage. finders or other fee or
commission in connection with this Agreement or the
-12-
<PAGE>
transactions contemplated hereby based upon arrangements
made by or on behalf of the Shareholders.
(v) Ownership of Shares. The Shareholders warrant that
immediately prior to Closing they will be the owner of the
Shares, beneficially and of record, free and clear of all
Liens, as follows:
Robert J. Bornhofen 360 Shares
Ronald J. Nowak 360 Shares
3.2 Representations and Warranties of the Scangraphics.
Scangraphics represents and warrants to the Shareholders that, except as set
forth in the Disclosure Schedule of Shareholders in the form of Schedule 3.2:
(a) Organization and Qualification. Scangraphics is a
Pennsylvania corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania.
Scangraphics has and at Closing will have all requisite corporate
power, authority, and ability to transfer the Scangraphic Shares to
Shareholders. Scangraphics is duly licensed or qualified to do business
as a foreign corporation and is in good standing in all jurisdictions
in which the properties and assets now owned or leased by Scangraphics
or the nature of the business now conducted by it requires Scangraphics
to be so licensed or qualified and where the failure so to qualify
might reasonably be expected to have a Material Adverse Effect, and has
listed all such foreign jurisdictions in the Disclosure Schedule of the
Scangraphics.
(b) Authorization and Approval. Scangraphics has all requisite
power and authority to execute and deliver this Agreement and the
Conveyance Documents, to consummate the transactions contemplated
hereby and thereby and to perform all the terms and conditions hereof
to be performed by it. The execution and delivery by Scangraphics of
this Agreement and the Conveyance Documents; the performance by
Scangraphics of all the terms and conditions hereof and thereof to be
performed by it and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by all
requisite action on the part of the Scangraphics. This Agreement and
the Conveyance Documents, when executed by Scangraphics constitutes or
will constitute the legal; valid and binding obligations of
Scangraphics enforceable against it in accordance with its respective
terms.
(c) The authorized capital of Scangraphics consists of
Class A Convertible Preferred Stock, par value $2.00,
authorized 1,000,000 Shares. Outstanding 500,000 Shares. Class
-13-
<PAGE>
A Convertible Preferred Stock, Series C, par value $10.00. Outstanding
125,000 Share. Common Stock, par value $.001, 50,000,000 Share
authorized. As of the date hereof, there are 9,033,112 shares of common
stock issued and outstanding. All issued and outstanding stock are duly
authorized, validly issued, fully paid, nonassessable, and are not
subject to and were not issued in violation of any preemptive rights.
No Scangraphics shares are held by Scangraphics in its Treasury. Except
as set forth in Section 3.2(c) of the Scangraphics Disclosure Schedule,
there are no options, warrants, calls, rights, subscriptions,
convertible securities or other rights or agreements, arrangements or
commitments of any kind relating to the issued or unissued capital
stock of Scangraphics to issue transfer or sell any securities of
Scangraphics, or securities or other instruments convertible into or
exchangeable or exercisable for any securities of Scangraphics. Except
as set forth in Section 3.2(c) of Scangraphics Disclosure Schedule,
there are no Scangraphics agreements, floating trust or other
agreements or understandings to which Scangraphics is a party or is
bound relating to the voting or transfer of any such shares nor are
there any such contract to which Scangraphics are bound. There is no
outstanding contractual or obligations of Scangraphics to purchase,
redeem or otherwise acquire any shares of Scangraphics common stock or
preferred stock. Scangraphics does not have any equity investment in
any corporation, association, partnership, joint venture or any other
entity other than as set forth in Section 3.2(c) of Scangraphics
Disclosure Schedule. Scangraphics will file a Registration Statement
under Form S-3 as set forth in Paragraph 1.5 hereof. Scangraphics is
up-to-date in all of its SEC filings.
(d) No Violation: Consents. This Agreement and the
execution and delivery hereof by Scangraphics do not, and the
fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated
hereby will not:
(i) violate or conflict with or require any consent
under any provision of the articles of incorporation,
bylaws or equivalent governing instruments of the
Scangraphics;
(ii) violate or conflict with any provision of, or
require any filing, consent, authorization or approval under,
any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to or binding upon
Scangraphics (assuming receipt of all governmental consents
and the making of all governmental filings typically required
or made after consummation of
-14-
<PAGE>
transactions of the nature contemplated by this
Agreement);
(iii) conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse
of time or both), or accelerate or permit the acceleration of
the performance required by, or require any consent,
authorization or approval under (A) any mortgage, indenture,
Joan or credit agreement or any other agreement or instrument
evidencing indebtedness for money borrowed to which
Scangraphics is a party or by which Scangraphics is bound or
to which any of its assets or properties are subject, (B) any
lease. license. contract or other agreement or instrument to
which Scangraphics is a party or by which it is bound or to
which any of its assets or properties is subject or (C) any
order, judgment or decree to which is a party or by which it
is are bound or to which it or any of its assets or properties
are subject; or any Lien upon the assets or properties of the
Scangraphics, which violation, conflict, breach, default,
acceleration, Lien or the failure to make or obtain which
filing, consent, authorization or approval, will or might
reasonably be expected to have a Material Adverse Effect on
the business or assets of Scangraphics.
(e) No Default. Scangraphics is not in default under, and no
condition exists that with notice or lapse of time or both would
constitute a default under, (i) any mortgage, loan or credit agreement,
indenture, evidence of indebtedness or other instrument evidencing
borrowed money to which it is a party or by which it or any of its
assets properties are bound or to which any of their assets or
properties are subject, (ii) any judgment, order or injunction of any
court, arbitrator or governmental agency or (iii) any other agreement,
contract, lease, license or other instrument, which default or
potential default in any such case will or might reasonably be expected
to have a Material Adverse Effect.
(f) Compliance with Laws. To the best of its knowledge,
Scangraphics is not in violation of any law, regulation, order,
judgment or decree of any federal or state court or governmental
authority applicable to their respective businesses and operations,
which violation would or might reasonably be expected to have a
Material Adverse Effect on the business or assets of Scangraphics.
(g) Financial Statements.
(i) Attached hereto as Exhibit B are true and
complete copies of the following financial and income
-15-
<PAGE>
statements (collectively, the "Scangraphics' Financial
Statements"), which have been tendered by Scangraphics to the
Shareholders prior to the execution of this Agreement:
(A) 1992 Annual Report, 10K.
(B) 1993 Annual Report, 10K.
(C) 1994 Annual Report, 10K. (D) September 30,
1995, 10Q.
(ii) The Scangraphics' Financial Statements, taken as
a whole, fairly present, in accordance with generally accepted
accounting principles consistently applied with prior
practice, the financial position of Scangraphics as of the
dates indicated and the results of operations and cash flows
of Scangraphics for the periods then ended. There are no
material liabilities, contingent or otherwise, and no material
assets of the Scangraphics, that are not reflected in the
Financial Statements.
(h) Title to Assets. Scangraphics will have at Closing, good,
marketable and indefeasible title to all the Assets listed on
Scangraphics' Financial Statements, in each case free and clear of all
Liens. except for the liens specifically listed in Scangraphics
Disclosure Schedule. Scangraphics has not received any written notice
of any material adverse claim that has not been satisfied with respect
to its title to any material Permit, right-of-way, easement or lease on
or under which their facilities are located. With respect to any real
or personal property leased to Scangraphics for use in its Business,
the terms "title to all the assets" shall be construed to mean
ownership of such lease rather than title to the property. Scangraphics
enjoys peaceful and undisturbed possession under all material Permits
or leases under which the Business is operating, and all such Permits
and leases are valid, subsisting and in full force and effect.
(i) Absence of Certain Changes. Except as disclosed to
the Shareholders in this Agreement, the Financial Statements,
or in any other exhibit or schedule to this Agreement, since
September 30, 1995, there has not been:
(i) any Material Adverse Change;
(ii) any damage, destruction or loss suffered by the
Business or with respect to the Assets, whether covered by
insurance or not, that has had, or might reasonably be
expected to have, a Material Adverse Effect;
(iii) any material change by Scangraphics in
accounting methods or principles applicable to the
Business or the Assets that would be required to be
-16-
<PAGE>
disclosed under generally accepted accounting principles,
consistently applied with past practices of Scangraphics;
(iv) any sale, lease or other disposition of
properties and assets of Scangraphics included in the Assets
or used in the Business, other than those in the ordinary
course of business consistent with past practices;
(v) any borrowing of funds, agreement to borrow funds
or guaranty by Scangraphics affecting or relating to the
Assets or the Business, or any termination or material
amendment of any evidence of indebtedness, contract,
agreement, deed, mortgage, lease, license or other instrument
to which Scangraphics is bound or by which any of it or its
assets or properties is bound or to which any of its assets or
properties is subject other than in the ordinary course of
business consistent with past practices;
(vi) the creation or imposition of any Lien on any
of the assets. tangible or intangible; of Scangraphics
that constitute part of the Assets or are used in the
Business;
(vii) any other changes in the assets, liabilities,
financial condition or prospects of Scangraphics
affecting or relating to the Assets or the Business.
except for changes in the ordinary course of business
consistent with past practices; or
(viii) any contract, commitment or agreement to do
any of the foregoing.
(j) Contracts, Agreements, Plans and Commitments. The
Disclosure Schedule of Scangraphics sets forth a true and complete list
of all contracts, agreements, leases, guaranties, plans and commitments
of the following nature to which Scangraphics is a party or by which it
or any of its assets or properties is bound or to which any of its
assets or properties are subject as of the date hereof that affect or
relate in any way to the Assets or the Business:
(i) any contract, commitment or agreement, involving
in excess of $25,000 in any one year, including, but not
limited to, the items listed in Sections 3.2(j)(ii)-(xix);
(ii) any indenture, trust, loan agreement,
promissory note or other contract or obligation,
including any guarantee, under which Scangraphics has
-17-
<PAGE>
outstanding indebtedness, obligation or liability for
borrowed money;
(iii) any lease or sublease for the use or occupancy
of real property;
(iv) any agreement that restricts the right of
Scangraphics to engage in any type of business;
(v) any agreement by Scangraphics of surety,
guarantee or indemnification;
(vi) any contract or commitment for capital
expenditures or the acquisition or construction of fixed
assets;
(vii) any license, software, or royalty agreement;
(viii) any contract which grants to any person a
preferential right to purchase any of the assets of
Scangraphics;
(ix) any contract, agreement or commitment with
respect to the discharge or removal of Materials of
Environmental Concern;
(x) any contract or agreement with consultants
which is not terminable upon 30 days' notice or less;
(xi) any contract which continues (including any
renewals or extensions) more than one year from the date
of such contract;
(xii) a list of all of Scangraphics names or
tradenames;
There is no course of dealing, waiver, side agreement, arrangement or
understanding applicable to any such contract or agreement or list of
Scangraphics not disclosed therein or in Scangraphics Disclosure Schedule that
has had or might reasonably be expect to have a Material Adverse Effect. True,
correct and complete copies of all such written contracts or agreements or lists
together with all amendments thereto, have been made available to the
Shareholders for review by the Shareholders.
(k) Litigation. To the best of Scangraphics knowledge, there
are no actions, claims, suits, investigations, inquiries or proceedings
pending or, to the Scangraphics knowledge, threatened against
Scangraphics or any of its assets or properties with respect to the
Assets or the Business in any court or before any federal, state or
other governmental department, commission, agency or other
instrumentality or
-18-
<PAGE>
before any arbitrator, or which is contemplated being brought by
Scangraphics. To the best of Scangraphics knowledge, Scangraphics is in
compliance with all statues, rules and regulations applicable to it,
the Assets or the Business, except where the failure to so comply could
not have a Material Adverse Effect.
(l) Insurance. Section 3.2(1) of Scangraphics Disclosure
Schedule sets forth a complete and accurate list of insurance policies
maintained by Scangraphics, identifying in each case: (i) the name of
the insurance company; (ii) the nature and limits of the coverage;
(iii) the annual premiums paid therefor; and (iv) the coverage period
applicable thereto. All such insurance policies are in full force and
effect and provide for coverages which are usual and customary in the
business of Scangraphics as to amount and scope. Scangraphics has
properly paid or will pay all premiums due under such policies of
insurance on or prior to the Closing. Scangraphics is not aware of any
coverage dispute or claim under or relating to any of such policies.
(m) Employee Benefit: Labor Matters.
