AFP Imaging Corporation Subscription Agreement
Exhibit
4.1
Form
of Subscription Agreement utilized in a private placement of Common Stock,
effective April 12, 2007
AFP
Imaging Corporation
AFP
Imaging Corporation
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Dear
Sirs
and Madams:
Based
upon
the terms and conditions set forth herein, the undersigned hereby irrevocably
subscribes (the “Subscription”), subject to the terms and conditions herein, to
purchase the number of shares (each, a “Share” and collectively, the “Shares”)
of the common stock, par value $.01 per share (the “Common Stock”) of AFP
Imaging Corporation, a New York corporation (the “Company”), set forth in the
Execution Section of this Subscription Agreement, at a per Share purchase price
(the “Subscription Price”) as set forth in the Execution Section of this
Subscription Agreement.
The
Subscription is subject to and is made pursuant to the following terms and
conditions:
1. Representations,
Warranties and Covenants of the Company.
By its
acceptance of this Subscription Agreement, the Company shall be deemed to
represent and warrant to and covenant with the undersigned as
follows:
(a) Corporate
Status.
The
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York, (ii) has all necessary
corporate power and authority to own, operate or lease the properties and assets
now owned, operated or leased by the Company and to carry on the business of
the
Company, as it is now being conducted, and (iii) is duly licensed or qualified
and in good standing as a foreign corporation authorized to do business in
each
jurisdiction wherein the character of the properties owned or leased by the
Company and/or the nature of the activities conducted by the Company makes
such
licensing or qualification necessary, except where the failure to be so licensed
or qualified and in good standing would not prevent the Company from performing
any of its material obligations under this Subscription Agreement and would
not
have a material adverse effect on the business, operations or financial
condition of the Company (each, a “Material Adverse Effect”).
(b) Authority
of Agreement.
The
Company has the power and authority to accept the Subscription and to execute
and deliver this Subscription Agreement and, upon acceptance by the Company
(in
whole or part), to carry out its obligations under this Subscription Agreement;
and the execution, delivery and performance by the Company of this Subscription
Agreement and the consummation of the transactions contemplated by this
Subscription Agreement have been duly authorized by all necessary corporate
action on the part of the Company and this Subscription Agreement, upon
acceptance by the Company (in whole or part), constitutes the valid and legally
binding obligations of the Company enforceable against the Company in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors’ rights
generally now or hereafter in effect and subject to the application of equitable
principles and the availability of equitable remedies; the Shares to be issued
hereunder will be duly authorized, validly issued fully paid and
non-assessable.
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(c) Consents
and Approvals; No Conflict.
(i) The
acceptance, execution and delivery of this Subscription Agreement by the Company
does not, and the performance by the Company of its obligations under this
Subscription Agreement, upon acceptance by the Company (in whole or part),
will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any governmental or regulatory authority, other than
in
connection with state securities or “blue sky” laws, except where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not prevent the Company from performing any of its
material obligations under this Subscription Agreement and would not have a
Material Adverse Effect on the Company; and
(ii) The
acceptance, execution, delivery and performance of this Subscription Agreement
by the Company and the consummation of the transactions contemplated by this
Subscription Agreement do not and will not conflict with, violate or result
in a
breach or termination of any provision of, or constitute a default under (or
event which with the giving of notice or lapse of time, or both, would become
a
default under) the Certificate of Incorporation or By-laws of the Company or,
except as would not prevent the Company from performing any of its material
obligations under this Subscription Agreement and would not have a Material
Adverse Effect on the Company, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award applicable to the Company or give
to
others any rights of termination, amendment, acceleration or cancellation of,
or
result in the creation of any lien or encumbrance on any of the assets or
properties of the Company pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
relating to such assets or properties to which the Company is a party or by
which any of such assets or properties is bound.
(d) Absence
of Litigation.
No
claim, action, proceeding or investigation is pending which seeks to delay
or
prevent the consummation of the transactions contemplated by this Subscription
Agreement or which would be reasonably likely to adversely affect the Company’s
ability to consummate the transactions contemplated by this Subscription
Agreement or which would have a Material Adverse Effect on the Company, except
as disclosed in the SEC Reports (as such term is defined below).
(e) [Reserved]
(f) Accuracy
of Reports and Information.
The
Company is in full compliance, to the extent applicable, with all reporting
obligations under Section 12(b), 12(g) or 15(d) of the Securities Exchange
Act
of 1934, as amended (the “Exchange Act”); the Company has registered the Common
Stock pursuant to Section 12 of the Exchange Act and has filed all material
required to be filed pursuant to all reporting obligations, under either Section
13(a) or 15(d) of the Exchange Act, for a period of at least twelve months
immediately preceding the date hereof.
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(g) SEC
Filings/Full Disclosure.
None of
the Company’s filings with the Securities and Exchange Commission (the
“Commission”) since July 1, 2004 contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading; the Company has, since July 1, 2005, timely filed all
requisite forms, reports and exhibits thereto with the Commission; and the
Company’s Annual Report on Form 10-K for the year ended June 30, 2006 and
Quarterly Reports on Forms 10-Q for the quarters ended September 30, 2006 and
December 31, 2006 filed by the Company with the Commission, including exhibits
thereto (collectively, the “SEC Reports”) did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(h) Absence
of Undisclosed Liabilities.
The
Company has no material liabilities or obligations, absolute or contingent
(individually or in the aggregate), except as set forth in the financial
statements included in the SEC Reports (collectively, the “Financial
Statements”) or as incurred in the ordinary course of business after the date of
the Financial Statements.
(i) Governmental
Consent, etc.
No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required in connection
with the valid execution and delivery of this Subscription Agreement, or the
offer, sale or issuance of the Shares, or the consummation of any other
transaction contemplated by this Subscription Agreement, except the filing
with
the Commission of a registration statement on an appropriate form for the
purpose of registering for resale the Shares and any state securities laws
filings or registrations.
(j) Intellectual
Property Rights.
