Unassociated Document

0001144204-09-035970.txt : 20090706 0001144204-09-035970.hdr.sgml : 20090703 20090706095329 ACCESSION NUMBER: 0001144204-09-035970 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20090706 DATE AS OF CHANGE: 20090706 GROUP MEMBERS: COMVEST CAPITAL MANAGEMENT, LLC GROUP MEMBERS: MICHAEL S. FALK GROUP MEMBERS: ROBERT L. PRIDDY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AFP IMAGING CORP CENTRAL INDEX KEY: 0000319126 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 132956272 STATE OF INCORPORATION: NY FISCAL YEAR END: 1210 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-35032 FILM NUMBER: 09929574 BUSINESS ADDRESS: STREET 1: 250 CLEARBROOK RD CITY: ELMSFORD STATE: NY ZIP: 10523 BUSINESS PHONE: 9145926100 MAIL ADDRESS: STREET 1: 250 CLEARBROOK RD CITY: ELMSFORD STATE: NY ZIP: 10523 FORMER COMPANY: FORMER CONFORMED NAME: AUTOMATIC FILM PROCESSOR CORP DATE OF NAME CHANGE: 19821122 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ComVest Capital, LLC CENTRAL INDEX KEY: 0001362707 IRS NUMBER: 510567247 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE NORTH CLEMATIS STREET STREET 2: SUITE 300 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 561-868-6060 MAIL ADDRESS: STREET 1: ONE NORTH CLEMATIS STREET STREET 2: SUITE 300 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 SC 13D 1 v154112_sc13d.htm Unassociated Document

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 13D

INFORMATION TO BE INCLUDED IN STATEMENT FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

§ 240.13d-2(a)

AFP Imaging Corp.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

1058106

(CUSIP Number)

Kenneth Parzygnat

ComVest Capital, LLC

City Place Tower

525 Okeechobee Blvd., Suite 1050

West Palm Beach, Florida 33401

Telephone: (561) 727-2000

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

June 22, 2009

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. x

Note. Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

————————————————

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes)

CUSIP No. 1058106

13D

Page 2 of 8 Pages

1	NAMES OF REPORTING PERSONS ComVest Capital, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
	(see instructions)			(a) o
				(b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (see instructions) WC
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 19,282,200 Shares
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 19,282,200 Shares
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 19,282,200 Shares
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (see instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 51.8% of Common Stock
14	TYPE OF REPORTING PERSON (see instructions) OO (Limited Liability Company)

CUSIP No. 1058106

13D

Page 3 of 8 Pages

1	NAMES OF REPORTING PERSONS ComVest Capital Management, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
	(see instructions)			(a) o
				(b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (see instructions) AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 19,282,200 Shares (1)
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 19,282,200 Shares (1)
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 19,282,200 Shares (1)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (see instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 51.8% of Common Stock
14	TYPE OF REPORTING PERSON (see instructions) OO (Limited Liability Company)

(1) ComVest Capital Management, LLC may be deemed to hold an indirect beneficial interest in these shares, which are directly beneficially owned by ComVest Capital, LLC because ComVest Capital Management, LLC is the managing member of ComVest Capital, LLC.

CUSIP No. 1058106

13D

Page 4 of 8 Pages

1	NAMES OF REPORTING PERSONS Michael S. Falk
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
	(see instructions)			(a) o
				(b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (see instructions) AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION USA
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 19,282,200 Shares (1)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 19,282,200 Shares (1)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 19,282,200 Shares (1)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (see instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 51.8% of Common Stock
14	TYPE OF REPORTING PERSON (see instructions) IN

(1) Mr. Falk may be deemed to hold an indirect beneficial interest in these shares, which are directly beneficially owned by ComVest Capital, LLC because he is the co-managing member of ComVest Capital Management, LLC. The filing of this Schedule 13D and any future amendment by Mr. Falk, and the inclusion of information herein and therein with respect to Mr. Falk, shall not be considered an admission that he, for the purpose of Section 16(b) of the Exchange Act, is the beneficial owner of any shares in which he does not have a pecuniary interest. Mr. Falk disclaims any beneficial ownership of the shares of Common Stock covered by this Statement.

