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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 reported) April 17, 1997
AFP Imaging Corporation
(Exact name of registrant as specified in its charter)
New York 0-10832 13-2956272
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(State or other jurisdiction (Commission I.R.S. Employer
of incorporation or File Number) Identification No.)
organization)
250 Clearbrook Road, Elmsford, New York 10523
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 592-6100
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On April 17, 1997, AFP Imaging Corporation (the "Registrant"), a New
York Corporation, purchased from ACG Nystromgruppen AB ("Nystrom"),
a Swedish company, 500 common shares of Regam Medical Systems
International AB ("Regam"), a Swedish Company, representing 100
percent of the issued share capital of Regam. The Registrant assumed
all outstanding assets and liabilities as of the closing date free
and clear of all liens, claims, charges, pledges or encumbrances.
Regam is a manufacturer of a filmless digital dental radiography
system, with an installed base of over 3,500 units in Europe and
Asia.
The purchase price consisted of cash, notes payable and royalty
totalling $2.9 million. The Registrant used internally generated
equity funds, and did not incur additional bank debt.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable for the Registrant to file the financial
information of the business acquired hereunder at this time, and
such information will be filed by amendment to this Form 8-K within
sixty days from the date hereof.
(b) Pro-forma Financial Information.
It is impracticable for the Registrant to file the pro-forma
financial information required hereunder at this time, and such
information will be filed by amendment to this Form 8-K within sixty
days from the date hereof.
(c) Exhibits.
2.1 Stock Purchase Agreement dated April 17, 1997 by and between
ACG Nystromgruppen AB, a Swedish company and the Registrant.
2.2 Schedules and Exhibits omitted from Stock Purchase Agreement.
Exhibits and Schedules to this Agreement have been omitted,
but will be furnished supplementally by the Registrant to the
Commission upon request.
99.1 Promissory Note dated April 17, 1997 in the principal sum of
$1 million.
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SIGNATURES
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.
AFP Imaging Corporation
Dated: May 1, 1997 By: /s/ David Vozick
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David Vozick,
Chairman of the Board
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Exhibit Index
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Exhibit No. Description
2.1 Stock Purchase Agreement dated April 17, 1997 by and
between ACG Nystromgruppen AB, a Swedish Company and
AFP Imaging Corporation.
2.2 Schedules and Exhibits omitted from Stock Purchase
Agreement.
99.1 Promissory Note dated April 17, 1997, in the principal
sum of $1 million.
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STOCK PURCHASE AGREEMENT
This Agreement is entered into on April 17, 1997, by and between:
ACG Nystromgruppen AB, reg. No. 556030-0914, a Swedish company with its
registered office at Boras, duly incorporated and registered under the laws of
Sweden (hereinafter called the "Seller") and;
AFP Imaging Corporation, a company with offices at 250 Clearbrook Road,
Elmsford, New York 10523, duly incorporated under the laws of the State of New
York, (hereinafter called the "Buyer").
WITNESSETH
WHEREAS, the Seller is the owner of 500 shares with a par of value of SEK 100
per share in Regam Medical Systems International AB, reg. No. 556222-7370
(hereinafter called the "Shares"), a company organized and existing under the
laws of Sweden and with offices at Regementsvagen 5, Sundsvall (hereinafter
called the "Company"), representing 100 percent of the issued share capital of
the Company and;
WHEREAS, the Seller has offered to sell the Shares to the Buyer and the Buyer
desires to purchase the Shares.
NOW THEREFORE
In consideration of the premises and the mutual covenants contained herein, it
is hereby agreed as follows:
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1. PURCHASE AND SALE OF SHARES
Pursuant to the terms and conditions set forth herein, the Seller hereby agrees
to sell the Shares to the Buyer and the Buyer hereby agrees to purchase the
Shares from the Seller on the Closing (as defined below). The Shares shall be
sold free and clear of all claims, liens, charges, pledges or encumbrances and
together with all rights attached or accruing thereto, including all dividend
rights relating to profit and earnings from September 1, 1996.
2. PURCHASE PRICE
2.1 The purchase price shall be (i) a fixed amount of USD TWO MILLION
SEVEN HUNDRED THOUSAND (2,700,000) (the "Fixed Purchase Price") and
(ii) an additional purchase price according to section 2.3 (the
"Additional Purchase Price").
2.2
2.2.1 The Fixed Purchase Price shall be paid according to the following:
a) By wire transfer on the Closing USD 1,500,000
(as defined below)
b) By wire transfer on March 31, 1998 USD 200,000
c) Issuance by the Buyer on the Closing
(as defined below) of a promissory
note in the form of Exhibit 1 in the
aggregate principal amount of USD 1,000,000
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USD 2,700,000
2.2.2 The Seller's right to USD 200,000 according to Section 2.2.1b), shall
be covered by an irrevocable "on demand" guarantee confirmed and
payable by a Swedish bank.