Except
as disclosed in the SEC Reports, the Company has sufficient trademarks, trade
names, patent rights, copyrights and licenses to conduct its business as
contemplated therein; and, to the Company’s knowledge, neither the Company nor
its products and services are infringing or will infringe any trademark, trade
name, patent right, copyright, license, trade secret or other similar right
of
others currently in existence; and there is no claim being made against the
Company regarding any trademark, trade name, patent, copyright, license, trade
secret or other intellectual property right which could have a Material Adverse
Effect on the Company.
(k) Material
Contracts.
Except
as set forth in the SEC Reports or disclosed to the undersigned, the agreements
to which the Company is a party described in the SEC Reports are valid
agreements, in full force and effect, the Company is not in material breach
or
material default (with or without notice or lapse of time, or both) under any
of
such agreements, and, to the Company’s knowledge, the other contracting party or
parties thereto are not in material breach or material default (with or without
notice or lapse of time, or both) under any of such agreements.
(l) Title
to Assets.
Except
as set forth in SEC Reports, the Company has good and marketable title to all
properties and material assets described therein as owned by it, free and clear
of any pledge, lien, security interest, encumbrance, claim or equitable interest
other than such as are not material to the business of the Company.
(m) Subsidiaries.
The
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity,
except as stated in the SEC Reports.
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(n) Required
Governmental Permits.
The
Company is in possession of and operating in compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities which are material to the conduct of its business,
all of which are valid and in full force and effect.
(o) No
Insider Information.
The
Company has not disclosed to the undersigned any material non-public information
not otherwise disclosed in the SEC Reports except for the existence and terms
of
the financing contemplated by this Subscription Agreement, the Company’s
proposed acquisition of Quantitative Radiology srl (“QR”), and the existence
and/or proposed terms of other financing relating to the acquisition of
QR.
2. Representations,
Warranties and Covenants of the Undersigned.
The
undersigned hereby represents, warrants and acknowledges to and covenants and
agrees with the Company as follows:
(a) Status.
If the
undersigned is a corporation or other entity, the undersigned is a corporation
or other entity duly organized, validly existing and in good standing under
the
laws of the jurisdiction of its organization with full power and authority
to
execute, deliver and perform undersigned’s obligations under this Subscription
Agreement; and, if the undersigned is an individual or are individuals, the
undersigned has legal capacity to execute, deliver and perform his, her or
their
obligations under this Subscription Agreement.
(b) Authority
for Agreements.
The
undersigned has the power and authority to execute and deliver this Subscription
Agreement and to carry out the undersigned’s obligations hereunder; and the
execution, delivery and performance by the undersigned of this Subscription
Agreement and the consummation of the transactions contemplated by this
Subscription Agreement have been duly authorized by all necessary action on
the
part of the undersigned and this Subscription Agreement constitutes the valid
and legally binding obligation of the undersigned, enforceable against the
undersigned in accordance with its terms, except as the same may be limited
by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors’ rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable
remedies.
(c) Consents
and Approvals, No Conflicts.
(i) The
execution and delivery of this Subscription Agreement by the undersigned do
not,
and the performance by the undersigned of undersigned’s obligations under this
Subscription Agreement will not, require any consent, approval, authorization
or
other action by, or filing with or notification to, any governmental or
regulatory authority, except where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would not
prevent the undersigned from performing any of undersigned’s material
obligations under this Subscription Agreement; and
(ii) The
execution, delivery and performance of this Subscription Agreement by the
undersigned and the other agreements and agreements to be executed, delivered
and performed by the undersigned pursuant to this Subscription Agreement and
the
consummation of the transactions contemplated by this Subscription Agreement
and
such other agreements and documents by the undersigned do not and will not
conflict with, violate or result in a breach or termination of any provision
of,
or constitute a default under (or event which with the giving of notice or
lapse
of time, or both, would become a default under) the Certificate of Incorporation
or By-laws of the undersigned (if the undersigned is a corporation), any other
organizational instrument (if the undersigned is a legal entity other than
a
corporation), or, except as would not prevent the undersigned from performing
any of undersigned’s material obligations under this Subscription Agreement and
would not have a material adverse effect on the undersigned, any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to the undersigned or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
lien or encumbrance on any of the assets or properties of the undersigned
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument relating to such assets or
properties to which the undersigned is a party or by which any of such assets
or
properties is bound.
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(d) Investment
Intent.
The
undersigned is acquiring the Shares for the undersigned’s own account, for
investment only and not with a view to, or for sale in connection with, a
distribution thereof or any part thereof, within the meaning of the Securities
Act of 1933, as amended (the “Securities Act”), and the rules and regulations
promulgated thereunder, or any applicable state securities or blue-sky
laws.
(e) Investor
Status.
The
undersigned reasonably believes that it qualifies as an accredited investor
as
such term is defined under Regulation D promulgated under the Securities Act
(“Regulation D”) for the reason(s) as set forth in the Execution Section of this
Subscription Agreement, and all of the representations and warranties of the
undersigned set forth in this Subscription Agreement are correct and complete
as
of the date of this Subscription Agreement, shall be true and correct as of
the
Closing Date (as defined herein) and shall survive the closing of the purchase
of the Shares; and, if there should by any material change in such information
prior to the sale to the undersigned of the Shares, the undersigned will
immediately furnish such revised or corrected information to the
Company.
(f) Intent
to Transfer.
The
undersigned is not a party or subject to or bound by any contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge the Shares
or any part or interest in the Shares to any person, and has no present
intention to enter into such a contract, undertaking, agreement or
arrangement.
(g) Exemption
from Registration; Company’s Reliance.
(i) The
Company has advised the undersigned that the Shares have not been registered
under the Securities Act or under the laws of any state on the basis that the
issuance thereof is exempt from such registration;
(ii) The
Company’s reliance on the availability of such exemption is, in part, based upon
the accuracy and truthfulness of the undersigned’s representations contained in
this Subscription Agreement;
(iii) As
a
result of such lack of registration, the Shares may not be resold or otherwise
transferred or disposed without registration pursuant to or an exemption
therefrom available under the Securities Act and such state securities laws;
and
(iv) In
furtherance of the provisions of this Section 2(g), each certificate
representing any of the Shares shall bear a restrictive legend substantially
in
the following form:
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“THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND
MAY
NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT
AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SHARES TO THE EFFECT THAT REGISTRATION
IS
NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES
LAWS.”