CUSIP No. 1058106

13D

Page 5 of 8 Pages

1	NAMES OF REPORTING PERSONS Robert L. Priddy
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
	(see instructions)			(a) o
				(b) o
3	SEC USE ONLY
4	SOURCE OF FUNDS (see instructions) AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION USA
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 19,282,200 Shares (1)
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 19,282,200 Shares (1)
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 19,282,200 Shares (1)
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (see instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 51.8% of Common Stock
14	TYPE OF REPORTING PERSON (see instructions) IN

(1) Mr. Priddy may be deemed to hold an indirect beneficial interest in these shares, which are directly beneficially owned by because ComVest Capital, LLC because he is the co-managing member of ComVest Capital Management, LLC. The filing of this Schedule 13D and any future amendment by Mr. Priddy, and the inclusion of information herein and therein with respect to Mr. Priddy, shall not be considered an admission that he, for the purpose of Section 16(b) of the Exchange Act, is the beneficial owner of any shares in which he does not have a pecuniary interest. Mr. Priddy disclaims any beneficial ownership of the shares of Common Stock covered by this Statement.

CUSIP No. 1058106

13D

Page 6 of 8 Pages

Item 1. Security and Issuer.

The name of the issuer is AFP Imaging Corporation, a New York corporation (the “Issuer”). The Issuer’s principal executive offices are located at 250 Clearbrook Road, Elmsford, New York 10523. The title of the class of equity securities to which this statement on Schedule 13D (this “Schedule 13D”) relates is the common stock of the Issuer, par value $.01 per share (the “Common Stock”).

Item 2. Identity and Background.

(a), (b), (c) and (f) This Schedule 13D is filed by ComVest Capital, LLC (“ComVest”), ComVest Capital Management, LLC (“Management”), Michael S. Falk and Robert L. Priddy (collectively, the “Reporting Persons”). The business address of the reporting persons is ComVest Capital, LLC, City Place Tower, 525 Okeechobee Boulevard, Suit 1050, West Palm Beach, FL 33401. The principal business of the Reporting Persons is investing in middle-market companies. Capital and Management are organized as limited liability companies under the laws of the State of Delaware. Messrs. Falk and Priddy are citizens of the United States of America.

(d) and (e). During the last five years, none of the Reporting Persons have been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration

As of the date hereof, the Reporting Person beneficially owns a warrant to purchase an aggregate of 19,282,200 shares of Common Stock and an exercise price of $ 0.01 per share (the “Warrant”). The Warrant was acquired in connection with an amendment to a pre-existing loan agreement and the purchase of a Subordinated Promissory Note (the “New Note”) purchased on June 22, 2009 from the Issuer for an aggregate of $1 million.

Item 4. Purpose of Transaction

In April 2007, the ComVest entered into a Revolving Credit and Term Loan Agreement with the Issuer (the “Original Agreement”), which included both a convertible term note and a revolver. The Reporting Persons filed a Schedule 13G on April 20, 2007 to report the securities acquired in connection with the Original Agreement. On June 22, 2009, ComVest amended the Original Agreement so that, among other things, the term note originally issued in connection with the Original Agreement was amended to reflect a new $4,567,824.09 principal amount (the “Amended Term Note”). The interest rate on the Amended Term Note remains at 10%, the full principal is due June 30, 2011, and the Amended Term Note is no longer convertible into Common Stock.

In connection with the transaction, the Issuer issued to ComVest the New Note and the Warrant (as described in Item 3 above). The 800,000 warrants previously issued by the Issuer to ComVest in April 2007 were cancelled. Additionally, a nominee of the Reporting Persons, was appointed to the Board of Directors of the Issuer.