2.2.3 Payments under Sections 2.2. la) and b) shall be made in USD and to
such bank account as the Seller shall have designated to Buyer in
writing no later than two (2) days prior to date on which the payment
is to be made.
2.3
2.3.1 The Additional Purchase Price shall be based on the Buyer's Group's
(defined as the Buyer and any company controlling, controlled by or
under common control with the Buyer) Net Sales (as defined below)
relating to the Company's digital imaging products, hardware, software
and technologies, also known as "Sens-A-Ray" and/or model SUC-L and/or
Model SUC-l and/or Model 2000-448 and/or Model 2000-648 and all
derivatives thereof (the "Product") for the three calendar years
1997-1999 and shall be an amount equal to six (6) per cent of Net
Sales (as defined below) relating to the Product for each of the
aforementioned calendar years.
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The Buyer's Group's net sales related to the Product shall mean the
aggregate invoiced amounts by the Buyer's Group (or any licensee of
the Buyer's Group) for the sale or lease of the Product, less amounts
appearing on the Product invoices for returned sales and allowances,
value added or other such similar taxes and freight charges ("Net
Sales").
When calculating the Net Sales the Buyer's Group's accounts shall be
in accordance with generally accepted accounting principles and the
accounting principles presently used by the Buyer's Group. The billing
shall be in accordance with presently used billing principles.
The Additional Purchase Price shall be paid by wire transfer to a bank
account designated by the Seller. The payment shall be made not later
than March 31 in each relevant year (1998, 1999 and 2000).
The Buyer shall on demand present to the Seller all documentation
needed by the Seller to calculate the Additional Purchase Price. The
Seller has the right, by means of an authorized auditor (Sw:
auktoriserad revisor) appointed by the Seller, to inspect those books
of the Buyer's Group that relate to Net Sales of the Product. The
Seller is also entitled to address questions to the auditors within
the Buyer's Group and to receive answers from these auditors with
regards to the Net Sales.
Accounts of Net Sales' shall be rendered quarterly from the Buyer to
the Seller. The Buyer shall also provide the Seller with annual
accounts each relevant year.
The Seller and its authorized auditor (Sw: auktoriserad revisor) shall
treat information received according to this Section as confidential.
2.3.2 Notwithstanding what has been stated in Section 2.3.1, the Additional
Purchase Price shall never be less than the following amounts (the
"Minimum Additional Purchase Price").
Calendar The Minimum Additional Due date
year Purchase Price
1997 USD 70,000 March 31, 1998 (aggregate for 1997)
1998 USD 140,000 March 31, 1999 (aggregate for 1997-1998)
1999 USD 200,000 March 31, 2000 (aggregate for 1997-1999)
It has been expressly agreed between the parties that the Minimum
Additional Purchase Price shall immediately fall due and be payable if
the Buyer's Group (i) no longer owns all of the patents and patent
applications listed in Exhibit 2 (unless (a) such patents and
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patent applications have lapsed or expired or (b) the Company is
unable to effect a registration of such patents and patent
applications in the name of the Company), (ii) makes decisions or
takes measures limiting the Net Sales of the Product because of the
fact that the sales of the Product are not profitable for the Buyer's
Group.
The Seller's right to immediate payment of the Minimum Additional
Purchase Price in connection with (i) and (ii) above, shall exclude
the Seller from any right to compensation for damages for the
remaining Additional Purchase Price which would have been due and
payable had no such decisions or measures been made or taken.
Notwithstanding what has been stated in Sections 2.3.1 and 2.3.2, the
total Additional Purchase Price under this Agreement shall never,
under any circumstances, exceed USD 1,000,000.
2.3.3 If the (company, within three (3) years from the Closing, is contacted
by the University of Texas, USA, or by its assigns (the "University")
regarding the University's patent No. 5,179,579 and as a result of
such contact the Company becomes legally obligated (including a good
faith settlement with the University) to pay royalties to such
University in order to continue to sell the Product, the parties to
this Agreement hereby agree that the percentage rate of six (6) per
cent as set out in Section 2.3.1 shall be re-negotiated.
Notwithstanding what has been stated in this Section 2.3.3, the
Minimum Additional Purchase Price and the total Additional Purchase
Price as set out in Section 2.3.2 shall nevertheless remain unchanged.
3. RELEASE FROM GUARANTEE
The Seller has pursuant to a sensor supply agreement with EEV Limited ("EEV")
and Svenska Handelsbanken guaranteed the Company's fulfillment of its
obligations towards EEV. The guarantee is in an amount not to exceed Great
Britain Pounds ("GBP") 220,000. The Seller shall be released from this
guarantee and the Buyer shall guarantee the Company's obligations towards
Svenska Handelsbanken, if so requested by Svenska Handelsbanken.
The Company's major obligations under the EEV Supply Agreement as of the date
hereof are set forth in Exhibit 3.
