0000911420-05-000151.txt : 20120625 0000911420-05-000151.hdr.sgml : 20120625 20050411163912 ACCESSION NUMBER: 0000911420-05-000151 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20050411 DATE AS OF CHANGE: 20050411 GROUP MEMBERS: COMMONWEALTH ASSOCIATES GROUP HOLDINGS, LLC GROUP MEMBERS: COMVEST II PARTNERS, LLC GROUP MEMBERS: COMVEST INVESTMENT PARTNERS II LLC GROUP MEMBERS: MICHAEL S. FALK, INDIVIDUALLY GROUP MEMBERS: ROBERT L. PRIDDY, INDIVIDUALLY FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COMVEST INVESTMENT PARTNERS II LLC CENTRAL INDEX KEY: 0001275683 IRS NUMBER: 010784781 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: 830 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10022 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FISCHER IMAGING CORP CENTRAL INDEX KEY: 0000750901 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 362756787 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-45235 FILM NUMBER: 05744318 BUSINESS ADDRESS: STREET 1: 12300 N GRANT ST CITY: DENVER STATE: CO ZIP: 80241 BUSINESS PHONE: 3034526800 MAIL ADDRESS: STREET 1: 12300 NORTH GRANT STREET CITY: DENVER STATE: CO ZIP: 80241 SC 13D 1 d1040439.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 FISCHER IMAGING CORPORATION (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 (Title of Class of Securities) 337719108 (CUSIP Number) COMVEST INVESTMENT PARTNERS II LLC ONE NORTH CLEMATIS STREET, SUITE 300 WEST PALM BEACH, FLORIDA 33401 (561) 868-6074 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copy to: Alan I. Annex, Esq. Greenberg Traurig, LLP 200 Park Avenue New York, New York 10166 MARCH 30, 2005 (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 Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Page 1 of 12) -------------------------------------------------------------------------------- CUSIP No. 337719108 SCHEDULE 13D Page 2 of 12 Pages -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) COMVEST INVESTMENT PARTNERS II LLC (01-0784781) -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OR A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------------- 3. SEC USE ONLY -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* WC -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,000,000 EACH ------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,000,000 -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.5% -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* OO -------------------------------------------------------------------------------- CUSIP No. 337719108 SCHEDULE 13D Page 3 of 12 Pages -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) COMVEST INVESTMENT PARTNERS, LLC (01-6228703) -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OR A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------------- 3. SEC USE ONLY -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* AF -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,000,000 EACH ------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,000,000 -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.5% -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* OO -------------------------------------------------------------------------------- CUSIP No. 337719108 SCHEDULE 13D Page 4 of 12 Pages -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) COMMONWEALTH ASSOCIATES GROUP HOLDINGS, LLC (01-0622406) -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OR A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------------- 3. SEC USE ONLY -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* AF -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,000,000 EACH ------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,000,000 -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.5% -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* OO -------------------------------------------------------------------------------- CUSIP No. 337719108 SCHEDULE 13D Page 5 of 12 Pages -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) MICHAEL S. FALK -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OR A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------------- 3. SEC USE ONLY -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* AF -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION USA -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,000,000 EACH ------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,000,000 -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.5% -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* IN -------------------------------------------------------------------------------- CUSIP No. 337719108 SCHEDULE 13D Page 6 of 12 Pages -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) ROBERT L. PRIDDY -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OR A GROUP* (a) [ ] (b) [ ] -------------------------------------------------------------------------------- 3. SEC USE ONLY -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS* AF -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION USA -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF SHARES ------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,000,000 EACH ------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON WITH ------------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,000,000 -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.5% -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON* IN ITEM 1. SECURITY AND ISSUER. This Statement relates to presently exercisable warrants to purchase shares (the "Shares") of the Common Stock, par value $0.01 per share (the "Common Stock"), of Fischer Imaging Corporation, a Delaware corporation (the "Issuer") acquired by the Reporting Person on March 30, 2005. The principal executive offices of the Issuer are located at 12300 North Grant Street, Denver Colorado 80241. ITEM 2. IDENTITY AND BACKGROUND. The name of the Reporting Person is ComVest Investment Partners II LLC, a Delaware limited liability company ("ComVest"). ComVest is a private investment company. The managing member of ComVest is ComVest II Partners LLC, a Delaware limited liability company ("ComVest II Partners"), the managing member of which is Commonwealth Associates Group Holdings, LLC, a Delaware limited liability company ("CAGH"). Michael Falk ("Falk") is the Chairman and principal member of CAGH. Falk and Robert Priddy ("Priddy") are members of ComVest II Partners. Falk and Priddy are citizens of the United States of America. The business address for ComVest and the other individuals described in this Item 2 is One North Clematis Street, Suite 300, West Palm Beach, Florida 33401. During the last five years, neither ComVest nor any other person enumerated in this Item 2, has 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. On February 22, 2005, Issuer and ComVest signed a Note and Warrant Purchase Agreement, as amended by Amendment No. 1 to Note and Warrant Purchase Agreement (the "Amendment") dated as of March 29, 2005 (together, the "Purchase Agreement") and consummated the transactions contemplated thereby. Pursuant to the terms and conditions set forth in the Purchase Agreement, ComVest (i) provided to Issuer a senior secured promissory note in the principal amount of $5,000,000 (the "Initial Note") and (ii) committed to purchase an additional senior secured promissory notes up to an aggregate, subject to certain conditions principal amount of $5,000,000 (together with the Initial Note, the "Notes"). The Issuer also granted to ComVest a warrant to purchase 2,000,000 shares of Common Stock at $4.25 (the "Warrant Shares"). Such warrant was not exercisable for six months from the date of issuance. In addition, ComVest and the Issuer entered into a Registration Rights Agreement on February 22, 2005 (the "Registration Rights Agreement"). In connection with the Amendment (i) ComVest purchased an additional Note from Issuer in the principal amount of $2,000,000 from the original commitment and (ii) Issuer issued to ComVest, as a replacement of the original warrant, an amended and restated warrant (the "Warrant") to purchase 2,000,000 Warrant Shares with an exercise price of $4.25 per share. Such Warrant is exercisable by ComVest on the first to occur of (1) an event which results in the change of control of the Issuer, (ii) the entering into by the Issuer of an agreement to engage in any transaction that would result in a change of control of the Issuer, (iii) the delivery by ComVest to the Issuer of a written agreement pursuant to which ComVest agrees not to resell any of the Warrant Shares to the public prior to August 23, 2005 and (iv) August 23, 2005. ComVest, pursuant to the Purchase Agreement, has the right to nominate one (1) director to the Issuer's Board of Directors until such time as (i) the Notes shall have been paid off in full and (ii) either (A) all of the Warrant Shares shall have been registered for resale by ComVest pursuant to either Section 2 or Section 3 of the Registration Rights Agreement and shall be freely sellable by ComVest or (B) the Registration Rights Agreement shall have been terminated. The ComVest Director shall be entitled to participate in all compensation plans available to non-management directors and shall be covered by any director insurance provided by the Issuer to the other directors. The Issuer will cause the Class II slate of Directors presented to the stockholders of the Issuer for election to the Board of Directors to include the ComVest Director and the Issuer shall recommend that the stockholders of the Issuer vote their shares in favor of the election of the ComVest Director. If the stockholders of the Issuer shall fail to elect the ComVest Director to the Board of Directors, then the Board of Directors shall immediately increase the Page 7 of 12 Pages number of Directors of the Issuer by one (1) and elect the ComVest Director to the Board of Directors of the Issuer. In addition, ComVest shall have the right to appoint one (1) individual as a nonvoting and nonparticipating observer representative (the "ComVest Observer") at all meetings of the Board of Directors and committees thereto. The Issuer shall provide the ComVest Observer, concurrently with the members of the Board of Directors, and in the same manner, copies of all notices, minutes, consents, materials and other information provided to or to which the Issuer's directors have access; provided however, that the ComVest Observer shall agree to hold in confidence any non-public confidential information so provided; and provided further, that the Issuer shall have the right to request that the ComVest Observer not participate in any portion of any Board of Directors meeting in which the Board of Directors determines that (a) the ComVest Observer's presence would threaten the Issuer's ability to claim attorney-client privilege with respect to the matters being discussed, (b) the subject matter to be discussed by the Board of Directors involves an actual conflict of interest between the Issuer and the ComVest Observer, as reasonably determined in good faith by the Board of Directors, or (c) the ComVest Observer's presence would cause the Issuer to breach confidentiality provisions to which the Issuer is bound. Meetings to be held by telephone conference and actions to be taken by written consent shall not be prohibited, provided that the ComVest Observer shall be given notice of such meeting or a copy of each written consent at the same time as provided to the Issuer's directors. The ComVest Observer shall receive no compensation, except that the Issuer will reimburse out-of-pocket expenses of the ComVest Observer in the same manner as the directors of the Issuer. ITEM 4. PURPOSE OF TRANSACTION. ComVest acquired the Warrant for investment purposes and not with the view to sell in connection with any distribution thereof. Except in the ordinary course of business or as set forth below, the Reporting Person has no present intention or plans or proposals which relate to or could result in any of the matters referred to in paragraphs (a) through (j) of Item 4 of Schedule 13D. Subsequent to the closing of the transactions with ComVest, Larry E. Lenig Jr. was elected to the Issuer's board. Mr. Lenig had been designated by ComVest. The information provided in Item 3 is incorporated by reference herein. Notwithstanding anything to the contrary contained herein, the Reporting Person reserves the right, depending on all relevant factors, to change its intention with respect to any and all of the matters referred to above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) ComVest has received a Warrant to purchase 2,000,000 shares of Common Stock exercisable at $4.25 per share, representing 17.5% of the Issuer's outstanding Common Stock. Page 8 of 12 Pages Falk and Priddy, by virtue of their status as managing members of ComVest II Partners (the managing member of ComVest) and as the principal members of ComVest and ComVest II Partners, may be deemed to have indirect beneficial ownership of the Shares owned by ComVest. However, Falk and Priddy disclaim any beneficial ownership of such Shares. (b) Falk and Priddy, by virtue of their status as managing members of ComVest II Partners (the managing member of ComVest) and as the principal members of ComVest and ComVest II Partners, have the power to vote or to direct the vote and the power to dispose and to direct the disposition of the Shares owned by ComVest. (c) Not applicable. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Other than as set forth above or as listed in Item 7 below, neither ComVest nor any other person named in Item 2 above has any contracts, arrangements, understandings or relationships (legal or otherwise) with any person with respect to any securities of the Issuer, including but not limited to any contracts, arrangements, understandings or relationships concerning the transfer or voting of such securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 1. Joint Filing Agreement, as required by Rule 13d- 1 under the Securities exchange Act of 1934. 2. Note and Warrant Purchase Agreement, dated as of February 22, 2005, by and between Fischer Imaging Corporation and ComVest Investment Partners II LLC. 3. Amendment No. 1 to Note and Warrant Purchase Agreement, dated as of March 29, 2005, by and between Fischer Imaging Corporation and ComVest Investment Partners II LLC. 4. Senior Secured Note in the principal amount of $5,000,000. 5. Senior Secured Note in principal amount of $2,000,000. 6. Amended and Restated Warrant, dated as of February 22, 2005. 7. Registration Rights Agreement. 8. Security Agreement. Page 9 of 12 Pages 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: April 11, 2005 COMVEST INVESTMENT PARTNERS II LLC By: ComVest II Partners, LLC, its managing member By: /s/Michael S. Falk ---------------------------------------- Name: Michael S. Falk Title: Managing Member Dated: April 11, 2005 COMVEST II PARTNERS, LLC By: /s/Michael S. Falk ------------------------------------ Name: Michael S. Falk Title: Managing Member Dated: April 11, 2005 COMMONWEALTH ASSOCIATES GROUP HOLDINGS, LLC By: /s/Michael S. Falk -------------------------------------------- Name: Michael S. Falk Title: Chairman and Managing Member /s/Michael S. Falk Dated: April 11, 2005 -------------------------------------------- Michael S. Falk, Individually /s/Robert L. Priddy Dated: April 11, 2005 -------------------------------------------- Robert L. Priddy, Individually Page 10 of 12 Pages EXHIBIT INDEX 1. Joint Filing Agreement, as required by Rule 13d- 1 under the Securities exchange Act of 1934. 2. Note and Warrant Purchase Agreement, dated as of February 22, 2005, by and between Fischer Imaging Corporation and ComVest Investment Partners II LLC. 3. Amendment No. 1 to Note and Warrant Purchase Agreement, dated as of March 29, 2005, by and between Fischer Imaging Corporation and ComVest Investment Partners II LLC. 4. Senior Secured Note in the principal amount of $5,000,000. 5. Senior Secured Note in principal amount of $2,000,000. 6. Amended and Restated Warrant, dated as of February 22, 2005. 7. Registration Rights Agreement. 8. Security Agreement. Page 11 of 12 Pages EX-1 2 e1042500.txt AMENDED JOINT FILING AGREEMENT EXHIBIT 1 AMENDED JOINT FILING AGREEMENT The undersigned hereby consent to the joint filing by any of them of a Statement on Schedule 13D and any amendments thereto, whether heretofore or hereafter filed, relating to the securities of Fischer Imaging Corporation, and hereby affirm that this Schedule 13D is being filed on behalf of each of the undersigned. Dated: April 11, 2005 COMVEST INVESTMENT PARTNERS II LLC By: ComVest II Partners, LLC, its managing member By: /s/Michael S. Falk ---------------------------------- Name: Michael S. Falk Title: Managing Member Dated: April 11, 2005 COMVEST II PARTNERS, LLC By: /s/ Michael S. Falk ---------------------------------- Name: Michael S. Falk Title: Managing Member Dated: April 11, 2005 COMMONWEALTH ASSOCIATES GROUP HOLDINGS, LLC By: /s/Michael S. Falk ------------------------------------------ Name: Michael S. Falk Title: Chairman and Managing Member /s/Michael S. Falk Dated: April 11, 2005 ---------------------------------------------- Michael S. Falk, Individually /s/Robert L. Priddy Dated: April 11, 2005 ---------------------------------------------- Robert L. Priddy, Individually EX-2 3 e1042537.txt NOTE AND WARRANT PURCHASE AGREEMENT EXHIBIT 2 ================================================================================ EXECUTION COPY NOTE AND WARRANT PURCHASE AGREEMENT Dated as of February 22, 2005 between FISCHER IMAGING CORPORATION and COMVEST INVESTMENT PARTNERS II LLC ================================================================================ EXECUTION COPY TABLE OF CONTENTS

Page ARTICLE 1 DEFINITIONS.....................................................................................1 ARTICLE 2 AGREEMENT TO PURCHASE; CLOSING..................................................................7 2.1 Purchase of Initial Note........................................................................7 2.2 Closing.........................................................................................7 2.3 Additional Notes................................................................................7 2.4 No Reborrowing..................................................................................9 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMVEST.......................................................9 3.1 Organization....................................................................................9 3.2 Accredited Investor.............................................................................9 3.3 No Public Distribution..........................................................................9 3.4 Subsequent Offers and Sales.....................................................................9 3.5 Accuracy of ComVest's Representations and Warranties............................................9 3.6 Information....................................................................................10 3.7 Capacity and Authority.........................................................................10 3.8 Due Execution..................................................................................10 3.9 Brokers........................................................................................10 3.10 No General Solicitation........................................................................10 3.11 Domicile.......................................................................................10 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................10 4.1 Organization...................................................................................10 4.2 Capitalization.................................................................................11 4.3 Issuance of the Securities and Warrant Shares..................................................12 4.4 Legality.......................................................................................12 4.5 Due Execution..................................................................................12 4.6 Non-Contravention..............................................................................12 4.7 Approvals......................................................................................12 4.8 SEC Filings; Financial Statements..............................................................13 4.9 Absence of Certain Changes.....................................................................15 4.10 Insurance......................................................................................17 4.11 Compliance with Law............................................................................17 4.12 Absence of Litigation..........................................................................18 4.13 Private Offering; Trust Indenture Act..........................................................18 4.14 Brokerage Fees.................................................................................18 4.15 Intellectual Property..........................................................................18 4.16 Labor Relations................................................................................20 4.17 Benefit Plans and Agreements...................................................................20

