Exhibit 10.1
Preliminary Contract for Share Transfer by and between QR Imaging S.r.l., NIM
S.r.l.,Gianmaria Tommasi, mara Tacconi, Attilio Tacconi and Mozzo Pierluigi,
dated February 22, 2007\
 
PRELIMINARY CONTRACT FOR SHARE TRANSFER
Between
 
NIM S.R.L., with registered office in Verona, Via Silvestrini No. 20, registered
in the Verona Register of Companies under No. 01737460236;
 
Gianmaria Tommasi, born in Marano di Valpolicella on May 4th, 1943 and resident
in Verona in Via Marin Faliero No. 185, tax code TMMGMR43E04E911L
 
Mara Tacconi born in Verona on July 4th, 1955 and resident in Villafranca di
Verona, Via del Fante 14 and Attilio Tacconi born in Verona on November 23rd,
1943 and resident in Verona, Via Franchetti No. 6 and Pierluigi Mozzo born in
San Giovanni Lupatoto on March 5th, 1950 and therein resident in Via Caduti del
Lavoro 7 as owners by means of trustee registration to VER.FID S.R.L. with
registered office in Verona, Corso Porta Nuova 22, registered in the Verona
Register of Companies under No. 01383610233, hereinafter referred to
collectively as the “Selling Parties” or also as the “Sellers”
on the one hand
and
 
QR Imaging S.r.l., , with registered office in Milan, Via Senato No. 20,
registered in the Milan Register of Companies under No. 05408370962 hereinafter
referred to also as “Imaging” or the “Purchaser”
on the other hand
 
 
1

--------------------------------------------------------------------------------

 
In the following Imaging and the Selling Parties shall be referred to
collectively as the “Parties” and, individually, a “Party”.
Whereas:
- The Selling Parties are owners of 100% of the capital of QR srl of nominal
10,400 Euros, with registered office in Verona, Corso Porta Nuova No. 22 -
registered in the Verona Register of Companies under No. 02164000230 -
(hereinafter also referred to as “QR” or the “Company”) and intend to transfer
their respective capital shares to Imaging;
 
- Imaging is interested in purchasing the totality of shares representing the
entire company’s capital of QR hereinafter also referred to as the
“Participation”);
 
- a due diligence on company’s legal and accounting situation respectively as of
May 17 and as of June 30, 2006 was performed on behalf of the Purchaser.
Given all the above which, together with the attachments to this Contract, is an
integral part thereof,
it is hereby agreed and stipulated as follows:
1. Sale of the Participation
1.1 At the Closing date (hereinafter also referred to as “Closing Date”), in
accordance with the provisions of this Contract and of applicable law, the
Sellers shall sell, assign, transfer to the Purchaser and the Purchaser shall
purchase from the Sellers 100% of the capital of QR srl divided between the
Selling Parties as follows:
 
 
2

--------------------------------------------------------------------------------

 
Name of seller  Quotas in the Company
Tommasi Gianmaria 7.5%
Mozzo Pierluigi (held through fiduciary company Verfid srl)30 %
Tacconi Mara (held through fiduciary company Verfid srl)5 %
Tacconi Attilio (held through fiduciary company Verfid srl)7,5 %
Nim (held through fiduciary company Verfid srl) 50%
TOTAL -  100%
 
1.2 Each of the Sellers shall sell, transfer, assign to the Purchaser and this
latter party shall purchase from each of the Sellers all rights arising from the
shares held in the Company.
 
1.3 Conclusion of sale of 100% of the capital of QR srl shall take place the
last week of the month of March 2007 and in any case no later than April 15,
2007 (the “Closing Date”). This date is held by the parties, to safeguard the
economic character of the deal, to be an essential term. Passage of this term
without stipulation of the definitive contract shall be equivalent to withdrawal
(also in accordance with point 3.2) and shall cause loss of the deposit or
payment of the double in accordance with point 3 of this Contract, depending on
which Party is to exercise the right of withdrawal.
 