(h) Sophistication
of the Undersigned.
The
undersigned has evaluated the merits and risks of purchasing the Shares and
has
such knowledge and experience in financial and business matters that the
undersigned is capable of evaluating the merits and risks of such purchase,
is
aware of and has considered the financial risks and financial hazards of
purchasing the Shares, and is able to bear the economic risk of purchasing
the
Shares, including the possibility of a complete economic loss with respect
to
such purchase.
(i) Access
to Information.
The
undersigned has had access to such information regarding the business and
finances of the Company and the Shares, the receipt and careful review of which
is hereby acknowledged by the undersigned, and has been provided the opportunity
to discuss with the Company’s management the business, affairs and financial
condition of the Company and such other matters with respect to the Company
as
would concern a reasonable person considering the transactions contemplated
by
this Subscription Agreement and/or concerned with the operation of the Company,
including, without limitation, pursuant to a meeting and/or discussions with
management of the Company.
(j) No
Guarantees.
It has
never been represented, guaranteed or warranted to the undersigned by the
Company, or any of its officers, directors, agents, representatives or
employees, or any other person, expressly or by implication, that:
(i) Any
gain
will be realized by the undersigned from the undersigned’s investment in the
Shares;
(ii) That
there
will be any approximate or exact length of time that the undersigned will be
required to remain as a holder of the Shares; or
(iii) That
the
past performance or experience on the part of the Company, its predecessors
or
of any other person, will in any way indicate any future results of the
Company.
(k) No
Other Representations, Warranties, Covenants or Agreements of the
Company.
Except
as set forth in this Subscription Agreement, the Company has not made any
representation, warranty, covenant or agreement with respect to the matters
contained herein.
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(l) High
Degree of Investment Risk.
The
undersigned acknowledges that the purchase of the Shares involves a high degree
of risk and may result in a loss of the entire amount invested; that the Company
has limited working capital and limited sources of financing available; that
there is no assurance that the Company’s operations will be profitable in the
future; and that there is no assurance that a public market for shares of Common
Stock will continue to exist.
(m) State
of Residence or Principal Place of Business.
The
state of residence or state of incorporation and principal place of business
as
set forth in the Execution Section of this Subscription Agreement is the
undersigned’s true and correct state of residence (if an individual) or state of
incorporation or organization and state of principal place of business (if
a
corporation or other non-individual entity), and the undersigned has no present
intention of becoming a resident, or reincorporating or relocating its principal
place of business to, of any other country, state or jurisdiction.
(n) No
Purchaser Representative.
The
undersigned has not authorized any person or institution to act as the
undersigned’s “purchaser representative” (as such term is defined in Rule 501 of
Regulation D) in connection with the tendering of the Subscription.
(o) No
General Solicitation.
The
undersigned has not received any general solicitation or general advertising
regarding the purchase of any of the Shares.
(p) No
Finder.
Except
for fees payable to HDR Partners and/or its agents or affiliates (“HDR”), which
fees shall be borne solely by the Company, there is no finder or placement
agent
in connection with this Subscription Agreement and the purchase of the Shares
contemplated hereby. The undersigned understands and acknowledges that HDR,
as
placement agent, is entitled to receive fees in connection with the sale of the
Shares of up to five percent (5%) of the Subscription Price.
(q) No
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The
undersigned will not engage in any transaction with respect to securities of
the
Company at any time if, at the time of such transaction, the undersigned is
aware of any material non-public information relating to the Company or its
securities.
3. Acceptance
or Rejection of Subscription; Company Withdrawal of Offer.
It is
understood and agreed that this Subscription Agreement is made subject to the
following terms and conditions:
(a) The
Company shall have the right to accept or reject the Subscription and this
Subscription Agreement, in whole or in part, for any reason, including, but
not
limited to, ineligibility of the undersigned under the applicable federal,
state
or foreign securities laws, for any other reason, or for no reason.
(b) If
the
Subscription is rejected, in whole or part, (i) any funds representing the
aggregate Subscription Price subject to the Subscription previously tendered
will be returned to the undersigned without interest or penalty, (ii) the
undersigned will have no further liability to the Company and (iii) the Company
will have no further liability to the undersigned.
(c) If
the
Subscription is accepted in part and rejected in part, the undersigned will
be
so notified, at which time the excess aggregate Subscription Price subject
to
the Subscription previously tendered shall promptly be returned to the
undersigned without interest or penalty.
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4. Registration
Rights.
(a) Defined
Terms.
As used
in this Article 4, terms defined elsewhere in this Subscription Agreement shall
have their assigned meanings and each of the following terms shall have the
following meanings (such definitions to be applicable to both the plural and
singular of the terms defined):
(i) Registerable
Securities.
The term
“Registerable Securities” shall mean any of the Shares and any shares of Common
Stock or other securities received in connection with any stock split, stock
dividend, merger, reorganization, recapitalization, reclassification or other
distribution payable or issuable upon the Shares; provided,
however,
that,
for the purposes of this Subscription Agreement, the Shares and/or such other
securities will cease to be Registerable Securities when (A) a registration
statement under the Securities Act covering such Registerable Securities has
been declared effective and such Registerable Securities have been disposed
of
pursuant to such effective registration statement, (B) such Registerable
Securities are distributed to the public pursuant to the Securities Act or
pursuant to an exemption from the registration requirements of the Securities
Act, including, but not limited to, Rules 144 and 144A promulgated under the
Securities Act, or (C) such Registerable Securities have been otherwise
transferred and the Company, in accordance with applicable law and regulations,
has delivered new certificates or other evidences of ownership for such
securities which are not subject to any stop transfer order or other restriction
on transfer;
(ii) Rightsholders.
The term
“Rightsholder” shall include the undersigned, all successors and assigns of the
undersigned, and all transferees of Registerable Securities where such transfer
affirmatively includes the transfer and assignment of the rights of the
transferor-Rightsholder under this Subscription Agreement with respect to the
transferred Registerable Securities; provided,
however,
the term
“Rightsholders” shall not include any person or entity after the person or
entity has sold, transferred or assigned all of the person’s or entity’s
Registerable Securities; and
(iii) The
words
“hereof,” “herein” and “hereunder” and words of similar import when used in this
Article 4 shall refer to this Article 4 as a whole and not to any particular
provision of this Article 4, and article, section, subsection, paragraph,
clause, schedule and exhibit references are to this Article 4 unless otherwise
specified.