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4.18 Environmental, Health and Safety Matters.......................................................21 4.19 FDA and Regulatory Matters; Clinical Trials....................................................22 4.20 List of Material Contracts and Other Data......................................................23 4.21 Tax Matters....................................................................................24 4.22 Real Property; Title to Assets.................................................................25 4.23 Rights Agreement Expired.......................................................................26 4.24 Company Products...............................................................................26 4.25 Certain Business Practices.....................................................................26 4.26 Interested Party Transactions..................................................................26 ARTICLE 5 COVENANTS AND ACKNOWLEDGMENTS..................................................................27 5.1 Transfer Restrictions..........................................................................27 5.2 Restrictive Legend.............................................................................27 5.3 Disclosure of Transaction......................................................................28 5.4 Lock-Up of Executive Officer and Director Shares...............................................28 5.5 Sales of Company Securities....................................................................28 5.6 Reporting Status...............................................................................28 5.7 Use of Proceeds................................................................................28 5.8 Registration Rights............................................................................29 5.9 Reservation of Common Stock Issuable upon Exercise of Warrants.................................29 5.10 Covenant as to Common Stock....................................................................29 5.11 Affirmative Covenants..........................................................................29 5.12 Negative Covenants.............................................................................31 5.13 Board of Directors.............................................................................32 5.14 Removal or Resignation of ComVest Director.....................................................33 5.15 Consulting Arrangement.........................................................................33 ARTICLE 6 CLOSING........................................................................................34 6.1 Execution and Delivery of Transaction Documents................................................34 6.2 Payment of Purchase Price......................................................................34 6.3 Payment of Financing Fee and Commitment Fee; Reimbursement of ComVest Expenses.................34 6.4 Officers' Certificate..........................................................................34 6.5 Secretary's Certificate........................................................................34 6.6 Certificate of Incorporation...................................................................35 6.7 Good Standing Certificates.....................................................................35 6.8 Pay-Off of Silicon Valley Bank Credit Facility.................................................35 6.9 Appointment of ComVest Director................................................................35 ARTICLE 7 INDEMNIFICATION................................................................................35 7.1 Indemnification of ComVest by the Company......................................................35 7.2 Indemnification of the Company by Com Vest.....................................................36 7.3 Third Party Claims.............................................................................36

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7.4 Non-Exclusive Remedies.........................................................................37 ARTICLE 8 EXPENSES.......................................................................................37 ARTICLE 9 SURVIVAL.......................................................................................37 ARTICLE 10 MISCELLANEOUS..................................................................................37 10.1 Governing Law; Jurisdiction....................................................................37 10.2 Counterparts...................................................................................38 10.3 Headings.......................................................................................38 10.4 Severability...................................................................................38 10.5 Parties in Interest; Successors and Assigns....................................................38 10.6 Remedies.......................................................................................38 10.7 Amendments.....................................................................................38 10.8 Merger.........................................................................................38 10.9 Notices........................................................................................38 10.10 Waiver of Jury Trial...........................................................................40 EXHIBITS Exhibit A Senior Secured Note Exhibit B Warrant Exhibit C Registration Rights Agreement Exhibit D Security Agreement Exhibit E Lock-Up Agreement

iii NOTE AND WARRANT PURCHASE AGREEMENT THIS NOTE AND WARRANT PURCHASE AGREEMENT (this "AGREEMENT"), dated as of the 22nd day of February, 2005, is made by and between Fischer Imaging Corporation a Delaware corporation (the "COMPANY") and ComVest Investment Partners II LLC, a Delaware limited liability company ("COMVEST"). RECITALS WHEREAS, ComVest wishes to purchase, and the Company wishes to sell and issue to ComVest, upon the terms and subject to the conditions stated in this Agreement, a senior secured promissory note of the Company in the principal amount of $5,000,000, in the form attached hereto as Exhibit A (the "INITIAL NOTE"); and WHEREAS, upon the terms and subject to the conditions stated in this Agreement, ComVest will commit to purchase additional senior secured promissory notes of the Company (i) in the principal amount of $2,000,000 (the "SECOND NOTE") upon the performance of certain conditions and (ii) subject to the purchase of the Second Note and certain further conditions, up to an aggregate principal amount of $3,000,000 (the "ADDITIONAL NOTES", and together with the Initial Note and the Second Note, the "NOTES"), each of which shall be in substantially the form of the Initial Note and shall have the same maturity as the Initial Note; and WHEREAS, in connection with the sale of the Initial Note, the Company will also issue to ComVest warrants to purchase 2,000,000 shares of the Company's Common Stock upon the terms and subject to the conditions of this Agreement in the form attached hereto as Exhibit B (each a "WARRANT" and collectively, the "WARRANTS"); and WHEREAS, in connection with the consummation of the transactions contemplated by this Agreement, the parties hereto are also entering into, of even date herewith, a Registration Rights Agreement in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT") and a Security Agreement in the form attached hereto as Exhibit D (the "SECURITY AGREEMENT"). NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: AGREEMENTS: ARTICLE 1 DEFINITIONS "ACTIVITIES TO DATE" shall have the definition provided in Section 4.19(b). "ADDITIONAL NOTE PURCHASE PRICE" shall have the definition provided in Section 2.3. "ADDITIONAL NOTES" shall have the definition provided in the second paragraph of the Recitals. "AFFILIATE" of a specified person shall mean a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person. "APPROVALS" shall have the definition provided in Section 4.19(b). "AGREEMENT" shall have the definition provided in the introductory paragraph. "BALANCE SHEET" shall have the definition provided in Section 4.8(b). "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company. "CAPITAL EXPENDITURES" shall mean all expenditures of the Company and its subsidiaries for tangible assets which are capitalized, and the fair value of any tangible assets leased by the Company or any of its subsidiaries under any lease which is or should be capitalized on the Company's consolidated balance sheet in accordance with GAAP, consistently applied, including all amounts paid or accrued in connection with the purchase (whether on a cash or deferred payment bases) or lease (including capitalized lease obligations) of any machinery, equipment, tooling, real property, improvements to real property (including leasehold improvements) or any other tangible asset of the Borrower or any of its subsidiaries which is required, in accordance with GAAP, consistently applied, to be treated as a fixed asset on the consolidated balance sheet of the Company and its subsidiaries. "CLAIM" shall have the definition provided in Section 7.3. "CLOSING" shall have the definition provided in Section 2.2. "CLOSING DATE" shall have the definition provided in Section 2.2. "CMS" shall have the definition provided in Section 4.19(a). "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMMITMENT FEE" shall have the definition provided in Article 8. "COMMON STOCK" shall have the definition provided in the first paragraph of the Recitals. "COMPANY" shall have the definition provided in the introductory paragraph. "COMPANY INDEMNITEES" shall have the definition provided in Section 7.2. "COMPANY PRODUCTS" shall have the definition provided in Section 4.19(b). "COMVEST" shall have the definition provided in the introductory paragraph. "COMVEST DIRECTOR" shall have the definition provided in Section 5.13. "COMVEST EXPENSES" shall have the definition provided in Article 8. 2 "COMVEST INDEMNITIES" shall have the definition provided in Section 7.1. "COMVEST OBSERVER" shall have the definition provided in Section 5.13. "DEFAULT" shall mean any act, event, condition or circumstance which, with the giving of notice, the passage of time, or both, would constitute an Event of Default. "DERIVATIVE SECURITIES" shall have the definition provided in Section 4.2. "DISCLOSURE SCHEDULES" shall have the definition provided in Article 4. "EBITDA" shall have the definition provided in the Initial Note. "EMPLOYEE PLAN" shall mean any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including, without limitation, each "employee benefit plan," within the meaning of Section 3(3) of ERISA (whether or not ERISA is applicable to such plan), that is or has been maintained, contributed to, or required to be contributed to, by the Company, any Affiliate or any predecessor of the Company for the benefit of any employee of the Company, or with respect to which the Company or any Affiliate has or may have any liability or obligation. "ENVIRONMENTAL LAW" shall mean any federal, state, local and foreign statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all those relating to (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection of the environment, health, safety or natural resources. "ENVIRONMENTAL PERMIT" shall have the definition provided in Section 4.18. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "EVENT OF DEFAULT" shall mean any of the events specified in Section 6 of the Initial Note or the corresponding section of any Additional Note, provided that any requirement for the giving of notice, the passage of time, or both, or any other condition, has been satisfied. "EXCHANGE ACT" shall have the definition provided in Section 3.2. "EXECUTIVE OFFICERS" shall mean Harris Ravine, the Company's President and Chief Executive Officer, David Kirwan, the Company's Senior Vice President, Finance, Chief Financial Officer and Secretary, Mary Beth Wallingford, the Company's Controller, Scott Yarde, 3 the Company's Vice President of Sales and Marketing, and Steven Moseley, the Company's Vice President of Business Development. "FDA" shall have the definition provided in Section 4.19(a). "FDA CERTIFICATE" shall have the definition provided in Section 2.3. "FINANCIALS" shall have the definition provided in Section 4.8(b). "FINANCING FEE" shall have the definition provided in Article 8. "FISCHER EUROPE" shall have the definition provided in Section 6.5. "FISCHER INTERNATIONAL" shall have the definition provided in Section 6.5. "GAAP" shall have the definition provided in Section 4.8(b). "HAZARDOUS SUBSTANCES" means (i) those substances defined in or regulated under the following United States federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos and radon; and (v) any other contaminant, substance, material or waste regulated by any governmental or regulatory authority pursuant to any Environmental Law. "HHS" shall have the definition provided in Section 4.19(a). "INDEBTEDNESS" shall mean, with respect to any person, (a) all indebtedness of such person, whether or not contingent, for borrowed money, (b) all obligations of such person for the deferred purchase price of property or services, (c) all obligations of such person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such person as lessee under leases that have been or should be, in accordance with GAAP, consistently applied, recorded as capital leases, (f) all obligations, contingent or otherwise, of such person under acceptance, letter of credit or similar facilities, (g) all obligations of such person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness of others referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, 4 primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (i) all Indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien or other encumbrance on property (including accounts and contract rights) owned by such person, even though such person has not assumed or become liable for the payment of such Indebtedness. "INDEMNIFIED PARTY" shall have the definition provided in Section 7.3. "INDEMNIFYING PARTY" shall have the definition provided in Section 7.3. "INITIAL NOTE" shall have the definition provided in the first paragraph of the Recitals. "INITIAL NOTE PURCHASE PRICE" shall have the definition provided in Section 2.1. "INTELLECTUAL PROPERTY" shall mean any: (a) patent, patent application, trademark (whether registered or unregistered), trademark application, trade name, fictitious business name, domain name, service mark (whether registered or unregistered), service mark application, copyright or rights of copyright (whether registered or unregistered), copyright application, mask work, mask work application, trade secret, customer list, system, computer software (including source code and object code), computer program, invention, design, blueprint, engineering drawing, proprietary product, technology, proprietary right or other intellectual property right or intangible asset, confidential information, ideas, and all other intellectual property or proprietary rights of any kind, including without limitation writings of any kind, printed or graphic matter (including all preparatory materials such as sketches, drafts, outtakes, outlines and drawings), and any audiovisual works, artwork, designs, photographs, video tapes, films, slides, tape recordings, music, and mechanicals; or (b) right to use or exploit any of the foregoing. "KNOWLEDGE OF THE COMPANY" shall mean the actual knowledge of any director of the Company or any Executive Officer and such knowledge that any such individual would obtain after the exercise of reasonable investigation. "LEASE DOCUMENTS" shall have the definition provided in Section 4.22(b). "LICENSED INTELLECTUAL PROPERTY" shall have the definition provided in Section 4.15(b), and excludes any subscription or license to third party commercial publications, online services, online applications, and software applications, each of which are generally available for license or subscription fees of $25,000 or less per year. "LOSSES" shall have the definition provided in Section 7.1. "MATERIAL ADVERSE EFFECT" shall mean, when used in connection with the Company or any subsidiary of the Company, any event, circumstance, change or effect that is or is reasonably likely to be materially adverse to the business, condition (financial or otherwise), assets, liabilities or results of operations of the Company and its subsidiaries taken as a whole. 5 "MATERIAL CONTRACTS" shall have the definition provided in Section 4.20. "NOTES" shall have the definition provided in the second paragraph of the Recitals. "OIG" shall have the definition provided in Section 4.19(a). "OPTION PLANS" shall have the definition provided in Section 4.2. "OWNED INTELLECTUAL PROPERTY" shall have the definition provided in Section 4.15(a). "PBGC" shall have the definition provided in Section 4.17(a). "PERMITS" shall have the definition provided in Section 4.11. "POST-CLOSING COMMITMENT" shall mean the commitment of ComVest to purchase the Second Note and the Additional Notes subject to and in accordance with Section 2.3. "PREFERRED STOCK" shall have the definition provided in Section 4.2. "REGISTRATION RIGHTS AGREEMENT" shall have the definition provided in the fourth paragraph of the Recitals. "RETURNS" shall have the definition provided in Section 4.21. "RIGHTS AGREEMENT" shall mean the Amended and Restated Rights Agreement between the Company and Computershare Trust Company, Inc. (as Rights Agent), dated as of November 9, 2001. "RIGHTS" shall have the definition under the Rights Agreement. "SECOND NOTE" shall have the meaning provided in the first paragraph of the Recitals. "SECOND NOTE CLOSING DATE" shall have the meaning provided in Section 2.3(a). "SECOND NOTE PURCHASE PRICE" shall have the meaning provided in Section 2.3(a). "SEC REPORTS" shall have the definition provided in Section 4.8(a). "SECURITIES" shall mean the collective reference to the Notes, the Warrants and the Warrant Shares. "SECURITIES ACT" shall have the definition provided in Section 3.3. "SECURITY AGREEMENT" shall have the definition provided in the fourth paragraph of the Recitals. "TAX" or collectively, "TAXES", shall mean any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and 6 valued added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity. "TRANSACTION DOCUMENTS" shall mean this Agreement, the Notes, the Warrants, the Registration Rights Agreement and the Security Agreement (including collateral assignments of Intellectual Property pursuant thereto). "WARRANT" and "WARRANTS" shall have the definition provided in the third paragraph of the Recitals. "WARRANT SHARES" shall mean the shares of Common Stock issued or issuable upon exercise of the Warrants. ARTICLE 2 AGREEMENT TO PURCHASE; CLOSING 2.1 PURCHASE OF INITIAL NOTE. Upon the terms and subject to the conditions set forth herein, the Company hereby agrees to issue and sell to ComVest and ComVest hereby agrees to purchase from the Company, at the Closing, the Initial Note in the principal amount of $5,000,000. The purchase price (the "INITIAL NOTE PURCHASE PRICE") for the Initial Note to be purchased hereunder is $5,000,000. In connection with the purchase of the Initial Note by ComVest, the Company shall issue the Warrants to ComVest at the Closing. 