4. CONDITIONS TO CLOSING
The respective obligations of the parties under this Agreement to be performed
at or before the Closing (as defined below) shall be subject to the
satisfaction, at or before the Closing (as defined below), of each of the
following conditions:
4.1 The Seller shall have submitted to the Company, as an unconditional
shareholder's contribution, the principal amount of SEK 3,770,000.
Such unconditional shareholder's contribution shall be effected as of
February 28, 1997, by means of waiving of all of the
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Seller's claims, which claims as of February 28, 1997, amount to SEK
1,890,000, against the Company. The remaining amount, SEK 1,880,000
shall have been effected by capital infusion to the Company. Evidence
of such unconditional shareholder's contribution, satisfactory to
Buyer, shall be delivered to Buyer.
4.2 Seller shall have been released from its guarantee pursuant to Section
3 hereof.
4.3 All consents and/or assignments that shall be necessary to consummate
the transactions contemplated by this Agreement shall have been
obtained.
4.4 The officers and directors of the Company shall have tendered their
resignations effective as of the Closing.
4.5 Opinion from Buyer's Swedish counsel, in form satisfactory to Buyer,
regarding acquisition of assets from Regam Medical Systems AB in
bankruptcy.
Opinion from Buyer's US counsel addressed to Seller and opinion from
Seller's Swedish counsel addressed to Buyer, in form satisfactory to
Buyer and Seller, as the case may be.
5. ACTIONS ON CLOSING; COOPERATION RESPECTING ACTIONS AFTER CLOSING
5.1 The Closing shall take place on April 17, 1997, at the offices of Snow
Becker Krauss P.C., 605 Third Avenue, New York, New York 10158, or at
such other place as the parties hereto mutually agree (the "Closing").
At the Closing, the Buyer shall pay a portion of the Fixed Purchase
Price (USD 1,500,000) according to Section 2.2. la) above, deliver the
bank guarantee according to Section 2.2.2 and deliver the promissory
note according to Section 2.2.1c).
5.2 Against receipt of such portion of the Fixed Purchase Price (USD
1,500,000) and the promissory note and the guarantee as set out in
Section 5.1 above, the Seller shall deliver to the Buyer, duly
endorsed share certificates representing the Shares together with any
dividend coupons and the share ledger of the Company.
5.3 Following the Closing, Seller shall use its best efforts to assist
Buyer, at Buyer's reasonable request, in negotiating, processing,
handling or otherwise resolving any ongoing matter regarding the
business of the Company not completed by the Closing. More
specifically, Seller shall use its best efforts, at Buyer's reasonable
request, to make sure that the Company's projects involving the
European Union are not terminated due to the change of ownership of
the Company under this Agreement. It should, however, be noted that
the Seller in no way can guarantee that such projects involving the
European Union will not be terminated due to the change of ownership
of the Company
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under this Agreement. Furthermore, if necessary for registration
purposes, Seller shall assist Buyer, at Buyer's reasonable request, in
any registration procedure to register the Company as owner of the
patents, trademarks and pending applications listed in Exhibit 6. For
avoidance of doubt, it is expressly agreed that all costs relating to
such registration procedure shall be borne by the Buyer.
6. BOARD OF DIRECTORS
6.1 Promptly after the Closing an extraordinary general meeting of
shareholders of the Company shall be held by the Buyer in order to
elect a new Board of Directors.
6.2 The Seller covenants that the present directors will be removed from
their positions without any claim for compensation or renumeration
from the Company and that these directors will not from the date of
the Closing exercise their formal authority to represent the Company.
6.3 The Buyer covenants that the next ordinary shareholders' meeting of
the Company will pass the necessary resolutions whereby the present
directors will be discharged from liability with respect to their
administration of the Company's affairs, on the condition, however,
that the Company's auditors approve such discharge from liability.
6.4 The Seller shall cause general powers of attorney to be duly issued in
favor of any persons appointed by the Buyer which individuals shall
have unlimited authority to represent the Company in all matters until
the new Board of Directors has been officially registered.
7. FINANCIAL STATEMENTS
Annexed hereto as Exhibit 4 and 5 are the audited financial statements
of the Company for the period September 1, 1995-August 31, 1996, and
the unaudited interim financial statements for the period September 1,
1996-February 28, 1997 (the "Financial Statements").
8. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The purchase price for the Shares has been based on a future value,
determined on an earnings basis. Therefore, the only representations
and warranties given by the Seller as of the Closing are the
following:
8.1 The Company is duly organized, validly existing under the laws of
Sweden and has the corporate authority to own its properties and carry
on its business as now conducted.
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8.2 All books and records of the Company have been properly maintained in
accordance with Swedish law.