(i) For purposes of this Section 3.2(1), the term
"Plan" shall mean any stock purchase, stock option, pension,
profit-sharing, bonus, deferred compensation, incentive
compensation, commission, severance or termination pay,
hospitalization, medical, dental, life or other insurance, or
supplemental unemployment benefits plan or agreement or policy
or contract or other arrangement providing employment-related
compensation or benefits to any officer consultant, director,
annuitant, employee, former employee, retiree or independent
contractor of Scangraphics (other than directors' and
officers' liability policies), whether or not insured,
including without limitation "employee benefit plans" as
defined in ERISA and the rule and regulations thereunder.
(ii) Each Plan is listed on the Disclosure Schedule
of Scangraphics. No Plan is or has been (A) covered by Title
IV of ERISA, (B) subject to the minimum funding requirements
of Section 412 of the Code, (C) a "multi-employer plan" as
defined in Section 3(37) of ERISA or (D) a voluntary
employees' beneficiary association within the meaning of
Section 501 (c) (9) of the Code. Each Plan intended to be
qualified under Section 401(a) of the Code is designated as a
tax-qualified plan on the Disclosure Schedule of Scangraphics
and is so qualified.
(iii) Scangraphics has heretofore made available for
review by Shareholders true and correct copies of the
following:
-19-
<PAGE>
(A) each written Plan, all amendments
thereto as of the date hereof and all current summary
plan descriptions provided to employees regarding the
Plans;
(B) a complete description of each other
Plan;
(C) each trust agreement and annuity
contract (or any other funding instruments), and each
insurance contract, pertaining to any of the Plans.
including all amendments to such documents to the
date hereof;
(D) the most recent Internal Revenue Service
("IRS") Form 5500 for each Plan; and
(E) the most recent determination letter
issued by the IRS with respect to any Plan qualified
under Section 401(a) of the Code.
(iv) Each Plan has been maintained and administered
in compliance with its terms and provisions and all applicable
laws. All obligations of Scangraphics with respect to each
Plan have been paid or performed and no Plan has been reduced
or modified or rendered not due by reason of any extension,
whether at the request of Scangraphics or otherwise.
Scangraphics has no commitment or obligation to establish or
adopt any new or additional Plans or to materially increase
the benefits under any existing Plan. No person has engaged in
any prohibited transaction (within the meaning of Section 4975
of the Code or Section 406 of ERISA). Scangraphics has no
obligation to make any payments which would be "excess
parachute payments" under Section 280G of the Code. Neither
Scangraphics nor any Plan provides for the continuation of
medical or health benefits or death benefits after an
employee's termination of employment (including retirement)
except for continuation coverage required pursuant to Section
4980B of the Code and Part 6 of Title I of ERISA and the
regulations thereunder. Scangraphics is not a party to any
collective bargaining agreement or labor contract.
(v) The consummation of the transactions contemplated
by this Agreement will not (A) entitle any current or former
employee of Scangraphics to severance pay, employment
compensation or any other payment, benefit or award or (B)
accelerate the time of payment or vesting, or increase the
amount of any benefit, award (including stock options,
restricted stock and similar
-20-
<PAGE>
awards) or compensation due any such employee or former
employee.
(vi) There are no pending, threatened or anticipated
claims against Scangraphics or any of the Plans by any
employee, former employee or retiree or beneficiary covered
under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
(n) Employees: Employment Contracts.
(i) Except as listed in Scangraphics Disclosure
Schedule or elsewhere in this agreement, Scangraphics shall
have no obligation to any officers or employees of
Scangraphics, whether current or former, with respect to the
continuation of employment of or benefits for any such
officers or employees.
(ii) The Disclosure Schedule of Scangraphics lists
each management or employment contract or contract for
personal services between Scangraphics and any officer,
consultant, director, employee or other person or entity.
(iii) A true and complete copy of each management or
employment contract or contract for personal services and
a complete description of any understanding or commitment
between Scangraphics and any officer, consultant.
director, employee or independent contractor has been
made available to the Shareholders for review.
(o) Intellectual Property Rights. Scangraphics has no patents,
patent applications, trademarks (whether registered or not), trademark
applications, trade names, service marks, copyrights or copyright
registration applications relating to or used in the Assets or the
Business except as listed in the Disclosure Schedule of Scangraphics.
(p) Environmental Matters.
(i) Scangraphics is in compliance with all
Environmental Laws applicable to the Assets or the
Business.
(ii) There is no Environmental Claim pending or, to
the knowledge of Scangraphics, threatened against Scangraphics
or the Business, that does or would affect or relate to the
Business or the Assets.
(iii) There are no past or present actions,
activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission,
discharge, presence or disposal of any
-21-
<PAGE>
Materials of Environmental Concern, that could form the basis
of any Environmental Claim against Scangraphics that might
reasonably be expected to affect or relate to the Business or
the Assets.
(q) Taxes. Scangraphics has caused, or will have caused by the
Closing Date, to be timely filed with the appropriate federal, foreign,
state, local and other governmental authorities all returns,
information returns or statements and reports with respect to taxes of
Scangraphics required to be filed on or before December 31, 1995.
Scangraphics has paid, or will have paid by the Closing Date, all Taxes
shown to be due on such returns or reports.
(r) No Tax Liens exist, and Scangraphics have no reason to
expect that any Tax Lien will arise, with respect to the Scangraphic
Shares or Assets, except for Liens imposed by law and incurred in the
ordinary course of business for obligations not yet due.
(s) Government Licenses and Permits. Scangraphics possesses,
and effective as of Closing will possess, all Permits necessary for the
ownership, use, operation and maintenance of the Assets and the
Business as they currently are being operated. Scangraphics is in
compliance with the Permits and all orders, judgments and decrees
applicable to the ownership, use, maintenance or operation of the
Assets or the Business.
(t) Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated hereby
based upon arrangements made by or on behalf of Scangraphics, except
for Osprey partners whose compensation is payable solely by
Scangraphics.
(u) Ownership of Shares. Scangraphics warrants that
immediately following the Closing that the Shareholders will
be the owner of the Scangraphic Shares, beneficially and of
record, free and clear of all Liens except for those share
restrictions set forth in this Agreement, as follows:
Robert J. Bornhofen 500,000 Shares
Ronald J. Nowak 500,000 Shares
(v) Full and Prompt Disclosure. A list of the written
information provided by Scangraphics to Shareholders is set
forth in Shareholders' Disclosure Statement. None of such
written information furnished to Scangraphics by the
Shareholders or any of its affiliates. representatives or
agents in connection with the Business, the Assets, this
-22-
<PAGE>
Agreement or the transactions contemplated hereby contains any untrue
statement of a material fact.
ARTICLE IV
ADDITIONAL AGREEMENTS AND COVENANTS
4.1 Covenants of the Shareholders. The Shareholders covenants and
agrees with Scangraphics as follows:
(a) Conduct of the Tangent's Business. Except as expressly may
be permitted hereunder or set forth in the Disclosure Schedule of
Shareholders, from the date hereof until the Closing Date, unless the
Shareholders and Scangraphics otherwise agree in writing, the Tangent
will not:
(i) make any material or significant change in the
conduct of the Business;
(ii) terminate or amend in any material respect any
contract, agreement or plan, except in the ordinary course of
business consistent with past practices and to the extent such
termination or amendment does not have a Material Adverse
Effect;
(iii) other than pursuant to existing contracts or
commitments, sell, lease or otherwise dispose of any of the
Assets or any assets or properties used in the Business
(except assets and properties sold, leased or otherwise
disposed of in the ordinary course of business consistent with
past practices and that does not result in a Material Adverse
Effect);
(iv) create, incur, assume or guarantee any long-term
debt or capitalized lease obligation or incur or assume any
short-term debt that affects or relates to the Assets or the
Business:
(v) enter into any employment, consulting, severance
or indemnification agreements, pay any bonuses to directors,
officers or employees, increase the compensation of any of the
Shareholders employees, or execute any collective bargaining
agreement or otherwise incur any obligation to any labor
organization or employee, in each case, to the extent that
such action affects or relates to the Business or the Assets;
(vi) mortgage, pledge or subject to any Lien any of
the Assets or the Business;
-23-
<PAGE>
(vii) enter into any contracts or leases or make any
additions to its property, not in the ordinary course of
business consistent with past practices that affects or
relates to Assets or the Business;
(viii) engage in any activities or transactions
outside the ordinary course of business; or
(ix) commit itself to do any of the foregoing.
(b) Operation of Business. From the date hereof until the
Closing Date, except as permitted hereunder, contemplated hereby or as
consented to in writing by Scangraphics the Tangent shall:
(i) carry on the Business in the usual and ordinary
course consistent with past practices; and
(ii) use its best efforts to preserve and maintain
the business organizations, employees and advantageous
business relationships of the Business, so that its goodwill
and going business shall be unimpaired at the Closing Date.
(c) Access. Shareholders shall cause Tangent to afford to
Scangraphics and its authorized representatives, without charge,
reasonable access during normal business hours from the date hereof
until the Closing Date to the Company's personnel, properties, books
and records for the purpose of conducting an investigation thereof, and
will cause its officers and employees to furnish to Scangraphics such
additional financial and operating data and other information as
Scangraphics may reasonably request.
(d) Best Efforts. The Shareholders shall use their best
efforts to obtain the satisfaction of all conditions to Closing set
forth in this Agreement.
(e) Public Announcements. Subject to applicable securities law
or stock exchange requirements, at all times until the Closing Date,
the Shareholders shall promptly advise, and obtain the prior approval
of, Scangraphics before issuing; or permitting any of its directors;
officers, employees or agents to issue, any press release with respect
to this Agreement or the transactions contemplated hereby.
(f) Regulatory Compliance. Prior to the Closing, the
Shareholders will comply in all material respects with all applicable
local, state and federal laws, rules and regulations, judgments,
decrees, orders, governmental permits, certificates and licenses,
including; without limitation, all Environmental Laws.
-24-
<PAGE>
(g) Instruments of Transfer and Assignment. At the Closing,
the Shareholders shall deliver to Scangraphics, effective as of the
Effective Time, such instruments of transfer and assignment and
conveyance of the Shares to Scangraphics as Scangraphics shall
reasonably require and as shall be consistent with the terms and
provisions of this Agreement and the Conveyance Documents.
(h) Release of Liens and Consents to Assignment. The
Shareholders shall obtain at or prior to Closing, and deliver to
Scangraphics, all such releases and termination statements as shall be
necessary to permit Tangent to have good, marketable and indefeasible
title to the Assets, free and clear of all Liens not listed on the
Disclosure Schedules of Shareholders. For all Liens listed on the
Disclosure Schedules of Shareholders, Shareholders shall provide
Scangraphics with all consents required by the secured parties
reflected on the Disclosure Schedules of Shareholders.
4.2 Covenants of Scangraphics. Scangraphics covenants and agrees with
the Shareholders as follows:
(a) Conduct of Scangraphics Business. Except as expressly may
be permitted hereunder or set forth in the Disclosure Schedule of
Scangraphics, from the date hereof until the Closing Date, unless
Scangraphics and the Shareholders otherwise agree in writing,
Scangraphics will not:
(i) make any material or significant change in the
conduct of the Business:
(ii) terminate or amend in any material respect any
contract, agreement or plan, except in the ordinary course of
business consistent with past practices and to the extent such
termination or amendment does not have a Material Adverse
Effect:
(iii) other than pursuant to existing contracts or
commitments, sell, lease or otherwise dispose of any of the
Assets or any assets or properties used in the Business
(except assets and properties sold, leased or otherwise
disposed of in the ordinary course of business consistent with
past practices and that does not result in a Material Adverse
Effect);
(iv) create, incur, assume or guarantee any long-term
debt or capitalized lease obligation or incur or assume any
short-term debt that affects or relates to the Assets or the
Business;
-25-
<PAGE>
(v) enter into any employment, consulting, severance
or indemnification agreements, pay any bonuses to directors,
officers or employees, increase the compensation of any of the
Scangraphics employees, or execute any collective bargaining
agreement or otherwise incur any obligation to any labor
organization or employee, in each case, to the extent that
such action affects or relates to the Business or the Assets;
(vi) mortgage, pledge or subject to any Lien any of
the Assets or the Business;
(vii) enter into any contracts or leases or make any
additions to its property, not in the ordinary course of
business consistent with past practices that affects or
relates to Assets or the Business;
(viii) engage in any activities or transactions
outside the ordinary course of business; or
(ix) commit itself to do any of the foregoing.
(b) Operation of Business. From the date hereof until the
Closing Date, except as permitted hereunder, contemplated hereby or as
consented to in writing by Scangraphics. Scangraphics shall:
(i) carry on the Business in the usual and ordinary
course consistent with past practices; and
(ii) use its best efforts to preserve and maintain
the business organizations, employees and advantageous
business relationships of the Business, so that its
goodwill and going business shall be unimpaired at the
Closing Date.