2.2 CLOSING. The closing (the "CLOSING") of the purchase and sale of the Initial Note and the issuance of the Warrants will take place at the offices of Davis Graham & Stubbs LLP (or such other place as the parties may agree) on the date hereof. The date of the Closing is referred to herein as the "CLOSING DATE." At the Closing, the parties shall take such actions and make such deliveries as are provided in Article 6 below. 2.3 ADDITIONAL NOTES. (a) Second Note. Within five (5) calendar days after the receipt by ComVest of a certificate (the "FDA CERTIFICATE"), signed on behalf of the Company by its President and Chief Executive Officer, to the effect that (i) the FDA has completed its field audit at the Company and the Company has met with the lead auditor and conducted an exit (or completion) interview to review the results of the audit and to discuss with the lead auditor the findings, recommendations, citations and requirements that are likely to be, or, if then available, that are contained in the FDA's written report (including any Form 483) to be issued in connection with the audit, (ii) based on the exit interview, such written report (including any Form 483), if any, and taking into account discussions with the FDA audit team during the course of the audit, to the Company's knowledge, neither the FDA audit report, when issued, nor any interim finding, order or requirement issued by the FDA in connection with the audit contains or recommends any of the following: (A) any order requiring closure of one or more of the Company's present or contemplated lines of business; (B) any order requiring a product recall, which, if required to be implemented in accordance with its terms, would reasonably be expected to have a Material Adverse Effect; (C) the imposition of any fines that would reasonably be expected to have a 7 Material Adverse Effect; or (D) any requirement to change the practices or business operations of the Company in a manner materially inconsistent with its present method of operation (except for such matters which the Company is then contesting in good faith) unless such changes are not reasonably expected to have a Material Adverse Effect or to have a materially adverse impact on its presently forecasted results of operations for 2005 and 2006 and (iii) the Company wishes to issue and sell the Second Note, ComVest shall purchase the Second Note. The purchase price for the Second Note to be purchased hereunder is $2,000,000 (the "SECOND NOTE PURCHASE PRICE"), which shall be payable by wire transfer of immediately available funds to the Company at the time of closing of such Second Note purchase (the "SECOND NOTE CLOSING Date"). If the FDA Certificate is not received by ComVest by November 15, 2005, then the Post-Closing Commitment shall automatically terminate and be of no further force or effect. (b) Subsequent Notes. Within twenty (20) calendar days after written request made by the Company at any time and from time to time subsequent to the Second Note Closing and before November 15, 2005, ComVest shall purchase one or more Additional Notes, provided that (a) each such request to purchase an Additional Note shall be in the minimum amount of $750,000 (or such lesser amount as shall constitute the remaining unfunded portion of the Post-Closing Commitment), (b) ComVest shall not be required to purchase Additional Notes in any amount in excess of (i) $750,000 in the aggregate pursuant to a request made by the Company between the Second Note Closing Date and May 5, 2005, (ii) $1,500,000 in the aggregate pursuant to a request made by the Company between the Second Note Closing Date and August 5, 2005, (iii) $2,500,000 in the aggregate pursuant to a request made by the Company between the Second Note Closing Date and November 5, 2005 and (iv) $3,000,000 in the aggregate pursuant to a request made by the Company between the Second Note Closing Date and November 15, 2005, and (c) the aggregate principal amount of Additional Notes required to be purchased hereunder shall in no event and under no circumstances exceed $3,000,000. The purchase price for each Additional Note shall be an amount equal to the principal amount of such Additional Note (the "ADDITIONAL NOTE PURCHASE PRICE"), which shall be payable by wire transfer of immediately available funds to the Company at the time of closing of such Additional Note purchase. (c) Additional Conditions. ComVest's obligation to purchase the Second Note or any Additional Note(s) hereunder is expressly subject to and conditioned upon the following: (A) the Closing shall have occurred and, with respect to the Additional Notes, the Second Note shall have been issued, (B) no Default or Event of Default shall exist at the time of the Company's delivery of the FDA Certificate or request to ComVest under Section 2.3(b), as the case may be, and at the time of the closing of such Second Note or Additional Note purchase, (C) in the FDA Certificate or in the request for the purchase of the Additional Note, as the case may be, the Company shall certify to ComVest that no Default or Event of Default then exists, (D) immediately prior to ComVest's payment for such Second Note or Additional Note, the Company shall certify in writing to ComVest that no Default or Event of Default then exists, and (E) the Company shall pay to ComVest, at the time of the Second Note purchase and each Additional Note purchase, an additional financing fee in an amount equal to 1.25% of the subject Second Note Purchase Price or Additional Note Purchase Price, as the case may be. In no event and under no circumstances shall ComVest be required to purchase any Additional Notes based upon any request made by the Company subsequent to November 15, 2005, and in the event that any of the Notes shall be accelerated or shall be declared to be immediately due and payable in 8 either case by reason of any Event of Default, then the Post-Closing Commitment (or the remaining portion thereof not theretofore funded) shall automatically terminate and be of no further force or effect. 2.4 NO REBORROWING. Any principal amounts repaid or prepaid under any of the Notes may not be reborrowed. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMVEST ComVest hereby represents and warrants to the Company that the following representations and warranties are true and correct as of the date of this Agreement, except for representations and warranties that are made only as of a specific date, which are true and correct as of such specific date. 3.1 ORGANIZATION. ComVest is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Delaware. 3.2 ACCREDITED INVESTOR. ComVest is: (i) experienced in making investments of the kind contemplated by this Agreement; (ii) able, by reason of its business and financial experience, to protect its own interests in connection with the transactions contemplated by this Agreement; (iii) able to afford the entire loss of its investment in the Securities; (iv) an "accredited investor" as that term is defined in Rule 501(a) of Regulation D of the Securities Act; and (v) not a broker-dealer as such term is defined in the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE ACT"). 3.3 NO PUBLIC DISTRIBUTION. ComVest is acquiring the Securities for its own account, for investment purposes only, and not with a present view towards the public sale or distribution thereof, except pursuant to a sale or sales that are registered under the Securities Act of 1933, as amended, and the rules and regulations thereunder (the "SECURITIES ACT") or exempt from such registration. ComVest has not been organized for the purpose of investing in securities of the Company, although such investment is consistent with its purposes. 3.4 SUBSEQUENT OFFERS AND SALES. All subsequent offers and sales of the Securities by ComVest shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from such registration; with any offers and sales which are being made pursuant to an applicable exemption from registration being accompanied by a customary legal opinion obtained by ComVest, which legal opinion shall be reasonably satisfactory to the Company and the Company's legal counsel. 3.5 ACCURACY OF COMVEST'S REPRESENTATIONS AND WARRANTIES. ComVest understands that the Securities are being offered and sold to it in reliance upon exemptions from the registration requirements of the United States federal securities laws, and that the Company is relying upon the truth and accuracy of ComVest's representations and warranties contained in the Transaction Documents and any ancillary documents thereto, as applicable, and ComVest's compliance with the Transaction Documents and any ancillary documents thereto, in order to determine the availability of such exemptions and the eligibility of ComVest to acquire the Securities in accordance with the terms and provisions of the Transaction Documents. 9 3.6 INFORMATION. ComVest: (i) has been provided with and has reviewed all requested information concerning the business of the Company, including, without limitation, the Company's SEC Reports and (ii) has had all requested access to the management of the Company and has had the opportunity to ask questions of the management of the Company. 3.7 CAPACITY AND AUTHORITY. ComVest has the requisite capacity and authority to execute, deliver and perform each of the Transaction Documents and any and all ancillary documents thereto and to consummate the transactions contemplated thereby. 3.8 DUE EXECUTION. This Agreement and the other Transaction Documents, and any ancillary documents thereto, have been duly and validly authorized by ComVest and have been duly executed and delivered by ComVest, and such agreements, when executed and delivered by each of the other parties thereto, will each be a valid and binding agreement of ComVest, enforceable against ComVest in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors' rights generally, and by general principles of equity. 3.9 BROKERS. ComVest has not employed, engaged or retained, or otherwise incurred any liability to, any person as a broker, finder, agent or other intermediary in connection with the transactions contemplated herein. 3.10 NO GENERAL SOLICITATION. ComVest has not learned of the investment in the Securities as a result of any public advertising or general solicitation. 3.11 DOMICILE. ComVest has its principal place of business in the jurisdiction set forth below ComVest' s name in the notice provisions of this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to ComVest that the following representations and warranties are true and correct on and as of the date of this Agreement, except for representations and warranties that are made only as of a specific date, which are true and correct as of such specified date. The disclosure schedules ("DISCLOSURE SCHEDULES") contemplated by this Article 4 have been arranged to correspond to the numbered and lettered sections of this Article 4 and have been delivered concurrently with the execution of this Agreement. Any items referenced in a section of such Disclosure Schedules will be deemed to be included in the Disclosure Schedule sections of any reasonably related representations. 4.1 ORGANIZATION. The Company is a corporation duly incorporated and validly existing under the laws of the State of Delaware. Each of the Company's subsidiaries is a corporation duly incorporated and validly existing under the laws of its respective jurisdiction of incorporation. Each of the Company and its subsidiaries is duly qualified as a foreign corporation in all jurisdictions in which the failure to so qualify would, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on Schedule 4.1 (which sets forth for each subsidiary of the Company the number of issued and outstanding shares of each class of capital stock of each such subsidiary of the Company and the record and beneficial owner of 10 such outstanding shares), all of the outstanding shares of capital stock of the Company's subsidiaries is owned, beneficially and of record, either directly or indirectly (through another subsidiary) by the Company, free and clear of all liens and other encumbrances. Except as disclosed in Schedule 4.1, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. Each of the Company and its subsidiaries has all requisite corporate power and authority, and holds all licenses, permits and other required authorizations from governmental authorities, necessary to conduct its business as it is now being conducted or proposed to be conducted and to own or lease its properties and assets as they are now owned or held under lease, except to the extent the failure to hold such licenses, permits and other authorizations would not, individually or in the aggregate, have a Material Adverse Effect. The Certificates of Incorporation, By-laws or equivalent organizational documents of the Company and each of its subsidiaries are in full force and effect and (i) the Company is not in violation of any of the provisions of its Certificate of Incorporation or By-laws and (ii) none of its subsidiaries is in violation of any of the provisions of its Certificate of Incorporation, By-laws or equivalent organizational documents except for violations that would not, individually or in the aggregate, have a Material Adverse Effect. 4.2 CAPITALIZATION. On the date hereof, the authorized capital of the Company consists of 25,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, $.01 par value per share ("PREFERRED STOCK"). On the date hereof, there are 9,348,484 shares of Common Stock issued and outstanding and no shares of Preferred Stock issued and outstanding. Except for grants of rights to purchase shares of the Company's Common Stock under the Company's 1991 Stock Option Plan, as amended, 1993 Non-Employee Director Stock Option Plan, as amended, and the Company's 2004 Stock Incentive Plan and under other options granted to officers, employees, and consultants as compensation (the "OPTION PLANS"), in each case as set forth on Schedule 4.2 (which sets forth (i) the total number of options which have been granted by the Company, whether such options were granted pursuant to the Option Plans or otherwise, (ii) the name of each person who holds such an option, (iii) the particular plan pursuant to which such option was granted, (iv) the number of shares of Company Common Stock subject to such option, (v) the exercise or purchase price of such option, (vi) the date on which such option was granted, (vii) the applicable vesting schedule, (viii) the date on which such option expires, and (ix) whether the exercisability of such option will be accelerated in any way by the transactions contemplated by this Agreement), there are no options, warrants or convertible securities of the Company or any other rights to acquire securities of the Company (collectively, the "DERIVATIVE SECURITIES"). All outstanding securities of the Company are duly authorized, validly issued, fully paid and nonassessable. No stockholder of the Company is entitled to any preemptive rights with respect to the purchase of or sale of any securities by the Company. Except (a) for the Warrant Shares as contemplated herein, (b) for 3,392,000 shares of Common Stock reserved for issuance under the Company's Option Plans, or (c) as set forth in Schedule 4.2, none of the shares of capital stock of the Company is reserved for any purpose, and the Company is neither subject to any obligation (contingent or otherwise), nor has any option, to repurchase or otherwise acquire or retire any shares of its capital stock. Except as set forth in Schedule 4.2, all outstanding shares of Common Stock, all outstanding Company stock options and all outstanding shares of capital stock of each subsidiary of the Company have been issued and granted in compliance with all applicable securities laws and other applicable laws, rules and 11 regulations and all material requirements set forth in applicable contracts, except for such noncompliance that would not, individually or in the aggregate, have a Material Adverse Effect. 4.3 ISSUANCE OF THE SECURITIES AND WARRANT SHARES. The Notes and the Warrants have been duly and validly authorized, issued and delivered, free and clear of any liens or other encumbrances imposed by or through the Company, and the Warrant Shares when issued in accordance with the terms of the Warrants, will be duly authorized, validly issued, fully paid and nonassessable, will be free and clear of any liens or other encumbrances imposed by or through the Company, and will not be subject to preemptive rights. There are no preemptive rights of any stockholder of the Company to acquire the Securities. The Company has duly reserved from its authorized and unissued shares of Common Stock 2,000,000 shares of Common Stock for issuance upon exercise of the Warrants. 4.4 LEGALITY. The Company has the requisite corporate power and authority to enter into each of the Transaction Documents and to issue and deliver the Securities. 4.5 DUE EXECUTION. This Agreement and the other Transaction Documents, and any ancillary documents thereto, have been duly and validly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the other Transaction Documents, and this Agreement and the other Transaction Documents and any ancillary documents thereto have been duly executed and delivered by the Company, and such agreements, when executed and delivered by each of the other parties thereto, will be the legal, valid and binding agreement and obligation of the Company, enforceable in accordance with their respective terms, except to the extent that enforcement of such agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors' rights generally, and by general principles of equity. 4.6 NON-CONTRAVENTION. The execution and delivery of the Transaction Documents, and the performance by the Company of its obligations thereunder, does not (i) constitute or result in a violation of either the Certificate of Incorporation or By-laws of the Company, or (ii) constitute a default under (or an event which with notice or lapse of time or both could become a default) or give to others any rights of termination, amendment or cancellation of, any agreement, indenture or instrument to which the Company is a party unless the same shall have been waived or consented to by the other party, or result in a violation of any law, rule, regulation, order, judgment or decree (foreign or domestic and including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected other than any of the foregoing matters in this clause (ii) which would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 4.6, neither the filing of the registration statement required to be filed by the Company pursuant to the Registration Rights Agreement nor the offering or sale of the Notes, the Warrants and the Warrant Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied on or prior to the date hereof, for or relating to the registration of any shares of the Common Stock. 