(b) Required
Registration.
(i) Requirement
to Register.
No later
than the date (the “Required Filing Date”) which is 150 days following the
issuance of the Shares pursuant to this Subscription Agreement, the Company
shall file a registration statement on an applicable form chosen by the Company,
in its sole discretion, to register (the “Required Registration”) for resale
under the Securities Act all of the Registerable Securities. The Company shall
have the right to require each Rightsholder to specify the intended method(s)
of
disposition of the Registerable Securities of such Rightsholder, including,
but
not limited to, whether or not such distribution or portion thereof is to relate
to an underwritten offering, the name of the managing underwriter(s), if any,
the terms of any such underwriting and such other information as the Company
may
reasonably request. In the event that the Company fails to file the registration
statement as contemplated by this Section 4(b)(i) on or before the Required
Filing Date for any reason other than the failure of (A) the undersigned to
timely provide information to the Company or its counsel concerning the
undersigned necessary for inclusion in the registration statement pursuant
to
applicable rules and regulations of the Commission or (B) the independent
auditors of the Company to timely complete any necessary audit and/or review
of
financial statements relating to QR that are required for inclusion in the
registration statement pursuant to applicable rules and regulations of the
Commission, the Company shall pay to the Rightsholder a fee equal to 1% of
the
Subscription Price, payable for each month (or portion thereof) in which such
failure to file the registration statement shall occur. Each such monthly fee
shall be due and payable no later than the fifteenth day following the end
of
the calendar month upon which such fee is calculated.
(ii) Number
of Required Registrations; Expenses.
The
Rightsholders shall be entitled, in the aggregate, to one Required Registration,
the Registration Expenses (as defined in Section 4(d)) of which, subject to
the
provisions of Section 4(d), shall be borne by the Company, but the Company
shall
not be responsible for the payment of any underwriter’s discount, commission or
selling concession in connection with any of the Registerable Securities. The
Company shall not be deemed to have effected a Required Registration unless
and
until such Required Registration is declared effective.
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(iii) Delay
in Effecting Required Registration.
Notwithstanding anything to the contrary contained in Paragraphs 4(b)(i) and
4(b)(ii), the Company shall not be obligated to effect a Required Registration
at any time when the Company, in the good faith judgment of its Board of
Directors made no later than 30 days prior to the Required Filing Date, and
certified in writing by an authorized officer of the Company, reasonably
believes that the existence of a pending material event in respect of the
Company would make the filing of the registration statement with respect to
the
Required Registration, or the offering of securities pursuant to the Required
Registration, detrimental to the interests of the Company or its shareholders.
Such delay shall only extend through the date such event is no longer
pending.
(iv) Approval
of Underwriter by the Company.
If the
Required Registration is to involve an underwritten offering, the managing
underwriter(s) and each selling agent selected by those Rightsholders
participating in each such underwritten offering shall be subject to the written
approval of the Company, which approval may not be unreasonably
withheld.
(c) Registration
Procedures.
(i) Obligations
of the Company.
The
Company will, in connection with any registration pursuant to Section 4(b)
hereof, as expeditiously as possible:
(A) prepare
and file with the Commission a registration statement under the Securities
Act
on any appropriate form chosen by the Company, in its sole discretion, which
shall be available for the sale of all Registerable Securities, and use its
commercially reasonable efforts to cause such registration statement to become
effective as soon thereafter as reasonably practicable; provided,
that
subject to the provisions of Paragraph 4(b)(iii), that the obligation of the
Company to effect such registration and/or cause such registration statement
to
become effective, may be postponed for (1) such period of time when the
financial statements of the Company required to be included in such registration
statement are not available (due solely to the fact that such financial
statements have not been prepared in the regular course of business of the
Company) or (2) any other bona
fide
corporate
purpose;
(B) use
its
commercially reasonable efforts to keep such registration statement effective
for a period of up to 36 months from the Closing Date;
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(C) notify
the
Rightsholders whose Registerable Securities are included in such registration
statement and the managing underwriter(s), if any, of an underwritten offering
of any of the Registerable Securities included in such registration statement,
and confirm such advice in writing, (1) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to
a
registration statement or any post-effective amendment, when the same has become
effective, (2) of any request by the Commission for amendments or supplements
to
a registration statement or related prospectus or for additional information,
(3) of the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (4) if at any time the representations and warranties of
the
Company contemplated by clause (1) of Subparagraph 4(c)(i)(J) hereof cease
to be
true and correct, (5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the Registerable
Securities for sale in any jurisdiction or the initiation or threatening of
any
proceeding for such purpose and (6) of the happening of any event which makes
any statement made in the registration statement, the prospectus or any document
incorporated therein by reference untrue or which requires the making of any
changes in the registration statement or prospectus so that such registration
statement, prospectus or document incorporated by reference will not contain
any
untrue statement of material fact or omit to state any material fact required
to
be stated therein or necessary to make the statements therein not
misleading;
(D) make
commercially reasonable efforts to obtain the withdrawal of any order suspending
the effectiveness of such registration statement at the earliest possible moment
and to prevent the entry of such an order;
(E) use
commercially reasonable efforts to register or qualify the Registerable
Securities included in such registration statement under such other securities
or blue sky laws of such jurisdictions as any Rightsholder whose Registerable
Securities are included in such registration statement reasonably requests
in
writing and do any and all other acts and things which may be necessary or
advisable to enable such Rightsholder to consummate the disposition in such
jurisdictions of such Registerable Securities; provided,
that the
Company will not be required to (1) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Subparagraph 4(c)(i)(E), (2) subject itself to taxation in any such jurisdiction
or (3) take any action which would subject it to general service of process
in
any such jurisdiction;
(F) make
available for inspection by each Rightsholder whose Registerable Securities
are
included in such registration, any underwriter(s) participating in any
disposition pursuant to such registration statement, and any representative,
agent or employee of or attorney or accountant retained by any such Rightsholder
or underwriter(s) (collectively, the “Inspectors”), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the “Records”) as shall be reasonably necessary to enable them to
exercise their due diligence responsibility (or establish a due diligence
defense), and cause the officers, directors and employees of the Company to
