THIS SECURITY AGREEMENT (as from time to time amended, modified, restated, supplemented and in effect, this”Security Agreement”) is entered into as of February 22, 2005 by Fischer Imaging Corporation, a Delaware corporation (the “Company“), to and infavor of ComVest Investment Partners II LLC, a Delaware limited liability company (the “Secured Party“), as contemplated in the Note and WarrantPurchase Agreement (the “Purchase Agreement“) between the Company and the Secured Party dated of even date herewith.
A. Pursuantto the Purchase Agreement, the Company is issuing to the Secured Party a Senior Secured Promissory Note dated of even date herewith in the principal amount of$5,000,000 and may hereafter issue additional senior secured promissory notes in an aggregate principal amount of up to $5,000,000 (collectively, the”Notes“). The purchase and sale of the Notes is governed by the Purchase Agreement. Capitalized terms used herein without definition shall be defined inthe manner set forth in the Purchase Agreement.
B. Inorder to induce the Secured Party to accept the Notes in accordance with the Purchase Agreement, and in consideration therefor, the Company has agreed to grant to theSecured Party a perfected lien on and security interest in all of the Company’s assets and properties, wherever located, and whether now or hereafter existing, owned or acquired, all pursuant to theterms of this Security Agreement, in order to secure the due and punctual payment of (i) the principal and interest (including, without limitation, interest accruing during the pendency of anybankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Notes, when and as due, whether at maturity, by acceleration,upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including but not limited to fees, costs, expenses and indemnities, whether primary, secondary,direct, contingent, fixed or otherwise (including, without limitation, monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceedingregardless of whether allowed or allowable in such proceeding), of the Company under the Notes or this Security Agreement (collectively, the”Obligations“).
C. Itis a condition precedent to the purchase and acceptance of the Notes by the Secured Party that the Company executes and delivers this Security Agreement.
NOW, THEREFORE, for and in consideration of the covenants and provisions set forth herein, and for other valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Company agrees as follows:
1.1 Grant of Security Interest. As security for the Obligations, the Company hereby assigns, pledges and grantsa continuing and unconditional security interest to the Secured Party, its successors and assigns, in and to all of the personal property of the Company, wherever located, and whether now owned orhereafter acquired, including:
(a) allequipment (including all “Equipment” as such term is defined in Section 9-102(a)(33) of the Uniform Commercial Code as in effect from time to timein the State of New York (the “Code“)), machinery, vehicles, fixtures, improvements, supplies, furniture, and other fixed assets, all as now owned orhereafter acquired by the Company or in which the Company has or hereafter acquires any interest, and any items substituted therefor as replacements and any additions or accessions thereto (all of the property described in this clause (a) being hereinafter collectively referred to as “Equipment”);
(b) allgoods (including all “Goods” as defined in Section 9-102(a)(44) of the Code) and all inventory (including all “Inventory” as defined inSection 9-102(a)(48) of the Code) of the Company, now owned or hereafter acquired by the Company or in which the Company has or hereafter acquires any interest, including but notlimited to, raw materials, scrap inventory, work in process, products, packaging materials, finished goods, documents of title, chattel paper and other instruments covering the same and allsubstitutions therefor and additions thereto (all of the property described in this clause (b) being hereinafter collectively referred to as “Inventory”);
(c) allpresent and future accounts in which the Company has or hereafter acquires any interest (including all “Accounts” as defined inSection 9-102(a)(2) of the Code), contract rights (including all rights to receive payments and other rights under all equipment and other leasing contracts) and rights to paymentand rights or accounts receivable evidencing or representing indebtedness due or to become due the Company on account of goods sold or leased or services rendered, claims and instruments (includingtax refunds, royalties and all other rights to the payment of money of every nature and description), including but not limited to, any such right evidenced by chattel paper (whether in tangible,electronic or other form), and all liens, securities, guaranties, remedies, security interests and privileges pertaining thereto (all of the property described in this clause (c) beinghereinafter collectively referred to as “Accounts”);
(d) allinvestment property now owned or hereafter acquired by the Company (including all “Investment Property” as defined in Section 9-102(a)(49) of theCode), including, without limitation, all securities (certificated and uncertificated), securities accounts, securities entitlements, commodity contracts and commodity accounts, and all dividends anddistributions paid or payable thereon; provided, however, that with respect to securities constitutingcapital stock or other equity interests in entities whose jurisdiction of formation is other than the United States of America or any state thereof, the Collateral shall not include more than 65% ofthe outstanding equity securities of any class of any such issuers;
(e) allgeneral intangibles now owned or hereafter acquired by the Company or in which the Company has or hereafter acquires any interest (including all “GeneralIntangibles” as defined in Section 9-102(a)(42) of the Code), including but not limited to, payment intangibles (including all “Payment Intangibles” as defined inSection 9-102(a)(61) of the Code), choses in action and causes of action and all licenses and permits (to the extent the collateral assignment of such licenses and permits is notprohibited by applicable law), registrations, franchises, corporate or other business records, systems, designs, software, manuals, procedures, drawings, goodwill, logos, indicia, businessidentifiers, inventions, processes, production methods, proprietaryinformation, know-how and trade-secrets of the Company, and all Owned Intellectual Property, trade-names, copyrights, patents, trademarks (including service marks) and copyright, patentand trademark applications, all continuations thereof in whole or in part, and contract rights (including but not limited to all rights to receive payments and other rights under all equipment andother leasing contracts, instruments and documents owned or used by the Company, and any goodwill relating thereto);