4.7 APPROVALS. Other than the filing of a registration statement with the SEC as contemplated by the Registration Rights Agreement, and the receipt by the Company of approval 12 from the SEC for such registration statement to be declared effective, no authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, stock exchange or market is required to be obtained by the Company for the entry into or the performance of the Transaction Documents. 4.8 SEC FILINGS; FINANCIAL STATEMENTS. (a) Except as set forth on Schedule 4.8(a), the Company has filed, and as of the Closing will have filed, all registration statements, prospectuses, reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated by reference) required to be filed by it with the SEC since December 31, 2003, and the Company has made the same available to ComVest in the form filed with the SEC. All such registration statements, prospectuses, reports, schedules, forms, statements and other documents filed since December 31, 2003 (including those that the Company may file subsequent to the date of this Agreement), as amended, are referred to herein as the "SEC REPORTS." As of their respective dates, the SEC Reports (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such SEC Reports, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected prior to the date of this Agreement by a subsequently filed SEC Report. None of the Company's subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the SEC Reports (the "FINANCIALS") (i) complied in all material respects as to form with the published rules and regulations of the SEC with respect thereto, (ii) was prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), consistently applied, during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form l0-Q, Form 8-K or any successor form under the Exchange Act), and (iii) fairly presented in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as at the respective dates thereof and the consolidated results of the Company's operations and cash flows for the periods indicated. The balance sheet of the Company as of September 30, 2004 contained in the SEC Reports is hereinafter referred to as the "BALANCE SHEET." (c) Except as disclosed in the Financials, since the date of the Balance Sheet and through the date of this Agreement, neither the Company nor any of its subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) required under GAAP to be set forth on a consolidated balance sheet, except for (i) liabilities incurred since the date of the Balance Sheet in the ordinary course of business consistent with past practices which would not, individually or in the aggregate, have a Material Adverse Effect, (ii) liabilities set forth on Schedule 4.8(c), and (iii) liabilities incurred pursuant to this Agreement. (d) The Company has heretofore furnished to ComVest complete and correct copies of all material amendments and modifications that have not been filed by the Company 13 with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect. (e) The Company has made available to ComVest all comment letters received by the Company from the SEC or the staff thereof since December 31, 2003 and all responses to such comment letters filed by or on behalf of the Company. (f) To the Company's knowledge, each director and executive officer of the Company has filed with the SEC all statements required by Section 16(a) of the Exchange Act and the rules and regulations thereunder since December 31, 2003. (g) The Company has timely filed and made available to ComVest all certifications and statements required by (i) Rule 13a-14 or Rule 15d-14 under the Exchange Act, or (ii) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any SEC Report. Except as disclosed in the SEC Reports or as set forth in Schedule 4.8(g), the Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act and such controls and procedures are effective to ensure that all material information concerning the Company and its subsidiaries is made known on a timely basis to the individuals responsible for the preparation of the Company's SEC filings and other public disclosure documents. As used in this Section 4.8, the term "file" shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC. (h) The Company maintains a standard system of accounting established and administered in accordance with GAAP. Except as set forth in Schedule 4.8(h), the Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (i) Since December 31, 2003, except as set forth in Schedule 4.8(i), neither the Company nor any subsidiary nor, to the Company's knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any subsidiary, has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any subsidiary has engaged in questionable accounting or auditing practices. No attorney representing the Company or any subsidiary, whether or not employed by the Company or any subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company. Except as set forth in the SEC Reports or in Schedule 4.8(i), since December 31, 2003, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by 14 or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Board of Directors or any committee thereof. (j) To the knowledge of the Company, except at set forth on Schedule 4.8(j), no employee of the Company or any subsidiary has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable law, rule, regulation or order. Neither the Company nor any subsidiary nor any officer, employee, contractor, subcontractor or agent of the Company or any such subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any Subsidiary in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. ss. 1514A(a). (k) All accounts receivable of the Company and its subsidiaries reflected on the Balance Sheet or arising thereafter have arisen from bona fide transactions in the ordinary course of business consistent with past practices and in accordance with SEC regulations and GAAP applied on a consistent basis and are not to the knowledge of the Company subject to valid defenses, set-offs or counterclaims. To the knowledge of the Company, the Company's reserve for contractual allowances and doubtful accounts is adequate and has been calculated in a manner consistent with past practices. Since the date of the Balance Sheet, neither the Company nor any of its subsidiaries has modified or changed in any material respect its sales practices or methods including, without limitation, such practices or methods in accordance with which the Company or any of its subsidiaries sells goods, fills orders or records sales. (l) Other than as set forth in Schedule 4.8(1), all accounts payable of the Company and its subsidiaries reflected on the Balance Sheet or arising thereafter are the result of bona fide transactions in the ordinary course of business and have been paid or are not yet due or payable. Since the date of the Balance Sheet, the Company and its subsidiaries have not altered in any material respects their practices for the payment of such accounts payable, including the timing of such payment. (m) Other than as set forth in Schedule 4.8(m), as of the date hereof, the Company and its subsidiaries have no Indebtedness except (i) pursuant to the credit facility with Silicon Valley Bank (which is to be repaid in full at Closing in accordance with Section 6.8, using proceeds of the Initial Note Purchase Price), and (ii) accounts payable, trade payables and capital lease obligations incurred by the Company and its subsidiaries in the ordinary course of business, consistent with past practices. 4.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 2003, except as set forth in Schedule 4.9, or as expressly contemplated by this Agreement, or specifically disclosed in the SEC Reports filed since December 31, 2003 and prior to the date of this Agreement, (a) the Company and its subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice, (b) there has not been any event, circumstance, change or effect that, individually or in the aggregate, would have a Material Adverse Effect, and (c) in furtherance, and not in limitation, of the foregoing, none of the Company or any subsidiary has, directly or indirectly: 15 (i) amended or otherwise changed its Certificate of Incorporation or By-laws or equivalent organizational documents; (ii) issued, sold, pledged, disposed of, granted or encumbered, or authorized the issuance, sale, pledge, disposition, grant or encumbrance of, (A) any shares of any class of capital stock of the Company or any subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any subsidiary, or (B) any assets of the Company or any subsidiary, except in the ordinary course of business and in a manner consistent with past practice; (iii) declared, set aside, made or paid any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock; (iv) reclassified, combined, split, subdivided or redeemed, or purchased or otherwise acquired, directly or indirectly, any of its capital stock; (v) (A) acquired (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporation, partnership, other business organization or any division thereof or any significant amount of assets; (B) incurred any material Indebtedness or issued any debt securities or assumed, guaranteed or endorsed, or otherwise become responsible for, the obligations of any person, or made any loans or advances, or granted any security interest in any of its assets, except in the ordinary course of business and consistent with past practice; (C) entered into any material contract or agreement other than in the ordinary course of business and consistent with past practice; (D) authorized, or made any commitment with respect to, any single capital expenditure which is in excess of $100,000 or capital expenditures which are, in the aggregate, in excess of $200,000 for the Company and its subsidiaries taken as a whole; or (E) entered into or amended any contract, agreement, commitment or arrangement with respect to any matter set forth in this clause (v); (vi) hired any executive officer or individual with an employment agreement, increased the compensation payable or to become payable or the benefits provided to its directors, officers or employees, except for increases in the ordinary course of business and consistent with past practice in salaries, wages, bonuses, incentives or benefits of employees of the Company or any subsidiary who are not directors or officers of the Company or any subsidiary, or granted any severance or termination pay to, or entered into any employment or severance agreement with, any director, officer or other employee of the Company or of any subsidiary, or established, adopted, entered into or amended any collective bargaining, bonus, profit-sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (vii) taken any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures; 16 (viii) made any Tax election or settled or compromised any United States federal, state, local or non-United States income Tax liability; (ix) paid, discharged or satisfied any material claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the Balance Sheet or subsequently incurred in the ordinary course of business and consistent with past practice; (x) amended, modified or consented to the termination of any Material Contract, or amended, waived, modified or consented to the termination of any material rights of the Company or any subsidiary thereunder, other than in the ordinary course of business and consistent with past practice; (xi) commenced or settled any material litigation, suit, claim, action or proceeding; (xii) permitted any item of Owned Intellectual Property to lapse or to be abandoned, dedicated, or disclaimed, failed to perform or make any material filings, recordings or other similar actions or filings applicable to the Owned Intellectual Property, or failed to pay all fees and Taxes required to maintain and protect its interest in each and every item of Owned Intellectual Property; (xiii) failed to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder; or (xiv) announced an intention, entered into any formal or informal agreement or otherwise made a commitment, to do any of the foregoing. 4.10 INSURANCE. The Company and its subsidiaries maintain property and casualty, general liability, personal injury and other similar types of insurance that are reasonably adequate and consistent with industry standards and historical claims experience. Except as set forth in Schedule 4.10, the Company and its subsidiaries have not received notice from, and have no knowledge of any threat by, any insurer (that has issued any insurance policy to the Company or its subsidiaries) that such insurer intends to deny coverage under or cancel, discontinue or not renew any insurance policy covering the Company or any of its subsidiaries presently in force. 4.11 COMPLIANCE WITH LAW. Except as set forth in Schedule 4.11, the Company and its subsidiaries are in compliance in all material respects with all statutes, laws, rules, regulations and orders of the United States and of all states, municipalities and applicable agencies and foreign jurisdictions or bodies which are applicable to the Company, any of its subsidiaries, any of their assets or properties or any of their businesses or operations, and the prior failure, if any, by the Company or its subsidiaries to have fully complied with any such statute, law, rule, regulation or order has not resulted in and would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Each of the Company and its subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any governmental or regulatory authority necessary for each of the Company or its subsidiaries to own, lease and operate its 17 properties or to carry on its business as it is now being conducted, except as would not, individually or in the aggregate, have a Material Adverse Effect (the "PERMITS"). As of the date of this Agreement, no suspension or cancellation of any of the Permits is pending or, to the knowledge of the Company, threatened. 4.12 ABSENCE OF LITIGATION. Except as disclosed in the SEC Reports or as set forth in Schedule 4.12, there is no action, suit, formal inquiry or investigation, or proceeding before or by any governmental or regulatory authority, court, public board or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened, against or affecting the Company or any of its subsidiaries, or any of their assets, properties, business or operations, in which an unfavorable decision, ruling or finding would, individually or in the aggregate, have a Material Adverse Effect or adversely affect the transactions contemplated by the Transaction Documents or the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, the Transaction Documents. Except as disclosed in the SEC Reports or as set forth in Schedule 4.12, neither the Company nor any of its subsidiaries nor any property, asset, business or operation of the Company or any of its subsidiaries is subject to any continuing order of, consent decree, settlement agreement or similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any governmental or regulatory authority, or any order, writ, judgment, injunction, decree, determination or award of any governmental or regulatory authority that would, individually or in the aggregate, have a Material Adverse Effect. 4.13 PRIVATE OFFERING; TRUST INDENTURE ACT. Subject to the accuracy of ComVest's representations and warranties set forth in Article 3 hereof, the offer, sale and issuance of the Securities, as contemplated by this Agreement, are exempt from the registration requirements of the Securities Act and the Company is not required to qualify an indenture relating to the Notes under the Trust Indenture Act of 1939, as amended. Prior to the effectiveness of the registration statement contemplated by the Registration Rights Agreement, the Company agrees not to take any action that would render the issuance and sale of such Securities subject to the registration requirements of the Securities Act. The Company has not offered or sold the Securities by any form of general solicitation or general advertising, as such terms are used in Rule 502(c) under the Securities Act. 4.14 BROKERAGE FEES. The Company and its subsidiaries have not incurred any liability for any consulting fees or agent's commissions in connection with the offer and sale of the Securities and the transactions contemplated by this Agreement, except that the Company shall, at Closing, pay the Financing Fee and the Commitment Fee, and shall, at the time of the purchase of the Second Note and any Additional Notes, pay the additional financing fee described in Section 2.3(c). 