 
3

--------------------------------------------------------------------------------

 
2. Transfer of the Participation
 
2.1  (i) On March 15th, 2007 the Selling Parties shall provide the Purchaser’s
consultants including for instance, auditing firm and financial advisors
(hereinafter referred to as (the “Consultants”), for all opportune assessments,
a balance sheet made with reference to February 28th, 2007, according to which
the Net Worth of QR shall be determined as of February 28th, 2007 (hereinafter,
in this contract, the term Net Worth, even if written as accounting net worth,
shall refer to the description given in art. 2424 of the Civil Code). The
Consultants, as part of these assessments, may, at their own discretion,
participate in the phases of drawing up of the aforementioned balance sheet.
When exercising this right the Consultants can, among other things, participate
in informative meetings organized by the Sellers without this hampering or
hindering the procedures for drawing up of the balance sheet by the Selling
Parties.
(ii) Whenever remarks are made by the Consultants that render the Net Worth of
QR as of February 28th, 2007, lower than the amount guaranteed at points 7.2 (i)
and 7.2 (ii) of this Contract then the Purchaser shall have the task of
notifying these remarks by and no later than March 20th, 2007 as the Parties
hold 5 days to be sufficient for formulating the remarks even in accordance with
the powers granted to the Consultants in the previous point. In said assumption
the Parties shall discuss the facts that emerged in order to find a shared
solution.
(iii) Whenever no shared solution is forthcoming the Sellers undertake to issue,
at the closing, which shall in any case take place according to the required
terms and procedures, a guarantee from a primary bank to be used at the outcome
and in accordance with the decision of the arbitrator specified in the following
point, for an amount equal to the amount of difference between guaranteed net
worth and what was detected by the Consultants.
(iv) The Parties shall therefore rely, following the closing, on the decision of
a third arbitrator, appointed by the President of the Court of Verona, who must
decide on the remarks raised by the auditing firm and consequently determine the
Net Worth and the amount that can in case be used on the guarantee that was
issued and also determine the Party which is to pay, in addition to his own
fees, also the costs for the guarantee.
 
 
4

--------------------------------------------------------------------------------

 
 
2.2 Sale of the Participation shall be performed at the Closing Date by signing
of the deed certified by notary public in Verona named by the Sellers in order
to give correct and full execution to the provisions of this Contract.
 
2.3 The Parties take note that signing of the notarized deed shall not
constitute novation with respect to the agreements in this Contract, having the
only purpose of transferring ownership of the Participation.
 
2.4 Transfer of ownership of the Participation in accordance with this Contract
shall take place at the Closing Date, with effect and enjoyment starting that
same date.
 
2.5 The Sellers shall deliver to Imaging, at the Closing Date, a legal opinion
signed by an attorney-at-law chosen by the Sellers which certifies that, at the
Closing Date:
 
(i) the Company is a limited liability company duly organized and validly
existing in accordance with Italian law, has the capacity necessary for being
owner of its assets or for leasing them and performing its business, is not
undergoing winding-up, is not insolvent, is not subject to any bankruptcy
procedure or the like and has not stipulated any agreement according to which
its own assets are placed under the control of creditors or of an official
receiver or a special administrative receiver and that no circumstances exist
that could give rise to one of these situations;
 
(ii) the Contract is valid and binding upon the Sellers when it is signed
without any further authorizations whatsoever being required;
 
(iii) the Contract can be executed against the Sellers in accordance with the
Italian law;
 
(iv) The Company’s quotas are free from any encumbrances, it being meant by
“encumbrance“ any lack of title, claim, privilege, obligation, burden, pledge,
real or personal rights by third parties, attachment or any other burden of
whatever nature, and are freely transferable
 
 
5

--------------------------------------------------------------------------------

 
 
3. Deposit
 
3.1 The Purchaser undertakes to pay or cause its holding AFP Imaging Corporation
in the name and on behalf of the Purchaser , within and not later than March 2,
2007 (terms deemed as essential by the parties) pay to the Sellers a
€1,000,000.00 (one million/00) as penalty deposit through wire payment by means
of bank transfer on bank account XXXX.
 