(f) allother personal property owned by the Company or in which the Company has or hereafter acquires any interest, wherever located, and of whatever kind or nature,tangible or intangible;
(g) allmoneys, cash, chattel paper (including all “Chattel Paper” as defined in Section 9-102(a)(11) of the Code), checks, notes, bills of exchange,documents of title, money orders, negotiable instruments, commercial paper, and other securities, letters of credit (including all “Letter-of-Credit Rights” as defined inSection 9-102(a)(51) of the Code), supporting obligations (including all “Supporting Obligations” as defined in Section 9-102(a)(77) of the Code), instruments (including all “Instruments” as defined in Section 9-102(a)(47) of the Code), documents (including all “Documents” as defined in Section 9-102(a)(30)of the Code) and deposit accounts (including all “Deposit Accounts” as defined in Section 9-102(a)(29) of the Code), deposits and credits from time to time whether or not in thepossession of or under the control of the Secured Party;
(h) allcommercial tort claims (as defined in Section 9-102(a)(13) of the Code);
(i) allbooks and records relating to any of the foregoing assets or property; and
(j) anyconsideration received or receivable when all or any part of the property referred to in clauses (a) through (i) above is sold, transferred, exchanged,leased, collected or otherwise disposed of, or any value received or receivable as a consequence of possession thereof, including but not limited to, all products, proceeds (including all “Proceeds”as defined in Section 9-102(a)(64) of the Code), cash, negotiable instruments and other instruments for the payment of money, chattel paper, security agreements or other documents,insurance proceeds, condemnation awards or proceeds of other proceeds now or hereafter owned by the Company or in which the Company has an interest.
Theproperty set forth in clauses (a) through (j) of the preceding sentence is referred to herein as the “Collateral.”
1.2 Perfection of Security Interests.
(a) TheCompany hereby authorizes the Secured Party to file a financing statement or financing statements and other filing or recording documents or instruments(collectively, the “Financing Statements“) describing the Collateral (which may be described as “all assets” or similar general description) in any andall jurisdictions and filing offices where the Secured Party deems such filing to be necessary or appropriate including, without limitation, the jurisdiction of the debtor’s location for purposes ofthe Code. For purposes of this Section 1.2(a), the Financing Statements shall be deemed to include any amendment, modification, assignment, continuation statement or other similar instrumentconsistent with the rights granted to Secured Party under this Agreement and the Purchase Agreement.
(b) TheCompany will reasonably cooperate with Secured Party in obtaining control (including “Control” as contemplated by Section 9-312(b) of the Code)with respect to Collateral consisting of deposit accounts, investment property and electronic chattel paper, and will execute and deliver any and all control agreements reasonably required by theSecured Party in order to effect and obtain such control. In addition, the Company will (i) notify the Secured Party regarding the acquisition of any and all Collateral which is subject to orevidenced by a certificate of title (including, without limitation, vehicles) and with respect to such Collateral, upon the request of the Secured Party, cause the certificate of title for suchCollateral to include official notation of the Secured Party’s lien and security interest in such Collateral, and (ii) notify the Secured Party regarding the acquisition of any Collateral as towhich perfection of the Secured Party’s security interest cannot be effected by the filing of a financing statement but can be effected by possession of such Collateral and with respect to suchCollateral, upon the request of the Secured Party, promptly deliver possession of such Collateral to the Secured Party.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. The Company represents and warrants that:
(a) TheCompany has and shall have good and indefeasible title to all the Collateral owned by it, wherever and whenever acquired, free and clear of any lien or encumbranceexcept (i) to the extent disclosed in the Purchase Agreement, (ii) liens for taxes, assessments and other governmental charges or levies (excluding liens imposed pursuant to any of the provisions of ERISA orEnvironmental Law) not yet due or as to which the period of grace, if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings with adequatereserves on the books of the Company, (iii) claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinarycourse of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings, (iv) liens consisting ofdeposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers’ compensation, unemployment insurance or similar legislation,(v) liens securing purchase money indebtedness or capitalized leases for the acquisition of capital assets to the extent permitted without violation of the Purchase Agreement, provided thatsuch liens shall be created substantially simultaneously with the acquisition or lease of the subject assets, do not at any time encumber any property or assets other than the assets acquired in suchpurchase money financing or capitalized lease, and do not secure any amount exceeding the original purchase price or lease payment amount of the acquired assets at the time that such assets wereacquired by the Company, and (vi) the liens and security interests of the Secured Party pursuant to this Security Agreement (collectively, “PermittedLiens“). Except as disclosed in or permitted without violation of the Purchase Agreement, the Company has not filed, nor is there on record, a financing statement under theCode (or similar statement or instrument of registration under the law of any jurisdiction) covering any Collateral except for Permitted Liens. No consent of any other person is required on the partof the Company for the Company’s execution, delivery and performance of this Security Agreement and the granting of the liens hereunder.