CUSIP No. 1058106

13D

Page 7 of 8 Pages

The Reporting Persons entered into the transaction in the ordinary course of business for investment purposes. The Reporting Persons are filing this Schedule 13D in accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended, in order to supersede their previously filed Schedule 13G. Other than as set forth in this Item 4, none of the Reporting Persons have any current plans, proposals or negotiations that relate to or would result in any of the matters referred to in paragraphs (a) through (j) of Item 4 of Schedule 13D. The Reporting Persons intend to review their investment in the Issuer on a continuing basis, and may seek to engage in discussions with other shareholders and/or with management and the Board concerning the business, operations or future plans of the Issuer. Additionally, the Reporting Persons may, from time to time and at any time, make additional loans to the Issuer, acquire additional warrants or shares of Common Stock of the Issuer in the open market or otherwise, and reserve the right to dispose of any or all of their shares in the open market or otherwise, at any time and from time to time.

Item 5. Interest in Securities of the Issuer

(a) and (b) The Reporting Persons beneficially own Common Shares as follows:

Name	Number of shares of Common Stock	Sole or Shared Voting(2)	Sole or Shared Dispositive(2)	% of Total Outstanding(1)

ComVest	19,282,200	Sole	Sole	51.8%

Management	19,282,200	Sole	Sole	51.8%

Falk	19,282,200	Shared	Shared	51.8%

Priddy	19,282,200	Shared	Shared	51.8%

Total:	19,282,200			51.8%

(1) The calculation of the percentage is based on 17,928,800 shares of common stock outstanding as of May 12, 2009, as reported in the Issuer’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009, filed with the Securities and Exchange Commission on May 14, 2009.

(2) ComVest directly beneficially owns the securities identified above in the form of direct ownership of the Warrant. Management is the managing member of ComVest and may be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 promulgated pursuant to the Exchange Act) of the shares of Common Stock that ComVest beneficially owns. Management, as the managing member of ComVest, has the sole power to direct the voting and disposition of the shares of Common Stock that Management beneficially owns. Messrs. Falk and Priddy are the co-managing members of Management and, accordingly, each of Messrs. Falk and Priddy may be deemed to be the indirect beneficial owner (as that term is defined under Rule 13d-3 promulgated pursuant to the Exchange Act) of the shares of Common Stock that Management may be deemed to beneficially own. Each of Messrs. Falk and Priddy, as a co-managing member of Management, shares with the other the power to direct the voting and disposition of the shares of Common Stock that Management may be deemed to beneficially own.

(c) No Reporting Person has effected any transactions with respect to the Common Stock in the past 60 days, other than the transaction reported herein.

(d) No person (other than the Reporting Persons) is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Common Shares.

(e) Not applicable.

CUSIP No. 1058106

13D

Page 8 of 8 Pages

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

On June 22, 2009, ComVest entered into an Equity Incentive Agreement with BioWave Innovations, LLC (“BioWave”). Under that agreement, in order to incentivize BioWave to cause the Issuer to reduce the Issuer’s loan obligations to ComVest, ComVest agreed to assign to BioWave a portion of the Warrant if and when the Issuer makes certain repayments of the principal on the outstanding loans.

Item 7. Material to be Filed as Exhibits

Exhibit 1 Joint Filing Agreement dated as of July 1, 2009.

Exhibit 2 Equity Incentive Agreement between ComVest and BioWave.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated as of July 1, 2009

ComVest Capital, LLC

By: /s/ Cecilio Rodriguez_

Name: Cecilio Rodriguez

Title: Chief Financial Officer

ComVest Capital Management, LLC

By:/s/ Cecilio Rodriguez_

Name: Cecilio Rodriguez

Title: Chief Financial Officer

/s/ Michael S. Falk

Michael S. Falk, Individually

/s/ Robert L. Priddy

Robert L. Priddy, Individually

EX-1 2 v154112_ex-1.htm Unassociated Document

EXHIBIT 1

SCHEDULE 13D JOINT FILING AGREEMENT

In accordance with the requirements of Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, and subject to the limitations set forth therein, the parties set forth below agree to jointly file the Schedule 13D to which this joint filing agreement is attached, and any and all future amendments to the Schedule 13D, and have duly executed this joint filing agreement as of the date set forth below.