3.2 The effectiveness of such Contract is conditioned to the to the fact that
the payment has been cashed within and not later than the term provided for in
paragraph 3.1. If such term expires and the
Sellers have not received the agreed amount as caparra, such contract shall be
deemed as it has never been subscribed, exception made for the sellers’right to
claim for damages.
 
3.3 The Parties, within the Closing Date, can withdraw from this Contract and
the deposit paid, or return of the double its amount in accordance with art.
1386 of the Civil Code, shall be the sole compensation for failure to perform
definitive contract as the Parties agree that no other compensation shall be
owed.
 
4. Price of the Participation
 
4.1 The Purchaser shall pay to the Selling Parties, as purchase price of the
Participation specified in previous article 2, an amount of 13,000,000.00 Euros
(thirteen million/00) simultaneous with stipulation of the notarial deed
mentioned in article 2.2. of the present Contract by banker’s draft. In this
case the Selling Parties shall return to Imaging the Deposit given in accordance
with point 3 of this Contract unless Imaging takes measures so that the deposit
is held by the Selling Parties as partial payment of the price, consequently
subtracting it from the amount specified in the previous sentence.
 
5. Contracts with some Selling Parties
 
5.1 Imaging undertakes, also in accordance with art. 1381 of the Civil Code, to
have the QR Company, at the Closing date, appoint or maintain appointed
professor Gianmaria Tommasi as director of QR. In particular relations between
the Company and professor Gianmaria Tommasi, , shall be governed by a contract
having the same form as in attachment 1 to this Contract, which professor
Tommasi undertakes to sign at the Closing Date.
 
5.2 Imaging undertakes, also in accordance with art. 1381 of the Civil Code, to
have the QR Company, at the Closing date, appoint or maintain appointed Mrs.
Mara Tacconi as proxy for QR. In particular relations between the Company and
Mrs. Mara Tacconi, , shall be governed by a contract having the same form as in
attachment 2 to this Contract, which Mrs. Tacconi undertakes to sign at the
Closing Date.
 
5.3 Imaging undertakes, also in accordance with art. 1381 of the Civil Code, to
have the QR Company, at the Closing date, stipulate a contract with Messrs.
Attilio Tacconi and Pierluigi Mozzo having the same form as in attachment 3 to
this Contract, regarding transfer of ownership of the DTC patent as for Annex
3.1 at the present Contract and implementation thereof, which Messrs. Tacconi
and Mozzo undertake to sign at the Closing Date.
 
5.4 The terms set at points 5.1, 5.2 and 5.3 are held to be essential by the
Parties.
 
 
6

--------------------------------------------------------------------------------

 
6. Interim Management
 
6.1 The Selling Parties declare and the Purchaser take note that during November
2006 Q.R. srl shareholders’meeting resolved on payment of reserves of retained
earnings or remunerations to directors and proxies as percentages of profits
from the 2006 financial year, for a overall amount not exceeding € 750.000 and
in any case within limits that prevent it from affecting the guaranteed net
worth of the Company as of February 28, 2007.
Save for the right to receive the payment of dividends or remunerations
described in the previous sentence, and save as otherwise provided for by this
Contract, the Selling Parties ensure that, in the period elapsing between the
date of signing of this Contract and the Closing Date, they shall limit
themselves to routine management of the Company according to criteria of
prudential and proper management in order to preserve the financial, assets and
commercial situation, without stipulating any contract or entering into any
obligation or debt or incurring any liability or performing any activity which
could:
 
- make any of the Sellers’ representations and guarantees in accordance with
this Contract no longer reflect reality or in any case inexact;
 
- create enduring costly commitments for the Company in the future.
 
7. Guarantees
 
7.1 The Selling Parties guarantee full and unconditioned ownership and unimpeded
availability of the assets of QR and of the Participation, stating them to be
free of any restraint, burden or encumbrance or other charges as well as, in
particular, of any pre-emption rights.
 