(b) Schedule A hereto lists, as to the Company, (i) the Company’s principal executive office and other place(s)of business, (ii) the address where the books and records relating to the Collateral are maintained, (iii) any other location of any Equipment or tangible Collateral, (iv) thelocation of leased facilities and name of each lessor/sublessor, (v) the location, account title and account numbers of all bank accounts maintained by or on behalf of the Company,(vi) all Owned Intellectual Property of the Company (setting forth, with respect to all owned patents, trademarks and copyrights or applications therefor, the name, registered owner, filingdate, registration number or serial number, as applicable), and (vii) all other names by which the Company has been known or under which the Company or any predecessor has done business withinthe past five (5) years, and all entities or businesses acquired by the Company (whether through stock purchase, merger, consolidation, share exchange, acquisition of assets or otherwise)within the past five (5) years.
(c) Exceptas disclosed or permitted without violation of the Purchase Agreement, the Company has paid or will pay when due all taxes, fees, assessments and other chargesnow or hereafter imposed upon the Collateral except for any tax, fee, assessment or other charge the validity of which is being contested in good faith by appropriate proceedings and so long as theCompany shall have set aside on its books adequate reserves with respect thereto.
(d) Asa result of the execution and delivery of this Security Agreement and the filing of any financing statements or other documents necessary to assure, preserve andperfect the security interest created hereby to the extent a lien may be perfected by filing a financing statement, the Secured Party shall have a valid and perfected lien on, and a continuingsecurity interest in, the Collateral and such lien shall be superior and prior to all other liens other than the Permitted Liens.
(e) AllAccounts represent bona fide transactions completed in accordance with the terms and provisions contained in the contracts, agreements, invoices and other documentsgoverning or evidencing the same. As of the date hereof, there are no setoffs, counterclaims or disputes existing or asserted with respect to Accounts, subject only to nonmaterial set off, return and similar rights arising in the ordinary course of business. The Company has not made any agreement with any accountdebtor for any deduction therefrom except non-material set-offs and claims arising in the ordinary course of business. To the Company’s knowledge, at the date hereof, allaccount debtors have the capacity to contract and are solvent, and each Account constitutes the legally valid and binding obligation of the subject account debtor, except as and to the extent setforth on Schedule B attached hereto. To the Company’s knowledge, the goods giving rise to Accounts are not subject to any lien, claim orencumbrance except (i) set-off and claims arising in the ordinary course of business, (ii) liens, claims and encumbrances in favor of the Secured Party, and (iii) asdisclosed or permitted without violation of the Purchase Agreement.
(f) AllInventory is of good and merchantable quality, free from any material defects. To the Company’s knowledge, none of such Inventory is subject to any licensing,patent, trademark, trade name or copyright with any person that restricts the Company’s ability to manufacture and/or sell Inventory. Except as disclosed in Schedule 4.15(c) of the PurchaseAgreement, the completion of the manufacturing process of such Inventory by a person other than the Company is permitted under each contract to which the Company is a party or to which the subjectInventory is subject. All Inventory manufactured by the Company has been and will be manufactured in compliance in all material respects with the Fair Labor Standards Act and other applicable law.
(g) Noneof the Collateral is held by a third party in any location as assignee, trustee, bailee, consignee or in any similar capacity.
(h) TheCompany is a Delaware corporation whose legal name is Fischer Imaging Corporation, whose federal tax identification number is 36-2756787, and whoseDelaware organizational identification number is 2266894.
2.2 Survival. All representations, warranties and agreements of the Company contained in this Security Agreementshall survive the execution, delivery and performance of this Security Agreement and shall,except for any covenants which expressly continue thereafter, continue until the termination of this Security Agreement pursuant to Section 5.5 hereof.
3.1 Covenants. The Company hereby covenants and agrees with the Secured Party that so long as this SecurityAgreement shall remain in effect, any Obligations shall remain unpaid or unperformed, or the Post-Closing Commitment shall not have expired or been terminated, (a) the Company shallpromptly give written notice to the Secured Party of any adverse claim or levy or attachment, execution or other process against a material portion of the Collateral; (b) at the Company’s owncost and expense, the Company shall take any and all lawful actions reasonably necessary or desirable to defend the Collateral against the claims and demands of all persons other than the SecuredParty and persons holding Permitted Liens, and to defend the security interest of the Secured Party in the Collateral and the priority thereof against any lien or encumbrance of any nature other thanPermitted Liens; (c) the Company shall keep all tangible Collateral insured with financially sound and reputable insurers, against loss by fire, explosion, theft, fraud and such othercasualties, with coverages in amounts and with deductibles at least as favorable as those generally maintained by businesses of similar size, scope and location engaged in similar activities, andshall maintain liability insurance with financially sound and reputable companies, with coverages in amounts and with deductibles at least as favorable as those generally maintained by businesses ofsimilar size, scope and location engaged in similar activities (all such policies to name the Secured Party as loss payee and/or additional insured (as appropriate), and with certificates thereof tobe delivered to the Secured Party at any time and from time to time upon reasonable request, indicating that such coverages will not be cancelled or modified without thirty (30) days prior written notice to the Secured Party); (d) the Company shall keep all Equipment and other tangible Collateral in good order and repair (normal wear and tear excepted) andpromptly notify the Secured Party of any event causing any material loss, damage or depreciation in value of the Collateral in the aggregate and of the estimated extent of such loss, damage ordepreciation; (e) at the Secured Party’s request, the Company shall mark any Collateral that is chattel paper with a legend showing the Secured Party’s lien and security interest therein orshall deliver same to the Secured Party; (f) the Company shall promptly give written notice to the Secured Party of any change in or addition to the intellectual property rights material to itsbusiness or any change in any of the information set forth on Schedule A hereto, and update such Schedule A accordingly if so requested by the Secured Party; (g) the Company shallpromptly notify the Secured Party in writing of the particulars of any and all commercial tort claims held or acquired by the Company at any time and from time to time; and (h) the Companyshall not (i) amend or terminate any contract or other document or instrument constituting part of the Collateral, except for transactions in the ordinary course of business substantiallyconsistent with customary practice, (ii) voluntarily or involuntarily exchange, lease, sell, transfer or otherwise dispose of any Collateral other than in the ordinary course of business, withrespect to the routine sale or other disposition of obsolete or worn out Equipment, (iii) make any compromise, settlement, discharge or adjustment or grant any extension of time for paymentwith respect to any Account or any lien, Guaranty or remedy pertaining thereto, except for transactions in the ordinary course of business, (iv) except upon thirty (30) days priorwritten notice to the Secured Party, change its name, or the location of any Collateral or the establishment or closing of any bank account, or (v) change the location of its principalexecutive office or jurisdiction of incorporation.