4.15 INTELLECTUAL PROPERTY. (a) Schedule 4.15(a) sets forth all material Intellectual Property owned by the Company and its subsidiaries ("OWNED INTELLECTUAL PROPERTY"), including the name, if any, and a brief description thereof. Except as set forth in Schedule 4.15(a), to the knowledge of the Company, either the Company or one of its subsidiaries holds good, valid and indefeasible title to all Owned Intellectual Property, free and clear of any liens or encumbrances of any kind, 18 except for: (i) any lien for current taxes not yet due and payable, and (ii) liens that have arisen in the ordinary course of business and that do not (individually or in the aggregate) materially detract from the value of such assets subject thereto or materially impair the operations of the Company and its subsidiaries. (b) Schedule 4.15(b) further sets forth: (i) all material Intellectual Property licensed by the Company or any of its subsidiaries from third parties and used in the conduct of the business of the Company and its subsidiaries ("LICENSED INTELLECTUAL PROPERTY"), including a brief description thereof; (ii) with respect to any Owned Intellectual Property that is the subject of any registration or pending application in any jurisdiction worldwide, the names of the jurisdictions, any registration and/or application serial numbers, current status, any action, filing, submission, or maintenance fee due, and the date by which any of the foregoing are due; (iii) a brief description of all material licenses, sublicenses, and other agreements pursuant to which the Company (or any of its subsidiaries) or any sublicensee of the Company (or any of its subsidiaries) has granted to any third party the right to use any of the Owned Intellectual Property; (iv) all other material consents, indemnifications, forbearances to sue, settlement agreements and licensing or cross-licensing arrangements to which the Company or any of its subsidiaries is a party relating to the Owned Intellectual Property; and (v) any ongoing royalty or payment obligations with respect to the Licensed Intellectual Property. (c) To the knowledge of the Company, the Company and its subsidiaries have a valid right to use, license, and otherwise exploit all Licensed Intellectual Property and any rights thereunder will not be affected by the Company entering into this Agreement and the agreements and transactions contemplated hereby. Except as set forth in Schedule 4.15(c), neither the Company nor any of its subsidiaries is under any obligation to pay royalties or other payments in connection with any license, sublicense, or other agreement, nor restricted from assigning its rights under any sublicense or agreement respecting the Licensed Intellectual Property, nor will the Company or any of its subsidiaries otherwise be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement relating to the Licensed Intellectual Property. (d) To the knowledge of the Company, each of the Company's and its subsidiaries' rights in all of the Owned Intellectual Property are valid, subsisting, and enforceable. None of the Owned Intellectual Property or any registrations therefor have been canceled or adjudicated invalid or unenforceable, or are subject to any outstanding order, judgment, or decree restricting its use or adversely affecting or reflecting the Company's or any of it subsidiaries' rights thereto. All Owned Intellectual Property that is the subject of a registration or pending application is valid, subsisting, unexpired, in proper form and all renewal fees and other maintenance fees that have fallen due on or prior to the Closing Date have been paid. Either the Company or its applicable subsidiary has timely made all filings and payments with the appropriate foreign and domestic intellectual property offices required to maintain in subsistence all Owned Intellectual Property. No due dates for filings or payments concerning any Owned Intellectual Property (including, without limitation, office action responses, affidavits of use, affidavits of continuing use, renewals, requests for extension of time, maintenance fees, application fees and foreign convention priority filings) fall due within ninety (90) days of the Closing Date, whether or not such due dates are extendable. All documentation 19 necessary to confirm and effect the Company's and its subsidiaries' ownership of and rights in any Owned Intellectual Property that is the subject of a registration or pending application acquired by the Company or any of its subsidiaries from third parties has been filed in the United States Patent and Trademark Office and the United States Copyright Office, and all other relevant intellectual property offices and agencies in other jurisdictions. Except as set forth in Schedule 4.15(d), no Owned Intellectual Property is the subject of any legal or governmental proceeding before any governmental, registration or other authority in any jurisdiction, including any office action or other form of preliminary or final refusal of registration. (e) The consummation of the transactions contemplated hereby will not materially alter or impair any Owned Intellectual Property. To the knowledge of the Company, no Owned Intellectual Property has been used, divulged, disclosed or appropriated to the detriment of the Company or any of its subsidiaries for the benefit of any third party; and, to the knowledge of the Company, no employee or agent of the Company or any of its subsidiaries has misappropriated any material trade secrets or other material confidential information of any third party in the course of the performance of his or her duties as an employee of the Company or any of its subsidiaries. To the knowledge of the Company and except as set forth in Schedule 4.15(e): (i) none of the Owned Intellectual Property infringes, misappropriates, or conflicts with any Intellectual Property owned or used by any other third party; (ii) none of the products that are or have been designed, created, developed, assembled, manufactured or sold by the Company or any of its subsidiaries is infringing, misappropriating, or making any unlawful or unauthorized use of any Intellectual Property owned or used by any other third party, and the Company and its subsidiaries have all rights and licenses reasonably necessary in order to make, have made, use or sell such products; (iii) no third party is infringing, misappropriating or making any unlawful or unauthorized use of, and no Intellectual Property owned or used by any other third party infringes or conflicts with, any Owned Intellectual Property; and (iv) except as set forth in Schedule 4.15, there is no claim, suit, action or proceeding pending or threatened or asserted against the Company or any of its subsidiaries: (A) alleging any conflict or infringement by the Company or any of its subsidiaries of any third party's intellectual property or proprietary rights; or (B) challenging the Company's or any of its subsidiaries' ownership or use of, or the validity or enforceability of, any of the Owned Intellectual Property or the Licensed Intellectual Property. 4.16 LABOR RELATIONS. Except as set forth on Schedule 4.16, there are no complaints, charges or claims against the Company or any of its subsidiaries pending or filed with any governmental authority, arbitrator or court based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any individual by the Company or any of its subsidiaries, which, if adversely determined, would, individually or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of such complaint, charge or claim. Neither the Company nor any of its Affiliates has any liability for any failure to comply with applicable legal requirements with respect to employment, employment practices, terms and conditions of employment, wages and hours, tax withholding, payment of wages and compensation, Company-owed employment taxes, and/or classification of employees and independent contractors, except as would not, individually or in the aggregate, have a Material Adverse Effect. 4.17 BENEFIT PLANS AND AGREEMENTS. Except as would not, individually or in the aggregate, have a Material Adverse Effect: 20 (a) The Company and all Affiliates have substantially performed all obligations required to be performed by them under, are not in default or violation of, and have no knowledge of any default or violation by any other party to, the terms of any Employee Plan, and each Employee Plan has been established and maintained substantially in accordance with its terms and in substantial compliance with all applicable legal requirements, including, without limitation, ERISA and the Code. (b) The Company has no liabilities under its Employee Plans, other than (i) routine claims for benefits, (ii) funding obligations pursuant to the terms of such Employee Plans, and (iii) taxes due in the normal course that may be paid prior to their due date. (c) The Company does not maintain, administer or contribute to, has never maintained, administered or contributed to, and has no liability under any employee benefit plan (i) that is subject to Title IV of ERISA; (ii) that is a "multiemployer plan" as defined in Section 3(37) of ERISA; or (iii) that is not subject to United States law or that covers or has covered employees of the Company or of an Affiliate whose services are performed primarily outside of the United States. (d) Except as set forth on Schedule 4.17, with respect to any Employee Plan, as of the Closing Date, there will have been no prohibited transactions (as defined in Section 4975(c) of the Code and Section 406 of ERISA) that could result in the imposition of a liability against the Company or reportable events (as defined in Section 4043(b) of ERISA and regulations thereunder). (e) The Company has no liability with respect to any Employee Plan that is maintained or contributed to by an Affiliate. (f) No Employee Plan provides (except at no cost to the Company or any Affiliate), or represents any liability of the Company or any Affiliate to provide, retiree life insurance, retiree health or other retiree employee welfare benefits to any person for any reason, except as may be required by Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or other applicable legal requirements. 4.18 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as described in Schedule 4.18 or as would not, individually or in the aggregate, have a Material Adverse Effect (a) none of the Company nor any of its subsidiaries has violated or is in violation of any Environmental Law; (b) none of the properties currently or formerly leased or operated by the Company or any of its subsidiaries (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance resulting from any act or omission of the Company or any of its subsidiaries and none of the properties formerly owned by the Company or any of its subsidiaries (including, without limitation, soils and surface and ground waters) were, during the time of the Company's or such subsidiaries' ownership thereof, contaminated with any Hazardous Substance; (c) none of the Company or any of its subsidiaries is actually, potentially or allegedly liable for any off-site contamination by Hazardous Substances; (d) none of the Company or any of its subsidiaries is actually, potentially or allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens); (e) each of the Company and each of its subsidiaries has all permits, licenses and other authorizations required 21 under any Environmental Law ("ENVIRONMENTAL PERMITS") and (1) each of the Company and each of its subsidiaries is in compliance with its Environmental Permits. 4.19 FDA AND REGULATORY MATTERS; CLINICAL TRIALS. (a) Except as set forth in Schedule 4.19(a) or as would not, individually or in the aggregate, have a Material Adverse Effect, the Company and each of its subsidiaries is in compliance with all applicable laws, regulations, rules, and policies of or administered by, as the case may be, the United States Department of Health and Human Services ("HHS") and each of its constituent agencies, including, but not limited to, the Food and Drug Administration ("FDA"), the Centers for Medicare & Medicaid Services ("CMS"), and the Office of Inspector General ("OIG"), and with all laws, regulations, rules, and policies of or administered by their respective foreign counterparts, and state and local governments. For purposes of applying this section, any responsibility of the Company or any of its subsidiaries under any of the aforementioned laws, rules, regulations or policies that has been transferred by the Company or such subsidiary through contract to another person or entity, shall for purposes of ascertaining compliance with this section, be deemed to be the responsibility of the Company notwithstanding any contract to the contrary. (b) Except as set forth in Schedule 4.19(b) or as would not, individually or in the aggregate, have a Material Adverse Effect, the Company and each of its subsidiaries has obtained all necessary and applicable approvals, clearances, authorizations, licenses and registrations required by United States or foreign governments or government agencies to permit the design, development, pre-clinical and clinical testing, manufacture, labeling, sale, distribution and promotion of the Company's products (the "COMPANY PRODUCTS") in jurisdictions where it and they currently conduct such activities (the "ACTIVITIES TO DATE") with respect to each Company Product (collectively, the "APPROVALS"). The Company and each of its subsidiaries is in compliance in all material respects with the terms and conditions of each of the Approvals and has no reason to believe that any governmental entity will seek to revoke or otherwise cancel or amend the Approvals. (c) The Company and each of its subsidiaries is in compliance with all FDA and non-United States equivalent agencies and similar state and local laws, rules or regulations applicable to the maintenance, compilation and filing of reports, including medical device reports, with regard to the Company Products, except for such noncompliance as would not, individually or in the aggregate, have a Material Adverse Effect. Schedule 4.19(c) sets forth a list of all applicable adverse event reports related to the Company Product, including any Medical Device Reports (as defined in 21 CFR part 803). Set forth on Schedule 4.19(c) are complaint review and analysis reports of the Company and its subsidiaries in connection with the their business through the date hereof, including information regarding complaints, categorized by product and root cause analysis of closed complaints, which reports are correct in all material respects. (d) Except as set forth in Schedule 4.19(d), none of the Company nor any of its subsidiaries has received any written notice or other written communication from the FDA or any other governmental entity and has no reason to believe that it will receive such notice for any act or omission antedating this Agreement: (i) contesting the pre-market clearance or approval 22 of, the uses of or the labeling and promotion of any of the Company Products; or (ii) otherwise alleging any violation of any laws, rules or regulations by the Company, any such subsidiary or any of their employees or contractors. (e) There have been no recalls, field notifications or seizures ordered or adverse regulatory actions taken (or, to the knowledge of the Company, threatened), including but not limited to FDA Form 483 and FDA Warning Letters, or any other governmental entity with respect to any of the Company Products, including any facilities where any such products are produced, processed, packaged or stored, and neither the Company nor any of its subsidiaries has, within the last three (3) years, either voluntarily or at the request of any governmental entity, initiated or participated in a recall or field upgrade of any such product, except as noted in Schedule 4.19(e). (f) The Company has conducted all of its clinical trials with respect to the Company Products with reasonable care and in accordance with all applicable laws, rules, regulations and policies, and the stated protocols for such clinical trials. (g) All filings with and submissions to the HHS, FDA, CMS, OIG and any similar regulatory entity in any other jurisdiction made by the Company or any of its subsidiaries with regard to the Company Products, whether oral, written or electronically delivered, were true, accurate and complete in all material respects as of the date made, and, to the extent required to be updated, have been updated to be true, accurate and complete in all material respects as of the date of such update, and to the knowledge of the Company such filings, submissions and updates comply with all regulations of the HHS, FDA, CMS, OIG or such similar regulatory entity regarding material misstatements and omissions to state material facts. 4.20 LIST OF MATERIAL CONTRACTS AND OTHER DATA. Set forth on Schedule 4.20 is a complete list of the following contracts and agreements to which the Company or any of its subsidiaries is a party or by which its or their assets or business or operations may be bound or affected (collectively, the "MATERIAL CONTRACTS"): (i) all material contracts, as defined by Item 601 of Regulation S-K, (ii) all material distribution and supply agreements and (iii) all other contracts, agreements or arrangements which are material to the Company and its subsidiaries, taken as a whole, or to the business or operations of the Company and its subsidiaries, or the absence of which would, individually or in the aggregate, have a Material Adverse Effect, and, in each case, which are not directed sales agreements. Each of the Material Contracts is legal, valid and binding and in full force and effect, and none of the Company, any of its subsidiaries nor, to the knowledge of the Company, any other party to such Material Contract is in violation of or in default in the performance, observance or fulfillment of any material obligation, agreement, covenant or condition contained therein, except as would not, individually in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 4.20, the Company has not received any notice from any party to any Material Contract (i) stating that such party intends not to perform, observe or fulfill any of its obligations, agreements, covenants or conditions under such Material Contract, or (ii) claiming that the Company or any of its subsidiaries is in violation or breach of, or default under, any Material Contract. Except as would not, individually or in the aggregate, have a Material Adverse Effect, neither the execution of the Transaction Documents nor the consummation of any transaction contemplated thereby shall constitute a default under, give rise to cancellation rights under, or otherwise adversely affect any of the rights of the 23 Company or any of its subsidiaries under any Material Contract. The Company has furnished or made available to ComVest true and complete copies of all Material Contracts, including any and all amendments thereto. 4.21 TAX MATTERS. Except as set forth in Schedule 4.21 or as would not, individually or in the aggregate, have a Material Adverse Effect: (a) The Company has prepared and timely filed or made a timely request for extension for all required federal, state, local and foreign returns, estimates, information statements and reports (collectively, the "RETURNS") relating to any and all Taxes concerning or attributable to the Company, its subsidiaries or its or their operations required to be filed by the Company or any of its subsidiaries for the period prior to the date hereof, and such Returns are true and correct in all material respects and have been completed in accordance with applicable laws, rules and regulations. (b) The Company (i) has paid or accrued all Taxes it is required to pay or accrue, and (ii) will have withheld and timely remitted with respect to its employees all federal and state income taxes, FICA, FUTA, and other Taxes required to be withheld and remitted. (c) Neither the Company nor any of its subsidiaries has been delinquent in payment of any Tax, nor is there any Tax deficiency outstanding, assessed or, to the Company's knowledge, proposed against the Company or any of its subsidiaries in writing; nor has the Company or any of its subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. (d) No audit or other examination of any Returns of the Company or any of its subsidiaries is presently in progress; nor has the Company or any of its subsidiaries been notified in writing of any request for such an audit or other examination. (e) None of the Company or any of its subsidiaries has any liabilities for any unpaid federal, state, local or foreign Taxes which have not been accrued or reserved against on the Company's balance sheets, whether asserted or unasserted, contingent or otherwise. (f) There are no liens, pledges, charges, claims, security interests or other encumbrances of any sort on the assets of the Company or any of its subsidiaries relating to or attributable to Taxes other than liens for taxes and assessments which are not yet due and payable or which are being actively contested in good faith with the appropriate taxing authority. (g) The Company has no knowledge of any reasonable basis for the assertion of any claim relating or attributable to Taxes, which, if adversely determined, would result in any lien, pledge, charge, claim, security interest or other encumbrances on any assets of the Company or any of its subsidiaries. (h) None of the Company's or any of its subsidiaries' assets are treated as "tax-exempt use property" within the meaning of Section 168 of the Code. (i) None of the Company or any of its subsidiaries has filed a consent agreement under Section 341(f) of the Code concerning collapsible corporations or agreed to 24 have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company or any of its subsidiaries. (j) None of the Company or any of its subsidiaries is a party to a tax sharing or allocation agreement; nor does the Company or any of its subsidiaries owe any amount under any such agreement. (k) Within the past five calendar years, neither the Company nor any subsidiary of the Company has distributed stock of a controlled corporation pursuant to Section 355 of the Code nor had its stock distributed by another corporation pursuant to Section 355 of the Code. (l) None of the Company or any of its subsidiaries has liability for the Taxes of any person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as transferee or successor, by contract, or otherwise. 