8.3 The Shares are fully paid and have been validly issued in compliance
with the relevant laws of Sweden and are free of pre-emptive rights or
other restrictions on transfer of title, free and clear of all
mortgages, pledges, liens, encumbrances, charges or other third party
rights of any kind. The Seller has good and marketable title to the
Shares and shall on Closing have full right and power to sell, assign
and transfer the Shares to the Buyer.
The Buyer has been made aware of the legal requirement to increase the
share capital of the Company to SEK 100,000 before December 31, 1997.
8.4 All patents, copyrights, trademarks and trade names owned by the
Company, together with all pending applications (domestic and
foreign), are listed in Exhibit 6. Most of the patents, trademarks and
pending applications were formerly owned by Regam Medical System AB,
and a few were owned by Benny Johansson, which company and person are
still registered as owner of most of the patents, trademarks and
pending applications. The rights in the patents, the trademarks and
pending applications acquired by the Company are in full force and
effect.
8.5 The Company's registered share capital amounts to SEK 50,000.
8.6 The Seller is not bound by any commitment of any kind relating to the
Shares, whether by conversion, exchange, option, warrant or otherwise.
8.7 The execution, delivery and performance of this Agreement has been
duly authorized by the Seller and does not (i) violate the articles of
association of the Seller or the Company or any other agreement to
which the Seller or the Company is a party, or (ii) conflict with or
violate any law, rule, regulation, order, writ, decree, judgment,
injunction or award applicable to the Company or the Seller.
8.8 Except as have already been obtained, no approvals or consents are
necessary in respect of the Seller or the Company in connection with
the transactions contemplated by this Agreement.
8.9 There are no material liabilities, fixed or contingent, not fully
provided for in the Financial Statements.
8.10 Except as set forth in Exhibit 7, the Company has good and marketable
title to all real, personal and intangible property reflected on the
Financial Statements as of the respective dates thereof, subject to no
liens, pledges, encumbrances, or charges of any kind not reflected on
the Financial Statements.
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8.11 Except as disclosed in Exhibit 8, there are no pending or to the
Seller's knowledge threatened litigation against the Company which
could result in a material adverse change in the financial position,
business, assets or properties of the Company. To the best of the
Seller's knowledge, the Company has never been involved in litigation
which has resulted in a material adverse change in the financial
position, business, assets or properties of the Company.
8.12 All material agreements, contracts and understandings of the Company
are listed in Exhibit 9. Except as set forth in Exhibit 9, the Company
is not a party to any (i) contracts not made in the ordinary course of
business, (ii) leases with respect to real property, (iii) dealer's,
manufacturer's representative or distributors agreements not
terminable by the Company on 90 days notice or less, or (iv)
insurance, severance or any other arrangements providing employee
benefits.
The Company has performed all obligations required to be performed to
date and is not in default in any material respect under any agreement
listed in Exhibit 9.
Except as set forth in Exhibit 10, neither this Agreement nor the
transactions contemplated herein will in accordance with the terms of
above mentioned material agreements constitute a breach or an event of
default under such material agreements to which the Company is a
party, or will in accordance with its terms, result in the termination
in whole or in part of any such material agreement to which the
Company is bound.
8.13 The Company does not have any current, future or contingent liability
in respect of current or past employees in respect of pension or
related retirement benefits that are not either fully insured by a
third party, fully funded or for which sufficient provisions have not
been made for in the Financial Statements.
8.14 The Company has not offered or agreed to pay any material amount of
money for the purpose of obtaining or maintaining business in
violation of law.
8.15 The Company has filed all necessary reports and tax returns required
by all Swedish governmental agencies relating to the Company's
business, all of which, in all material respects, are correct and
complete, and has paid or caused to be paid all assessments shown to
be due or claimed to be due thereon as of the Closing. All taxes or
social law benefit payments for employees of the Company, due as of
the Closing, to government agencies have been paid.
8.16 Copies of the Company's registration certificate, articles of
association and share ledger as set out in Exhibits 11, 12 and 13 are
complete, correct and current in all material respects. It should be
noted that the Company has moved from its registered address at
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S. Allen 5 to its current offices at Regementsvagen 5. This is not
reflected on the Company's registration certificate.
8.17 The Company is in substantial compliance with all rules and
regulations applicable to the conduct of its business, including
applicable zoning and environmental laws affecting the Company's
business.
8.18 Since September 1, 1996, no dividend or other payment in respect of
the Shares has been declared or paid by the Company.
8.19 Except as listed in Exhibit 14, the Company has not entered into any
agreements with its employees relating to profit sharing, stock
options or similar arrangements.
8.20 Attached hereto as Exhibit 15 is a list and brief description of all
policies of fire, extended coverage, public and products liability and
all other kinds of insurance held by the Company. Said policies are in
full force and effect, and the Company is not delinquent with respect
to any premium relating thereto.
8.21 Since February 28, 1997, the Company has conducted its business in the
ordinary course and consistent with past practice and no change,
action, taking or other event has occurred which could result in a
material adverse change in the financial position, business, assets or
properties of the Company.