(c) Access. Scangraphics shall afford to the Shareholders and
their authorized representatives, without charge, reasonable access
during normal business hours from the date hereof until the Closing
Date to the Scangraphics' personnel, properties, books and records for
the purpose of conducting an investigation thereof, and will cause its
officers and employees to furnish to the Shareholders such additional
financial and operating data and other information as the Shareholders
may reasonably request.
(d) Best Efforts. Scangraphics shall use their best
efforts to obtain the satisfaction of all conditions to
Closing set forth in this Agreement.
(e) Regulatory Compliance. Prior to the Closing,
Scangraphics will comply in all material respects with all
-26-
<PAGE>
applicable local, state and federal laws, rules and regulations,
judgments, decrees, orders, governmental permits, certificates and
licenses, including, without limitation, all Environmental Laws. After
Closing, Scangraphics will complete the registration of securities set
forth in Paragraph 3.2(c) above.
(f) Instruments of Transfer and Assignment. At the Closing,
Scangraphics shall deliver to the Shareholders, effective as of the
Effective Time, such instruments of transfer and assignment conveyance
of the Scangraphic Shares to the Shareholders as Shareholders shall
reasonably require and as shall be consistent with the terms and
provisions of this Agreement and the Conveyance Documents.
ARTICLE V
CONDITIONS TO CLOSING
The obligations of Scangraphics and Shareholders to proceed with the
Closing are subject to the satisfaction of Scangraphics and Shareholders on or
prior to the Closing Date of all of the following conditions, any one or more of
which may be waived, in whole or in part, by Scangraphics and Shareholders.
(a) Compliance. Scangraphics and Shareholders shall have
complied in all respects with the covenants and agreements contained
herein and the representations and warranties contained herein shall be
true on and as of the Closing Date.
(b) Officers Certificate. Scangraphics and Shareholders
shall have received a certificate; dated the Closing Date, of
executive officers of Scangraphics and Shareholders substantially in
the form of Exhibits C and C-2 hereto.
(c) Legal. Scangraphics shall have received from Clanahan,
Tanner, Downing and Knowlton, P.C. a legal opinion dated the Closing
Date substantially in the form of Exhibit D hereto and Shareholders
shall have received from Dilworth Paxson, Kalish & Kauffman a legal
opinion dated the Closing Date substantially in the form of Exhibit E
hereto.
(d) Statutes: Consents. Any statutory requirements for the
valid consummation of the transactions contemplated hereby shall have
been fulfilled and any other third party or governmental consents,
approvals or authorizations necessary for the valid consummation of the
transactions contemplated herein shall have been obtained.
(e) No Orders, etc. No action; suit or proceeding shall
have been commenced or shall be pending or threatened. and no
statute, rule, regulation or order shall have been enacted,
-27-
<PAGE>
promulgated; issued or deemed applicable to the transactions
contemplated by this Agreement, by any United States federal or state
government or governmental agency, instrumentality or court that
reasonably may be expected to (i) prohibit the Scangraphics' ownership
of the stock of Tangent, or compel Scangraphics to dispose of or hold
separate all or a material portion of the Tangent's business or assets
or the Assets or the Business, as a result of the transactions
contemplated by this Agreement, (ii) prohibit the transfer of the
Shares to Scangraphics, or the transfer of the Scangraphic Shares to
the Shareholders, or otherwise prohibit or limit the consummation of
the transactions contemplated by this Agreement, (iii) make such
purchase, payment or consummation illegal or (iv) impose or confirm
material limitations on the ability of Scangraphics effectively to own
the Shares or for the Shareholders to own the Scangraphic Shares or for
Tangent to conduct the Business as it is currently conducted by the
Shareholders.
(f) Good Standing: etc. Scangraphics and Shareholders
shall have received (i) a certificate or certificates of good
standing and existence of Tangent and Scangraphics dated as of
a recent date, together with a bring-down certificate or
certificates to the Closing Date: and (ii) such other
instruments as the Scangraphics and Shareholders reasonably
may request from each other.
(g) Appointment to Board of Directors. Scangraphics shall have
appointed Robert A. Garber to its Board of Directors for a one year
term. The director shall, inter alia, have access to all documents
filed with the SEC.
(h) Affiliates Letters. Each person who may deem to be an
Affiliate of Tangent on the Closing Date shall have delivered to
Scangraphics a letter satisfactory to counsel for Scangraphics,
acknowledging and agreeing to abide by the limitations imposed by law
or required to assure that the transaction qualifies for pooling for
interest accounting in respect of the sale or other disposition of
Scangraphics shares received by such person pursuant to this
transaction.
(i) Pooling. An opinion from BDO Seidman, L.L.P. to the
effects that the transaction contemplated by this Agreement
qualifies for the "pooling of interest" accounting treatment
if consummated in accordance with this agreement.
(j) Robert J. Bornhofen will have entered into the Employment
Agreement with Tangent as set forth in Exhibit Fl hereof.
-28-
<PAGE>
(k) Ronald J. Nowak will have entered into the
Employment Agreement with Tangent as set forth in Exhibit F2
hereof.
(l) Robert A. Garber will have entered into the
Employment Agreement with Tangent as set forth in Exhibit F3
attached hereto.
(m) Simultaneously with the Closing, Scangraphics shall
execute the aforesaid three agreements.
ARTICLE VI
TERMINATION
6.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Closing Date by the mutual written consent of the
parties hereto.
6.2 Termination by Scangraphics or the Shareholders. This Agreement may
be terminated by either Scangraphics or the Shareholders if (a) the Closing
shall not have occurred on or before December 28, 1995 or (b) any court or
governmental agency of competent jurisdiction shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the purchase and sale.
6.3 Termination by the Shareholders. This Agreement may be terminated
by the Shareholders if (a) Scangraphics shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it at or prior to the Closing Date
and such failure has not been cured within 15 days after receipt of notice
thereof, (b) any condition to the purchase and sale has not been satisfied for
any reason, or (c) in the course of its due diligence review, the Shareholders
uncover some defect or condition which has a Material Adverse Effect on the
Assets of Scangraphics and impairs the value of the Assets or the Business of
Scangraphics to the Shareholders. In the event of such termination, the
Shareholders shall be entitled to recovery from Scangraphics of all legal,
accounting, travel, and other out-of-pocket expenses incurred by the
Shareholders as of the date of termination.
6.4 Termination by the Scangraphics. This Agreement may be terminated
by Scangraphics if (a) the Shareholders shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it at or prior to the Closing Date
and such failure has not been cured within 15 days after receipt of notice
thereof, (b) any condition to the purchase and sale has not been satisfied for
any reasons, or (c) in the course of its due diligence review, Scangraphics
uncovers some defect or condition which has a Material
-29-
<PAGE>
Adverse Effect on the Assets and impairs the value of the Assets or the Business
of Tangent to Scangraphics. In the event of such termination, Scangraphics shall
be entitled to recovery from the Shareholders of all legal, accounting, travel,
and other out-of-pocket expenses incurred by Scangraphics as of the date of
termination.
6.5 Effect of Termination. In the event of termination of this
Agreement as provided in this Article VI, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto with
respect thereto except that any termination pursuant to this Article VI shall
not relieve any party of any liability to the other party for the willful breach
of the provisions hereof occurring before such termination.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of the Scangraphics. The Shareholders agree to
indemnify the Scangraphics against, and hold the Scangraphics harmless from any
Losses sustained by the Scangraphics arising out of, regardless of whether such
Losses arise as a result of a third-party claim or as a result of a dispute
between indemnitor and indemnitee, resulting from or relating to (a) any
inaccuracy in or breach of any of the representations, warranties or covenants
(without regard to any materiality standard or qualification regarding Material
Adverse Effect contained therein) made by the Shareholders, (b) the failure of
the Shareholders to perform any of their obligations contained in the Agreement.
7.2 Indemnification of the Shareholders. Scangraphics agrees to
indemnify the Shareholders against, and hold the Shareholders harmless from any
Losses sustained by the Shareholders arising out of, resulting from or relating
to, and regardless of whether such Losses arise as a result of a third party
claim or as a result of a dispute between indemnitor and indemnitee, (a) any
inaccuracy in or breach of any of the representations, warranties or covenants
(without regard to any materiality standard or qualification regarding Material
Adverse Effect contained therein) made by Scangraphics herein, (b) the failure
of Scangraphics to perform any of the obligations of Scangraphics contained in
this Agreement.
7.3 Survival. The covenants, representations and warranties set forth
in this Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing.
7.4 Indemnification Procedures. All claims for indemnification under
this Agreement shall be asserted and resolved as follows: a party claiming
indemnification under this Agreement (an "Indemnified Party"), shall within a
reasonable time, notify
-30-
<PAGE>
the party from whom indemnification is sought (an "Indemnifying Party") of any
claims asserted against the Indemnified Party for which indemnification is
sought by transmitting to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail (a) the nature of the claim,
(b) an estimate of the amount of damages attributable to the claim which
estimate shall not be conclusive of the final amount of such claim) and (c) the
basis of the request for indemnification under this Agreement. Within 20 days
after receipt of the Indemnity Notice, the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its potential
liability with respect to such claim and (ii) in the event of a third-party
claim, whether the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such claim. If the Indemnifying Party
notifies the Indemnified Party within the 20-day period that the Indemnifying
Party elects to assume the defense of the claim, then the Indemnifying Party
shall have the right to defend, at its sole cost and expense, such claim by all
appropriate proceedings and shall have full control of such defense and
proceedings, including any compromise or settlement thereof. If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any claim that the Indemnifying Party elects to contest,
including, without limitation, the making of any related counterclaim or
cross-complaint. If the Indemnifying Party does not notify the Indemnified Party
within 20 days from its receipt of the Indemnity Notice that the Indemnifying
Party disputes such claim, the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed a liability of the Indemnifying Party
hereunder. Nothing in this Agreement shall prevent an Indemnified Party, at its
expense, from independently retaining counsel with respect to any claim.
7.5 Insurance Proceeds. In determining the amount of any loss,
liability or expense for which any party is entitled to indemnification under
this Agreement, the gross amount thereof will be reduced by any insurance
proceeds realized or to be realized by such party and such correlative insurance
benefit shall be net of the insurance premium that becomes due as a result of
such claim.
ARTICLE VIII
DEFINITIONS
The terms set forth below in this Article IX shall have the meanings
ascribed to them below or in the section of this Agreement referred to below:
"Affiliates" with respect to any person, means any person that directly
or indirectly controls, is controlled by or is under common control with such
person.
-31-
<PAGE>
"Agreement" is as defined above in the preamble.
"Assets" as it relates to Tangent or the Shareholders means all of the
assets of Tangent as listed on its Financial Statements and assets described in
3.1(h), and shall include all assets, tangible or intangible, of Tangent used,
held, or relating to the Business, and the names and trademarks of Tangent
Engineering, Tangent Color Systems, and INTREPID, and all other tradenames of
Tangent, together with all trade secrets and good will. The term "Assets" as it
relates to Scangraphics means all of the assets of Scangraphics as listed on its
Financial Statements, and shall include all assets of Scangraphics used, held,
or relating to its Business, and the names and trademarks of Scangraphics, Inc.,
Scangraphics, Sedona GeoServices, and all other tradenames of the Purchaser.
"Business" as defined in Section 3.1(h).
"Closing" and "Closing Date" are as defined in Article II.
"Code" means the Internal Revenue Code of 1986, as amended.
"Conveyance Documents" means the instruments necessary or appropriate
to Purchaser good, marketable, and indefeasible title to the Shares.
"Environmental Claim" means any claim, action, investigation or notice
by any person or entity alleging potential liability arising out of, based on or
resulting from (a) the presence, or release into the environment, including,
without limitation, the indoor environment, of any Materials of Environmental
Concern at any location, whether or not owned by the Tangent or used in the
Business or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Laws" means all federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Financial Statements" means the financial statements described in
Section 3.1(i) or Section 3.2(i), respectively.
"Indemnified Party" is as defined in Section 7.4.
"Indemnifying Party" is as defined in Section 7.4.
-32-
<PAGE>
"Indemnity Notice" is as defined in Section 7.4.
"Intellectual Property Rights" are as defined in Section
3.1(p).
"IRS" means Internal Revenue Service.
"Letter of Intent" shall mean the correspondence dated November 28,
1995 executed by Shareholders and Purchaser which outlines the transactions set
forth in this Agreement.
"Lien" means any lien, charge, encumbrance, right of others.
mortgage, pledge, security interest or other adverse claim of any
kind whatsoever.