4.22 REAL PROPERTY; TITLE TO ASSETS. (a) None of the Company or any of its subsidiaries owns, or has in the past ten (10) years owned, any real property. (b) Schedule 4.22(b) lists each parcel of real property currently leased or subleased by the Company or any of its subsidiaries, with the name of the lessor and the date of the lease, sublease, assignment of the lease, any guaranty given or leasing commissions payable by the Company or any Subsidiary in connection therewith and each amendment to any of the foregoing (collectively, the "LEASE DOCUMENTS"). True, correct and complete copies of all Lease Documents have been delivered to ComVest. Except as would not, individually or in the aggregate, have a Material Adverse Effect, all such current leases and subleases are in full force and effect and are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) by the Company or any of its subsidiaries or, to the Company's knowledge, by the other party to such lease or sublease, or person in the chain of title to such leased premises. (c) There are no contractual or legal restrictions that preclude or restrict the ability to use any real property owned or leased by the Company or any of its subsidiaries for the purposes for which it is currently being used. There are no material latent defects or material adverse physical conditions affecting the real property, and improvements thereon, owned or leased by the Company or any of its subsidiaries other than those that would not, individually or in the aggregate, have a Material Adverse Effect. (d) Except as set forth in Schedule 4.22(d) or as would not, individually or in the aggregate, have a Material Adverse Effect, each of the Company and its subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of any liens or other encumbrances, except for such imperfections of title, if any, that do not interfere with the present value of the subject property. 25 4.23 RIGHTS AGREEMENT EXPIRED. The Rights Agreement has expired by its terms, there are no longer any Rights issued or exercisable under the Rights Agreement, and none of the execution or delivery of this Agreement or the other Transaction Documents or the exercise of the Warrant to acquire the Warrant Shares or the consummation of any other transaction contemplated by the Transaction Documents will result in (i) the occurrence of the "flip-in event" described under Section 11 of the Rights Agreement, (ii) the occurrence of the "flip-over event" described in Section 13 of the Rights Agreement, or (iii) the Rights under the Rights Agreement becoming evidenced by, and transferable pursuant to, certificates separate from the certificates representing shares of Common Stock. 4.24 COMPANY PRODUCTS. Except as disclosed in the SEC Reports or as set forth in Schedule 4.24 and as would not, individually or in the aggregate, have a Material Adverse Effect, each product manufactured, sold, leased or delivered by the Company or any of its subsidiaries has been in conformity with all applicable contractual commitments and all express and implied warranties, and to the Company's knowledge, neither the Company nor any of its subsidiaries has any claims outstanding for the replacement or repair of such products or other damages in connection therewith. Except as set forth in the SEC Reports filed prior to the date of this Agreement or as would not, individually or in the aggregate, have a Material Adverse Effect, neither the Company nor any of its subsidiaries has any liabilities or obligations arising out of any injury to persons or property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by the Company or any of its subsidiaries. 4.25 CERTAIN BUSINESS PRACTICES. None of the Company, any of its subsidiaries or, to the Company's knowledge, any directors or officers, agents or employees of the Company or any of its subsidiaries, has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii) made any payment in the nature of criminal bribery. 4.26 INTERESTED PARTY TRANSACTIONS. Except as set forth in Schedule 4.26, no director, officer or other Affiliate of the Company or any of its subsidiaries has or has had, directly or indirectly, (i) an economic interest in any person that has furnished or sold, or furnishes or sells, services or products that the Company or any of its subsidiaries furnishes or sells, or proposes to furnish or sell; (ii) an economic interest in any person that purchases from or sells or furnishes to, the Company or any of its subsidiaries, any goods or services; (iii) a beneficial interest in any contract or agreement disclosed in the Disclosure Schedules; or (iv) any contractual or other arrangement with the Company or any of its subsidiaries; provided, however, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an "economic interest in any person" for purposes of this Section 4.26. The Company and its subsidiaries have not, since December 31, 2003, (i) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the Company, or (ii) materially modified any term of any such extension or maintenance of credit. 26 ARTICLE 5 COVENANTS AND ACKNOWLEDGMENTS 5.1 TRANSFER RESTRICTIONS. (a) ComVest acknowledges and agrees that until thirty (30) days after the expiration of the Post-Closing Commitment, it may not assign or transfer any Note or any rights or obligations thereunder. After such date, the Notes may only be transferred in amounts of at least $1,000,000 and upon fifteen (15) days prior written notice to the Company. Neither the Notes nor any interest or participation therein may be assigned or transferred to Hologic, Inc., General Electric Medical Systems, Philips Medical Systems, Ethicon Endo-Surgery, Inc. or Siemens Medical Solutions; to any other business or entity which directly or indirectly engages in the business of developing, designing, manufacturing, supplying and/or distributing diagnostic medical imaging products competitive with any of the Company's then current product lines; to Morgan Nields or any business or entity in which he is employed or is otherwise involved or has a greater than 5% ownership interest; or to any Affiliate of any of the foregoing. Notwithstanding the foregoing, ComVest shall be entitled to transfer all or any portion of the Notes to its Affiliates or to make a distribution of all or any portion of the Notes to its members. (b) ComVest acknowledges and agrees that, except as provided in the Registration Rights Agreement, (i) none of the Securities has been, or is being, registered under the Securities Act, and such Securities may not be transferred unless (A) subsequently registered thereunder, or (B) they are transferred pursuant to an exemption from such registration; and (ii) any sale of the Securities made in reliance upon Rule 144 under the Securities Act may be made only in accordance with the terms of said Rule, accompanied by a legal opinion obtained by ComVest which is reasonably satisfactory to the Company's legal counsel. Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The provisions of Sections 5.1 and 5.2 hereof, together with the rights and obligations of ComVest under the Transaction Documents, shall be binding upon any subsequent transferees of the Securities. 5.2 RESTRICTIVE LEGEND. ComVest acknowledges and agrees that, until such time as the Securities shall have been registered under the Securities Act or ComVest demonstrates to the reasonable satisfaction of the Company and its legal counsel that such registration shall no longer be required, the Notes and certificates evidencing the Securities shall bear a restrictive legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL (IN FORM AND FROM COUNSEL) OR OTHER EVIDENCE REASONABLY 27 SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act and such sale or transfer is effected. ComVest agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. 5.3 DISCLOSURE OF TRANSACTION. The Company shall issue a press release describing the material terms of the transactions contemplated hereby as soon as practicable after the Closing but in no event later than one (1) business day after Closing. The Company shall also file with the SEC a Current Report on Form 8-K describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the Registration Rights Agreement, the Initial Note, the Warrant and the Security Agreement) as soon as practicable following the date of execution of this Agreement but in no event more than four (4) business days following the date of execution of this Agreement. The Company will provide ComVest and its counsel sufficient opportunity to review and provide comments to such press release and Form 8-K. 5.4 LOCK-UP OF EXECUTIVE OFFICER AND DIRECTOR SHARES. The Company will use its best efforts to cause Harris Ravine and David Kirwan and each of its directors to enter into the Lock-Up Agreement substantially in the form of Exhibit E. 5.5 SALES OF COMPANY SECURITIES. ComVest agrees that for the shorter of (i) a period of three (3) years after Closing or (ii) until the Post-Closing Commitment is no longer outstanding, the Warrant has been exercised in full and all of the Warrant Shares have been sold, it will not, and will cause its Affiliates not to, sell short, sell short against the box, engage in other similar derivative transactions or otherwise effect any sales of securities of the Company except for sales which are covered through the delivery of the Warrant Shares. 5.6 REPORTING STATUS. The Company's Common Stock is registered under Section 12(g) of the Exchange Act. So long as ComVest beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. 5.7 USE OF PROCEEDS. The Company will use the net proceeds from the sale of the Initial Note (a) first, to pay in full all outstanding obligations of the Company to Silicon Valley Bank, in accordance with the payoff and release letter contemplated by Section 6.8, and (b) 28 second, for working capital needs, and will use the proceeds from the sale of the Second Note and any Additional Notes for general corporate purposes; provided, however, that without the prior written consent of ComVest, no proceeds of the Notes shall be used or applied to the payment of any judgment in or settlement of any litigation, arbitration or other proceeding or legal dispute relating to the Company. 5.8 REGISTRATION RIGHTS. The Company acknowledges that with respect to the Warrant Shares, it has provided ComVest with certain registration rights under the Securities Act as set forth in the Registration Rights Agreement. 5.9 RESERVATION OF COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS. The Company hereby agrees at all times to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the full exercise of the Warrants, such number of shares of Common Stock as shall from time to time equal the number of shares sufficient to permit the full exercise of the Warrants. 5.10 COVENANT AS TO COMMON STOCK. The Company covenants that all shares of Common Stock which may be issued upon exercise of the Warrants will, upon issuance pursuant to the terms of the Warrants, be duly authorized, validly issued, fully paid and nonassessable. 5.11 AFFIRMATIVE COVENANTS. For so long as any of the Notes or the Post-Closing Commitment is outstanding, the Company shall, and shall cause each of its subsidiaries to: (a) Do or cause to be done all things necessary to at all times (i) preserve, renew and keep in full force and effect its corporate or other legal existence and all material rights, permits and franchises, (ii) comply with its covenants and agreements in this Agreement and the other Transaction Documents, (iii) maintain, preserve and protect all of its material property (including all Owned Intellectual Property) used or useful in the conduct of its business and keep same in good repair, working order and condition (reasonable wear and tear excepted), and from time to time make or cause to be made all needed and proper repairs, renewals, replacements, betterments and improvements thereto, (iv) maintain insurance of such types, in such amounts and against such hazards as is legally required and/or as is reasonable, prudent and customary for businesses of similar size and scope and similarly situated, and with respect to all such insurance (other than workers' compensation insurance), name ComVest as loss payee and/or additional insured as its interests appear, and provide for ComVest to receive written notice thereof at least thirty (30) days prior to any cancellation, modification or non-renewal of the subject policy, and (v) comply in all material respects with all laws, rules, regulations and other legal requirements applicable to its business operations, whether now in effect or hereafter enacted, promulgated or issued; (b) File, pay and discharge, or cause to be filed, paid and discharged, all material taxes, assessments and governmental charges or levies imposed upon it or its income and profits or any of its property or any part thereof, before the same shall become in default, as well as all material lawful claims for labor, materials, supplies and otherwise, which, if unpaid when due, might become a lien or charge upon such property or any part thereof; provided, that the Company and its subsidiaries shall not be required to pay or discharge any such tax, assessment, charge, levy or claim so long as the validity thereof is being contested in good faith 29 by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto, and payment with respect to such tax, assessment, charge, levy or claim shall be made before any of the Company's or any of its subsidiaries' property is seized or sold in satisfaction thereof; (c) Give prompt written notice to ComVest of (i) any proceedings instituted against the Company or any of its subsidiaries in any federal or state court or before any commission or other regulatory body (whether federal, state or local) which, if adversely determined, would, individually or in the aggregate, have a Material Adverse Effect, and (ii) the occurrence of any Default or Event of Default, and the action taken or proposed to be taken with respect thereto; (d) Furnish to ComVest: (i) promptly after filing with the SEC, all annual, quarterly and other periodic reports, and all current reports, relating to the Company, with all financial information contained therein to be prepared and presented in compliance with all applicable rules and regulations; (ii) concurrently with the delivery of each annual report described in the foregoing clause (i), a certificate from the independent certified public accountants for the Company, in form and content reasonably satisfactory to ComVest, certifying that, in connection with their audit, which was performed to express an opinion on such financial statements, such accountants either do not have knowledge of the existence of any Event of Default under Sections 5.11(i) and 5.12(1) or, to their knowledge, the extent of such Event of Default; (iii) promptly after distribution to the Company's stockholders, copies of all proxy materials, reports and other information provided by the Company to its stockholders; (iv) within fifteen (15) days of the end of each calendar month, a certificate signed on behalf of the Company by its Chief Financial Officer, certifying that he has examined the provisions of this Agreement and the Notes, and that to his knowledge, no Default or Event of Default has occurred or is continuing; (v) promptly after receipt from the FDA, a copy of any Form 483 received by the Company in connection with the FDA audit; and (vi) promptly, from time to time, such other non-confidential information regarding the Company and/or its subsidiaries as ComVest may reasonably request; (e) Maintain centralized books and records regarding all of the Company's business operations at the Company's principal place of business, and permit agents or representatives of ComVest to inspect, at any time during normal business hours, upon reasonable notice, and without undue disruption of the Company's business, all of the Company's and its subsidiaries' various books and records, and to make copies, extracts, abstracts and/or reproductions thereof; (f) Maintain a standard system of accounting in order to permit the preparation of financial statements in accordance with GAAP, consistently applied; (g) In the event of any discharge, spill, injection, escape, emission, disposal, leak or other release of Hazardous Substances on any real property owned or leased by the Company or any of its subsidiaries, which is not authorized by an Environmental Permit, and which requires notification to or the filing of any report with any federal, state or local governmental agency, the Company shall promptly notify ComVest thereof, and shall comply with the notice requirements of any applicable governmental agency, and take all steps necessary 30 to promptly clean up such discharge, spill, injection, escape, emission, disposal, leak or other release in accordance with all applicable Environmental Law; (h) Cause Harris Ravine and David Kirwan to continue to be employed or to function as the senior executive officers of the Company, unless a successor to any of them is appointed within ninety (90) days of the termination of such individual's employment, each such successor to be reasonably satisfactory to ComVest; and (i) Achieve EBITDA of not less than the amount set forth below for each period indicated: Quarter Ending Minimum EBITDA -------------- -------------- March 31, 2005 $(2,000,000) June 30, 2005 $(1,000,000) September 30, 2005 $750,000 December 31, 2005 $750,000 March 31, 2006, and $1,000,000 each quarter thereafter 5.12 NEGATIVE COVENANTS. For so long as any of the Notes or the Post-Closing Commitment is outstanding, the Company hereby agrees that it will not (and that no subsidiary of the Company will), without the prior written consent of ComVest (which consent shall not be unreasonably withheld): (a) Materially change the nature of the Company's business; (b) Sell, assign, transfer, lease or otherwise convey all or any substantial portion of the assets of the Company outside of the ordinary course of business, or enter into any agreement of consolidation or merger or agree to any share exchange; (c) Incur any Indebtedness (exclusive of Indebtedness under the Notes) in excess of $1,000,000 in the aggregate at any time outstanding, or become a guarantor or otherwise liable (contingently or otherwise) for any Indebtedness (other than endorsements of negotiable instruments for collection in the ordinary course of business), except for (i) Indebtedness incurred to prepay the Notes in full (provided that, in conjunction with such prepayment, the Company shall affirmatively release ComVest from all further funding obligations in respect of the Post-Closing Commitment), and (ii) current liabilities incurred in the ordinary course of business consistent with past practices; or permit to exist any lien or other encumbrance on any of its assets or properties except as may be permitted pursuant to the Security Agreement; (d) Become subject to (including, without limitation, by way of amendment to or modification of), any agreement or instrument, which by its terms would conflict with or materially restrict the Company's right to perform the provisions of this Agreement or any other Transaction Document; 31 (e) Redeem or repurchase any securities of the Company (other than the Notes) or set aside any funds therefor; (f) Declare or pay any dividends or other distributions on the capital stock of the Company, or set aside any funds therefor; (g) Increase or agree to increase the compensation payable or to become payable to Harris Ravine or David Kirwan other than reasonable increases consistent with past practices; (h) Enter into any non-ordinary course agreement, directly or indirectly, with officers, employees, stockholders, directors or Affiliates of the Company, other than employment agreements, compensation arrangements, stock options or other service-related