8.22 Seller acquired certain of the assets of the Company from Regam
Medical Systems AB in bankruptcy in accordance with the bankruptcy
laws of the Kingdom of Sweden, free and clear of any and all prior
claims. Such assets have been transferred to the Company by Seller.
8.23 The Financial Statements delivered to the Buyer are true, complete and
accurate in all material respects and fairly present the assets,
liabilities, financial condition and results of operations of the
Company as at the respective dates thereof and for the periods
referred to therein. The Buyer has been informed about and has
accepted that costs for development of sensors, amounting to SEK
1,600,000 are capitalized. All other development costs have been met
by the Company.
8.24 The Company's accounts receivable are bona fide accounts and, since
February 28, 1997, have not been diminished in any manner other than
by cash collections and write-offs in the ordinary course of business.
A schedule of write-offs is annexed as Exhibit 16. All accounts
receivable reflected in the Financial Statements will be within 120
days from the Closing, fully collected net of the amount of disclosed
write-offs in Exhibit 16.
8.25 The Company's credit facility with Svenska Handelsbanken amounts to
SEK 2,000,000 (which amount includes an amount of SEK 300,000 relating
to a guarantee issued by
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Svenska Handelsbanken to Lovanger Elektronik AB) and, as of the
Closing, the outstanding balance drawn against the credit facility is
less than SEK 500,000 (excluding the amount of SEK 300,000 relating to
the guarantee issued by Svenska Handelsbanken to Lovanger Elektronik
AB).
8.26 All machinery and equipment owned by the Company is in operating
condition and good repair, reasonable wear and tear excepted, and is
in conformity with all safety rules and all other applicable
ordinances, regulations and laws.
8.27 The Company's relationship with its customers, vendors and employees
is in all material respects satisfactory. Prior to the date of this
Agreement, there has been no material adverse change in connection
with any agreement or relationship of the Company with any of its top
customers.
8.28 No warranty claims will be made relating to the Product manufactured
or sold by the Company through the Closing, except for warranty claims
in the ordinary course of business.
8.29 All loans and any other form of indebtedness of the Company running to
the Seller have been canceled or discharged.
9. INDEMNIFICATION
9.1 The Seller shall indemnify, defend and hold harmless the Buyer and the
Company and its successors and assigns from and against the cost of
any and all claims, damages, losses, liability, deficiencies, actions,
suits, proceedings, costs or legal expenses arising out of or
resulting from (i) any breach of a representation, warranty or
covenant by Seller contained in this Agreement, (ii) events occurring
in the course of or relating to the Company's business prior to
Closing ("Third Party Claim") which are not disclosed in this
Agreement or in the Financial Statements, (iii) a liability finally
determined for Federal, state, local or foreign taxes that relates to
periods up to and including the Closing (a "Tax Claim") to the extent
that such taxes were not paid prior to the Closing or were not
reflected on the Financial Statements, or (iv) any and all costs and
expenses (including reasonable attorneys fees) related to the
foregoing.
Notwithstanding anything to the contrary in this Agreement, the
provisions of Section 9 shall operate to limit the liability of the
Seller in respect of any claim by the Buyer for any breach of or
inaccuracy in the representations and warranties or otherwise under or
pursuant to this Agreement.
For the avoidance of any doubts, it is explicitly agreed that the
Seller shall not assume any liability whatsoever for any taxes that
may directly or indirectly be levied on the Buyer in connection with
the transactions contemplated by this Agreement.
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9.2 The Buyer shall in any event not be entitled to damages or other
amounts in respect of any claim by the Buyer for any breach of or
inaccuracy in the representations and warranties or otherwise under or
pursuant to this Agreement unless and until the aggregate amount of
all claims exceeds USD 100,000 (excepting, however, claims made as
regards unpaid accounts receivable pursuant to Section 8.24 above, for
which claims the USD 100,000 threshold shall not apply).
All claims shall be calculated in USD.
The total aggregate liability of the Seller under or pursuant to this
Agreement shall not in any event exceed USD 1,200,000.
9.3 No claim shall be brought by the Buyer against the Seller for any
breach of or inaccuracy in the representations or warranties or
otherwise under or pursuant to this Agreement unless such claim is
made bona fide and unless notice in writing of any such claim,
accompanied by reasonable particulars thereof specifying the nature of
the breach giving rise to the claim and, so far as practicable, the
amount claimed in respect thereof, has been given to the Seller not
later than the first anniversary of the Closing, or not later than one
month following the expiration of the applicable statue of limitations
in respect of tax matters or, at any time, with respect to a breach of
any representation or warranty of which the Seller had actual
knowledge prior to the Closing.
9.4 The Buyer shall not be entitled to recover damages or otherwise obtain
reimbursement more than once in respect of any individual breach of
the representations and warranties or otherwise under or pursuant to
this Agreement.