3.2 Further Deliveries. The Company hereby covenants and agrees with the Secured Party that so long as thisSecurity Agreement shall remain in effect, any Obligations shall remain unpaid or unperformed, or the Post-Closing Commitment shall not have expired or been terminated, (a) theCompany shall, at any time and from time to time upon request of the Secured Party, execute and deliver any and all specific collateral assignments which the Secured Party may reasonably request withrespect to Owned Intellectual Property, and the Secured Party hereby consents to the filing thereof with the United States Patent and Trademark Office, the United States Copyright Office, and/or anyother governmental agency or office (domestic or foreign) in which such filing may be appropriate, (b) the Company shall use all reasonable efforts to cause each depositary bank holding adeposit account of the Company, and each securities intermediary holding any investment property owned by the Company, to execute and deliver a control agreement sufficient to provide the SecuredParty with control of such deposit account or investment property, and otherwise in form and substance reasonably satisfactory to the Secured Party, and the Company shall itself execute and deliverany and all such control agreements (and in the event that any such depositary bank or securities intermediary refuses to execute and deliver such control agreement, the Secured Party may require theapplicable deposit account or investment property to be transferred to another institution which will execute and deliver such control agreements), (c) the Company shall, with respect to allletter of credit rights and electronic chattel paper owned or held by the Company, take such actions and deliver such agreements as are reasonably requested by the Secured Party to provide the SecuredParty with control thereof, (d) with respect to any Collateral which is the subject of or evidenced by a certificate of title, the Company shall notify the Secured Party of the existence ofsuch collateral and upon the Secured Party’s request, cause the Secured Party’s security interest to be officially noted on such certificate of title, (e) upon request by the Secured Party, theCompany shall obtain for the benefit of the Secured Party a landlord waiver or landlord subordination agreement pursuant to which, among other things, the landlord of each premises at which anymaterial amount of Collateral is located agrees to treat all such Collateral as personal property (and not as fixtures) and agrees to waive or subordinate in favor of the Secured Party any and allliens and security interests (whether pursuant to a lease agreement, by statute, or otherwise) which such landlord may have for unpaid rent or otherwise, or obtain such landlord’s written consent to acollateral assignment of the subject lease in favor of the Secured Party, (f) in the event that any of the Collateral is at any time or from time to time held by any bailee, warehouseman, consignee or other person, the Company shall notify such person in writing ofthe Secured Party’s security interest in such Collateral, and shall use commercially reasonable efforts to obtain such person’s written agreement to hold such Collateral for the Secured Party’saccount and subject to the Secured Party’s instructions and to deliver to the Secured Party all warehouse receipts, bills of lading or other similar documents (duly endorsed in favor of the SecuredParty) relating to such Collateral, and (g) the Company shall notify the Secured Party not less than thirty (30) days prior to acquiring any fee interest in any real property, and shallexecute and deliver to the Secured Party a mortgage or deed of trust on such real property to secure the Obligations, which shall be senior and in priority to any other mortgage or deed of trust otherthan Permitted Liens.
3.3 Intellectual Property.
(a) Exceptas could not reasonably be expected to have a Material Adverse Effect, the Company (either itself or through licensees) (i) will continue to use eachregistered trademark (owned by the Company)and trademark for which an application (owned by the Company) is pending, to the extent reasonably necessary to maintain such trademark in full force free from any claim of abandonment fornon-use, (ii) will maintain products and services offered under such trademark at a level not less than the quality of such products and services as of the date hereof,(iii) will not (and will not knowingly permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such trademark would reasonably be expected to becomeinvalidated or impaired in any way, (iv) will not do any act, or and knowingly omit to do any act, whereby any issued patent owned by the Company would reasonably be expected to becomeforfeited, abandoned or dedicated to the public, (v) will not knowingly (and will not knowingly permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act wherebyany registered copyright owned by the Company or copyright for which an application is pending (owned by the Company) would reasonably be expected to become invalidated or otherwise impaired, and(vi) will not (either itself or through licensees) do any act whereby any material portion of the Company’s owned copyrights may fall into the public domain. The foregoing does not obligate theCompany to institute or pursue any reconsideration, lawsuit or appellate proceeding, or to exhaust all available legal or administrative recourses.