transactions that are approved or ratified by a majority of the disinterested members of the Board of Directors; (i) Make any investments in, or otherwise acquire or hold securities of, or make loans or advances to, or enter into any arrangement for the purpose of providing funds or credit to, any other person, except (i) existing investments in the Company's subsidiaries, and loans by the Company to existing subsidiaries, up to a maximum aggregate principal amount of $7,730,000 at any time outstanding, (ii) advances to employees of the Company or its subsidiaries for business expenses not to exceed at any time $25,000 in the aggregate, (iii) recoverable draws not to exceed $100,000 in the aggregate to sales representatives employed by the Company against commissions to be payable to such representatives on sales completed but not yet collected, and (iv) temporary short-term investments in obligations of the United States or certificates of deposit of commercial banks reasonably satisfactory to ComVest, having a maturity not more than one (1) year after the date of acquisition thereof; (j) Initiate the voluntary dissolution or winding up or reorganization of the Company; (k) Agree, consent, permit or otherwise undertake to amend any of the terms or provisions of the Company's or any of its subsidiaries' certificate of incorporation, by-laws or other organizational documents in a manner which may impair in any respect any of ComVest's rights under any of the Transaction Documents; (l) Make aggregate Capital Expenditures (whether through cash purchase, principal payments under capitalized leases or purchase money financing, or otherwise) in any fiscal year of the Company in excess of $1,250,000 in the aggregate for the Company and all of its subsidiaries; or (m) Change its fiscal year. 5.13 BOARD OF DIRECTORS. Until such time as (i) the Notes shall have been paid off in full and (ii) either (A) all of the Warrant Shares shall have been registered for resale by ComVest pursuant to either Section 2 or Section 3 of the Registration Rights Agreement and shall be freely sellable by ComVest or (B) the Registration Rights Agreement shall have been terminated pursuant to clause (b) of Section 13 thereof): 32 (a) The Board of Directors shall consist of not more than six (6) members (subject to the last sentence of this paragraph (a)) and ComVest shall have the right to nominate one (1) individual for election to the Board of Directors (the "COMVEST DIRECTOR"). The ComVest Director shall be entitled to participate in all compensation plans available to non-management directors and shall be covered by any director insurance provided by the Company to the other directors. The Company will cause the Class II slate of Directors presented to the stockholders of the Company for election to the Board of Directors to include the ComVest Director, and the Company shall recommend that the stockholders of the Company vote their shares in favor of the election of the ComVest Director. If the stockholders of the Company shall fail to elect the named ComVest Director to the Board of Directors, then the Board of Directors shall (i) fill such vacancy with another individual nominated by ComVest or (ii) if there is no vacancy, immediately increase the number of Directors of the Company by one (1) and appoint such other ComVest nominee to the Board of Directors. (b) In addition, ComVest shall have the right to appoint one (1) individual as a nonvoting and nonparticipating observer representative (the "COMVEST OBSERVER") at all meetings of the Board of Directors and committees thereto. The Company shall provide the ComVest Observer, concurrently with the members of the Board of Directors, and in the same manner, copies of all notices, minutes, consents, materials and other information provided to or to which the Company's directors have access; provided however, that the ComVest Observer shall agree to hold in confidence any non-public confidential information so provided; and provided further, that the Company shall have the right to request that the ComVest Observer not participate in any portion of any Board of Directors meeting in which the Board of Directors determines that (a) the ComVest Observer's presence would threaten the Company's ability to claim attorney-client privilege with respect to the matters being discussed, (b) the subject matter to be discussed by the Board of Directors involves an actual conflict of interest between the Company and the ComVest Observer, as reasonably determined in good faith by the Board of Directors, or (c) the ComVest Observer's presence would cause the Company to breach confidentiality provisions to which the Company is bound. Meetings to be held by telephone conference and actions to be taken by written consent shall not be prohibited, provided that the ComVest Observer shall be given notice of such meeting or a copy of each written consent at the same time as provided to the Company's directors. The ComVest Observer shall receive no compensation, except that the Company will reimburse out-of-pocket expenses of the ComVest Observer in the same manner as the directors of the Company. 5.14 REMOVAL OR RESIGNATION OF COMVEST DIRECTOR. As long as ComVest has any right to nominate a person for election to the Board of Directors, as specified in Section 5.13(a), at any time at which a vacancy shall be created on the Board of Directors as a result of the death, disability, retirement, resignation, removal or otherwise of the ComVest Director, ComVest shall be entitled to nominate another individual to fill the vacancy and the Company will cause such individual to become a member of the Board of Directors until the next succeeding annual meeting of the stockholders of the Company, at which time the provisions of Section 5.13(a) shall apply. 5.15 CONSULTING ARRANGEMENT. ComVest will assist the Company in identifying potential strategic partners, merger or acquisition candidates or acquisition targets. In the event that ComVest introduces a joint venture partner, a merger or acquisition partner or an acquisition 33 target to the Company, then, at the closing of such transaction, the Company shall pay to ComVest a cash fee equal to 1% of the transaction value (which shall include not only amounts paid for equity interests or for assets, but assumed Indebtedness as well) less (i) an amount equal to the Financing Fee, Commitment Fee and Additional Note financing fees theretofore paid (provided, this clause (i) shall apply only until such time as an amount equal to such Financing Fee, Commitment Fee and Additional Note financing fees shall have been fully deducted from the fees contemplated by this Section 5.15) and (ii) an amount equal to any investment banking fairness opinion fees necessary to complete such transaction, provided that the fee payable to ComVest under this Section 5.15 shall be at least $500,000 in connection with a Sale of the Company (as defined in the Notes) or any transaction or series of related transactions in which any person other than ComVest acquires from the Company, directly or indirectly, equity interests in the Company possessing more than 30% of the voting power of all outstanding equity interests in the Company. ARTICLE 6 CLOSING The parties will take the following actions at Closing: 6.1 EXECUTION AND DELIVERY OF TRANSACTION DOCUMENTS. Each of ComVest and the Company shall execute each of the Transaction Documents to which it is a party and any and all ancillary documents thereto and deliver the same to the other party. In addition, the Company shall deliver to ComVest executed copies of Lock-Up Agreements, substantially in the form of Exhibit E, as executed by Harris Ravine and David Kirwan and each of the directors of the Company. 6.2 PAYMENT OF PURCHASE PRICE. ComVest shall pay to the Company the Initial Note Purchase Price, by wire transfer of immediately available funds payable to the Company. 6.3 PAYMENT OF FINANCING FEE AND COMMITMENT FEE; REIMBURSEMENT OF COMVEST EXPENSES. The Company shall pay to ComVest the Financing Fee, the Commitment Fee and the ComVest Expenses, by wire transfer of immediately available funds payable to ComVest. 6.4 OFFICERS' CERTIFICATE. The Company shall deliver a certificate executed by the President or the Chief Executive Officer of the Company and by the Chief Financial Officer of the Company, stating that all of the representations and warranties of the Company set forth in the Transaction Documents are accurate as of the Closing Date and that the Company has performed all of its covenants and agreements required to be performed under the Transaction Documents on or before the Closing Date. 6.5 SECRETARY'S CERTIFICATE. The Company shall deliver a certificate of the Secretary of the Company, dated the Closing Date, (i) certifying the continued and valid existence of the Company, Fischer Imaging Europe SA, Societe anonyme ("FISCHER EUROPE") and Fischer Imaging Deutschland GmbH ("FISCHER INTERNATIONAL"), (ii) certifying that no amendments to the Company's Certificate of Incorporation have been approved or adopted by the Board of Directors or the stockholders of the Company since the date of the certificate specified in Section 34 6.6 below, (iii) certifying the attached copy of the By-laws of the Company as being a true, accurate and complete copy of the By-laws of the Company, (iv) certifying the total number of outstanding shares of Common Stock as of the Closing Date, (v) certifying the authorization of the Company's execution, delivery and performance of the Transaction Documents, and (vi) certifying the resolutions adopted by the Board of Directors authorizing the actions to be taken by the Company contemplated by the Transaction Documents. 6.6 CERTIFICATE OF INCORPORATION. The Company shall deliver a copy of the Certificate of Incorporation (or equivalent organizational document) of the Company and each of its subsidiaries, certified by the Secretary of State (or equivalent governmental authority) of the jurisdiction of formation of each such entity as of a date not more than 10 business days prior to the Closing Date. 6.7 GOOD STANDING CERTIFICATES. The Company shall deliver good standing certificates for the Company from Delaware and Colorado as of a date not more than five business days prior to the Closing Date and tax certificates of Fischer Europe and Fischer Deutschland from their respective jurisdictions of organization. 6.8 PAY-OFF OF SILICON VALLEY BANK CREDIT FACILITY. The Company shall obtain from Silicon Valley Bank, and shall deliver to ComVest, a payoff and release letter, in form and substance reasonably satisfactory to ComVest, stating (a) the amounts (principal, interest, fees and other charges) required in order to pay in full all obligations of the Company to Silicon Valley Bank as of the Closing Date, and (b) that, upon receipt by Silicon Valley Bank of such stated payoff amount, all obligations of the Company to Silicon Valley Bank (other than inchoate indemnification obligations) shall be deemed satisfied and all liens and security interests securing the Company's obligations to Silicon Valley Bank shall be deemed released (with express authority to the Company to file or cause to be filed UCC termination statements and other releases in respect of all filed financing statements, collateral assignments and/or other filings with respect to such liens and security interests); and the Company shall utilize or direct the payment of a portion of the Initial Note Purchase Price to effect such full payoff of Silicon Valley Bank. 6.9 APPOINTMENT OF COMVEST DIRECTOR. The Company shall cause its Board of Directors to elect the ComVest Director to the Board of Directors as a Class II Director. ARTICLE 7 INDEMNIFICATION 7.1 INDEMNIFICATION OF COMVEST BY THE COMPANY. The Company hereby agrees to indemnify and hold harmless each of ComVest, its Affiliates, their investment advisors, their managing members, and each of their respective officers, managers, members, directors, partners, shareholders, and employees (collectively, the "COMVEST INDEMNITEES"), from and against any and all losses, claims, damages, judgments, penalties, liabilities and deficiencies (including the reasonable fees and expenses of legal counsel) (collectively, "LOSSES"), to the extent arising out of or in connection with: 35 (i) any misrepresentation, omission of fact or breach of any of the Company's representations or warranties contained in this Agreement or the other Transaction Documents, the annexes, schedules or exhibits hereto or any instrument, agreement or certificate entered into or delivered by the Company pursuant to this Agreement or the other Transaction Documents; or (ii) any failure by the Company to perform any of its covenants, agreements, undertakings or obligations set forth in this Agreement or the other Transaction Documents, the annexes, schedules or exhibits hereto or any instrument, agreement or certificate entered into or delivered by the Company pursuant to this Agreement or the other Transaction Documents. 7.2 INDEMNIFICATION OF THE COMPANY BY COM VEST. ComVest hereby agrees to indemnify and hold harmless the Company and its officers, directors and employees (collectively, the "COMPANY INDEMNITEES"), from and against any and all Losses to the extent arising out of or in connection with any misrepresentation, omission of fact or breach of any of ComVest's representations, warranties or covenants contained in this Agreement or the other Transaction Documents to which it is a party and any failure by ComVest to perform any of its covenants, agreements, undertakings or obligations set forth in this Agreement or the other Transaction Documents to which it is a party. 7.3 THIRD PARTY CLAIMS. Promptly after receipt by either party hereto seeking indemnification pursuant to this Article 7 (an "INDEMNIFIED PARTY") of written notice of any investigation, claim, proceeding or other action in respect of which indemnification is being sought (each, a "CLAIM"), the Indemnified Party promptly shall notify the party against whom indemnification pursuant to this Article 7 is being sought (the "INDEMNIFYING PARTY") of the commencement thereof; but the omission to so notify the Indemnifying Party shall not relieve it from any liability that it otherwise may have to the Indemnified Party, except to the extent that the Indemnifying Party is materially prejudiced and forfeits substantive rights and defenses by reason of such failure. In connection with any Claim, the Indemnifying Party shall be entitled to assume the defense thereof. Notwithstanding the assumption of the defense of any Claim by the Indemnifying Party, the Indemnified Party shall have the right to employ separate legal counsel and to participate in the defense of such Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs and expenses of such separate legal counsel to the Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall have concluded that representation of the Indemnified Party and the Indemnifying Party by the same legal counsel would not be appropriate due to actual or, as reasonably determined by legal counsel to the Indemnified Party, potentially differing interests between such parties in the conduct of the defense of such Claim, or if there may be legal defenses available to the Indemnified Party that are in addition to or disparate from those available to the Indemnifying Party, or (z) the Indemnifying Party shall have failed to employ legal counsel reasonably satisfactory to the Indemnified Party within a reasonable period of time after notice of the commencement of such Claim. If the Indemnified Party employs separate legal counsel in circumstances other than as described in clauses (x), (y) or (z) above, the fees, costs and expenses of such legal counsel shall be borne exclusively by the Indemnified Party. Except as provided above, the Indemnifying Party shall not, in connection with any Claim in the same jurisdiction, be liable for the fees and expenses of more than one firm of legal counsel for the Indemnified Party (together with appropriate local counsel). The Indemnifying Party shall not, without the prior written consent 36 of the Indemnified Party (which consent shall not unreasonably be withheld) settle or compromise any Claim or consent to the entry of any judgment that does not include an unconditional release of the Indemnified Party from all liabilities with respect to such Claim or judgment. 7.4 NON-EXCLUSIVE REMEDIES. The parties' rights to indemnification under this Article 7 are in addition to, and not exclusive of, any and all other rights and remedies granted to the parties in the Transaction Documents, all of which may be exercised singly or concurrently. ARTICLE 8 EXPENSES The Company covenants and agrees with ComVest that the Company shall pay or cause to be paid the following: (i) all expenses in connection with registration or qualification of the Warrant Shares for offering and sale under federal securities laws and state securities laws; (ii) a financing fee in the amount of $112,500 (the "FINANCING FEE"), which shall be fully earned by and payable to ComVest at Closing; (iii) a commitment fee in the amount of $50,000 (the "COMMITMENT FEE") in respect of the Post-Closing Commitment, which shall be fully earned by and payable to ComVest at Closing; (iv) the additional financing fee in respect of purchases of the Second Note and Additional Notes, which shall be fully earned by and payable to ComVest in accordance with Section 2.3(c); and (v) all reasonable costs and expenses incident to the performance of ComVest' s obligations hereunder which are not otherwise specifically provided for in this Section, including the fees and disbursements of ComVest's counsel and due diligence expenses, which payment or reimbursement shall not exceed $100,000 (the "COMVEST EXPENSES"). Other than as set forth in this Article 8, each of the parties hereto agrees that it shall each be responsible for and pay its own expenses and fees, including all legal, accounting and other professional fees, associated with the transactions contemplated by Transaction Documents. ARTICLE 9 SURVIVAL The representations and warranties of the Company and ComVest shall survive the Closing until eighteen (18) months following the Closing Date; provided, that the representations and warranties set forth in Sections 3.1, 3.7, 3.8, 4.1, 4.2, 4.3, 4.4 and 4.5 shall survive indefinitely. The agreements and covenants of the Company and ComVest, including the covenants and acknowledgments under Article 5 and the indemnification obligations under Article 7, shall survive the execution and delivery of this Agreement and the delivery of the Securities hereunder until such time as is specified in the applicable provision or, if no time is specified, indefinitely. ARTICLE 10 MISCELLANEOUS 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of New York, without giving effect to conflicts of laws issues. Each of the parties submits to the jurisdiction of the federal courts 37 whose district encompass the Borough of Manhattan, City of New York or the state courts of the State of New York sitting in the Borough of Manhattan, City of New York in connection with any dispute arising under this Agreement or any of the transactions contemplated hereby, and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. 10.2 COUNTERPARTS. This Agreement may be signed in two or more counterparts (and by facsimile), each of which shall be deemed an original. 10.3 HEADINGS. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement. 10.4 SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. 