Dated: July 1, 2009

		ComVest Capital, LLC

		By: /s/ Cecilio Rodriguez_
		Name: Cecilio Rodriguez
		Title: Chief Financial Officer

		ComVest Capital Management, LLC

		By:/s/ Cecilio Rodriguez_
		Name: Cecilio Rodriguez
		Title: Chief Financial Officer


		/s/ Michael S. Falk
		Michael S. Falk, Individually


		/s/ Robert L. Priddy
		Robert L. Priddy, Individually

EX-2 3 v154112_ex-2.htm Unassociated Document

EQUITY INCENTIVE AGREEMENT

AGREEMENT (this “Agreement”), entered into as of this 22nd day of June, 2009, by and between COMVEST CAPITAL, LLC, a Delaware limited liability company having its principal offices at One North Clematis, Suite 300, West Palm Beach, Florida 33401 (“ComVest”), and BIOWAVE INNOVATIONS, LLC, a Connecticut limited liability company having its principal offices at 274 Ridgefield Road, Wilton, Connecticut 06897 (“BioWave”);

W I T N E S S E T H:

WHEREAS, on or about the date hereof, (a) BioWave is purchasing from AFP Imaging Corporation, a New York corporation (the “Company”), shares of Series A Convertible Preferred Stock of the Company, the terms of which will provide BioWave with ownership and managerial control of the Company, and (b) ComVest is increasing, amending and restructuring its existing credit facilities with the Company, and in connection therewith the Company is issuing to ComVest a warrant to purchase up to 19,282,200 shares of common stock of the Company (the “Warrant”); and

WHEREAS, ComVest wishes to incentivize BioWave to cause the Company to effect one or more Liquidity Events (as such term is hereinafter defined) and utilize the proceeds thereof to permanently reduce the Company’s loan obligations to ComVest, and BioWave is desirous of increasing its ownership interest in the Company; and

WHEREAS, ComVest and BioWave have determined that it is in their mutual best interests to grant each other certain rights as more particularly set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Definitions.

In addition to the other capitalized terms defined elsewhere herein, the following terms shall have the following meanings wherever used in this Agreement:

“Advances” has the meaning ascribed thereto in the Loan Agreement.

“Affiliate” means, with respect to any Person, any other Person controlling, controlled by or under common control with the first Person.

“Exercise Price” has the meaning ascribed thereto in the Warrant.

“Liquidity Event” has the meaning ascribed thereto in the Loan Agreement.

“Loan Agreement” means the Amended and Restated Revolving Credit and Term Loan Agreement of even date herewith by and between ComVest and the Company, as same may be amended, modified, supplemented and/or restated from time to time.

“Maximum Revolver Amount” has the meaning ascribed thereto in the Loan Agreement.

“Person” means any individual, corporation, partnership, limited liability company, unincorporated association, business trust, governmental entity or agency, or other entity of any kind.

“Preferred Stock” shall mean the the shares of currently authorized Series A Convertible Preferred Stock of the Company which are outstanding from time to time.

“Target Amount” means $6,000,000.

“Term” means the period from the date hereof until the earlier of (a) the date (if any) on which BioWave and its Affiliates collectively cease to own a majority of the outstanding Preferred Stock or otherwise cease to control the ownership or management of the Company, or (b) June 30, 2011; provided, that to the extent that proceeds of a Liquidity Event are promptly applied as provided in Section 2 below, such proceeds shall be deemed to have been so applied during the Term notwithstanding that the subject Liquidity Event caused the expiration of the Term under the foregoing clause (a).

“Term Note” has the meaning ascribed thereto in the Loan Agreement.

“Warrant” has the meaning ascribed thereto in the First “WHEREAS” paragraph above.

“Warrant Shares” has the meaning ascribed thereto in the Warrant.