7.2 The Selling Parties also guarantee:
 
(i) that the balance sheet of QR shall show, as of February 28th, 2007, an
accounting net worth not less than € 1.397.320,00 (onemilionthreehundred
ninetyseventhousandthreehundredtwenty/00), (hereinafter also referred to as the
guaranteed net worth.
 
(ii) that compared to the situation guaranteed as of February 28th, 2007 the Net
Worth, at the Closing Date, shall have varied only due to routine management and
in any case shall not be less than € 1.397.320,00 (onemilionthreehundred
ninetyseventhousandthreehundredtwenty/00.
 
(iii) that the Company’s book entries, books and records have been and shall be
kept in compliance with current laws and with accounting principles;
 
(iv) that the financial statements of the Company as well as the balance sheet
made with reference to the date of February 28th, 2007 have been and shall be
drawn up in accordance with applicable laws and in compliance with accounting
principles and represent/shall represent in a truthful manner the balance sheet
of the Company at the dates they refer to;
 
(v) that the Participation is the full and exclusive property of the Selling
Parties and is not subject to pledge, attachment, usufruct, burdens and any
restraints and/or any other third-party right, whether real or not, prejudicial
records and/or registrations which may even only partially limit enjoyment
thereof and that it may befreely transferred. No party has stipulated any
contract or option or is holder of any right which can become a contract or an
option, for the purchase, the subscription, the allocation or issue of any
shares or other securities whatever, not yet issued, relative to the Company.
There are not in circulation (i) any convertible securities of, or negotiable
with, the corporate capital of the Company, (ii) any options or other rights to
purchase or of subscription of the corporate capital of the Company; or (iii)
any agreement to which the Sellers or the Company are parties in relation to the
issue of or the subscription for any part whatever of the corporate capital of
the Company, or the issue of or the subscription for any such convertible or
negotiable securities or any such options or rights whatever;
 
(vi) that the Company has not hired nor has undertaken to hire starting January
1st, 2006 any employee or consultant whose gross monthly remuneration is higher
than €5,000.00 (five thousand/00);
 
(vii) that the Company is not involved in lawsuits, legal or administrative
proceedings or of any other kind;
 
(viii) that the Company has not given any guarantee in favour of or in the
interests of third parties nor have third parties gave guarantees in the
interests of the Company;
 
(ix) that the Company has always acted in accordance with applicable
environmental standards (including any law related to hazardous substances) and
that there is no requirement provided for by applicable environmental
regulations that has been imposed on the Company, nor has any notice been
received of the fact that this requirement could reasonably be imposed on it,
related to the activities of the Company or environmental liabilities related to
the company’s assets which could increase the relevant costs for adapting to
environmental regulations. The Company has conducted its business, until the
Closing Date, in compliance with regulations on work health and safety;
 
(x) that the Company does not hold, to any extent, neither directly nor
indirectly, any intellectual property right except for the patents listed in
Exhibit 4., which contains a true and complete list of all the intellectual
property rights owned by or licensed by the Company as of the date of this
Contract.
 
 
7

--------------------------------------------------------------------------------

 
The Company is licensee of the patent DTC. The Sellers hereby represent and
warrant that at the Closing Date, the Company will be the owner of the patent
DTC.
 
Such patents are free from any encumbrance, and the Company has the right to use
them without any payment to be due to third parties. In particular no employee
or former employee holds, to any extent, rights for any invention, improvements
or discoveries related to products or services of the Company Intellectual
property rights means all intellectual property rights held in the capacity of
owner, licensor or licensee of the Company including by way of example and
not exhaustively:
 
- the Company’s name and its distinctive signs (mark, firm etc)
- marks, trade and other types, registered or not (“Marks”);
- all patents and their applications and patentable inventions (“Patents”);
- all copyrights, registered or not even if unedited (“Copyrights”);
- all know-how, commercial secrets, confidential lists of customers, software of
every type, technical information, data, technology, plans, projects, designs
and models; and
- all rights relating to internet sites and dominions utilized by the Company.
 