supply all information reasonably requested by any Inspector in connection
with
such registration statement; provided,
that the
Rightsholder and Inspector enter into an appropriate non-disclosure agreement
with the Company; provided,
further,
that the
Records which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be disclosed by
the
Inspectors, unless (1) the release of the Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (2) the
disclosure of the Records is required by any applicable law or regulation or
any
governmental regulatory body with jurisdiction over such Rightsholder or
underwriter; provided,
further,
that
such Rightsholder or underwriter(s) agree that such Rightsholder or
underwriter(s) will, upon learning the disclosure of such Records is sought
in a
court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company’s expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
10
(G) cooperate
with the Rightsholder whose Registerable Securities are included in such
registration statement and the managing underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing Registerable
Securities to be sold thereunder, not bearing any restrictive legends, and
enable such Registerable Securities to be in such denominations and registered
in such names as such Rightsholder or any managing underwriter(s) may reasonably
request at least two business days prior to any sale of Registerable
Securities;
(H) comply
with all applicable rules and regulations of the Commission and promptly make
generally available to its security holders an earnings statement covering
a
period of twelve months commencing, (1) in an underwritten offering, at the
end
of any fiscal quarter in which Registerable Securities are sold to
underwriter(s), or (2) in a non-underwritten offering, with the first month
of
the Company’s first fiscal quarter beginning after the effective date of such
registration statement, which earnings statement, in each such case, shall
satisfy the provisions of Section 11(a) of the Securities Act;
(I) provide
a
CUSIP number for all Registerable Securities not later than the effective date
of the registration statement relating to the first public offering of
Registerable Securities of the Company pursuant hereto;
(J) enter
into
such customary agreements (including an underwriting agreement in customary
form) and take all such other actions reasonably requested by the Rightsholders
holding a majority of the Registerable Securities included in such registration
statement or the managing underwriter(s) in order to expedite and facilitate
the
disposition of such Registerable Securities and, in such connection, whether
or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (1) make such representations
and
warranties, if any, to the holders of such Registerable Securities and any
underwriter(s) with respect to the registration statement, prospectus and
documents incorporated by reference, if any, in form, substance and scope as
are
customarily made by issuers to underwriter(s) in underwritten offerings and
confirm the same if and when requested, (2) obtain opinions of counsel to the
Company and updates thereof addressed to each such Rightsholder and the
underwriter(s), if any, with respect to the registration statement, prospectus
and documents incorporated by reference, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Rightsholders and
underwriter(s), (3) obtain a “cold comfort” letter and updates of such letter
from the Company’s independent certified public accountants addressed to such
Rightsholders and to the underwriter(s), if any, which letter shall be in
customary form and cover matters of the type customarily covered in “cold
comfort” letters by accountants in connection with underwritten offerings, and
(4) deliver such documents and certificates as may be reasonably requested
by
the Rightsholders holding a majority of such Registerable Securities and
managing underwriter(s), if any, to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company; each such action required by this Subparagraph 4(c)(i)(J)
shall be done at each closing under such underwriting or similar agreement
or as
and to the extent required thereunder; and
11
(K) if
requested by the holders of a majority of the Registerable Securities included
in such registration statement, use its best efforts to cause all Registerable
Securities which are included in such registration statement to be listed,
subject to notice of issuance, by the date of the first sale of such
Registerable Securities pursuant to such registration statement, on each
securities exchange, if any, on which securities similar to the Registered
Securities are listed.
(ii) Obligations
of Rightsholders.
In
connection with any registration of Registerable Securities of a Rightsholder
pursuant to Section 4(b) or 4(c):
(A) The
Company may require that each Rightsholder whose Registerable Securities are
included in such registration statement furnish to the Company such information
regarding the distribution of such Registerable Securities and such Rightsholder
as the Company may from time to time reasonably request in writing;
and
(B) Each
Rightsholder, upon receipt of any notice from the Company of the happening
of
any event of the kind described in clauses (2), (3), (5) and (6) of Subparagraph
4(c)(i)(C) hereof, shall forthwith discontinue disposition of Registerable
Securities pursuant to the registration statement covering such Registerable
Securities until such Rightsholder’s receipt of the copies of the supplemented
or amended prospectus contemplated by clause (1) of Subparagraph 4(c)(i)(C)
hereof, or until such Rightsholder is advised in writing (the “Advice”) by the
Company that the use of the applicable prospectus may be resumed, and until
such
Rightsholder has received copies of any additional or supplemental filings
which
are incorporated by reference in or to be attached to or included with such
prospectus, and, if so directed by the Company, such Rightsholder will deliver
to the Company (at the expense of the Company) all copies, other than permanent
file copies then in the possession of such Rightsholder, of the current
prospectus covering such Registerable Securities at the time of receipt of
such
notice; and the Company shall have the right to demand that such Rightsholder
or
other holder verify its agreement to the provisions of this Subparagraph
4(c)(ii)(B) in any Holder Notice of the Rightsholder or in a separate document
executed by the Rightsholder.
12
(d) Registration
Expenses.
All
expenses incident to the performance of or compliance with this Subscription
Agreement by the Company, including, without limitation, all registration and
filing fees of the Commission, National Association of Securities Dealers,
Inc.
and other agencies, fees and expenses of compliance with securities or blue
sky
laws (including reasonable fees and disbursements of counsel in connection
with
blue sky qualifications of the Registerable Securities), rating agency fees,
printing expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the fees and expenses incurred
in connection with the listing, if any, of the Registerable Securities on any
securities exchange and fees and disbursements of counsel for the Company and
the Company’s independent certified public accountants (including the expenses
of any special audit or “cold comfort” letters required by or incidental to such
performance), Securities Act or other liability insurance (if the Company elects
to obtain such insurance), the fees and expenses of any special experts retained
by the Company in connection with such registration and the fees and expenses
of
any other person retained by the Company (but not including any underwriting
discounts or commissions attributable to the sale of Registerable Securities
or
other out-of-pocket expenses of the Rightsholders, or the agents who act on
their behalf, unless reimbursement is specifically approved by the Company)
will
be borne by the Company. All such expenses are referred to in this Article
4 as
“Registration Expenses.”