2. Transfer(s) of Warrant/Warrant Shares.

(a) In the event that, at any time and from time to time during the Term, the Company or any of its subsidiaries shall repay the principal of the Term Loan and/or the Advances out of the net proceeds of any Liquidity Event, then, upon presentation to ComVest of a reasonably detailed calculation of the net proceeds of the subject Liquidity Event, ComVest shall assign to BioWave a portion of the Warrant, such portion (on a percentage basis) to be equal to (i) 50%, multiplied by (ii) the amount of net proceeds applied to repay the Term Loan and/or Advances divided by the Target Amount; provided, however, that in no event shall ComVest be obligated to assign, in the aggregate, more than 50% of the total Warrant in respect of all Liquidity Events taken in the aggregate. The foregoing notwithstanding, to the extent that any net proceeds are applied to the repayment of the outstanding Advances, then such repayment shall only entitle BioWave to an assignment under this Section 2 to the extent that the Company, by written agreement simultaneously executed and delivered to ComVest, effects an equal and corresponding permanent reduction in the Maximum Revolver Amount.

(b) In the event that, at the time of any required assignment hereunder, ComVest shall have exercised the Warrant to such an extent that it no longer holds a sufficient portion of the Warrant to satisfy such assignment obligations hereunder, then ComVest may satisfy that portion of its assignment obligations for which it does not hold the Warrant by assigning to BioWave a number of Warrant Shares equivalent to such Warrant deficiency; and, in connection therewith, as a condition to such assignment of Warrant Shares, BioWave shall pay to ComVest an amount equal to the Exercise Price paid by ComVest under the Warrant for the subject Warrant Shares.

(c) Any and all Warrants and/or Warrant Shares assigned hereunder shall be assigned free and clear of all liens, security interests, pledges, encumbrances and other adverse interests.

3. Covenants.

ComVest shall, throughout the Term, retain ownership of a sufficient portion of the Warrant and/or a sufficient number of Warrant Shares as needed in order to satisfy its obligations (or, if applicable, its maximum remaining obligations) under Section 2 above. In the event that ComVest wishes to sell, assign (other than a pledge to secure loans or indebtedness), transfer or otherwise dispose of a portion of the Warrant and/or Warrant Shares such as would cause its remaining holdings not to satisfy the requirements of the preceding sentence, ComVest shall first obtain the prior written consent of BioWave with respect to such sale, assignment, transfer or disposition, which consent may be expressly conditioned upon the written agreement of the purchaser, assignee or transferee to be bound by and to comply with this Agreement with respect to a sufficient portion of the Warrant and/or Warrant Shares so as to enable BioWave (assuming compliance by ComVest with its remaining obligations hereunder) to receive the intended benefits of this Agreement.

4. Board Designee.

In order to induce ComVest to enter into this Agreement, BioWave shall notify ComVest in writing reasonably in advance of any and all meetings of the shareholders of the Company for the election of directors, and of any action proposed to be taken by written consent of shareholders of the Company with respect to the election of directors; and at any such meeting or in any such written consent, BioWave shall vote all of its shares of capital stock in the Company in favor of one (1) designee of ComVest (who shall be reasonably satisfactory to BioWave) to serve on the Board of Directors of the Company. This Section 4 shall be of no further force or effect from and after such time (if any) as ComVest and/or its Affiliates collectively own less than 35% of the Warrant and/or the Warrant Shares underlying the Warrant.

5. Assignment.

(a) ComVest shall not assign any of its obligations under this Agreement except with the prior written consent of BioWave, provided that such consent shall not be required in connection with (i) any pledge of this Agreement as collateral for loans or indebtedness, and/or (ii) the sale or assignment of all or substantially all of ComVest’s interests (loans and equity securities) in the Company if the purchaser or assignee agrees in writing to be bound by and to comply with this Agreement. Transfers, assignments or dispositions of the Warrant and/or Warrant Shares may, under the circumstances described in Section 3 above, also require the prior written consent of BioWave.

(b) BioWave may not assign any of its rights under this Agreement without the prior written consent of ComVest. In the event that, at any time and from time to time, BioWave sells, assigns, transfers or otherwise disposes of any of its capital stock in the Company, BioWave shall cause the purchaser, assignee or transferee to agree to be bound by the provisions of Section 4 above as respects the voting of the subject shares of capital stock in the Company.