"Losses" means any loss, cost, damage or other expense.
including but not limited to reasonable costs, expert witness, and
attorneys' fees, regardless of whether suit is brought.
"Material Adverse Change" means any change, individually or in the
aggregate, which will have, or could reasonably be expected to have, a Material
Adverse Effect on the business or assets of the Company.
"Material Adverse Effect" means, for Losses which were not known before
or as of Closing, any effect, individually or in the aggregate, on the business,
assets, prospects, results of operations or condition (financial or otherwise)
of Tangent or Scangraphics, as the case may be, which decreases, or could
reasonably be expected to decrease the value of the Business by $100,000 or
more. For Losses which were known before or as of Closing, "Material Adverse
Effect" means effect, individually or in the aggregate, on the business, assets,
prospects, results of operations or condition (financial or otherwise) of
Tangent or Scangraphics, as the case may be, which decreases, or could
reasonably be expected to decrease, the value of the Business, without regard to
monetary thresholds.
"Materials of Environmental Concern" means any pollutant, contaminant,
waste, toxic substance, hazardous substance or petroleum.
"Permits" means all governmental licenses, franchises, permits,
certificates, orders, approvals, authorizations, exemptions, registrations and
similar documents or instruments as are necessary to permit the operation of the
Assets or the Business substantially as operated prior to the date of this
Agreement.
"Plan" is as defined in Section 3.1(h)
"Taxes" means all federal, state, local or foreign income, gross
receipts, profits, franchise, sales, use, occupation,
-33-
<PAGE>
personal or real property [(including in lieu-of-taxes)], capital, wealth, ad
valorem, environmental, employment, severance, production, excise, stamp,
transfer, workers' compensation, social security, wage withholding or similar
taxes, motor vehicle registration fees, customers or import duties and all other
taxes or other governmental fees or charges imposed by any country or political
subdivision thereof, together with any interest, additions or penalties with
respect thereto.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when received if
sent by registered or certified mail, return receipt requested, or by facsimile
transmission to the parties at the following addresses (or at such other address
as a party may specify by like notice):
(a) If to the Scangraphics, to:
Andrew E. Trolio
President
Scangraphics, Inc.
700 Abbott Drive
Broomall, PA 19008
Telecopy: (610) 543-6257
with a copy to:
Edward N. Barol, Esquire
Dilworth, Paxson, Kalish & Kauffman
3200 Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103
Telecopy: (215) 575-7200
(b) If to the Shareholders, addressed to:
Robert A. Garber
Vice-President, Financial Operations
Tangent Engineering, Inc.
14 Inverness Drive East, Suite A-100
Englewood, Colorado 80112
Telecopy No. 303-799-1606
with a copy to:
Peter T. Moore
Clanahan, Tanner, Downing and Knowlton, P.C.
1600 Broadway
-34-
<PAGE>
Suite 2400
Denver, Colorado 80202
Telecopy: (303) 830-0299
9.2 Expenses. Regardless of whether the Closing shall occur, and except
as set forth in this Agreement, each of the parties will be responsible for its
or his own expenses and fees incurred by it or him in connection with the
transaction contemplated herein.
9.3 Further Assurances. The Shareholders and Scangraphics agree to take
all necessary or appropriate actions and to deliver or cause to be delivered to
each other on the Closing Date, and at such other times thereafter as shall be
reasonably agreed, any such additional instruments as any of them may reasonably
request for the purpose of carrying out this Agreement and the transactions
contemplated hereby, including but not limited to the full use and enjoyment the
stock of Tangent by Scangraphics on and after the Closing Date.
9.4 Exclusive Agreement. This Agreement supersedes all prior
agreements between the parties (whether written or oral) and is intended
as a complete and exclusive statement of the terms of the agreement between the
parties.
9.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
9.6 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.7 Headings. The headings herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit or affect any of the provisions of this Agreement.
9.8 Assignment. No party hereto shall assign this Agreement or any part
hereof without the prior written consent of the other party. No assignment
pursuant to this Section shall release any party of its obligations under this
Agreement.
9.9 Binding Effect: Third Parties. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Nothing in this
Agreement shall entitle any person other than the Shareholders, Scangraphics or
their respective successors and assigns permitted hereby, to any claim, cause of
action, remedy or right of any kind.
9.10 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any
-35-
<PAGE>
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same agreement.
-36-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
SCANGRAPHICS, INC.
By: /s/ ANDREW E. TROLIO
-----------------------------------
Andrew E. Trolio
President
By: /s/ ROBERT J. BORNHOFEN
-----------------------------------
Robert J. Bornhofen
By: /s/ RONALD J. NOWAK
-----------------------------------
Ronald J. Nowak
-37-
<PAGE>
Exhibit F2
EMPLOYMENT AGREEMENT
(Robert J. Bornhofen)
THIS EMPLOYMENT AGREEMENT between Employer and Employee identified
below is executed as of this 29th day of December, 1995, and is effective as of
the date of the closing of the Stock Purchase Agreement of even date herewith
between Tangent Engineering, Inc., 14 Inverness Drive. East, Suite A-100,
Englewood, Colorado 80112, and Scangraphics, Inc., a Pennsylvania corporation,
having its principal offices at 700 Abbott Drive, Broomall, PA 19008.
1. Defined Terms. The following terms will have the meanings ascribed
below, wherever they appear in this Agreement.
1.1 Employer. Tangent Engineering, Inc., 14 Inverness
Drive, East, Suite A-100, Englewood, Colorado 80112.
1.2 Employee. Robert J. Bornhofen.
1.3 Base Compensation. $100,000 per year payable in
equal bi-weekly installments.
1.4 Employee Benefits. Those benefits which are offered
generally to employees of the Employer from time to time, including but not
limited to health insurance, sick leave, profit sharing, whether qualified or
unqualified, retirement income, stock option and other plans if generally made
available to all employees of Employer. In addition to these general benefits,
Employer agrees to grant Employee annual paid vacation of one month per year.
1.5 Primary Duties. The Employee shall be employed as a Senior
Vice President-International Marketing of Employer. Employee, as a key
employee of Employer, is expected to perform the following primary duties for
Employer: To coordinate and supervise all manufacturing, product development and
customer service activities for Employer; to provide, in cooperation with Robert
A. Garber, input and guidance with respect to personnel matters and short- and
long-term planning; and to assume direct reporting responsibility to the
President and Board of Directors of Scangraphics, Inc., the parent corporation
of Employer. Employee agrees to perform fully, faithfully, competently, and
effectively such duties and such supplementary duties as may be assigned to him
by Board of Directors of Employer and/or the Board of Directors of the parent
company Scangraphics and to devote his full time and best efforts to the
business of Employer. Employee shall not, accept with Employer's written
consent, engage in any other employment during the term of his employment with
Employer.
1.6 Reasonable Out-of-Pocket Expenses. Reasonable
out-of-pocket expenses, actually incurred by the Employee, in the
<PAGE>
performance of work for the Employer, in the ordinary course of the Employer's
business and the duties of the Employee for the Employer, or as otherwise
previously approved in writing by the president or a vice president of the
Employer; provided that receipts, invoices, credit card charge receipts or other
evidence of the incurring of such expenses, together with such supporting
information as Employer may reasonably request, and in all events sufficient to
establish a deduction of such expenses as ordinary and necessary business
expenses for federal income tax purposes, have been furnished to the controller
or other designated disbursing officer of the Employer.
1.7 Term. The Term of this Agreement is as set forth in
paragraph 6 below.
2. Employment. Employer agrees to employ Employee and
Employee agrees to perform the duties of Employee set forth herein
for the Term of this Agreement.
3. Compensation, Perquisites.
3.1 Base Compensation. During the Initial Term, the Employee
shall be paid the Basic Compensation or such greater amount as may be set by the
Board of Directors of Employer. On the anniversary date of this Agreement each
and every year during the Initial Term and any renewal or extension hereof,
Employee's Base Compensation shall be increased by 10% over the Base
Compensation of the prior year, provided that during the prior year the profits
of Employer have equaled not less than 20% of the Base Compensations of
Employee, Robert A. Garber and Robert J. Bornhofen. If the pre-tax profits for
the said prior year of Employer shall not equal the said sum, then there will be
no increase in Base Compensation for the year commencing on the anniversary
date.
3.2 Bonuses. Employee shall be entitled to participate
in performance bonuses as and when approved by the Board of Directors of
Scangraphics.
3.3 Employee Benefits. Employee shall be entitled to
participate in all Employee Benefits offered by the Employer including
continuation of current medical coverage and 401K programs of Employer.
3.4 Perquisites. Employee shall be entitled to perquisites
consistent with the perquisites offered to key employees of Employer.
3.5 Reasonable Reimbursement of Expenses. Employee shall
be entitled to reimbursement of Reimbursable Expenses promptly upon furnishing
the required supporting information to Employer.
-2-
<PAGE>
4. Duties of Employee.
4.1 Primary Duties. Employee shall at all times during
the Term of this Agreement be expected to perform and shall perform
the Primary Duties for the Employer.
4.2 Other Duties. In addition to the Primary Duties, the
Employee shall perform such additional duties as may be assigned from time to
time by Employer's board of directors.
5. Duty of Loyalty.
5.1 Duty of Loyalty. During the Term of this Agreement,
Employee, as a key employee of Employer, is expected to devote full time
attention to the work of the Employer during normal business hours to the
business of Employer.
5.2 Scope of this Paragraph. Except as otherwise contained in
this Agreement, Employee is not prevented him making investments in other
business enterprises, through the stock market or otherwise, so long as Employee
is not actively engaged in the conduct of any business which would compete with
the business of Employer or which would interfere with the Employee's duties for
the Employer.
6. Term.
6.1 Initial Term. This Agreement shall have an Initial
Term of three years, commencing January 1, 1996.
6.2 Subsequent Term. After the Initial Term, this
Agreement shall automatically be renewed, without further action by
either party, for successive annual terms unless terminated as
provided below.
6.3 Termination. This Agreement may be terminated as
follows:
6.3.1 During the Initial Term of this Agreement,
and any extension, this Agreement may be terminated at the end of the then
current term by either party giving the other party sixty (60) days written
notice of its intention to terminate at the end of that current term.
6.3.2 At any time, by the Employer for "good
cause." Good cause shall mean conviction of a crime of moral turpitude, on the
job intoxication, but only after full compliance with the law of Colorado
regarding discharge for intoxication, violation of any law, rule or regulation
promulgated by any governmental authority which would subject the Employer to
administrative sanction, fine, criminal action or civil claim for damages,
violation of any material term of this Agreement,
-3-
<PAGE>
embezzlement from the Employer, usurpation of a valid opportunity of the
Employer unless the specific action is approved by the Employers board of
directors.
6.4 Accrued Salary, Bonus and Commission. Termination of the
Employee by Employer for any reason other than good cause in accordance with
paragraph 6.3.3 shall not affect Employees right to any salary, bonus or
commission earned under this Agreement and Employee shall be entitled to receive
payment of a sum equal to the balance of the employees then Basic Compensation
to the end of the then term in the following manner at the option of the
employee in the same biweekly payments, or in a lump sum payment giving credit
for the value of money at the rate of 6% per annum.
7. Assignment. This Agreement shall be personal to both Employer and
Employee and the rights hereunder may not be assigned nor the duties hereunder
delegated without the consent of both parties, provided however, Employer may
assign this Agreement in the event of merger, consolidation or transfer of
substantially all of its assets, but the Agreement may only be assigned to the
resulting party or the acquires of substantially all the assets of Employer.
8. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered or mailed, by
certified or registered mail with postage prepaid, to the party intended at the
address set forth in item 1 of the signature page of this Agreement or to such
other person and place as either party shall furnish to the other in writing.
9. Cost of Suit. In the event of default hereunder and suit therefrom
to enforce any provision of this Agreement, any party against whom judgment is
awarded shall be liable to the prevailing party for all costs and expenses,
including reasonable attorneys' fees incurred in the preparation, prosecution
and appeal of such suit for enforcement or damages.
10. Miscellaneous. This instrument: (a) contains the entire agreement
among the parties, (b) may not be amended nor may any rights hereunder be
waaved except by an instrument in writing signed by the party sought to be
charged with such amendment or waiver, (c) shall be construed in accordance
with, and governed by, the laws of Colordo, (d) shall be binding upon and shall
insure to the benefit of the parties and the respective personal representatives
and assigns, except as above set forth, and (e) may be executed in any number of
counterparts of the signature page each of which shall be considered an
original, (f) if any provision of this Agreement shall be or become illegal or
unenforceable in whole or in part for any reason whatsoever, the remaining
provisions shall nevertheless be deemed valid, binding and subsisting, (g) the
waiver by either party of a breach of violation of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
or violation thereof, (h) this writing represents the entire
-4-
<PAGE>
Agreement and understanding of the parties with respect to the subject
matter hereof; it may not be altered or amended except by agreement writing
signed by both parties, (i) the heading of paragraphs in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation, (j) this Agreement supersedes any earlier Employment Agreement
and as such is the only Agreement in force.