(xi) that all tax declarations by the Company have been prepared and filed
within the times and in the forms prescribed by the rules applicable thereto.
All the aforesaid declarations are true, exact and complete. All payments
relating to imposts, taxes, contributions and withholdings have been effected
timorously (or, where applicable, all setting aside of funds to reserves for
payment thereof have been made) and for all the correct amounts and all tax
requirements have been correctly and timely carried out. There are no pending
investigations, assessments, searches, inspections or applications relative to
taxes regarding which the Company could be liable. The Company has retained and
paid all taxes in regard to which withholdings were required and also paid all
taxes in regard to sums paid or due to employees, independent workers, creditors
or third parties in general.
 
(xii) that no representation, warranty, or agreement made by the Company or the
Sellers in the Contract or in its Exhibits contains or will contain any untrue
statement or omits or will omit to state anything necessary for the proper
fulfilment of the obligations contained in this Contract. The Sellers are not
aware of any fact which can adversely affect the value of the Participation or
of the assets of the Company. The Sellers shall disclose to the Purchasers prior
to the Closing Date any fact, information or document that may either have an
effect on any statement, covenant, representation, warranty, or agreement
contained in this Contract or in any document mentioned therein.

7.3 The Parties mutually agree to exclude any form of the Sellers’ guarantee as
to the product liability sold or services provided by QR, it remaining clear
that no product or service provided by the Company in recent years has ever been
found, according to the Sellers’ knowledge, defective to the point of requiring
any compensation from the Company nor does there exist, as far as the Sellers
know, any claim whatsoever for product liability. The relevant contingent
liabilities, therefore, remain entirely to the Company’s account, excluding any
kind of indemnity as governed by point 8 of this Contract.
 
8. Indemnity
 
8.1 Whenever due to whatever debt, liability, contingent liability and/or
inexistence and/or depreciation of the assets stated in the balance sheet, with
the exception of losses caused by product liability, (the “Losses”), already
existing at the Closing Date or in any case arising from facts prior to that
date and not reflected in the accounting data at the Closing Date, to an extent
whereby at the Closing Date the Net Worth is lower than what was guaranteed at
points 7.2 (i) and 7.2 (ii) of this Contract, the Selling parties must hold the
Purchaser and/or the Company, according to Purchaser’s instruction, harmless
from the Losses by paying a sum equal to the loss (Indemnity) in proportion to
their respective quotas (Indemnity). The Sellers also undertake to indemnify and
compensate the Purchaser and/or the Company, according to Purchaser’s
instruction, for any further damages, losses, expenses (including legal costs)
or costs which are the consequence of breach, falsity, non-conformity with the
truth, non-compliance or lack of exactness of the representations warrantees or
agreements, of this Contract. This Indemnity obligations shall arise immediately
but shall be payable only at the time when QR is required to make the relevant
payment.
 
8.2 The Selling Parties’ Indemnity obligations shall have a duration equal to
that of the applicable prescription related to claims from third parties being
understood that the notice of a claim for Indemnity interrupts calculation of
the terms.
 
8.3 Whenever an event arises which could give rise to Indemnity by the Selling
Parties, according to what is set at point 8.1, Imaging is obliged to involve
the Selling Parties in management of the dispute (irrespective of its nature)
and they shall also have the right to concur in determining important choices in
managing the dispute (for example: appointing professional consultants,
possibility of settling, possibility of challenging, etc.). Whenever the Parties
are in disagreement regarding these choices they shall put the decision up to a
third party appointed by the President of the Court of Verona who shall act as
arbitrator and decide without appeal.
 
8.4 The parties agree that the Indemnity obligations shall be valid and
effective up to an overall amount of €13,000,000 (thirteen million).
 
8.5 Refund of any contingent liabilities, if tax deductible, shall be performed
with a reduction equal to the consequent savings for reduced taxes to be
sustained by the Company;. any contingent assets can also be compensated net of
the corresponding current and/or deferred taxes where applicable.
 