6. Tag-Along Rights.

In the event that, at any time or from time hereafter, BioWave shall make or wish to accept any offer for the purchase and sale of any capital stock of the Company owned or held by BioWave, BioWave shall give written notice of such proposed transaction not less than twenty (20) days prior to the proposed commitment date or closing date (as the case may be) thereof, which notice shall set forth the name, address, telephone number and principal line of business of the proposed transferee(s), the material terms and conditions of the proposed transaction, and a copy of any and all relevant writings between the proposed transferee(s) and BioWave. ComVest shall have the right, exercisable upon written notice to BioWave given not less than five (5) days prior to the proposed date for the commitment or consummation of the transaction (as set forth in BioWave’s notice described in this Section 6), to elect to participate in such transaction and sell to the proprosed transferee(s) a portion of the Warrant and/or Warrant Shares (as such term is defined in the Warrant) equal, on a percentage basis, to the percentage of BioWave’s capital stock in the Company (counting preferred shares on an “as converted” basis) included in the proposed transaction, provided that ComVest shall not be required to make any representations or warranties or provide any indemnification to the transferee(s) other than with respect to ComVest’s unencumbered ownership of the subject Warrant and/or Warrant Shares; and otherwise, the terms and conditions of ComVest’s sale of Warrant and/or Warrant Shares shall be equivalent, on a per common share basis, to the terms and conditions under which BioWave sells its capital stock. In the event of any material modification of the terms and conditions of any proposed transaction described in this Section 6, BioWave shall give written notice thereof to ComVest, and ComVest shall have ten (10) days after receipt of such notice to determine whether to participate in or withdraw from the modified transaction. Anything elsewhere contained in this Section 6 to the contrary notwithstanding, this Section 6 shall not be applicable to any transfer of capital stock to any Affiliate of BioWave, provided that, as a condition to such transfer, such Affiliate shall agree in writing with ComVest to be bound by and to comply with this Section 6 in the same manner and to the same extent as BioWave.

7. Notices.

Any notices, requests, demands or other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or three (3) days after being mailed, addressed to the party being notified at the address of such party first set forth above, or at such other address as such party may hereafter have designated by notice; provided, however, that any notice of change of address shall not be effective until its receipt by the party to be charged therewith.

8. General.

(a) Neither this Agreement nor any of the terms or conditions hereof may be waived, amended or modified except by means of a written instrument duly executed by the party to be charged therewith. Any waiver or amendment shall only be applicable in the specific instance, and shall not constitute or be construed as a waiver or amendment in any other or subsequent instance. No failure or delay on the part of either party in respect of any enforcement of obligations hereunder shall in any manner affect such party’s right to seek or effect enforcement at any other time or in respect of any other required performance.

(b) The captions and paragraph headings used in this Agreement are for convenience of reference only, and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof.

(c) This Agreement, and all matters or disputes relating to the validity, construction, performance or enforcement hereof, shall be governed by and construed in accordance with the laws of the State of New York.

(d) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

(e) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original hereof, but all of which together shall constitute one and the same instrument.

(f) In the event of any dispute under or arising out of this Agreement, the prevailing party in such dispute shall be entitled to recover from the non-prevailing party, in addition to any damages and/or other relief that may be awarded, its reasonable costs and expenses (including reasonable attorneys’ fees) incurred in connection with prosecuting or defending the subject dispute.

(g) This Agreement constitutes the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements and understandings of every kind and nature between them as to such subject matter.

(h) This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective successors and permitted assigns, and no other person or entity shall have any right to rely on this Agreement or to claim or derive any benefit herefrom absent the express written consent of the party to be charged with such reliance or benefit.

(i) If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require; and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the date first set forth above.

	COMVEST CAPITAL, LLC

	By:
		Name: Gary E. Jaggard
		Title: Managing Director


	BIOWAVE INNOVATIONS, LLC

	By:
		Name: R. Scott Jones
		Title: Managing Director