(e) Indemnification;
Contribution.
(i) Indemnification
by the Company.
The
Company agrees to indemnify and hold harmless, to the full extent permitted
by
law, each Rightsholder, its officers and directors and each person who controls
such Rightsholder (within the meaning of the Securities Act), if any, and any
agent thereof against all losses, claims, damages, liabilities and expenses
incurred by such party pursuant to any actual or threatened suit, action,
proceeding or investigation (including reasonable attorney’s fees and expenses
of investigation) arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any registration statement, prospectus
or preliminary prospectus or any omission or alleged omission to state therein
a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, except insofar as the same arise out
of or
are based upon, any such untrue statement or omission based upon information
with respect to such Rightsholder furnished in writing to the Company by such
Rightsholder expressly for use therein.
(ii) Indemnification
by Rightsholder.
In
connection with any registration statement in which a Rightsholder is
participating, each such Rightsholder will be required to furnish to the Company
in writing such information with respect to such Rightsholder as the Company
reasonably requests for use in connection with any such registration statement
or prospectus, and each Rightsholder agrees to the extent it is such a holder
of
Registerable Securities included in such registration statement, and each other
such holder of Registerable Securities included in such Registration Statement
will be required to agree, to indemnify, to the full extent permitted by law,
the Company, the directors and officers of the Company and each person who
controls the Company (within the meaning of the Securities Act) and any agent
thereof, against any losses, claims, damages, liabilities and expenses
(including reasonable attorney’s fees and expenses of investigation) incurred by
such party pursuant to any actual or threatened suit, action, proceeding or
investigation arising out of or based upon any untrue or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact necessary, to make the statements therein (in the case of a prospectus,
in
the light of the circumstances under which they are made) not misleading, to
the
extent, but only to the extent, that such untrue statement or omission is based
upon information relating to such Rightsholder or other holder furnished in
writing to the Company expressly for use therein.
(iii) Conduct
of Indemnification Proceedings.
Promptly
after receipt by an indemnified party under this Section 4(e) of written notice
of the commencement of any action, proceeding, suit or investigation or threat
thereof made in writing for which such indemnified party may claim
indemnification or contribution pursuant to this Subscription Agreement, such
indemnified party shall notify in writing the indemnifying party of such
commencement or threat; but the omission so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party (A) hereunder, unless
the
indemnifying party is actually prejudiced thereby, or (B) otherwise than under
this Section 4(e). In case any such action, suit or proceeding shall be brought
against any indemnified party, and the indemnified party shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall
be
entitled to participate therein and the indemnifying party shall assume the
defense thereof, with counsel reasonably satisfactory to the indemnified party,
and the obligation to pay all expenses relating thereto. The indemnified party
shall have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (A)
the
indemnifying party has agreed to pay such fees and expenses, (B) the
indemnifying party shall have failed to assume the defense of such action,
suit
or proceeding or to employ counsel reasonably satisfactory to the indemnified
party therein or to pay all expenses relating thereto or (C) the named parties
to any such action or proceeding (including any impleaded parties) include
both
the indemnified party and the indemnifying party and the indemnified party
shall
have been advised by counsel that there may be one or more legal defenses
available to the indemnified party which are different from or additional to
those available to the indemnifying party and which may result in a conflict
between the indemnifying party and such indemnified party (in which case, if
the
indemnified party notifies the indemnifying party in writing that the
indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action or proceeding on behalf of the indemnified party;
it
being understood, however, that the indemnifying party shall not, in connection
with any one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the
fees and expenses of more than one separate firm of attorneys at any time for
the indemnified party, which firm shall be designated in writing by the
indemnified party).
13
(iv) Contribution.
If the
indemnification provided for in this Section 4(e) from the indemnifying party
is
unavailable to an indemnified party under this Section 4(e) in respect of any
losses, claims, damages, liabilities or expenses referred to in this Section
4(e), then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (A) in
such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other or
(B)
if the allocation provided by clause (A) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying party and
indemnified party, as well as any other relevant equitable considerations.
The
relative fault of such indemnifying party and the indemnified parties shall
be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates
to
information supplied by, such indemnifying party or indemnified parties, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
in
this Paragraph 4(e)(iv) shall be deemed to include, subject to the limitation
set forth in Paragraph 4(e)(v), any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Paragraph 4(e)(iv) were determined by pro rata allocation
or by
any other method of allocation which does not take into account the equitable
considerations referred to in clauses (A) and (B) of the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(v) Limitation.
Anything
to the contrary contained in this Section 4(e) or in Section 4(f)
notwithstanding, no holder of Registerable Securities shall be liable for
indemnification and contribution payments aggregating an amount in excess of
the
maximum amount received by such holder in connection with any sale of
Registerable Securities as contemplated herein.
14
(f) Participation
in Underwritten Registration.
No
Rightsholder may participate in any underwritten registration hereunder unless
such Rightsholder (i) agrees to sell such holder’s securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and to comply with Regulation M under
the
Exchange Act and (ii) completes and executes all questionnaires, appropriate
and
limited powers of attorney, escrow agreements, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangement; provided,
that all
such documents shall be consistent with the provisions of this Article
4.
5. Further
Assurances.
At any
time and from time to time after the date hereof, the undersigned shall, without
further consideration, execute and deliver to the Company, or such other party
as the Company may direct, such other instruments or documents and shall take
such other actions as the Company may reasonably request to carry out the
transactions contemplated by this Subscription Agreement.
6. Indemnification.
The
undersigned acknowledges that the undersigned understands the meaning and legal
consequences of the representations, warranties and covenants contained herein,
and the undersigned hereby agrees to indemnify and hold harmless the Company,
and the Company’s directors, officers, employees, agents and controlling
persons, from and against any and all loss, damage or liability due to or
arising out of a breach by the undersigned of any of its representations,
warranties and covenants.
7. Conditions
to Closing.
(a) QR
Transaction.
