STOCK PURCHASE AGREEMENT
STOCK
PURCHASE AGREEMENT, dated as of June 22, 2009 (this “Agreement”), by and
between AFP IMAGING CORPORATION, a New York corporation (the “Company”), and
BIOWAVE INNOVATIONS, LLC, a Connecticut limited liability company (the “Purchaser”).
W I T N E S S E T H :
WHEREAS,
the Company is engaged in the business of designing, developing, manufacturing
and distributing equipment for generating, capturing and/or producing medical
and dental diagnostic images through electronic technologies, and the chemical
processing of photosensitive materials; and
WHEREAS,
to obtain working capital for its continuing operations and development, the
Company has offered to the Purchaser, and the Purchaser has agreed to purchase
from the Company, shares of Series A Convertible Preferred Stock of the Company,
in accordance with the terms and conditions of this Agreement;
NOW,
THEREFORE, the Company and the Purchaser hereby agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 DEFINITIONS. The following terms shall have the
respective meanings set forth below whenever used in this
Agreement:
“Certificate of
Amendment” shall mean the Certificate of Amendment of the Certificate of
Incorporation of the Company in the form of Exhibit A annexed
hereto, which authorizes the Series A Convertible Preferred Stock of the Company
and sets forth the relative rights, powers, preferences and limitations of such
series of preferred stock.
“Closing” shall have
the meaning ascribed thereto in Section 2.2(b).
“Closing Date” shall
have the meaning ascribed thereto in Section 2.2(b).
“Commission” shall
mean the Securities and Exchange Commission and any other similar or successor
agency of the federal government then administering the Securities
Act.
“Common Stock” shall
mean the authorized common stock of the Company from time to time pursuant to
the certificate of incorporation of the Company.
“Conversion Shares”
shall mean the shares of the Common Stock issuable upon conversion of the
Shares.
“Loan Agreement” shall
mean the Amended and Restated Revolving Credit and Term Loan Agreement dated as
of June 22, 2009 by and between ComVest Capital, LLC and the Company, as same
may be amended, modified, supplemented and/or restated from time to
time.
“Outside Closing Date”
has the meaning ascribed thereto in Section 2.2(b).
“person” shall include
any individual, a corporation, an association, a limited liability company, a
partnership, a trust or estate, a government or any agency or political
subdivision thereof, or any other entity.
“Securities Act” shall
mean the Securities Act of 1933, and any similar or successor federal statute,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
“Shares” shall have
the meaning ascribed thereto in Section 2.1.
ARTICLE
II
AUTHORIZATION AND ISSUANCE
OF SHARES
Section
2.1 AUTHORIZATION OF ISSUE. The Board of Directors
of the Company has authorized the execution, delivery and filing of the
Certificate of Amendment and the issuance of up to 578,466 shares of Series A
Convertible Preferred Stock of the Company (collectively, the “Shares”) at a price
of $0.864355 per Share, which the Purchaser has agreed to purchase upon the
satisfaction of the conditions precedent set forth in Article V
below.
Section
2.2 ISSUANCE OF SHARES.
(a) Purchase of
Shares. Subject to the terms and conditions hereof, the
Company agrees to sell to the Purchaser and the Purchaser agrees to purchase
from the Company, on the Closing Date, 578,466 Shares for an aggregate purchase
price of $500,000. The aggregate purchase
price for the Shares shall be payable to the Company, either by certified or
bank cashier’s check or by wire transfer of immediately available funds, on the
Closing Date.
(b) Closing. After
such time as the conditions precedent set forth in Article V below have been
satisfied to the reasonable satisfaction of the Purchaser, the Company and the
Purchaser shall effect the closing of the purchase and sale of the Shares (the
“Closing”);
provided, however, that unless
extended by written agreement of the Company and the Purchaser, the date of the
Closing (the “Closing
Date”) shall not be later than June 23, 2009 (the “Outside Closing
Date”). At the Closing, the Company will deliver to the
Purchaser a stock certificate representing the Shares, against payment of the
purchase price therefor.
ARTICLE
III
THE COMPANY’S
REPRESENTATIONS AND WARRANTIES
The
Company represents and warrants to the Purchaser as follows:
Section
3.1 ORGANIZATION AND GOOD STANDING; AUTHORIZATION BY THE
COMPANY. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
York. True and complete copies of the certificate of incorporation
and the by-laws of the Company, each as in effect on the date of this Agreement,
have been delivered to the Purchaser. The Company has full power,
authority and legal right to execute and deliver this Agreement and to issue,
sell and deliver the Shares, to perform its obligations hereunder, and to engage
in the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company, and the consummation by the
Company of the transactions contemplated hereby, have been duly authorized by
all necessary corporate action on the part of the Company. This
Agreement is a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting the enforcement of creditors’ rights generally, and by general
equitable principles.