11. Secret, Confidential or Proprietary Information.
11.1 Employee will hold in a fiduciary capacity for the
benefit of Employer, its parent subsidiaries and designees and shall not
disclose to any person or entity other than Employer or persons or entities
designated by Employer all secret, confidential or proprietary information,
knowledge, patents, trade secrets, client identities, marketing and other
business methods, technique, process, practices, procedures, plans and
strategies, data regarding Employer and any of its subsidiaries and clients
obtained by Employee during his employment by Employer, and any other secrets,
confidential or proprietary information pertaining to Employer or its business,
during the term or terms of this Agreement and at all times after its
termination.
11.2 Any invention, improvement, innovation, or new product,
process or idea made or developed by Employee, alone or in conjunction with
others, during the course of the Employee's employment with Employee, relating
to Employer's business, shall be deemed to have been made or developed by
Employee solely for the benefit of Employer and shall be the sole and exclusive
property of Employer. Employee shall not at anytime, whether during employment
with Employer or after its termination, use or disclose to any third party such
invention, improvement, innovation, or new product, process or idea, except as
expressly authorized in writing by Employer.
11.3 Immediately upon notice of termination of employment by
Employer or Employee, Employee shall give to Employer the originals and all
copies of all documents, correspondence, memoranda, records, notes, manuals,
materials, client and prospective client lists and formation, and other things
relating, either directly or indirectly, to Employer's business, including, but
not limited to, secret, confidential or proprietary information, in Employee's
possession, custody or control.
12. Agreement Not to Compete.
12.1 As used n this Agreement, the term client" shad mean any
person or entity with whom or which Employee is directly or indirectly doing
business at the time Employee ceases to be employed by Employer, or with respect
whom or which Employer has, within three (3) years preceding that date, done
business, or Employees has, within one (1) year preceding that date,
-5-
<PAGE>
specifically identified for active efforts to solicit or otherwise secure
business, regardless of where such client may be located in the United States.
12.2 As used in this Agreement, the term "compensation" shall
mean doing or seeking to do any type of business, or performing or g to perform
any type of service, done or performed, or sought to be done or performed, by
Employees during the time Employee is employed by Employer or within (for the
number of years see 12.3.3 below) following the termination of Employee's
employment with Employer. The term "Termination of Employment" shall mean the
effective date of Employee's tern ending. Employee being discharged or Employee
voluntarily leaving.
12.3 In recognition and consideration of Employee's
employment, compensation and fringe benefits, that this Employment Agreement is
in connection with the purchase by Scangraphics of stock of Employer, Employee's
introduction to Employer s clients, and the carefully guarded methods of doing
business which Employer utilizes and deems crucial to the success of its
business:
12.3.1 Employee shall not during the term of this
Agreement, or for a period (for the number of years see 12.3.3 below) following
the termination of Employee's employment with Employer, regardless of the reason
for termination or the party initiating termination, either directly or
indirectly, own, manage, operate, control, be employed or retained by, or in any
way engage in or be connected with any business enterprise, in any capacity
whatsoever, including, but not limited to, partner, owner, director, officer,
employee, agent or independent contractor, which seeks to solicit, divert, take
away, sell to, engage in or otherwise do business with, or perform any service
for, any client of Employer in competition with Employer.
12.3.2 Employee shall not during the term of this
Agreement, or for a period (for the number of years see 12.3.3 below) following
the termination of Employee's employment with Employer, regardless of the reason
for termination or the party initiating termination, either directly or
indirectly, own, manage, operate, control, be employed or retained by, or in any
way engage in or be connected with any business enterprise, in any capacity
whatsoever, including, but not limited to, partner, owner, director, officer,
employee, agent or independent contractor, which seeks to engage in, or is
engaged in. competition with Employer anywhere in the United States.
12.3.3 The number of years of restriction under
12.2. 12.3.1 and 12.3.2 shall be determined as follows: if the employee is
discharged by employer or the agreement ends at the end of its then term the
restriction is one year. If the employee shall voluntarily terminate his
employment the restrictions shall be
-6-
<PAGE>
three years.
12.4 For a period of three (3) years following the termination
of Employee's employment with Employer, regardless of the reason for termination
or the party initiating termination, Employee shall not, either directly or
indirectly, without the prior written consent of Employer, solicit. remit or
induce, or attempt to solicit, recruit or induce, for employment of any other
business relationship in competition with Employer, on any basis whatsoever,
including, but not limited to, fur-time, part-time, occasional or consulting,
any person who is employer) by Employee.
12.5 This agreement not to exploit for his own benefit client
and coemployee relationships developed during her employment with Employer, or
to engage in competition with Employer following the termination of her
employment, has been freely and willingly made by Employee in consideration of
the employment, with all of its compensation and benefits, being provided by
Employer, the secrets and confidences shared by Employer with Employee, and
other good and valuable consideration.
12.6 Employee acknowledges and agrees that nothing contained
in this Agreement nor the enforcement of any obligation in this Article and the
preceding Article alters or shall alter Employee's ability to obtain gainful
employment which will provide a livelihood for Employee and Employee's
dependents. Employee recognizes that this Agreement is reasonably necessary to
protect Employer's legitimate interests in its clients, including, but not
limited to, those originated by Employee, and in its secret, confidential or
proprietary information.
12.7 Employee acknowledges that any breach of any obligation
contained in this Article and the preceding Article is not adequately
compensable by monetary damages, and Employee agrees that any such breach shall
cause Employer irreparable harm for which Employer shall be entitled to a
temporary resting order and primary injunction without prior notice to Employee.
Any and all attorneys' fees, costs and expenses incurred by Employer in
enforcing the terms of this Article and the preceding Article shall be
reimbursed to Employer by Employee.
12.8 In the event that a court of competent jurisdiction shaD
determine that any of the restrictive covenants in this Agreement is inequitably
broad, it is the intention and agreement of the panties that the court shall
equitably adjust the obligations of Employee under this Agreement rather than
entirely eliminate any such obligations. In the event that a court shad
equitably adjust or eliminate any of the restrictive covenants in this
Agreement, all other aspects of this Agreement shall remain in full force and
effect.
12.9 The enumeration of remedies to which Employer is
-7-
<PAGE>
entitled does not limit any rights Employer otherwise possesses, including, but
not limited to, the right to monetary damages.
13. Incentive Warrants. In order to add additional incentive to
Employee to increase the sales and profitability of Employer which reflects in
the increase in the profitability of Scangraphics, Scangraphics does hereby
grant to Employee the warrants a copy of which are attached hereto Exhibit A and
made a pt hereof. In addition to the provisions set forth in the warrants it is
understood that no warrant is exercisable unless and under it has vested. Except
as hereafter provided, no warrant shall vest after a person has ceased to be an
Employee of Employer. In the event that Employee shall become fully disabled and
therefore unable to work in the foreseeable future as determined by a physician
appointed by Scangraphics the warrants will vest provided that they would have
otherwise vested had the Employee remained an Employee of Employer, that is the
necessary goals for vesting shall be achieved by Employer. Once a warrant has
vested it will continue to be vested regardless of whether Employee continues
his employment with Employer except in the event that Employee is discharged for
cause, in which event all options vested or invested shall immediately and
without further notice become null and void. If there shall be disagreement with
the physician appointed by Scangraphics to determine the permanent disability of
Employee, Employee may employ a physician duly licensed in the State of Colorado
to give an opinion. If the opinion of Employee's physician shall differ from
that of the opinion given by Scangraphics' physician, then the two physicians
shall choose a mutually acceptable physician to examine the Employee and the
opinion of the third physician shall be binding on both parties. In the event
that the two physicians cannot agree on the third physician within ninety (90)
days after the rendering by the Employee's physician of his opinion then the
third physician shall be chosen by the then President of the Colorado Medical
Association. In the event that Employee shall be discharged "without cause" the
warrants shall vest in the same manner and at the same times as if Employee were
fully disabled.
[INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
EMPLOYER:
TANGENT ENGINEERING, INC.
By: /s/ RONALD J. NOWAK
-------------------------------------
Ronald J. Nowak
Its: Vice President
AND RATIFIED BY:
/s/ ANDREW E. TROLIO
----------------------------------------
Andrew E. Trolio, President
Scangraphics, Inc.
700 Abbott Drive
Broomall, PA 19008
EMPLOYEE:
/s/ ROBERT J. BORNHOFEN
----------------------------------------
Robert J. BORNHOFEN
14 Inverness Drive East
Suite A-100
Englewood, Colorado 80112
14 Inverness Drive East
Suite A-100
Englewood, Colorado 80112
-9-
<PAGE>
Number:WC0125 **300,000** Shares
SCAN-GRAPHICS, INC.
Incorporated under the laws of the Commonwealth of Pennsylvania
This certifies that Robert J. Borphofen (the " holder") is the owner of 300,000
Common Stock Purchase Warrants (the "Warrants"), each Warrant giving the holder
the right to purchase one (1) fully paid and non-assessable share of Common
Stock, $.001 par value, of Scan-Graphics, Inc. (the "Company") at any time
through December 31, 2000, (the "exercise date") at an exercise price of $3.00
per Warrant and subject to the terms, conditions and limitations set forth
herein. The shares of Common Stock underlying these Warrants shall have "piggy
back registration rights" and will therefore be included in the next
registration statement to be filed with the SEC. The first 100,000 Warrants
shall vest, commencing on the 1st day of the fifth month of employment, in
thirty-two equal monthly installments of 3,125 shares of Common Stock per month,
for a total of 100,000 Warrants to be vested upon Tangent achieving $12,000,000
in cumulative gross revenues of Tangent's products by December 31, 1998
including Tangent's revenues for fiscal 1995. These Warrants are issued to
holder subject to the terms and conditions of the attached Employment Agreement.
As if Midnight of the exercise date, any unexercised Warrants issued herein will
automatically and without notice terminate and become null and void, unless
extended by action of the Board of Directors. Any exercise of these Warrants
shall be in writing, addressed to the Secretary of the Corporation at its
principal place of business, using the form attached hereto, and shall be
accompanied by payment in full by check.
In the event at the time of exercise of the Warrants, there does not exist a
Registration Statement on an appropriate Form under the Securities Act of 1933,
as amended (the "Act") which registration Statement shall have become effective
and shall be current with respect to the underlying shares being purchased, and
in the opinion of counsel to the Company such underlying shares will upon
issuance be "restricted" securities within the meaning of Rule 144 under the
Act, you will represent and warrant to the Company (i) that, upon exercise of
the Warrants, you are purchasing the underlying shares for resale or
distribution of any such underlying shares shall be made either pursuant to (x)
a Registration Statement on an appropriate Form under the Act, which
Registration Statement shall have become effective and shall be current with
respect to the underlying shares being sold, or (y) a specific exemption from
the registration requirements of the Act, but in claiming such exemption, you
shall, prior to any offer for sale or sales of such underlying shares, obtain a
favorable written opinion from counsel for, approved by the Company, as to the
applicability of such exemption.
In Witness Whereof , the said Corporation has caused this Certificate to be
signed by its authorized officers, and its Corporate Seal, to be hereunto
affixed this 29th day of December,
<PAGE>
Exhibit F2
EMPLOYMENT AGREEMENT
(Ronald J. Nowak)
THIS EMPLOYMENT AGREEMENT between Employer and Employee identified
below is executed as of this 29th day of December, 1995, and is effective as of
the date of the closing of the Stock Purchase Agreement of even date herewith
between Tangent Engineering, Inc., 14 Inverness Drive, East, Suite A-100,
Englewood, Colorado 80112, and Scangraphics, Inc., a Pennsylvania corporation,
having its principal offices at 700 Abbott Drive, Broomall, PA 19008.
1. Defined Terms. The following terms will have the meanings
ascribed below, wherever they appear in this Agreement.
1.1 Employer. Tangent Engineering, Inc., 14 Inverness
Drive, East, Suite A-100, Englewood, Colorado 80112.
1.2 Employee. Ronald J. Nowak
1.3 Base Compensation. $100,000 per year payable in
equal bi-weekly installments.