(b) TheCompany will give prompt written notice to the Secured Party if the Company knows, or has reason to know, that any application or registration relating to anymaterial Owned Intellectual Property has become forfeited, abandoned or dedicated to the public, or of any adverse determination (including, without limitation, any adverse determination in, anyproceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding the Company’s ownership of, or the validity of, anymaterial Owned Intellectual Property or the Company’s right to register the same or to own and maintain the same.
(c) Wheneverthe Company, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any material OwnedIntellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof,the Company shall report such filing to the Secured Party in writing within five (5) business days after the last day of the fiscal quarter in which such filing occurs. Upon request of theSecured Party, the Company shall execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Secured Party may reasonably request to evidence the SecuredParty’s security interest in any material copyright, patent or trademark owned by the Company and the goodwill and general intangibles of the Company relating thereto or represented thereby.
(d) Exceptas could not reasonably be expected to have a Material Adverse Effect, the Company will take all reasonable and necessary steps, at the Company’s sole cost andexpense, including, without limitation, in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other countryor any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the material Owned Intellectual Property,including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. The foregoing doesnot obligate the Company to institute or pursue any reconsideration, lawsuit or appellate proceeding, or to fully exhaust all available legal or administrative recourses.
(e) Inthe event that any material Owned Intellectual Property owned by the Company is infringed, misappropriated or diluted by a third party, the Company shall(i) at its sole cost and expense, take such actions as the Secured Party shall reasonably request and which in any event, the Company shall reasonably deem appropriate under the circumstancesto protect such Owned Intellectual Property, and (ii) if such Owned Intellectual Property is of material economic value, promptly notify the Secured Party after the Company learns of suchinfringement, misappropriation or dilution.
4.1 Event of Default. An “Event of Default “shall exist hereunder (a) if an Event of Default shall occurunder any of the Notes, or (b) if the Company shall breach in any material respect any agreement contained herein or otherwise default in any material respect in the observance or performanceof any of the covenants, terms, conditions or agreements on the part of the Company contained in this Security Agreement and such non-observance or nonperformance continues for a period ofthirty (30) days after the occurrence thereof.
4.2 Collections. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may,in its sole discretion, in its name or in the name of the Company, or otherwise: (a) communicate with the account debtors of any and all Accounts, and require the Company to notify such accountdebtors and any and all parties to any contracts included in the Collateral, notifying such account debtors and parties to contracts that the subject Accounts and contracts have been assigned to theSecured Party; (b) demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemeddesirable with respect to any of the Collateral, but shall be under no obligation to do so; and/or (c) extend the time of payment, arrange for payment in installments, or otherwise modify theterm of, or release, any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of, the Company, other than to discharge the Company in sodoing with respect to liabilities of the Company to the extent that the liabilities are paid or repaid. After the occurrence and during the continuance of an Event of Default, any money, checks,notes, bills, drafts, or commercial paper received by the Company shall be held in trust for the Secured Party and shall be promptly (and in any event within five (5) business days afterreceipt by the Company) turned over to the Secured Party as its interest shall appear. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may make such paymentsand take such actions as the Secured Party deems necessary to protect its security interest in the Collateral or the value thereof, and the Secured Party is hereby unconditionally and irrevocablyauthorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest or compromise any liens which in the judgment of the Secured Party appear to be equalto, prior to or superior to its security interest in the Collateral and any liens not expressly permitted by this Security Agreement.
4.3 Possession; Sale of Collateral.
(a) Uponthe occurrence and during the continuance of an Event of Default, the Secured Party may: (i) require the Company to assemble the tangible assets thatcomprise part of the Collateral and make them available to the Secured Party at any place or places reasonably designated by the Secured Party; (ii) to the extent permitted by applicable law,with or without notice or demand for performance and without liability for trespass, enter any premises where the Collateral may be located and peaceably take possession of the same, and may demandand receive such possession from any person who has possession thereof, and may take such measures as it may deem necessary or proper for the care or protection thereof (including, but not limited to,the right to remove all or any portion of the Collateral); and (iii) with or without taking such possession may sell or cause to be sold, in one or more sales or parcels, for cash, on credit orfor future delivery, without assumption of any credit risk, all or any portion of the Collateral, at public or private sale or at any broker’s board or any securities exchange, without demand ofperformance or notice of intention to sell or of time or place of sale, except ten (10) days’ written notice to the Company of the time and place of such sale or sales (and such other noticesas may be required by applicable statute, if any, and which cannot be waived), which the Company hereby expressly acknowledges is commercially reasonable. The Secured Party shall have no obligation toclean-up or otherwise prepare any Collateral for sale. The Collateral may be sold or disposed of for cash, upon credit or for future delivery as the Secured Party shall deem appropriate.Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of the Company. At any such sale, the Collateral, or portion thereof, to be soldmay be sold in one lot as an entirety or in separate parcels, as the Secured Party may determine. The Secured Party shall not be obligated to make any sale of any Collateral if it shall determine notto do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Secured Party may, without notice or publication, adjourn any public or private sale or cause thesame to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was soadjourned. The Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely toaffect the commercial reasonableness of any disposition of the Collateral. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may beretained by the Secured Party until the sale price is paid by the purchaser or purchasers thereof. The Secured Party shall not incur any liability for the failure to collect or realize upon any or allof the Collateral or for any delay in doing so and, in case of any such failure, shall not be under any obligation to take any action with respect thereto; provided, such Collateral may be sold againupon like notice. If any Collateral is sold upon credit, the Company will be credited only with payments actually made by the purchaser, received by the Secured Party and applied to the Obligations inaccordance with Section 4.4. In the event the purchasers fail to pay for the Collateral, the Secured Party may resell the Collateral. At any public sale made pursuant to thisSection 4.3, the Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal and all rights of marshalling, the Collateral and any other security for theObligations (all such rights being also hereby waived and released by the Company to the fullest extent permitted by law), and may make payment on account thereof by using any claim then due andpayable to the Secured Party from the Company as a credit against the purchase price, and the Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such propertywithout further accountability to the Company therefor. As an alternative to exercising the power of sale herein conferred upon it, the Secured Party may proceed by a suit or suits at law or in equityto foreclose this Security Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceedingby a court-appointed receiver. In any action hereunder, the Secured Party shall be entitled to the appointment of a receiver without notice, to peaceably take possession of all or any portion of the Collateral and to exercise such powers as the court shall confer upon the receiver. Notwithstandingtheforegoing, if an Event of Default shall occur and be continuing, the Secured Party shall be entitled, in its discretion, to apply, upon written notice to the Company, any cash or cash itemsconstituting Collateral in its possession to payment of the Obligations and to set off the Obligations against any and all liabilities or obligations owed by the Secured Party to the Company.