The
subscription for the Shares contemplated hereby shall be subject to a
post-closing condition that the acquisition by the Company of QR on terms
substantially similar to those set forth in the addendum annexed hereto as
Exhibit A (consisting of a Power Point presentation and the definitive purchase
agreement) is consummated on or before May 31, 2007. In the event that this
condition is not fulfilled, the undersigned shall have the right to rescind
the
purchase of the Shares hereunder. In such event, the undersigned shall tender
the Shares to the Company and the Company shall promptly reimburse the
undersigned for the full amount of the Subscription Price.
(b) Limitation
on Shares.
The
Shares, after giving effect to the issuance thereof, shall not constitute more
than 19.99% of the issued and outstanding Common Stock.
8. Closing.
The
closing of the subscription for the Shares contemplated by this Subscription
Agreement shall occur on or about three (3) business days prior to the closing
of the QR acquisition or such other date as may be agreed to by the parties
(the
“Closing Date”). On the Closing Date, the Company shall issue and deliver to the
undersigned certificates representing the Shares and the undersigned shall
deliver the Subscription Price to the Company by wire transfer of immediately
available funds to an account or accounts designated by the
Company.
15
9. Miscellaneous.
(a) Survival
of Warranties.
The
warranties and representations contained or made pursuant to this Subscription
Agreement will survive the execution and delivery of this Subscription Agreement
and the closing of the transactions contemplated by this Subscription Agreement,
including, but not limited to, the making of the Subscription and issuance
of
the Shares.
(b) Successors
and Assigns.
The
rights, benefits, duties and obligations of the parties to this Subscription
Agreement may not be assigned by such assigning party without the prior written
consent of the other party. The terms and conditions of this Subscription
Agreement will inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Subscription Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Subscription Agreement,
except as expressly provided in this Subscription Agreement.
(c) Governing
Law.
This
Subscription Agreement will be governed by, and construed and enforced in
accordance with the laws of the State of New York without regard to the conflict
of laws provisions thereof. The parties hereto do hereby consent and submit
to
the venue and jurisdiction of the state and federal courts sitting in the State
of New York, County of Westchester, as the sole and exclusive forum for such
matters of dispute, and further agree that, in the event of any action or suit
as to any matters of dispute between the parties, service of any process may
be
made upon the other party in the same manner as the giving of notices under
Section 9(f) of this Subscription Agreement.
(d) Counterparts.
This
Subscription Agreement may be signed in counterparts, any one of which will
be
deemed to be an original and all of which, when taken together, will constitute
one and the same agreement.
(e) Titles
and Subtitles.
The
titles and subtitles used in this Subscription Agreement are for convenience
only and are not to be considered in construing or interpreting this
Subscription Agreement.
(f) Notices.
All
requests, demands, notices and other communications required or otherwise given
under this Subscription Agreement shall be sufficiently given if (a) delivered
by hand against written receipt therefor, (b) forwarded by overnight courier
requiring acknowledgment of receipt or (c) mailed by postage prepaid, registered
or certified mail, return receipt requested, addressed as follows:
16
If
to the
Company, to: ▇▇▇▇▇
▇▇▇▇▇▇, Chairman of the Board
AFP
Imaging Corporation
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
with
a
copy to: ▇▇▇▇▇
▇.
▇▇▇▇▇▇▇, Esq.
Snow
▇▇▇▇▇▇ ▇▇▇▇▇▇ P.C.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If
to the
undersigned, to: The
undersigned at the mailing address set forth in the Execution Section of this
Subscription Agreement.
or,
in the
case of any of the parties hereto, at such other address as such party shall
have furnished in writing, in accordance with this Section 9(f), to the other
parties hereto. Each such request, demand, notice or other communication shall
be deemed given (i) on the date of delivery by hand, (ii) on the first business
day following the date of delivery to an overnight courier or (iii) three
business days following mailing by registered or certified mail.
(g) Amendment
and Waivers.
Any
amendment to this Subscription Agreement will not be effective unless the same
is in writing and signed by all of the parties to this Subscription Agreement.
The waiver by a party of a breach of any provision of this Subscription
Agreement by another party must be in writing and shall not operate or be
construed as a waiver of any subsequent breach by such other party.
(h) Severability.
If one
or more provisions of this Subscription Agreement are held to be unenforceable
under applicable law, such provision will be excluded from this Subscription
Agreement and the balance of this Subscription Agreement will be interpreted
as
if such provision were excluded and will be enforceable in accordance with
its
terms.
(i) Entire
Agreement.
This
Subscription Agreement amends, supplements and restates all agreements or
understandings, of whatever nature, whether oral or written, between and among
the parties hereto, including affiliates thereof, related in any way to, or
arising under, the Subscription and constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof.
17
(j) Proper
Construction.
The
language of all parts of this Subscription Agreement shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against any of the parties. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Subscription
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document. As used in this Subscription Agreement, the term “or” shall be deemed
to include the term “and/or” and the singular or plural number shall be deemed
to include the other whenever the context so indicates or requires.
(k) Further
Assurances.
Each
party agrees to do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Subscription Agreement and the transactions contemplated by this Subscription
Agreement.
(l) Legal
Representation of the Undersigned.
The
undersigned acknowledges that (i) the undersigned has read this Subscription
Agreement in its entirety, (ii) the undersigned has either (A) consulted with
legal counsel and other professionals of the undersigned’s own choosing or (B)
has chosen to forego such consultation after being advised to seek such
consultations and (iii) the undersigned understands the terms and consequences
of entering into this Subscription Agreement and is fully aware of the legal
and
binding effect of entering into this Subscription Agreement.
THE
SHARES HAVE NOT BEEN REGISTERED OR APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR
HAS
THE COMMISSION OR ANY SUCH AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS SUBSCRIPTION AGREEMENT OR THE AGREEMENTS AND DOCUMENTS REFERRED TO OR
INCORPORATED BY REFERENCE HEREIN (COLLECTIVELY, THE “DOCUMENTS”). ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE
SHARES ARE BEING OFFERED BY THE COMPANY IN RELIANCE UPON AN EXCEPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WHICH EXEMPTION
DEPENDS UPON THE EXISTENCE OF CERTAIN FACTS, INCLUDING, BUT NOT LIMITED TO,
THE
REQUIREMENTS THAT THE SHARES ARE NOT BEING OFFERED THROUGH GENERAL ADVERTISING
OR GENERAL SOLICITATION, ADVERTISEMENTS OR COMMUNICATIONS IN NEWSPAPERS,
MAGAZINES OR OTHER MEDIA, OR BROADCASTS ON RADIO OR TELEVISION, AND THAT THE
DOCUMENTS SHALL BE TREATED AS CONFIDENTIAL BY THE PERSONS TO WHOM IT IS
DELIVERED. ANY DISTRIBUTION OF THE DOCUMENTS OR ANY PART OF THE DOCUMENTS OR
DIVULGENCE OF ANY OF ITS CONTENTS SHALL BE UNAUTHORIZED.
IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF
THE COMPANY, INCLUDING THE MERITS AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THE DOCUMENTS. ANY REPRESENTATION TO
THE
CONTRARY IS A CRIMINAL OFFENSE. THE SHARES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. IN ADDITION,
THE CERTIFICATES REPRESENTING THE SHARES WILL BEAR A LEGEND TO SUCH EFFECT
AS
SET FORTH IN THIS SUBSCRIPTION AGREEMENT. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
IN
WITNESS WHEREOF, the
undersigned has duly executed this Subscription Agreement as of the date set
forth below the undersigned’s signature in the Execution Section to this
Subscription Agreement.
18
EXECUTION
SECTION FOR SUBSCRIPTION BY NON-INDIVIDUALS
I. SUBSCRIPTION
AMOUNT:
The
undersigned subscribes to purchase ____________ Shares at the Subscription
Price
determined immediately prior to Closing based on the average of (A) the volume
weighted average price of the Common Stock for the six-month period ending
on
the date three (3) business days prior to the closing of the QR acquisition
less
a discount of 5% and (B) the average closing price of the Common Stock for
the
six-month period ending on the date three (3) business days prior to the closing
of the QR acquisition less a discount of 5%.
II. SUBSCRIBER
STATUS:
The
undersigned is (check
appropriate box and, if applicable, fill in state with jurisdiction over
custodial account):
| G |
CORPORATION
(Please include certified corporate resolution authorizing
signature).
|
| G |
PARTNERSHIP.
|
| G |
TRUST.
|
| G |
LIMITED
LIABILITY COMPANY.
|
| G |
LIMITED
LIABILITY PARTNERSHIP.
|
[X]
OTHER
(Including
Employment Benefit Plans and Trusts, Individual Retirement Accounts, and ▇▇▇▇▇▇
Plans).
III. INFORMATION
AS IT IS TO APPEAR ON THE COMPANY RECORDS:
Name
of
Subscriber:
Federal
Taxpayer Identifying Number:
State
of
Incorporation or Organization:
State
of
Principal Place of Business:
Mailing
Address:
Telephone
Number:
Facsimile
Number:
19
IV. INVESTOR
STATUS (check
all appropriate boxes and, if applicable, provide all information
requested):
The
undersigned is an accredited investor, as such term is defined under Regulation
D, by reason of the fact that the undersigned is:
|
G
|
A
bank as defined in Section 3(a)(2) of the Securities Act, or any
savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of
the
Securities Exchange Act of 1934 (the “Exchange Act”); an insurance company
as defined in Section 2(13) of the Securities Act; an investment
company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act; a
Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state,
its
political subdivisions, or any agency or instrumentality of a state
or its
political subdivisions, for the benefit of its employees, and having
total
assets in excess of $5,000,000; an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”)
with investment decisions made by a plan fiduciary, as defined in
Section
3(21) of such Act, which is either a bank, savings and loan association,
insurance company or registered investment adviser; an employee benefit
plan within the meaning of ERISA and having total assets in excess
of
$5,000,000.
|
|
G
|
An
employee benefit plan within the meaning of ERISA which is a self-directed
plan, with investment decisions made solely by the following persons
who
are accredited investors, as defined in Regulation
D:
|
________________________________________________________________________
________________________________________________________________________
|
G
|
A
private business development company as defined in section 202(a)(22)
of
the Investment Advisers Act of
1940.
|
|
G
|
An
organization described in Section 501(c)(3) of the Internal Revenue
Code,
corporation, Massachusetts or similar business trust or partnership,
not
formed for the specific purpose of acquiring the securities offered,
with
total assets in excess of
$5,000,000.
|
|
G
|
A
trust, with total assets in excess of $5,000,000, not formed for
the
specific purpose of acquiring any shares of Common Stock, whose purchase
is directed by the following sophisticated person meeting the description
set forth in Rule 506(b)(2)(ii) of Regulation
D:
|
________________________________________________________________________
|
G
|
An
entity in which all of the equity owners are accredited investors,
as
defined in Regulation D. (The
Company has the right to request the names of each such accredited
investor equity owners and to require such person(s) to complete
a
Qualified Purchaser Questionnaire prior to the Company’s acceptance of the
undersigned’s subscription.)
|
20
V. SIGNATURE(S)
The
undersigned corporate officer, partner, trustee or fiduciary certifies that
the
undersigned has full power and authority from all requisite stockholders,
partners, co-trustees, co-fiduciaries of the subscribing entity named above
to
execute this Subscription Agreement on behalf of the subscribing entity and
to
make the representations, warranties and agreements made herein on its and
their
behalf and that investment in the Shares has been affirmatively authorized
by
the governing board or body of such entity and is not prohibited by law or
the
governing documents of the subscribing entity.
|
By:
|
By:
|
|||
|
(Signature
of Authorized Signatory)
|
(Signature
of Authorized Co-Signatory)
|
|||
|
(Name
of Authorized Signatory)
|
(Name
of Authorized Co-Signatory)
|
|||
|
(Title
of Authorized Signatory)
|
(Title
of Authorized Co-Signatory)
|
Date: _______________________________________,
2007
21
ACCEPTANCE
PAGE
(To
be
completed by the Company)
SUBSCRIPTION
AND SUBSCRIPTION AGREEMENT ACCEPTED AND AGREED TO:
Aggregate
number of Shares for
which
the
Subscription is accepted:
_________________
Subscription
Price:
$________________
AFP
Imaging Corporation
By:
/s/ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, President
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, President
Dated: ______________________________,
2007
22
Exhibit
A
Addendum