8.6 The Selling Parties’ obligations to indemnify as per the previous points
shall take effect only after, regarding one or more debit charges, deducting the
amounts set at point 8.5, a cumulative deductible is exceeded, mutually agreed
by the parties to be €25,000 (twenty five thousand/00). Below this amount,
consequently, Imaging cannot ask for any amount as Indemnity.
 
8.7 The Selling Parties, to guarantee the indemnity obligations governed by the
previous points, must deliver a guarantee issued by a primary bank for the
amount of €1,000,000 (one million) at the Closing Date. This guarantee must
retain validity for five years after the Closing Date.
 
8.8 Imaging, for itself and for its assignees, taking note of the Selling
Parties’ commitment to indemnify Losses, undertakes not to bring, and not to
have third parties bring, in any cases, lawsuits against the Selling Parties and
the directors for facts related to management of the Company prior to the
Closing Date.
 
 
8

--------------------------------------------------------------------------------

 
 
9. Non-competition agreements
 
9.1 The Sellers undertake to refrain from performing activities that are
directly or indirectly competitive with those of the Company in Italy and in the
rest of the world with the exclusion of Iran, Cuba and Vietnam. They take due
note that all consideration of this non-competition agreement is understood to
be already included in the sale price of the Participation. This clause shall
have a duration of five years from the date of termination of all collaboration
relationship by each of the Sellers with the Company with the clarification that
competition is understood to be such if it refers to activities in the dental
radiology sector using the “cone beam” technique.
 
9.2 The Seller who infringes the agreement, in case of breach of the
non-competition agreement, shall be required to pay the Company a penalty for
the amount of €150,000 as well as to compensate the Company for damage.
 
10. Court of jurisdiction and applicable law
 
10.1 The Court of Verona shall have sole jurisdiction for all disputes as to
this Contract or the agreements ancillary and/or consequent thereto.
 
10.2 The parties agree that this Contract, or the agreements ancillary and/or
consequent thereto, shall be governed by Italian law.
 
11. General Provisions
 
11.1 This Contract is drawn up in Italian and in English. In case of any
discrepancy between the texts in the two languages the Italian language shall
prevail.
 
11.2 Costs. Each Party shall pay its own costs and it is clarified in this
regard that the amounts due to the Consultants, including those regarding the
procedures called for at point 2 of this Contract, are totally owed by the
Purchaser. If one party brings a legal suit against the other Party in
accordance with this Contract the losing Party shall pay the other Party an
amount equal to the costs, including legal expenses, sustained for the suit.
 
11.3 All notices required by this Contract must be made in writing and delivered
by hand (including by courier), by telefax or telegram, or by registered letter
with return receipt to the following addresses:
 
- if to the Selling Parties, collectively or individually, to:
Giammaria Tommasi c/o NIM S.r.l.
Via Silvestrini 20
37135 Verona
Telefax: ++ 39 045 8203040
- if to Imaging to:
Studio Albertazzi
Galleria del Corso 1
20122 Milan
Telefax: + 39 02 76 02 57 73
 
Changes in the addresses and fax numbers of the Parties must be notified in the
same procedures as provided for by this article with a minimum seven days’
notice. Communications and notices are understood to have been received the
moment they reach the addressee’s address (if made by hand delivery, telegram or
registered letter) or the moment the addressee confirms (including confirmation
by telefax) having received notice by telefax.
Signed in Verona February 22, 2007
 
Gianmaria Tommasi /s/ Gianmaria Tommasi
Tacconi Attilio /s/ Attilio Tacconi
Tacconi Mara  /s/ Mara Tacconi
Mozzo Pierluigi  /s/ Pierluigi Mozzo
per Nim srl
Gianmaria Tommasi /s/ Gianmaria Tommasi
per Imaging
Donald Rabinovich /s/ Donald Rabinovitch
President
 

--------------------------------------------------------------------------------

 
9