(b) Ifan Event of Default shall occur and be continuing, the Secured Party shall, in addition to exercising any and all rights and remedies afforded to it hereunder, haveall the rights and remedies of a secured party under all applicable provisions of law, including but not limited to the Code.
(c) Ifan Event of Default shall occur and be continuing, the Secured Party shall be entitled (but shall not be required) to (i) operate any or all of the Collateral,(ii) perform any and all obligations of the Company under any contract included within the Collateral and exercise all rights of the Company thereunder, (ii) do all other acts which theSecured Party may deem reasonably necessary or appropriate to protect its security interest hereunder, and (iv) sell, assign, subcontract or otherwise transfer any such contract (subject,however, to the prior approval of each other party to such contract to the extent required thereunder). The Company agrees that notwithstanding anything to the contrary contained in this SecurityAgreement, the Company shall remain liable under each contract or other agreement giving rise to Accounts and general intangibles and all other contracts or agreements constituting part of theCollateral and the Secured Party shall not have any obligation or liability in respect thereof.
(d) Afterthe occurrence and during the continuance of an Event of Default, upon the Secured Party’s request, the Company shall deliver to the Secured Party all original andother documents, evidencing and relating to the sale and delivery of Inventory or Accounts, including but not limited to, all original orders, invoices and shipping receipts. The Company shall alsofurnish to the Secured Party, reasonably promptly upon the request of the Secured Party, such reports, reconciliations and aging balances regarding Accounts as the Secured Party may reasonably requestfrom time to time.
(e) Afterthe occurrence and during the continuance of an Event of Default, the Secured Party shall have the right (i) to receive any and all cash dividends, paymentsor distributions paid or payable in respect of any investment property included in the Collateral, (ii) to cause such investment property to be registered in the name of the Secured Party orits nominee, and (iii) to exercise all voting and other rights pertaining to such investment property and any and all rights of conversion, exchange and subscription and any other rights,privileges or options pertaining to such investment property as if the Secured Party were the absolute owner thereof. The Company hereby authorizes each issuer of investment property included in theCollateral to rely, without investigation, on any notice given by the Secured Party which states the existence of an Event of Default and requires compliance with instructions of the Secured Partywith respect to such investment property, without requirement of any other or further instructions from the Company; and the Company agrees that each such issuer shall be fully protected in socomplying with any such notice and instruction.
4.4 Application of Proceeds. Unless the Secured Party otherwise directs, the proceeds of any sale of Collateralpursuant to this Security Agreement or otherwise shall be applied after receipt by the Secured Party as follows:
(a) First,to the payment of all costs, fees and expenses of the Secured Party and its agents, representatives and attorneys incurred in connection with such sale or withthe retaking, holding, handling, preparing for sale (or other disposition) of the Collateral or otherwise in connection with any of the Notes, this Security Agreement or any of the Obligations, including, but not limited to, the reasonable fees and expenses of the Secured Party’s agents and attorneys and court costs(whether at trial, appellate or administrative levels), if any, incurred by the Secured Party in so doing;
(b) Second,to the payment of the outstanding principal balance, accrued interest, fees and other amounts payable on the Obligations in such order as the Secured Party maydetermine; and
(d) Third,to the Company or to such other Person as a court may direct.
4.5 Authority of Secured Party. The Secured Party shall have and be entitled to exercise all such powershereunder as are specifically delegated to the Secured Party by the terms hereof, together with such powers as are reasonably incidental thereto. The Secured Party may execute any of its dutieshereunder by or through its agents or employees and shall be entitled to retain counsel and to act in reliance upon the advice of such counsel concerning all matters pertaining to its dutieshereunder.