2
Section
3.2 CONSENTS AND APPROVALS. The Company has
obtained or made all necessary (a) governmental consents, approvals and
authorizations, and registrations and filings with governmental authorities, and
(b) consents, approvals, waivers and notifications of stockholders, creditors,
lessors and other non-governmental persons, in each case, in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
Section
3.3 SECURITIES LAWS. Neither the Company nor any
agent acting on its behalf has done or caused to be done or omitted to do
anything which would require registration under Section 5 of the Securities Act
of the Shares or the Conversion Shares. All other securities
heretofore issued by the Company have been issued in compliance with or pursuant
to an exemption from or under the Securities Act.
Section
3.4 AUTHORIZED AND OUTSTANDING CAPITAL STOCK. As of
the date hereof, (a) the outstanding capital stock of the Company consists of
17,928,800 shares of Common Stock, (b) there are outstanding options and
warrants for an aggregate of 1,627,400 shares of Common Stock, and (c) there are
outstanding convertible securities entitling the holders thereof to acquire an
aggregate of approximately 1,927,351 shares of Common Stock; and simultaneously
with the consummation of the transactions contemplated by this Agreement, (i)
the Company is issuing to ComVest Capital, LLC a warrant to purchase
19,282,200 shares
of Common Stock at a price of $.01 per share, (ii) ComVest Capital, LLC is
canceling outstanding warrants for the purchase of 800,000 shares of Common
Stock, (iii) ComVest Capital, LLC is surrendering the conversion rights with
respect to all of the convertible securities described in this Section 3.4, and
(iv) the Company will be issuing additional warrants to purchase an aggregate of
526,000 shares of Common Stock at a price of $.01 per share. The
Company has not granted or issued, or agreed to grant or issue, any options,
warrants or similar rights to acquire or receive any of the authorized but
unissued shares of its capital stock or any securities convertible into shares
of its capital stock, except as reflected in the preceding sentence and/or as
contemplated by this Agreement. The Company holds no shares of its
capital stock in its treasury. There are no outstanding preemptive
rights, conversion rights, rights of first refusal, stock appreciation rights,
phantom stock rights or registration rights in or with respect to the Company or
any of its capital stock.
Section
3.5 RESERVATION OF SHARES. The shares of Common
Stock issuable upon conversion of the Shares have been authorized, reserved and
set apart for issuance, free from preemptive rights in favor of the holders of
any shares of capital stock or other securities of the Company. Upon
conversion of the Shares in accordance with the Certificate of Amendment, the
Conversion Shares will be duly authorized, validly issued, fully paid and
nonassessable.
3
Section
3.6 ADDITIONAL REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Company in Article III of the Loan
Agreement are true and correct in all respects on the date hereof, and such
representations and warranties are hereby incorporated into this Agreement as if
set forth in full herein. Without limitation of the foregoing, except
for the Existing Events of Default (as defined and described in the Loan
Agreement), the Company and its subsidiaries are not in default of any of their
respective contractual or other obligations.
Section
3.7 BROKERS. The Company has not retained any
broker or finder in respect of the transactions contemplated by this Agreement,
or taken any action such as would entitle any broker or finder to a fee or
commission in respect of the execution and delivery of this Agreement and/or the
issuance of the Shares.
ARTICLE
IV
THE PURCHASER’S
REPRESENTATIONS AND WARRANTIES
The
Purchaser hereby represents and warrants to the Company that:
Section
4.1 AUTHORIZATION. This Agreement constitutes the
Purchaser’s valid and legally binding obligation, enforceable in accordance with
its terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting the enforcement of creditors’ rights
generally, and by general equitable principles. The Purchaser has
full power and authority to enter into this Agreement, and this Agreement and
the Purchaser’s obligations hereunder have been duly authorized by all necessary
company action on the part of the Purchaser.
Section
4.2 PURCHASE FOR OWN ACCOUNT. The Shares will be
acquired by the Purchaser for investment for the Purchaser’s own account, not as
a nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act.
Section
4.3 RECEIPT OF INFORMATION. The Purchaser has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Shares and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Purchaser or to which the Purchaser had
access. The foregoing, however, does not in any way limit or modify
the representations and warranties made by the Company in Article III
above.
Section
4.4 INVESTMENT EXPERIENCE. The Purchaser
understands that the purchase of the Shares involves substantial
risk. The Purchaser has experience as a purchaser in securities of
companies with working capital liquidity issues and a thin or inactive trading
market, and acknowledges that the Purchaser is able to fend for itself, can bear
the economic risk of its investment in the Shares, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of its investment in the Shares and protecting its own
interests in connection with this investment.
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Section 4.5
ACCREDITED PURCHASER
STATUS. The Purchaser is an “accredited investor” within the
meaning of Regulation D promulgated under the Securities
Act.
Section
4.6 RESTRICTED SECURITIES. The Purchaser
understands that the Shares constitute “restricted securities” under the
Securities Act inasmuch as they are being acquired
from the Company in a transaction not involving a public offering and that under
the Securities Act and applicable regulations thereunder such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, the Purchaser represents that it is familiar
with Rule 144 of the Commission, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act. The
Purchaser understands that the Company is under no obligation to register any of
the Shares or any of the Conversion Shares under the Securities Act. The
Purchaser understands that no public market now exists for the Shares, that only
a limited public market now exists for the Conversion Shares (which trading
market may cease at any time without notice), and that it is uncertain whether a
public market will ever exist for the Shares or the Conversion
Shares.