1.4 Employee Benefits. Those benefits which are offered
generally to employees of the Employer from time to time, including but not
limited to health insurance, sick leave, profit sharing, whether qualified or
unqualified, retirement income, stock option and other plans, if generally made
available to all employees of Employer. In addition to these general benefits,
Employer agrees to grant Employee annual paid vacation of one month per year.
1.5 Primary Duties. The Employee shall be employed as a Senior
Vice-President of Employer. Employee, as a key employee of Employer, is
expected to perform the following primary duties for Employer: To coordinate and
supervise all manufacturing, product development and customer service activities
for Employer; to provide, in cooperation with Robert A. Garber, input and
guidance with respect to personnel matters and short- and long-term planning;
and to assume direct reporting responsibility to the President and Board of
Directors of Scangraphics, Inc., the parent corporation of Employer. Employee
agrees to perform fully, faithfully, competently, and effectively such duties
and such supplementary duties as may be assigned to him by Board of Directors of
Employer and/or the Board of Directors of the parent company Scangraphics and to
devote his full time and best efforts to the business of Employer. Employee
shall not, accept with Employer's written consent, engage in any other
employment during the term of his employment with Employer.
1.6 Reasonable Out-of-Pocket Expenses. Reasonable out-
<PAGE>
of-pocket expenses, actually incurred by the Employee in the performance of work
for the Employer, in the ordinary course of the Employer's business and the
duties of the Employee for the Employer, or as otherwise previously approved in
writing by the president or a vice president of the Employer; provided that
receipts, invoices, credit card charge receipts or other evidence of the
incurring of such expenses together with such supporting information as
Employer may reasonably request, and in all events sufficient to establish a
deduction of such expenses as ordinary and necessary business expenses for
federal to income tax purposes, have been furnished to the controller or other
designated disbursing officer of the Employer.
1.7 Term. The Term of this Agreement is as set forth in
paragraph 6 below.
2. Employment. Employer agrees to employ Employee and
Employee agrees to perform the duties of Employee set forth herein for
the Term of this Agreement.
3. Compensation, Perquisites.
3.1 Base Compensation. During the Initial Term, the Employee
shall be paid the Basic Compensation or such greater amount as may be set
by the Board of Directors of Employer. On the anniversary date of this Agreement
each and every year during the Initial Term and any renewal over extension
hereof, Employee's Base Compensation shall be increased by 10% or the Base
Compensation of the prior year, provided that during the prior year the profits
of Employer have equaled not less than 20% of the Base Compensations of
Employee, Robert A. Garber and Robert J. Bornhofen. If the pre-tax profits for
the sad prior year of Employer shall not equal the said sum, then there will be
no increase in Base Compensation for the year commencing on the anniversary
date.
3.2 Bonuses. Employee shall be entitled to participate
in performance bonuses as and when approved by the Board of Directors of
Scangraphics.
3.3 Employee Benefits. Employee shad be entitled to
participate in all Employee Benefits offered by the Employer including
continuation of current medical coverage and 401K programs of Employer.
3.4 Perquisites. Employee shall be entitled to
perquisites consistent with the perquisites offered to key employees of
Employer.
3.5 Reasonable Reimbursement of Expenses. Employee shall
be entitled to reimbursement of Reimbursable Expenses promptly upon
furnishing the required supporting information to Employer.
4. Duties of Employee.
<PAGE>
4.1 Primary Duties. Employee shall at all times during
the Term of this Agreement be expected to perform and shall perform the
Primary Duties for the Employer.
4.2 Other Duties. In addition to the Primary Duties, the
Employee shall perform such additional duties as may be assigned from time
to time by Employer's board of directors.
5. Duty of Loyalty.
5.1 Duty of Loyalty. During the Term of this Agreement,
Employee, as a key employee of Employer, is expected to devote full time
attention to the work of the Employer during normal business hours to the
business of Employer.
5.2 Scope of this Paragraph. Except as otherwise contained in
this Agreement, Employee is not prevented from making investments in other
business enterprises, through the stock market or otherwise, so long as Employee
is not actively engaged in the conduct of any business which would compete with
the business of Employer or which would interfere with the Employee's duties for
the Employer.
6. Term.
6.1 Initial Term. This Agreement shall have an Initial
Term of three years, commencing January 1, 1996.
6.2 Subsequent Term. After the Initial Term, this
Agreement shall automatically be renewed, without further action by
either party, for successive annual terms unless terminated as
provided below.
6.3 Termination. This Agreement may be terminated as
follows:
6.3.1 During the Initial Term of this Agreement,
and any extension, this Agreement may be terminated at the end of the then
current term by either party giving the other party sixty (60) days written
notice of its intention to terminate at the end of that current term.
6.3.2 At any time, by the Employer for "good
cause." Good cause shall mean conviction of a crime of moral turpitude, on
the job intoxication, but only after full compliance with the law of Colorado
regarding discharge for intoxication, violation of any law, rule or regulation
promulgated by any governmental authority which would subject the Employer to
administrative sanction, fine, criminal action or civil claim for damages,
violation of any material term of this Agreement, embezzlement from the
Employer, usurpation of a valid opportunity of the Employer unless the specific
action is approved by the Employer's board of directors.
6.4 Accrued Salary, Bonus and Commission. Termination of
3
<PAGE>
the Employee by Employer for any reason other than good cause in accordance
with paragraph 6.3.3 shall not affect Employee's right to any salary, bonus or
commission earned under this Agreement and Employee shall be entitled to receive
payment of a sum equal to his then Base Compensation until the end of the then
term in the same biweekly payments, except Employee shall be under a duty to
mitigate the damages of Employer (payments) by obtaining other employment the
income from which will reduce the biweekly payments.
7. Assignment. This Agreement shall be personal to both Employer and
Employee and the rights hereunder may not be assigned nor the duties hereunder
delegated without the consent of both parties, provided however, Employer may
assign this Agreement in the event of merger, consolidation or transfer of
substantially all of its assets, but the Agreement may only be assigned to the
resulting party or the acquirer of substantially all the assets of Employer.
8. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered or mailed, by
certified or registered mail with postage prepaid, to the party intended at the
address set forth in item 1 of the signature page of this Agreement or to such
other person and place as either party shall furnish to the other in writing.
9. Costs of Suit. In the event of default hereunder and suit resulting
therefrom to enforce any provision of this Agreement, any party against whom
judgment is awarded shall be liable to the prevailing party for all costs and
expenses, including reasonable attorneys' fees incurred in the preparation,
prosecution and appeal of such suit for enforcement or damages.
10. Miscellaneous. This instrument: (a) contains the entire
agreement among the parties, (b) may not be amended nor may any rights
hereunder be waived except by an instrument in writing signed by the party
sought to be charged with such amendment or waver, (c) shall be construed in
accordance with, and governed by, the laws of Colorado, (d) shall be binding
upon and shall insure to the benefit of the parties and their respective
personal representatives and assigns, except as above set forth, and (e) may be
executed in any number of counterparts of the signature page each of which shall
be considered an original, (f) if any provision of this Agreement shall be or
become illegal or unenforceable in whole or in part for any reason whatsoever,
the remaining provisions shall nevertheless be deemed valid, binding and
subsisting, (g) the waiver by either party of a breach of violation of any
provision of this Agreement shall not operate or be construed a waiver of any
subsequent breach or violation thereof, (h) this writing represents the entire
Agreement and understanding of the parties with respect to the subject matter
hereof; it may not be altered or amended except by agreement in writing signed
by both parties, (i) the heading of paragraphs in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation, (j) this Agreement supersedes any earlier Employment Agreement
and as such is the only Agreement in force.
4
<PAGE>
11. Secret, Confidential or Proprietary Information.
11.1 Employee will hold in a fiduciary capacity for the
benefit of Employer, its parent subsidiaries and designees and shall not
disclose to any person or entity other than Employer or persons or entities
designated by Employer all secret,confidential or proprietary information,
knowledge, patents, trade secrets, client identities, marketing and other
business methods, technique, processes, practices, procedures, plans and
strategies, data regarding Employer and any of its subsidiaries and clients
obtained by Employee during his employment by Employer, and any other secret,
confidential or proprietary information pertaining to Employer or its business,
during the term or terms of this Agreement and at all times after its
termination.
11.2 Any invention, improvement, innovation, or new product,
process or idea made or developed by Employee, alone or in conjunction with
others, during the course of the Employee's employment with Employer, relating
to Employer's business, shall be deemed to have been made or developed by
Employee solely for the benefit of Employer and shall be the sole and exclusive
property of Employer. Employee shall not at anytime, whether during employment
with Employer or after its termination, use or disclose to any third party such
invention, improvement innovation, or new product, process or idea, except as
expressly authorized in writing by Employer.
11.3 Immediately upon notice of termination of employment by
Employer or Employee, Employee shall give to Employer the originals and all
copies of all documents, correspondence, memoranda, records, notes, manuals,
materials, client and prospective client lists and information, and other things
relating, either directly or indirectly, to Employer's business, including, but
not limited to, secret, confidential or proprietary information, in Employee's
possession, custody or control.
12. Agreement Not to Compete.
12.1 As used in this Agreement, the term "client" shall mean
any person or entity with whom or which Employer is directly or indirectly doing
business at the time Employee ceases to be employed by Employer, or with respect
to whom or which Employer has, within three (3) years preceding that date, done
business, or Employer has, within one (1) year preceding that date, specifically
identified for active efforts to solicit or otherwise secure business,
regardless of where such client may be located in the United States.
12.2 As used in this Agreement, the term "competition" shall
mean doing or seeking to do any type of business, or performing or seeking to
perform any type of service, done or performed, or sought to be done or
performed, by Employer during the time Employee is employed by Employer or
<PAGE>
within the two (2) years following the termination of Employee's employment
with Employer. The term "Termination of Employment" shall mean the end of
receipt of monies by Employee either as a result of Employee's term ending,
being discharged for cause, volutarily leaving or at the end of the receipt of
money from Employer under 6.4 hereof.
12.3 In recognition and consideration of Employee's
employment, compensation and fringe benefits, that this Employment
Agreement is in connection with the purchase by Scangraphics of stock of
Employer from Employee who owned 50% of the issued and outstanding stock of
Employer, Employee's introduction to Employer's clients, and the carefully
guarded methods of doing business which Employer utilizes and deems crucial to
the success of its business:
12.3.1 Employee shall not during the term of this
Agreement, or for a period of two (2) years following the termination of
Employee's employment with Employer, regardless of the reason for termination or
the party initiating termination, either directly or indirectly, own, manage,
operate, control, be employed or retained by, or in any way engage in or be
connected with any business enterprise, in any capacity whatsoever, including,
but not limited to, partner, owner, director, officer, employee, agent or
independent contractor, which seeks to solicit, divert, take away, sell to,
engage in or otherwise do business with, or perform any service for, any client
of Employer in competition with Employer.
12.3.2 Employee shall not during the term of this
Agreement, or for a period (for the number of years see 12.3.3 below) following
the termination of Employee's employment with Employer, regardless of the reason
for termination or the party initiating termination, either directly or
indirectly, own, manage, operate, control, be employed or retained by, or in any
way engage in or be connected with any business enterprise, in any capacity
whatsoever, including, but not limited to, partner, owner, director, officer,
employee, agent or independent contractor, which seeks to engage in, or is
engaged in, competition with Employer anywhere in the United States.
12.3.3 The number of years of restriction under
12.2, 12.3. and 12.3.2 shall be determined as follows: if the employee is
discharged by employer or the agreement ends at the end of its then term the
restriction is one year. If the employee shall voluntarily terminate his
employment the restrictions shall be three years.
12.4 For a period of three (3) years following the termination
of Employee is employment with Employer, regardless of the reason for
termination or the party initiating termination, Employee shall not, either
directly or indirectly, without the prior written consent of Employer, solicit,
recruit or induce, or attempt to solicit, recruit or induce, for employment of
any other business relationship in competition with Employer, on any basis
whatsoever, including, but not limited to, full time, part-time, occasional or
consulting, any person who is employed by Employer.
<PAGE>
12.5 This agreement not to exploit for his own benefit client
and co-employee relationships developed during her employment with Employer, or
to engage in compensation with Employer following the termination of her
employment, has been freely and willingly made by Employee in consideration of
the employment, with all of its compensation and benefits, being provided by
Employer, the secrets and confidences shared by Employer with Employees, and
other good and valuable consideration.
12.6 Employee acknowledges and agrees that nothing contained
in this Agreement nor the enforcement of any obligation contained in this
Article and the preceding Article alters or shall alter Employee's ability to
obtain gainful employment which will provide a livelihood for Employee and
Employee's dependents. Employee recognizes that this Agreement is reasonably
necessary to protect Employers legitimate interests in its clients, including,
but not limited to, those originated by Employee, and in its secret,
confidential or proprietary information.