4.6 Certain Waivers; Company Not Discharged. The Company expressly and irrevocably waives (to the extentpermitted by applicable law) presentment, demand for payment and protest of nonpayment in respect of its Obligations under this Security Agreement. The obligations and duties of the Company hereunderare irrevocable, absolute, and unconditional and shall not be discharged, impaired or otherwise affected by (a) the failure of the Secured Party to assert any claim or demand or to enforce anyright or remedy against the Company or any grantee or any Collateral under the provisions of this Security Agreement or any waiver, consent, extension, indulgence or other action or inaction inrespect thereof, (b) any extension or renewal of any part of the Obligations, (c) the release of any security interests in any part of the Collateral or the release, sale or exchange ofor failure to foreclose against any security held by or for the benefit of the Secured Party for payment or performance of the Obligations, (d) the bankruptcy, insolvency or reorganization ofthe Company or any grantee or any other Persons, or (e) any change, restructuring or termination of the corporate structure or existence of the Company or any grantee or any restructuring,refinancing, subordination or other change or variation in the terms of all or any portion of the Obligations.
4.7 Transfer of Security Interest. Subject to those restrictions imposed under the Purchase Agreement and theNotes with respect to any transfer or assignment of the Notes, the Secured Party may transfer to any other Person all or any part of the liens and security interests granted hereby, and all or anypart of the Collateral which may be in the Secured Party’s possession. Upon such transfer, the transferee shall be vested with all the rights and powers of the Secured Party hereunder with respect tosuch ofthe Collateral as is so transferred, but, with respect to any of the Collateral not so transferred, the Secured Party shall retain all of its rights and powers (whether given to it in this SecurityAgreement, or otherwise).
5.1 Further Assurances. The Company agrees, at its expense, to do such further things, to execute, acknowledge,deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Secured Party may from time to time reasonably request for the better preservation andperfection of the security interests and the rights and remedies created hereby, including but not limited to the execution and delivery of such schedules of Collateral and additional assignments,agreements and instruments, the payment of any fees and taxes required in connection with the execution and delivery of this Security Agreement, the granting and maintenance of the security interestscreated hereby and the execution, filing and recordation of any financing statements (including fixture filings) or other documents as the Secured Party may deem reasonably necessary or desirable forthe perfection of the security interests granted hereunder. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Secured Party, duly endorsed in a manner satisfactory to the Secured Party. If any Collateral requires possessionthereof to perfect the Secured Party’s security interest hereunder, such Collateral shall be promptly delivered to the Secured Party or its agent. If at any time the Company shall take and perfect asecurity interest in any property to secure payment and performance of an Account, the Company, upon the request of the Secured Party, shall promptly assign such security interest to the SecuredParty. The Company agrees that, after the occurrence and during the continuance of an Event of Default, it shall upon request of the Secured Party, take any and all actions, to the extent permitted byapplicable law, at its own expense, to obtain the approval of any governmental authority for any action or transaction contemplated by this Security Agreement that is then required by law, andspecifically, without limitation, upon request of the Secured Party, to prepare, sign and file with any governmental authority the Company’s portion of any application or applications for consent tothe assignment of licenses held by the Company, or for consent to the possession and sale of any of the Collateral by or on behalf of the Secured Party. The Company shall at all times, at its ownexpense and cost, keep accurate and complete records with respect to the Collateral, including but not limited to a record of all payments and proceeds received in connection therewith or as a resultof the sale thereof and of all credits granted, and agrees that the Secured Party or its representatives shall have the right at any reasonable time and from time to time to call at the Company’splace or places of business to inspect the Collateral and to examine or cause to be examined all of the books, records, journals and other data relating to the Collateral and to make extractstherefrom or copies thereof as are reasonably requested.
5.2 Effectiveness. This Security Agreement shall take effect immediately upon execution and delivery by theCompany.
5.3 Indemnity; Reimbursement of Secured Party; Deficiency. In connection with the administration and enforcementor exercise of any right or remedy granted to the Secured Party hereunder or under any other security documents, the Company shall, subject to the limitations set forth hereafter,(a) indemnify, defend and hold harmless the Secured Party from and against any and all claims, demands, losses, judgments and liabilities (including but not limited to liabilities for taxes andpenalties) of whatever nature, incurred by or assessed against the Secured Party in connection with such administration, enforcement or exercise (including in connection with any workout,restructuring, bankruptcy or any similar proceeding), and (b) pay or reimburse the Secured Party for all reasonable costs and expenses, including but not limited to the reasonable fees anddisbursements of attorneys, incurred by or assessed against the Secured Party in connection with such administration, enforcement or exercise (including in connection with any workout, restructuring,bankruptcy or any similar proceeding), but not including any costs or expenses related to the negotiation, drafting or execution of this Security Agreement or related documents (except to the extentprovided in Article 8 of the Purchase Agreement). The foregoing indemnity agreement includes all reasonable costs incurred by the Secured Party in connection with any litigation relating to theCollateral whether or not the Secured Party shall be a party to such litigation, including but not limited to the reasonable fees and disbursements of attorneys for the Secured Party, and anyout-of-pocket costs incurred by the Secured Party in appearing as a witness or in otherwise complying with legal process served upon it. The obligations of the Company in thisSection 5.3 shall not apply to any claims or losses which are found by a court of competent jurisdiction to have been proximately and primarily caused by the gross negligence or willfulmisconduct of the Secured Party. All indemnities contained in this Section 5.3 and elsewhere in this Security Agreement shall survive the expiration or earlier termination of this SecurityAgreement. After application of the proceeds by the Secured Party pursuant to Section 4.4 hereof, the Company shall remain liable to the Secured Party for any deficiency. The provisions of thisSection 5.3 shall survive any termination of this Security Agreement and release of liens hereunder.