9.5 In the event any third party asserts any claim with respect to any
matter for which Buyer shall have the right to seek indemnification
hereunder, the Buyer shall give prompt notice to the Seller, and the
Seller shall have the right at its election to control the defense of
such third party claim at its own expense by giving prompt notice to
the Buyer. The Buyer shall have the right at its choice and cost also
to participate in the defense. If the Seller elects to control the
defense, it will do so acting in good faith and taking into
consideration the reasonable interest of the Company. The Buyer
undertakes that it shall not settle any such third party claim without
the Seller's consent which the Seller undertakes not to unreasonably
withhold. In all events, the parties shall cooperate in defending
against any asserted third party claims, and the defending party shall
keep the other party duly and reasonably informed during the defense
of such claims.
9.6 If, in respect of any matter which would give rise to a breach of or
inaccuracy of the representations and warranties or otherwise under or
pursuant to this Agreement, the Buyer or the Company is entitled (or
would have been so entitled had the Buyer or the Company maintained in
force customary and adequate insurance protection) to claim under any
policy of insurance, then the Buyer or the Company shall make a claim
against its insurers and use their respective best efforts to recover
any amount under
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such insurance policy. If the Seller has paid to the Buyer or the
Company an amount pursuant to a claim in respect of the
representations and warranties or under any provisions of this
Agreement and the Buyer or the Company subsequently becomes entitled
to recovery under an insurance policy (or should have been entitled
had such insurance policy been maintained) the Buyer or the Company
shall forthwith repay to the Seller the recovered amount, not to
exceed what the Seller paid under such claim.
9.7 Where the Buyer or the Company at any time is entitled to recover from
some other person any sum in respect of any matter giving rise to a
claim under the representations and warranties or under any of the
other provisions of this Agreement the Buyer shall, and shall procure
that the Company, promptly undertake all necessary steps to enforce
such recovery.
9.8 If the Seller pays at any time to the Buyer or the Company an amount
pursuant to a claim in respect of the representations and warranties
or under any provisions of this Agreement and the Buyer or the Company
subsequently becomes entitled to recover from some other person any
sum in respect of any matter giving rise to such claim, the Buyer
shall, and shall procure that the Company shall, take all necessary
steps to enforce such recovery, and shall forthwith repay to the
Seller so much of the amount so recovered by the Buyer or the Company
as does not exceed the sum originally paid by the Seller to the Buyer
or the Company, less all reasonable costs, charges and expenses
incurred by the Buyer or the Company in recovering that sum from such
other person.
9.9 In the event of a claim by Buyer for indemnification in respect of
accounts receivable pursuant to Section 8.24 above, which claim is
paid by Seller. Buyer shall cause the Company to assign to Seller, the
accounts receivable in question. Seller will indemnify Buyer for such
claims only if the Company has made reasonable efforts to collect such
outstanding accounts receivable.
9.10 In addition to what is otherwise expressed in this Agreement, no claim
for any breach of or inaccuracy in the representations or warranties
or otherwise under or pursuant to this Agreement shall be brought by
the Buyer against the Seller if and to the extent that any such claim
occurs as a result of any legislation not in force at the date hereof,
or which takes effect retroactively, or occurs as a result of any
increase in the tax rate in force at the date hereof or any change in
the practice of the relevant tax authorities.
9.11 No matter shall be the subject of a claim for any breach of or
inaccuracy in the representations and warranties or otherwise under or
pursuant to this Agreement to the extent that allowance, provision or
reserve has been made for such matter in the Financial Statements.
9.12 The Buyer shall notify the Seller prior to the Closing of any breach
or misrepresentation of any warranty or representation herein which
during the due diligence has specifically come to its attention and
shall provide the Seller with an opportunity to remedy such
<PAGE>
13
breach or misrepresentation, failing which the Buyer shall not then be
entitled to present claims on the basis of such breach or
misrepresentation.
9.13 Any claim under this Section 9 or otherwise under or in relation to
this Agreement shall be paid in the form of a reduction in the
purchase price as follows:
first, from the Additional Purchase Price under Section 2.3 above; and
second, from the principal amount of USD 1,000,000 under Section
2.2.1c) above.
As stated above in Section 9.2, the total aggregate liability of the
Seller under or pursuant to this Agreement shall not in any event
exceed USD 1,200,000.
9.14 The remedies provided to the Buyer in this Agreement shall be
exclusive and it is therefore specifically agreed that no remedy
whatsoever under the Swedish Sale of Goods Act (koplag 1990:931) as
amended or under any other statute or legal principle, including (but
not limited to) to rescind this Agreement, shall be available to the
Buyer.
10. REPRESENTATIONS AND WARRANTIES OF THE BUYER
10.1 The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all
corporate power and authority to make and perform this Agreement.