12.7 Employee acknowledges that any breach of any obligation
contained in this Article and the preceding Article is not adequately
compensable by monetary damages, and Employee agrees that any such breach shall
cause Employer irreparable harm for which Employer shall be entitled to a
temporary restraining order and preliminary injunction without prior notice to
Employee. Any and all attorneys' fees, costs and expenses incurred by Employer
in enforcing the terms of this Article and the preceding Article shall be
reimbursed to Employer by Employee.
12.8 In the event that a court of competent jurisdiction shall
determine that any of the restrictive covenants in this Agreement is inequitably
broad, it is the intention and agreement of the parties that the court shall
equitably adjust the obligations of Employee under this Agreement rather than
any eliminate any such obligations. In the event at a court shall equitably
adjust or eliminate any of the restrictive covenants in this Agreement, all
other aspects of this Agreement shall remain in full force and effect.
12.9 The enumeration of remedies to which Employer is entitled
does not limit any rights Employer otherwise possesses, including, but not
limited to, the right to monetary damages.
13. Incentive Warrants. In order to add additional incentive to
Employee to increase the sales and profitability of Employer which reflects in
the increase in the profitability of Scangraphics, Scangraphics does hereby
grant to Employee the warrants a copy of which are attached hereto marked
Exhibit A and made a part hereof. In addition to the provisions set for in the
warrants it is understood that no warrant's excisable unless and until it has
vested. Except as hereafter provided, no warrant shall vest after a person has
ceased to be an Employee of Employer. In the event that Employee shall become
fully disabled and therefore unable to work in the foreseeable future as
determined by a
<PAGE>
physician appointed by Scangraphics the warrants will vest provided that they
would have otherwise vested had the Employee remained an Employee of Employer,
that is the necessary goals for vesting shall be achieved by Employer. Once a
warrant has vested it will continue to be vested regardless of whether Employee
continues his employment with Employer except in the event that Employee is
discharged for cause, in which event all options vested or invested shall
immediately and without further notice become null and void. If there shall be
agreement with the physician appointed by Scangraphics to determine the bent
disability of Employee, Employee may employ a physician duly tic in the State of
Colorado to give an opinion. If the opinion of Employee's physician shall differ
from that of the opinion given by Scangraphics' physician, then the two
physicians shall choose a mutually acceptable physician to examine the Employee
and the opinion of the third physician shall be binding on both parties. In the
event that the two physicians cannot agree on the third physician within ninety
(90) days after the rendering by the Employee's physician of his opinion then
the third physician shall be chosen by the then President of the Colorado
Medical Action. In the event that Employee shall be discharged "without cause"
the warrants shall vest.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
EMPLOYER:
TANGENT ENGINEERING, INC.
By: /s/ Ronald J. Nowak
-------------------------------------
Ronald J. Nowak
Its: Vice President
AND RATIFIED BY:
/s/ Andrew E. Trolio
----------------------------------------
Andrew E. Trolio, President
Scangraphics, Inc.
700 Abbott Drive
Broomall, PA 19008
<PAGE>
Number:WC0126 **300,000** Shares
SCAN-GRAPHICS, INC.
Incorporated under the laws of the Commonwealth of Pennsylvania
This certifies that Ronald J. Nowak (the " holder") is the owner of 300,000
Common Stock Purchase Warrants (the "Warrants"), each Warrant giving the holder
the right to purchase one (1) fully paid and non-assessable share of Common
Stock, $.001 par value, of Scan-Graphics, Inc. (the "Company") at any time
through December 31, 2000, (the "exercise date") at an exercise price of $3.00
per Warrant and subject to the terms, conditions and limitations set forth
herein. The shares of Common Stock underlying these Warrants shall have "piggy
back registration rights" and will therefore be included in the next
registration statement to be filed with the SEC. The first 100,000 Warrants
shall vest, commencing on the 1st day of the fifth month of employment, in
thirty-two equal monthly installments of 3,125 shares of Common Stock per month,
for a total of 100,000 Warrants to be vested upon Tangent achieving $12,000,000
in cumulative gross revenues of Tangent's products by December 31, 1998
including Tangent's revenues for fiscal 1995. These Warrants are issued to
holder subject to the terms and conditions of the attached Employment Agreement.
As if Midnight of the exercise date, any unexercised Warrants issued herein will
automatically and without notice terminate and become null and void, unless
extended by action of the Board of Directors. Any exercise of these Warrants
shall be in writing, addressed to the Secretary of the Corporation at its
principal place of business, using the form attached hereto, and shall be
accompanied by payment in full by check.
In the event at the time of exercise of the Warrants, there does not exist a
Registration Statement on an appropriate Form under the Securities Act of 1933,
as amended (the "Act") which registration Statement shall have become effective
and shall be current with respect to the underlying shares being purchased, and
in the opinion of counsel to the Company such underlying shares will upon
issuance be "restricted" securities within the meaning of Rule 144 under the
Act, you will represent and warrant to the Company (i) that, upon exercise of
the Warrants, you are purchasing the underlying shares for resale or
distribution of any such underlying shares shall be made either pursuant to (x)
a Registration Statement on an appropriate Form under the Act, which
Registration Statement shall have become effective and shall be current with
respect to the underlying shares being sold, or (y) a specific exemption from
the registration requirements of the Act, but in claiming such exemption, you
shall, prior to any offer for sale or sales of such underlying shares, obtain a
favorable written opinion from counsel for, approved by the Company, as to the
applicability of such exemption.
In Witness Whereof , the said Corporation has caused this Certificate to be
signed by its authorized officers, and its Corporate Seal, to be hereunto
affixed this 29th day of December,
<PAGE>
Exhibit F3
EMPLOYMENT AGREEMENT
(Robert A. Garber)
THIS EMPLOYMENT AGREEMENT between Employer and Employee identified below is
muted as of this ___ day of December, 1995, and is effective as of the date of
the closing of the Stock Purchase Agreement of even date herewith between
Tangent Engineering, Inc., 14 Inverness Drive, East, Suite A-100, Englewood,
Colorado 80112, and Scangraphics, Inc., a Pennsylvania cotion, having its
principal offices at 700 Abbott Drive, Broomall, PA 19008.
1. Defined Terms. The following terms will have the meanIngs
ascribed below, wherever they appear in this Agreement.
1.1 Employer. TangentEngineering, Inc., 14 Inverness
Drive, East, Suite A-100, Englewood, Colorado 80112.
1.2 Employee. Robert A. Garber
1.3 Base Compensation. $85,000 per year payable in
equal bi-weekly installments.
1.4 Employee Benefits. Those benefits which are offered
generally to employees of the Employer fiom time to time, including but not
limited to health insurance, sick leave, profit shinng, whether qualified or
unqualified, retirement income, stock option and other plans, if generally made
available to all employees of Employer. In addition to these general benefits,
Employer agrees to grant Employee annual paid vacation of one month per year.
1.5 Primary Duties. The Employee shall be employed as a
Vice-President and Chief Operating Officer of Employer. Employee, as a key
employee of Employer, is expected to perform the following primary duties for
Employer: To coordinate and supervise all domestic manufacturing, sales and
fiscal activities of Employer; to provide, in cooperation with Robert 1. Nowak
input and guidance with respect to personnel matters and short- and long-term
planmng; and to assume direct reporting responsibiliry to the President and
Eoard of Drs of Scangraphics, Inc., the parent corporation of Employer. Employee
agrees to perform fully, faithfully, competeniny, and effectively such duties
and such supplementary duties as may be assigned to him by Board of Directors of
Employer an-or the Board of Directors of the parent company Scangraphics and to
devote his full time and best efforts to the business of Employer. Employee
shall not, accept with Employer's written consent, engage in any other
employment during the term of his employment with Employer.
<PAGE>
1.6 Reasonable Out-of-Pocket Expenses. Reasonable
out-of-pocket expenses, actually incurred by the Employee in the performance of
work for the Employer, in the ordmary course of the Employer's business and the
duties of the Employee for the Employer, or as otherwise previously approved in
writing by the president or a vice president of the Employer; provided that
receipts, invoices, credit card charge receipts or other evidence of the
incurring of such expenses, together with such supporting information as
Employer may reasonably request, and in all events sutflcient to establish a
deduction of such expenses as ore and necessary business expenses for federal
income tax purposes, have been furnished to the controller or other designated
disbursing officer of the Employer.
1.7 Term. The Term of this Agreement is as set forth in
patagraph 6 below.
2. Employment. Employer to employ Employee and
Employee to perform the duties of Employee set forth herein for
the Term of this Agreement.
3. Compensation, Perquisites.
3.1 Base Compensation. During the Initial Term, the Employee
shall be paid the Basic Compensation or such greater amount as may be set by the
Board of Drs of Employer. On the anniversary date of this Agreement each and
every year during the Initial Term and any renewal or extension hereof,
Employee's Base Compensation shall be ink by 10% over the Base Compensation of
the prior year, provided that during the prior year the profits of Employer have
equaled not less than 20% of the Base Compensations of Employee, Ronald J. Nowak
and Robert J. Bornhofen. If the pretax profits for the said prior year of
Employer shall not equal the said sum, then there will be no increase in Base
Compensation for the year commencing on the anniversary date.
3.2 Bonuses. Employee shall be entitled to participate
in performance bonuses as and when approved by the Board of
Directors of Scangraphics.
3.3 Employee Benefits. Employee shall be entitled to
participate in all Employee Benefits offered by the Employer including
continuation of current medical coverage and 401K prods of Employer.
3.4 Perquisites. Employee shall be entitled to
perquisites consistent with the perquisites offered to key
employees of Employer.
3.5 Reasonable Reimbursement of Expenses. Employee
shall be entitled to reimbursement of Reimbursable Expenses
promptly upon furnishing the required supporting information to Employer.
-2-
<PAGE>
4. Duties of Employee.
4.1 Primary Duties. Employee shall at all times during
the Term of this Agreement be expected to perform and shall perform
the Primary Duties for the Employer.
4.2 Other Duties. In addition to the Primary Duties,
the Employee shall perform such additional duties as may be
assigned from time to time by Employer's board of directors.
5. Duty of Loyalty.
5.1 Duty of Loyalty. During the Term of this Agreement,
Employee, as a key employee of Employer, is e to devote full time attention to
the work of the Employer during normal business hours to the business of
Employer.
5.2 Scope of this Paragraph. Except as otherwise contained in
this Agreement, Employee is not prevented from making investments in other
business enterprises, through the stock market or otherwise, so long as Employee
is not actively engaged in the conduct of any business which would compete with
the business of Employer or which would interfere with the Employee's duties for
the Employer.
6. Term.
6.1 Initial Term. This Agreement shall have an Initial
Term of three years, commencing January 1, 1996.
6.2 Subsequent Term. After the Initial Term, this
Agreement shall automatically be renewed, without further action by either
party, for successive annual terms unless terminted as provided below.
6.3 Termination. This Agreement may be terminated as
follows:
6.3.1 During the Initial Term of this Agreement,
and any extension, this Agreement may be terminated at the end of the then
current term by either party grving the other party sixty (60) days written
notice of its intention to terminate at the end of that current term.
6.3.2 At any time, by the Employer for "good
cause." Good cause shall mean conviction of a crime of moral turpitude, on the
job intoxication, but only after full compliance with the law of Colorado
regarding discharge for intoxication, violation of any law, rule or regulation
promulgated by any governmental authority which would subject the Employer to
administrative sanction, fine, criminal action or civil claim for damages,
violation of any material term of this Agreement,
-3-
<PAGE>
embeement from the Employer, usurpation of a valid opportunity of the Employer
unless the specific action is approved by the Employer's board of directors.
6.4 Accrued Salary, Bonus and Commission. Termination of the
Employee by Employer for any reason other than good cause in accordance with
paragraph 6.3.3 shall not affect Employee's right to any saiary, bonus or
commission earned under this Agreement and Employee shall be entitled to receive
payment of a sum equal to the balance of the employees then Basic Compensation
to the end of the then term in the following manner at the option of the
employer in the same biweekly payments, or in a lump sum payment giving credit
for the value of money atthe rate of 6% per annum.
7. Assignment. This Agreement shall be personal to both Employer and
Employee and the rights hereunder may not be assigned nor the duties hereunder
delegated without the consent of both parties, provided however, Employer may
assign this Agreement in the event of merger, consolidation or transfer of
substantially all of its assets, but the Agreement may only be assigned to the
resulting patty or the acquirer of substantially all the assets of Employer.
8. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered or mailed, by Bed
or registered mall with postage prepaid, to the patty intended at the address
set forth in item 1 of the signature page of this Agreement or to such other
person and place as either party shall furnish to the other in writing.
9. Costs of Suit. In the event of default hereunder and suit resulting
therefrom to enlbrce any provision of this Agreement, any patty against whom
judgment is awarded shall be liable to the peg patty for all costs and expenses,
including reasonable attorneys' fees incurred in the ption, prosecution and
appeal of such suit for enforcement or damages.
10. Miscellaneous. This instrument: (a) contains the entire agreement
among the parties, (b) may not be amended nor may any rights hereunder be
waived except by an instrument th writing signed by the patty sought to be
charged with such amendment or waiver, (c) shall be construed in accordance
with, and governed by, the laws of Colorado, (d) shall be binding upon and shall
insure to the benefit of the parties and their respective personal
representatives and assigns, except as above set forth, and (e) may be executed
in any number of counterparts of the signature page each of which shall be
considered an original, (f) if any provision of this Agreement shall be or
become illegal or unenforceable in whole or in part for any reason whatsoever,
the remaining provisions shall nevertheless be deemed valid, binding and
subsisting, (g) the waiver by either patty of a breach of violation of any
provision of this Agreement shall not operate or be
-4-
<PAGE>
construed as a waiver of any subsequent breach or violation thereof, (h) this
writing represents the entire Agreement and understanding of the parties with
respect to the subject matter hereof; if may not be altered or amended except by
agreement in writing signed by both parties, (i) the heading of paragraphs in
this Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation, (j) this Agreement supersedes any earlier
Employment Agreement and as such is the only Agreement in force.
11. Secret, Confidential or Proprietary Information.
11.1 Employee will hold in a fiduciary capacity for the
benefit of Employer, its parent subsidiaries and designees and shall not
disclose to any person or entity other than Employer or persons or entities
designated by Employer all secret,confidential or proprietary information,
knowledge, patents, trade secrets, client identities, marketing and other
business methods, technique, processes, practices, procedures, plans and
strategies, data regarding Employer and any of its subsidiaries and clients
obtained by Employee during his employment by Employer, and any other secret,
confidential or proprietary information peg to Employer or its business, during
the term or terms ofthis Agreement and at all times after its tmmination.
11.2 Any invention, improvement, innovation, or new product,
process or idea made or developed by Employee, alone or in conjunction with
others, during the course of the Employee's employment with Employer, relating
to Employer's business, shall be deemed to have been made or developed by
Employee solely for the benefit of Employer and shall be the sole and exclusive
property of Employer. Employee shall not at anytime, whether during employment
with Employer or alter its termination, use or disclose to any third patty such
invention, improvement, innovation, or new product, process or idea, except as
expressly authorised in writing by Employer.
11.3 Immediately upon notice of tion of employment by Employer
or Employee, Employee shall give to Employer the originals and all copies of all
documents, condence, memoranda, records, notes, manuals, matermls, client and
prospective client lists and information, and other things relating, either
directly or indirectly, to Employer's business, including, but not limited to,
secret, confidential or proprietary information, in Employee's possession,
custody or control.
12. Agreement Not to Compete.
12.1 As used in this Agreement, the term "client" shall mean
any person or entity with whom or which Employer is directly or indirectly doing
business at the time Employee ceases to be employed by Employer, or with respect
to whom or which Employer
-5-
<PAGE>
has, within three (3) years peg that date, done business, or Employer has,
within one (1) year preceding that date, specifically identified for active
efforts to solicit or otherwise secure business, regardless of where such client
may be located in the United States.
12.2 As used in this Agreement, the term "competition" shall
mean doing or seeking to do any type of business, or performing or seeking to
perform any type of service, done or performed, or sought to be done or
performed, by Employer during the time Employee is employed by Employer or
within (for the number of years, see 12.3.3 below) following the termination of
Employee's employment with Employer. The term "Termination of Employment" shall
mean the effective date of Employee's term ending, Employee being discharged or
Employee voluntarily leaving.
12.3 In recognition and consideration of Employee's
employment, compensation and fringe benefits, that this Employment Agreement is
in connection with the purchase by Scangraphics of stock of Employer, Employee's
introduction to Employer's clients, and the carefully guarded methods of doing
business which Employer utiles and deems crucial to the success of its business:
12.3.1 Employee shall not during the term of this
Agreement, or for a period (for the number of years see 12.3.3 below) following
the termination of Employee's employment with Employer, regardless of the reason
for termination or the party initiating termination, either direclly or
indirectly, own, manage, operate, control, be employed or retained by, or in any
way engage in or be connected with any business enterprise, in any capaciry
whatsoever, including, but not limited to, partner, owner, director, officer,
employee, agent or independent contractor, which seeks to solicit, divert, take
away, sell to, engage in or otherwise do business with, or perform any service
for, any client of Employer in competition with Employer.
12.3.2 Employee shall not during the term of this
Agreement, or for a period (for the number of years see 12.3.3 below) following
the termination of Employee's employment with Employer, regardless of the reason
for termination or the party initiating termination, either directly or
indirectly, own, manage, operate, control, be employed or retained by, or in any
way engage in or be connected wig any business enterprise, in any capaciry
whatsoever, including, but not limited to, partner, owner, director, officer,
employee, agent or independent contractor, which seeks to engage in, or is
engaged in, competition with Employer anywhere in the United States.
12.3.3 The number of years of restriction under
12.2, 12.3.1 and 12.3.2 shall be determined as follows: if the employee is
discharged by employer or the agreement ends at the end of its then term the
restriction is one year. If the employee
-6-
<PAGE>
shall voluntarily terminate his employment the restrictions shall be three
years.
12.4 For a period of three (3) years following the termination
of Employee's employment with Employer, regardless of the reason for termination
or the party initiating termination, Employee shall not, either directly or
indirectly, without the prior written consent of Employer, solicit, recrvit or
induce, or attempt to solicit, recruit or induce, for employment of any other
business relationship in competition with Employer, on any basis whatsoever,
including, but not limited to, full-time, part-time, occasional or consulting,
any person who is employed by Employer.
12.5 This agreement not to exploit for his own benefit client
and co-employee relationships developed during her employment with Employer, or
to engage in competition with Employer following the termination of her
employment, has been freely and willingly made by Employee in consideration of
the employment, with all of its compensation and benefits, being provided by
Employer, the secrets and confidences shared by Employer with Employee, and
other good and valuable consideration.
12.6 Employee acknowledges and agrees that nothing contained
in this Agreement nor the enforcement of any obligation contained in this
Article and the preceding Article alters or shall alter Employee's ability to
obtain gainful employment which will provide a livelihood for Employee and
Employee's dependents. Employee recogs that this Agreement is reasonably
necessary to protect Employer's legitimate interests in its clients, including,
but not limited to, those originated by Employee, and in its secret,
confidential or proprietary information.
12.7 Employee acknowledges that any breach of any obligation
contained in this Article and the peg Article is not adequately compensable by
monetary damages, and Employee agrees that any such breach shall cause Employer
irreparable harm for which Employer shall be entitled to a temporary restrammg
order and preliminary injunction without prior notice to Employee. Any and all
attorneys' fees, costs and expenses incurred by Employer in enforcing the terms
of this Article and the peg Article shall be reimbursed to Employer by Employee.
12.8 In the event that a court of competent jurisdiction shall
determine that any of the restrictive covenants in this Agreement is inequitably
broad, it is the intention and agreement of the parties that the court shall
equitably adjust the obligations of Employee under this Agreement rather than
entirely eliminate any such obligations. In the event that a court shall
equitably adjust or elumnate any of the restrictive covenants in this Agreement,
all other aspects of this Agreement shall remain in full force and effect.
-7-
<PAGE>
12.9 The enumeration of remedies to which Employer is entitled
does not limit any rights Employer otherwise possesses, including, but not
limited to, the right to monetary damages.
13. Inocntive Warrants. In order to add additional incentive to
Employee to increase the sales and profitability of Employer which reflects in
the increase in the profitability of Scangraphics, Scangraphics does hereby
grant to Employee the warrants a copy of which are attached hereto marked
Exhibit A and made a part hereof. In addition to the provisions set forth in the
warrants it is understood that no warrant is exercisable unless and until it has
vested. Exceptas heprovided, no warrant shall vest af:eraperson has to bean
Employee of Employer. In the event that Employee shall become fully disabled and
therefore unable to work in the fole future as determmed by a physician
appointed by Scangraphics the warrants will vest provided that they would have
otherwise vested had the Employee remained an Employee of Employer, that is the
necessary goals for vesting shall be achieved by Employer. Once a t has vested
it will continue to be vested regardless of whether Employee continues his
employment with Employer except in the event that Employee is discharged for
cause, in which event all options vested or unvested shall immly and without
further notice become null and void. If there shall be ment with the physician
appointed by Scangraphics to determme the bent disability of Employee, Employee
may employ a physician duly tic in the State of Colorado to give an opinion. If
the opinion of Employee's physician shall differ from that of the opinion given
by Scangraphics' physician, then the two physicians shall choose a mutually
acceptable physician to esamme the Employee and the opinion of the third
physician shallbe binding on both parties. In theeventthatthetwo physicians
cannot agree onthcthirdphysician within ninety (90) days after the rendering
bythe Employee's physician of his opinion then the third physician shall be
chosen by the then President of the Colorado Medical Action. In the event that
Employee shall be discharged "without cause" the warmnts shall vest.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
EMPLOYER:
TANGENT ENGINEERING, INC.
By: /s/ Ronald J. Nowak
-------------------------------------
Ronald J. Nowak
Its: Vice President
AND RATIFIED BY:
/s/ Andrew E. Trolio
----------------------------------------
Andrew E. Trolio, President
Scangraphics, Inc.
700 Abbott Drive
Broomall, PA 19008
EMPLOYEE:
/s/ Robert A. Garber
----------------------------------------
Robert A. Garber
14 Inverness Drive East
Suite A-100
Englewood, Colorado 80112
14 Inverness Drive East
Suite A-100
Englewood, Colorado 80112
<PAGE>
Number:WC0127 **300,000** Shares
SCAN-GRAPHICS, INC.
Incorporated under the laws of the Commonwealth of Pennsylvania
This certifies that Robert J. Borphofen (the " holder") is the owner of 300,000
Common Stock Purchase Warrants (the "Warrants"), each Warrant giving the holder
the right to purchase one (1) fully paid and non-assessable share of Common
Stock, $.001 par value, of Scan-Graphics, Inc. (the "Company") at any time
through December 31, 2000, (the "exercise date") at an exercise price of $3.00
per Warrant and subject to the terms, conditions and limitations set forth
herein. The shares of Common Stock underlying these Warrants shall have "piggy
back registration rights" and will therefore be included in the next
registration statement to be filed with the SEC. The first 100,000 Warrants
shall vest, commencing on the 1st day of the fifth month of employment, in
thirty-two equal monthly installments of 3,125 shares of Common Stock per month,
for a total of 100,000 Warrants to be vested upon Tangent achieving $12,000,000
in cumulative gross revenues of Tangent's products by December 31, 1998
including Tangent's revenues for fiscal 1995. These Warrants are issued to
holder subject to the terms and conditions of the attached Employment Agreement.
As if Midnight of the exercise date, any unexercised Warrants issued herein will
automatically and without notice terminate and become null and void, unless
extended by action of the Board of Directors. Any exercise of these Warrants
shall be in writing, addressed to the Secretary of the Corporation at its
principal place of business, using the form attached hereto, and shall be
accompanied by payment in full by check.
In the event at the time of exercise of the Warrants, there does not exist a
Registration Statement on an appropriate Form under the Securities Act of 1933,
as amended (the "Act") which registration Statement shall have become effective
and shall be current with respect to the underlying shares being purchased, and
in the opinion of counsel to the Company such underlying shares will upon
issuance be "restricted" securities within the meaning of Rule 144 under the
Act, you will represent and warrant to the Company (i) that, upon exercise of
the Warrants, you are purchasing the underlying shares for resale or
distribution of any such underlying shares shall be made either pursuant to (x)
a Registration Statement on an appropriate Form under the Act, which
Registration Statement shall have become effective and shall be current with
respect to the underlying shares being sold, or (y) a specific exemption from
the registration requirements of the Act, but in claiming such exemption, you
shall, prior to any offer for sale or sales of such underlying shares, obtain a
favorable written opinion from counsel for, approved by the Company, as to the
applicability of such exemption.
In Witness Whereof , the said Corporation has caused this Certificate to be
signed by its authorized officers, and its Corporate Seal, to be hereunto
affixed this 29th day of December,
<PAGE>