Section
4.7 BROKERS. The Purchaser has not retained any
broker or finder in respect of the transactions contemplated by this Agreement,
or taken any action such as would entitle any broker or finder to a fee or
commission in respect of the execution and delivery of this Agreement and/or the
issuance of the Shares.
ARTICLE
V
CLOSING
CONDITIONS
Section
5.1 PURCHASER CONDITIONS. The Purchaser’s
obligation to purchase the Shares is subject to (a) the execution, delivery and
filing with the New York Department of State of the Certificate of Amendment (in
the form annexed hereto as Exhibit A), and the
delivery to the Purchaser of satisfactory evidence of such execution, delivery
and filing, (b) the delivery to the Purchaser of a duly executed stock
certificate representing the Shares, (c) the truth and accuracy of the Company’s
representations and warranties made in Article III above, and (d) the
consummation of the transactions (including, without limitation, the funding of
the $1,000,000 subordinated loan by ComVest Capital, LLC) contemplated by the
Loan Agreement (without material waiver or variation) to the reasonable
satisfaction of the Purchaser.
Section
5.2 COMPANY CONDITIONS. The Company’s obligation to
issue and sell the Shares is subject to (a) the Purchaser’s consent to the
Company’s execution and delivery, to occur simultaneously with the Closing, of
employment agreements with Xxxxx Xxxxxx, Xxxxxx Xxxxxxxxxxx, Xxxx XxXxxxxx,
Xxxxx Xxxxxx, Xxxx Xxxxxx and Xxxx Xxxxxxxxxxx, and (b) the funding by ComVest
Capital, LLC of the $1,000,000 subordinated loan contemplated by the Loan
Agreement.
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ARTICLE
VI
MISCELLANEOUS
Section
6.1 AMENDMENTS AND WAIVERS. This Agreement may not
be changed, modified or discharged orally, nor may any waivers or consents be
given orally hereunder, and every such change, modification, discharge, waiver
or consent shall be in writing and signed by the party to be charged
therewith.
Section
6.2 INTEGRATION AND SEVERABILITY. This Agreement,
including the Exhibits and Schedules hereto, embodies the entire agreement and
understanding between the Purchaser and the Company with respect to the subject
matter hereof, and supersedes all prior agreements and understandings relating
to the subject matter hereof. In case any one or more of the
provisions contained in this Agreement, or any application thereof, shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein, and any
other application thereof, shall not in any way be affected or impaired
thereby.
Section
6.3 SURVIVAL; SUCCESSORS AND ASSIGNS. All
covenants, agreements, statements, representations and warranties in this
Agreement shall survive the Closing, and shall bind and inure to the benefit of
the respective successors and assigns of each party, except that neither party
may assign any of its rights or obligations under this Agreement without the
prior written consent of the other party.
Section
6.4 NOTICES AND OTHER COMMUNICATIONS. All notices,
requests, consents and other communications hereunder shall be in writing and
shall be delivered or telecopied with confirmation of receipt, or shall be sent
by recognized overnight courier service (with all charges prepaid or billed to
the account of the sender), or shall be sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed (a) if to the
Purchaser, at 000 Xxxxxxxxxx Xxxx, Xxxxxx, XX 00000, or such other address as
may have been furnished to the Company by notice from the Purchaser, or (b) if
to the Company, to AFP Imaging Corporation, 000 Xxxxxxxxxx Xxxx, Xxxxxxxx, XX
00000, fax: (914) ___-____, or to such other address or telecopier number
as may have been furnished to the Purchaser by notice from the
Company. All notices shall be deemed to have been
given either at the time of the delivery or telecopy (with confirmation of
receipt) thereof to any officer or employee of the person entitled to receive
such notice at the address of such person for purposes of this Section 6.4, or,
if sent by overnight courier, on the next business day following delivery
thereof to the overnight courier service, or, if mailed, at the completion of
the third business day following the time of such mailing thereof to such
address, as the case may be.
Section
6.5 GOVERNING LAW; JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to its conflicts of law principles. Each
party hereby consents to the jurisdiction of all courts (state and federal)
sitting in the State of New York with respect to any dispute arising under or
relating to this Agreement.
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Section
6.6 HEADINGS. The headings of the various Sections
hereof are for convenience of reference only and shall in no way modify any of
the terms or provisions hereof.
Section
6.7 COUNTERPARTS; FACSIMILE SIGNATURES. This
Agreement may be signed by each party hereto upon a separate copy in which event
all of said copies shall constitute a single counterpart of this
Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart. Any party may execute and deliver this
Agreement by fax or electronic signature (such as PDF), which shall have the
same binding effect as an original ink signature.
Section
6.8 EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, the Company shall pay or
reimburse the Purchaser for all reasonable costs and expenses (including
reasonable attorneys’ fees) incurred by the Purchaser in connection with the
transactions contemplated by this Agreement, such payment or reimbursement to be
made promptly after written request therefor.
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remainder of this page is intentionally blank.]
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IN
WITNESS WHEREOF, the Company and the Purchaser have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized.
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AFP
IMAGING CORPORATION
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