10.2 This Agreement has been duly authorized and, upon execution and
delivery by the Buyer, is a valid and binding obligation of the Buyer
enforceable against the Buyer in accordance with its terms. Any
necessary government approvals, consents or authorizations required
for the execution and delivery of this Agreement and the consummation
by Buyer of the transactions contemplated hereby have been, or prior
to Closing shall be, obtained.
11. CONFIDENTIALITY AND NON-COMPETE
11.1 During a period of five (5) years from the Closing, the Seller
undertakes to refrain from behaving in a manner likely to harm the
business of the Company, such as attempting to induce their employees
to leave their employment with the Company, or from carrying on,
directly or indirectly, any activity of whatever nature that may
compete or be likely to compete with the activities of the Company, as
of the Closing, in Sweden and all other areas where the Company had
any business dealings or relationships (the "Territory") and
undertakes not to hold any participation in any company or person
carrying on a similar activity in the Territory except to the extent
its affiliates (other than the Company) are already involved in such
business.
<PAGE>
14
11.2 The Seller acknowledges that the Company possesses and will continue
to develop or acquire certain Proprietary Information (as defined
below), that the Seller has or may have access to certain Proprietary
Information, that the Company may disclose and has disclosed certain
Proprietary Information to the Seller and that the Company and the
Buyer have an important interest in protecting the confidentiality of
the Proprietary Information and providing for the ownership or
proprietary rights in that information. During a period of five (5)
years from the Closing, the Seller shall not disclose or use in the
Territory any Proprietary Information of the Company as of the
Closing. As used in this Section, "Proprietary Information" shall
include all information contained in patents, patent applications,
renewals or continuations, or other technical disclosures held or
filed by the Company, business ideas, know how, copyrights and
copyright applications, and trademark applications, writings and
designs, the identity of specific potential customers, the identity of
specific potential employees, and the identity of business
relationships with specific persons and specific business
organizations, as well as all information protectable as trade
secrets, including computer programs, know how, or marketing plans,
strategies, new products, unpublished financial statements, budgets,
projections, prices, costs, customer and supplier lists and training
and promotional materials.
11.3 The Seller acknowledges and agrees that such restrictions, rights and
remedies in this Section 11 are reasonable in duration and territory,
are designed to eliminate competition that would be unfair to the
Company and the Buyer, do not stifle Seller's business operations,
would not operate as a bar to Seller's business operations, are fully
required to protect legitimate interests of the Company and the Buyer.
The Seller acknowledges and agrees that the relevant areas and markets
in which the Company and any affiliates will conduct business and will
compete include the Territory. Seller acknowledges and agrees that the
Territory is reasonable and appropriate for the purposes of the
parties to this Agreement.
11.4 The provisions of this Section l 1 shall not be held invalid or
unenforceable because of (x) the scope of the Territory (y) actions
subject hereto or restricted hereby, or (z) the period of time within
which such provisions are effective; provided that the maximum
Territory, the actions subject to such provisions and the period of
time during which such provisions are effective shall be subject to
determination and limitation in accordance with Section 12.4 of this
Agreement.
12. MISCELLANEOUS
12.1 This Agreement and the Exhibits supersedes any prior oral or written
agreement between the parties, undertaking or representation or
warranty of any kind with respect to all matters referred to herein.
It is expressly declared that no amendments hereof shall be effective
unless made in writing and signed by the parties.
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15
12.2 This Agreement shall be governed by the laws of the Kingdom of Sweden
(excluding the law (1987:822) on International Sales and the Sale of
Goods Act (1990:931)).
12.3 Any controversy or claim arising out of or relating to this Agreement,
the breach hereof or the rights or liabilities of the parties
hereunder shall, unless resolved by agreement of the parties, be
referred to and finally settled by arbitration in accordance with the
rules of the Swedish Act of Arbitration (1929:145) as the law shall
from time to time be in effect. Judgment upon the award rendered may
be entered in any court having jurisdiction and application may be
made to such court for judicial acceptance of the award and an order
of enforcement, as the case may be.
12.4 Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal or incapable of being enforced in whole or
in part, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in full force and effect
as if this Agreement had been executed with the invalid portion
thereof eliminated, as long as the Agreement can be given effect in
line with the basic intentions of the parties.