5.4 Continuing Lien. It is the intent of the parties hereto that (a) this Security Agreement shallconstitute a continuing agreement as to any and all future, as well as existing transactions, between the Company and the Secured Party under or in connection with the Notes, the Purchase Agreementand the other Transaction Documents, and (b) the security interest provided for herein shall attach to after-acquired as well as existing Collateral.
5.5 Release. Upon payment in full of the Obligations and expiration or termination of thePost-Closing Commitment, the Secured Party shall reassign, redeliver and release (or cause to be so reassigned, redelivered and released), without recourse upon or warranty by the SecuredParty, and at the sole expense of the Company, to the Company, against receipt therefor, such of the Collateral (if any) as shall not have been sold or otherwise applied by the Secured Party pursuanttothe terms hereof and not theretofore reassigned, redelivered and released to the Company, together with appropriate instruments of reassignment and release.
5.6 Notice. Any notice required or permitted hereunder shall be given in writing (unless otherwise specifiedherein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission) or two business days following deposit of such notice with aninternationally recognized courier service, with all charges prepaid or billed to the account of the sender and addressed to each of the other parties thereunto entitled at the following addresses, orat such other addresses as a party may designate by five days advance written notice to each of the other parties hereto.
|Company:||Fischer Imaging Corporation
12300 N. Grant Street
Denver, Colorado 80241
ATTENTION: Harris Ravine
Telephone: (303) 452-6800
Facsimile: (303) 252-4256
with a copy to:
Ronald R. Levine, II
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202-1500
Telephone: (303) 892-9400
Facsimile: (303) 893-1379
ComVest Investment Partners II LLC
One North Clematis, Suite 300
West Palm Beach, Florida 33401
ATTENTION: Carl Kleidman
Telephone: (561) 868-6070
with a copy to:
Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
ATTENTION: Alan Annex and Kenneth A. Gerasimovich
Telephone: (212) 801-9200
Facsimile: (212) 801-6400
5.7 Successors and Assigns. This Security Agreement shall be binding upon and inure solely to the benefit ofeach party hereto and their successors and assigns, and nothing in this Security Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Neither the Company northe Secured Party shall assign this Security Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Secured Party mayassign its rights hereunder, subject to Section 4.7 above.
5.8 Governing Law; Jurisdiction; Waiver of Jury Trial. The provisions of this Security Agreement shall begoverned by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions. The Company hereby irrevocablyconsents to the jurisdiction of all courts (state and federal) sitting in the State of New York in connection with any claim, action or proceeding relating to or for enforcement of this SecurityAgreement, and hereby waives any defense of inconvenient forum or other such claim or defense in respect of the lodging of any such claim, action or proceeding in any such court. THE COMPANY HEREBYIRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT.
5.9 Waivers. No failure or delay of the Secured Party in exercising any power or right hereunder shall operateas a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or futureexercise thereof or the exercise of any other right or power. The rights and remedies of the Secured Party hereunder are cumulative, may be exercised singly or concurrently, and are not exclusive ofany rights or remedies which it would otherwise have. No course of conduct or course of dealing, or any delay, indulgence or other act or omission of the Secured Party, shall affect or impair, orconstitute a waiver of, any of the Secured Party’s rights or remedies hereunder, except to the extent set forth in a written agreement as provided in Section 5.10. No waiver of any provision ofthis Security Agreement or consent to any departure by the Company therefrom shall in any event be effective unless the same shall be evidenced as provided in Section 5.10, and then such waiveror consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Company in any case shall entitle the Company to any other or furthernotice or demand in similar or other circumstances.
5.10 Amendments. Neither this Security Agreement nor any provision hereof may be amended or modified, and norequired performance hereunder may be waived, except pursuant to an agreement or agreements in writing signed by the party to be charged therewith.
5.11 Severability. In the event any one or more of the provisions contained in this Security Agreement shall beheld invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such provision shall be limited in scope or effect to the extent necessary so as to permit such provision tobe enforceable to the fullest extent permitted by applicable law, and the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affectedor impaired thereby.
5.12 Counterparts. This Security Agreement may be executed in two or more counterparts, each of which shallconstitute an original, but all of which when taken together shall constitute but one contract, and shall become effective when copies hereof which, when taken together, bear the signatures of each ofthe parties hereto shall be delivered or mailed to the Secured Party.
5.13 Headings. Article and Section headings used herein are for convenience of reference only and are not toaffect the construction of, or to be taken into consideration in interpreting, this Security Agreement.
5.15 Interpretation. In the event of any express conflict between this Security Agreement and the PurchaseAgreement, the terms of the Purchase Agreement shall control; provided, that the imposition of any greater or more specific standard of performance or obligation in this Security Agreement shall notconstitute a conflict with the Purchase Agreement.
[signatureson following pages]
IN WITNESS WHEREOF, this Security Agreement has been duly executed by each of the undersigned as of the date first set forth above.
FISCHER IMAGING CORPORATION
Name: Harris Ravine
Title: President and Chief Executive Officer
|COMVEST INVESTMENT PARTNERS II LLC|
Location of Asset and Records
ARTICLE 1 SECURITY INTEREST
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
ARTICLE 3 COVENANTS
ARTICLE 4 REMEDIAL MATTERS
ARTICLE 5 MISCELLANEOUS
SCHEDULE A Location of Asset and Records