12.5 This Agreement may be executed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the Buyer and the Seller have executed this Agreement at
the day and year first written to be effective as and from this date:
ACG NYSTROMGRUPPEN AB AFP IMAGING CORPORATION
_____________________________ ____________________________
By:__________________________ By:_________________________
Title:_______________________ Title:______________________
<PAGE>
Exhibit 2.2 Schedules and Exhibits Omitted from Stock Purchase Agreement
Exhibit 1 Form of Promissory Note
Exhibit 2 Patent and Patent Applications (Acceleration of
Minimum Additional Purchase Price)
Exhibit 3 Obligations under the EEV Supply Agreement
Exhibit 4 Regam Medical Systems AB Audited Report for the
year ended August 31, 1996
Exhibit 5 Regam Medical Systems AB Financial Statement
for the six months ended February 28, 1997
Exhibit 6 Patents, Trademarks, Copyrights and Applications
Exhibit 7 Certificates of Floating Charges
Exhibit 8 Litigation
Exhibit 9 Material Agreements
Exhibit 10 EU Project Agreement
Exhibit 11 Registration Certificate
Exhibit 12 Articles of Association
Exhibit 13 Share Ledger
Exhibit 14 Profit Sharing Agreement
Exhibit 15 Insurance Policies
Exhibit 16 Schedule of Write-offs
<PAGE>
PROMISSORY NOTE
1. FOR VALUE RECEIVED, the undersigned APP Imaging Corporation, a New York
corporation, (hereinafter referred to as "Maker"), promises to pay to the
order of ACG Nystromgruppen AB (reg. No 556030-0914), a Swedish
corporation, or any successor holder(s) hereof from time to time, (being
hereinafter referred to as "Holder"), the principal sum of USD 1,000,000,
with interest thereon, or on so much thereof as is from time to time
outstanding and unpaid, at the rate hereinafter set forth, such principal
and interest to be paid as follows:
2. From and after the date hereof interest at a rate per annum (rounded
downwards to the nearest 1/16 of l%) appearing on Reuters Screen LIBO
Page as the London interbank offered rate for one year deposits in US
Dollars at approximately 11:00a.m. (London Time) (the "Libor Rate") on
April 17, 1997 plus two percent, payable on the following dates; April
17, 1998, April 17, 1999 and April 17, 2000. The interest shall be
calculated on the basis of a 360 day year and the actual number of days
elapsed. The interest rate shall be reset annually in accordance with the
above use the Libor Rate on April 17, 1998 and April 17, 1999 for the
following 360 day period.
3. The principal suns shall be repaid in full on April 17, 2000.
4. Each payment by Maker under this Promissory Note shall be made by
4:00p.m. Swedish time on the date that payment is due, to the Holder by
deposit to such bank account as the Holder have designated by notice to
Maker. Each payment under this Promissory Note shall be made in USD.
5. This Promissory Note may be prepaid in whole or in part at any time or
from time to time without penalty or premium.
6. Payments due on Saturdays, Sundays or legal holidays shall be due on the
next business day.
7. Holder shall have the right to terminate this Promissory Note immediately
and demand payment of principal sum and interest if Maker should not
perform its obligations under this Promissory Note.
<PAGE>
2
8. Protest and notice of demand, notice of dishonor and notice of non
payment and all other notices are hereby waived by Maker, provided,
however, that Maker shall be entitled to have all payments made under
this Promissory Note noted on the original of the Promissory Note and
provided further that Maker shall be entitled to receive the canceled
original Promissory Note upon payment in full of all amounts due here
under.
9. No failure to accelerate the debt evidenced hereby by reason of default
hereunder, nor indulgences granted from time to time, shall be construed
as a novation of this Promissory Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of such right of
acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Promissory Note.
10. This Promissory Note may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
11. As used herein, the term "Holder" shall be deemed to include its
respective heirs, successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
12. The Maker hereby agrees to reimburse the Holder for all expenses
(including reasonable attorney's fees) incurred by the Holder in
enforcing this Promissory Note.
13. Maker's obligations under this Promissory Note are subject to set off or
deduction in accordance with Section 9 of the Stock Purchase Agreement,
dated April 17, 1997, between the Maker and the Holder.
14. The indebtedness evidenced by this instrument is subordinated to any and
all obligations of Maker, both secured and unsecured, including but not
limited to unsecured cash flow based loans from a bank or other
institutional lender ("Senior Debt").
Holder shall execute and deliver such further instruments and Shall take
such further action as may from time to time be necessary in order to
carry out the provisions and intent of this subordination, and Holder
shall not act or permit any action prejudicial or inconsistent with the
priority position of Senior Debt over the indebtedness created by this
instrument
15 This Promissory Note shall be governed by, construed and interpreted as
to validity, enforcement and in all other respects in accordance with the
laws of Sweden. Any dispute, controversy or claim arising out of or
relating to this Promissory Note shall be referred to and finally settled
by arbitration in accordance with the rules of the Swedish Act of
Arbitration (1929:145) as the law shall from time to time be in effect;
provided, however, that the Beneficiary shall always be free to commence
proceedings and actions against us before the courts of any other country
having or claiming jurisdiction in respect of this
<PAGE>
3
Guarantee. The Beneficiary may claim execution of any judgment, award or
order in any court or appropriate authority of any country where we have
any assets,
16. THE MAKER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY OR RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
PROMISSORY NOTE
IN WITNESS WHEREOF, Maker has executed this Note on April 17, 1997.
AFP IMAGING CORPORATION
_____________________________
By:__________________________
Title:_______________________