10.5 PARTIES IN INTEREST; SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their successors and assigns, and nothing in this 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. Except in connection with an assignment and transfer of the Notes in compliance with Section 5.1 of this Agreement and the terms of the Notes, neither the Company nor ComVest shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, ComVest may assign its rights hereunder to any of its Affiliates. 10.6 REMEDIES. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to ComVest by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that ComVest shall be entitled, in addition to all other available remedies in law or in equity, to an injunction or injunctions to prevent or cure any breaches of the provisions of this Agreement and to enforce specifically the terms and provisions of this Agreement, without the necessity of showing economic loss and without any bond or other security being required. 10.7 AMENDMENTS. This Agreement, including without limitation the Notes and Warrants, may be modified or amended in writing by the Company and ComVest. No waiver hereunder shall be effective unless in writing signed by the party to be charged therewith. 10.8 MERGER. This Agreement, together with the other Transaction Documents, supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof, including, without limitation, the Term Sheet dated December 29, 2004. 10.9 NOTICES. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission) or two business days following deposit 38 of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at 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) 450-4370 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: ComVest Investment Partners II LLC One North Clematis, Suite 300 West Palm Beach, Florida 33401 ATTENTION: Carl Kleidman Telephone: (561) 868-6070 e-mail: Carlk@ComVest.com 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 39 10.10 WAIVER OF JURY TRIAL. Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby. Each of the parties hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the other hereto have been induced to enter into this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, as applicable, by, among other things, the mutual waivers and certifications in this Section 10.10. [REMAINDER OF PAGE BLANK] 40 IN WITNESS WHEREOF, this Agreement has been duly executed by each of the undersigned. COMPANY: FISCHER IMAGING CORPORATION By: -------------------------------------------- Name: Harris Ravine Title: President and Chief Executive Officer COMVEST INVESTMENT PARTNERS II LLC By: -------------------------------------------- Name: Title: 41 EX-3 4 e1042836.txt AMDMT NO. 1 TO NOTE & WARRANT PURCHASE AGREEMENT EXHIBIT 3 AMENDMENT NO. 1 TO NOTE AND WARRANT PURCHASE AGREEMENT AMENDMENT No. 1 (this "Amendment"), dated as of March 29, 2005, to the Note and Warrant Purchase Agreement (the "Agreement"), dated as of February 22, 2005, among Fischer Imaging Corporation, a Delaware corporation (the "Company"), and ComVest Investment Partners II LLC, a Delaware limited liability company ("ComVest"). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Agreement. RECITALS: WHEREAS, the Company and ComVest have entered into the Agreement; WHEREAS, pursuant to and in accordance with Section 10.7 of the Agreement, the parties wish to amend the Agreement as set forth in this Amendment; NOW, THEREFORE, in consideration of the rights and obligations contained herein, and for other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree as follows: Section 1. Amendments to the Agreement. (a) The third WHEREAS clause of the Agreement is hereby amended by deleting the parenthetical at the end thereof and replacing it with the following: "(each, as the same may be amended or restated from time to time, a "Warrant" and collectively, the "Warrants")". (b) Section 5.11(i) of the Agreement is hereby amended by adding the following after the word "indicated" and before the colon: "(except to the extent of any changes to EBITDA the may result from charges to EBITDA due to the implementation or exercise of the Put Option (as defined in the Warrants)". (c) Section 5.12(c) of the Agreement is hereby amended by deleting the word "and" before clause (ii) thereof and adding the following after the end of clause (ii) thereof and before the first semi-colon: "and (iii) Indebtedness incurred as a result of the exercise of the Put Option or in order to fund the payment required to be made by the Company upon exercise of the Put Option". (d) Section 5.12(e) of the Agreement is hereby amended by adding the following at the end thereof: ", except for the purchase of the Warrants if the Put Option thereunder is exercised". (e) Section 5.12(f) of the Agreement is hereby amended by adding the following at the end thereof: ", except payment of the purchase price for the Warrants if the Put Option thereunder is exercised". (f) Section 5.12(i) of the Agreement is hereby amended by deleting the word "and" before clause (iv) thereof and adding the following at the end thereof: "and (v) the acquisition of Warrants upon exercise of the Put Option thereunder". Section 2. Waiver. ComVest hereby waives the requirement specified in Section 2.3(a) of the Agreement that the Company deliver to ComVest the FDA Certificate as a condition to the obligation of ComVest to purchase the Second Note. For the avoidance of doubt, ComVest does not waive the requirement that the Company deliver to ComVest the FDA Certificate as a condition to the obligation of ComVest to purchase any Additional Notes under Section 2.3(b) of the Agreement, or any other conditions precedent to any such purchase, and the Company hereby agrees that it shall be required to deliver the FDA Certificate to ComVest as a condition to the obligation of ComVest to purchase any Additional Notes. Section 3. Expenses. The Company shall pay to ComVest all reasonable costs and expenses of ComVest, including the fees and disbursements of ComVest's counsel, associated with this Amendment, the Amended and Restated Warrant to Purchase Shares of Common Stock being entered into by the Company on the date hereof, the Deposit Account Control Agreement also being entered on the date hereof and any related documents and agreements. Section 4. Parties in Interest; Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each party hereto and its successors and assigns, and nothing in this Amendment, 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 Amendment. Except in connection with an assignment and transfer of the Notes in compliance with Section 5.1 of the Agreement and the terms of the Notes, neither the Company nor ComVest shall assign this Amendment or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, ComVest may assign its rights hereunder to any of its Affiliates to whom it assigns its rights under the Agreement. Section 5. Entire Agreement. This Amendment constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between ComVest and the Company with respect to the subject matter hereof. Except as amended by this Amendment, the Agreement shall continue in full force and effect. Section 6. Severability. If any term or other provision of this Amendment shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Amendment or the validity or enforceability of this Amendment in any other jurisdiction. Section 7. Counterparts. This Amendment may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 2 Section 8. Governing Law. This Amendment shall be governed by, and interpreted in accordance with, the internal laws of the State of New York, without giving effect to conflicts of law issues. IN WITNESS WHEREOF, the Company and ComVest have caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. FISCHER IMAGING CORPORATION By: ------------------------------------------------- Name: Title: COMVEST INVESTMENT PARTNERS II LLC By: ------------------------------------------------- Name: Title: 3 EX-4 5 e1042539.txt SENIOR SECURED PROMISSORY NOTE EXHIBIT 4 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION, IN REASONABLY ACCEPTABLE FORM AND SCOPE, OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS. THE TRANSFER AND SALE OF THIS NOTE IS ALSO RESTRICTED PURSUANT TO SECTION 8 OF THIS NOTE. SENIOR SECURED PROMISSORY NOTE ------------------------------ $ 5,000,000 February 22, 2005 FOR VALUE RECEIVED, Fischer Imaging Corporation, a Delaware corporation (the "COMPANY"), hereby promises to pay to the order of ComVest Investment Partners II LLC, a Delaware limited liability company, or registered assigns (the "HOLDER"), the sum of Five Million Dollars ($5,000,000) (the "PRINCIPAL"), with interest thereon, on the terms and conditions set forth herein and in the Note and Warrant Purchase Agreement dated February 22, 2005 between the Company and the Holder (the "PURCHASE AGREEMENT"). Payments of principal of, interest on and any other amounts with respect to this Senior Secured Promissory Note (this "NOTE") are to be made in lawful money of the United States of America. The amounts due under this Note are secured pursuant to the terms of that certain Security Agreement between the Company and the Holder of even date herewith. The Holder shall release its security interest upon payment in full of the entire Principal balance of this Note and all accrued Interest and other amounts payable hereunder. Notwithstanding any provision of this Note, the Purchase Agreement or any other agreement to the contrary, the Company shall not be required to pay, and the Holder shall not be permitted to contract for, take, reserve, charge or receive, any compensation that constitutes interest under Applicable Law in excess of the maximum amount of interest permitted by Applicable Law. All terms used in this Note but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. The original Holder of this Note will be deemed, by its acceptance hereof, to have agreed to the provisions and to have made the representations and warranties set forth in Article 3 of the Purchase Agreement. 1. INTEREST; PAYMENTS. (a) This Note shall bear interest on Principal amounts outstanding from time to time from the date hereof until maturity at an annual rate of eight and one-half percent (8.50%) ("INTEREST"); provided, however, that upon the occurrence and during the continuance of any Event of Default hereunder, the applicable Interest rate hereunder shall be 11.50% per Page 1 of 8 Page Note annum. All Interest shall be calculated on the basis of a 360-day year counting the actual days elapsed. Accrued Interest shall be payable, commencing November 15, 2005, and quarterly thereafter on each February 15, May 15, August 15 and November 15 thereafter (or, if such day is not a business day, on the next succeeding business day). (b) The Principal of this Note shall be payable (i) in ten (10) equal quarterly installments, each such installment in an amount equal to one (1%) percent of the original Principal amount of this Note, which installments shall be payable commencing February 15, 2006, and shall continue quarterly thereafter on each May 15, August 15, November 15 and February 15 thereafter (or, if such day is not a business day, on the next succeeding business day), and (ii) in an eleventh (11th) and final installment due and payable on August 15, 2008. (c) Anything contained in Sections 1(a) and 1(b) above to the contrary notwithstanding, all unpaid Principal and the accrued and unpaid Interest thereon shall be due and payable on the earlier of (i) August 15, 2008, or (ii) the Sale of the Company (the "MATURITY DATE"). 2. PREPAYMENT. (a) The unpaid Principal balance of this Note, together with all accrued and unpaid Interest, may at the Company's option be prepaid in whole or in part, at any time or from time to time upon fifteen (15) days' prior written notice to the Holder stating the Principal amount to be prepaid and the date on which such prepayment shall be made. (b) Within five (5) business days after the Company's receipt of any Equity Proceeds at any time or from time to time, the Company shall be required to make a prepayment of Principal under this Note in an amount equal to (i) one-half of such Equity Proceeds, multiplied by (ii) a fraction, the numerator of which shall be the Principal balance of this Note as of the date of such prepayment, and the denominator of which shall be the aggregate principal balance of all outstanding Notes as of the date of such prepayment. (c) Within forty-five (45) days after the close of each fiscal quarter (60 days in the case of the last fiscal quarter of each fiscal year) commencing with the fiscal quarter ending December 31, 2005, the Company shall be required to make a prepayment of Principal under this Note in an amount equal to (i) one-half of the positive Excess Cash Flow (if any) for such fiscal quarter, multiplied by (ii) a fraction, the numerator of which shall be the Principal balance of this Note as of the close of such fiscal quarter, and the denominator of which shall be the aggregate principal balance of all outstanding Notes as of the close of such fiscal quarter issued pursuant to the Purchase Agreement. (d) Any and all prepayments of Principal hereunder shall be applied to the remaining installments under Section 1 above in inverse order of maturity. Each prepayment of Principal shall be accompanied by all accrued Interest on the Principal amount prepaid accrued to the date of prepayment. 3. DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: Page 2 of 8 Page Note 7(a) "APPLICABLE LAW" means that law in effect from time to time and applicable to this Note which lawfully permits the contracting, charging, taking, reserving and/or collection of the highest permissible lawful, non-usurious rate of interest or amount of interest on or in connection with this Note. (b) "EBITDA" means, for the subject fiscal quarter, the sum of the following, determined in accordance with generally accepted accounting principles consistently applied and on a consolidated basis for the Company and its Subsidiaries: (i) Net Income, plus (ii) the sum of the following to the extent deducted in determining Net Income: (A) income and franchise taxes, (B) interest expense, and (C) depreciation, amortization, impairment of good will or other intangible assets, and other non-cash charges (including, without limitation, any impairment or similar charges), minus (iii) any non-cash gains. (c) "EQUITY PROCEEDS" means the aggregate proceeds (which, to the extent received in a form other than cash, shall be deemed to be a cash amount equal to the fair market value of the non-cash proceeds) received by or on behalf of the Company or any of its Subsidiaries at any time and from time to time from or in respect of the issuance and/or exercise of any equity securities and/or any options, warrants, convertible securities or other rights to purchase or acquire equity securities of the Company or any Subsidiary other than (i) issuances of securities under any Option Plan or similar plan approved by the stockholders of the Company, (ii) the exercise of any option granted or to be granted under any Option Plan or similar plan approved by the stockholders of the Company or (iii) the exercise of the Warrants, in each case net of any underwriting commissions, placement agent fees and other reasonable expenses paid or incurred by the Company in respect thereof (exclusive of any amounts paid or payable to officers, directors or other affiliates of the Company or any Subsidiary). (d) "EXCESS CASH FLOW" means, for the subject fiscal quarter, the sum of the following, determined in accordance with generally accepted accounting principles consistently applied and on a consolidated basis for the Company and its Subsidiaries: (i) EBITDA, minus (ii) income and franchise taxes to the extent paid or due and payable in cash, minus (iii) interest expense to the extent paid or due and payable in cash, minus (iv) all net principal payments made in respect of indebtedness for money borrowed (excluding mandatory prepayments hereunder measured by Excess Cash Flow), minus (v) capital expenditures paid in cash (including principal payments made under capitalized leases and purchase money financing of capital assets) up to a maximum of $312,500 per fiscal quarter, plus (vi) without limitation of Section 5.12(c) of the Purchase Agreement, net cash proceeds of any new borrowings (other than borrowings represented by Notes issued pursuant to the Purchase Agreement and borrowings solely for the purchase of capital assets within the limitations of Section 5.12(1) of the Purchase Agreement). (e) "NET INCOME" means, with respect to any fiscal quarter, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis and accordance with generally accepted accounting principles consistently applied, provided that, for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (i) any restoration of any contingency reserve, except to the extent that provision for such reserve was made out of income during the subject fiscal quarter, and/or (ii) any amounts deducted for amortization of depreciation to the extent resulting from the write-up of any asset. Page 3 of 8 Page Note (f) "PERSON" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, Section 13D group, or a governmental entity (or any department, agency or political subdivision thereof). (g) "SALE OF THE COMPANY" means any transaction or series of transactions pursuant to which any Person(s) other than the Holder acquire(s) (i) interests in the Company (or the surviving or resulting entity in such transaction or transactions) possessing more than fifty percent (50%) of the voting power (other than voting rights accruing only in the event of a default, breach or event of noncompliance), whether by merger, consolidation, reorganization, combination, issuance, sale or transfer of the Company's capital stock, or otherwise, or (ii) more than fifty percent (50%) of the Company's and its Subsidiaries' assets determined on a consolidated basis (measured by either book value in accordance with generally accepted accounting principles consistently applied or fair market value determined in the reasonable good faith judgment of the Company's Board of Directors). (h) "SUBSIDIARY" means, at the time as of which any determination is being made, any entity in which the Company owns, either directly or indirectly through Subsidiaries, a general partner's interest, or shares of stock or membership interests having a majority of the general voting power in electing the board of directors or managers of such entity. 4. PRIORITY OF NOTE. This Note shall be senior in right of payment to all classes of the Company's capital stock, including but not limited to, the Common Stock and any shares of preferred stock of the Company, shall be pari passu in right of payment to any and all other Notes issued pursuant to the Purchase Agreement, and shall be senior to all other indebtedness of the Company. 5. TIME OF THE ESSENCE. It is agreed that time is of the essence on this Note. 6. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event of Default": (a) The Company shall default in the payment when due of any Principal of or Interest on this Note whether on a scheduled payment date, at maturity, by reason of any mandatory prepayment in accordance with Section 2(b) or Section 2(c), or by acceleration or otherwise, and such default shall continue for fifteen (15) business days in the case of a default with respect to a mandatory prepayment under Section 2(c) or five (5) business days in any other case; or (b) The Company or any of its Subsidiaries (i) shall admit in writing its inability to pay its debts as they mature, or (ii) shall make a general assignment for the benefit of creditors, or (iii) shall be adjudicated bankrupt or insolvent, or (iv) shall commence a voluntary proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect; or (c) An involuntary proceeding shall be commenced against the Company or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or a receiver, liquidator, trustee, custodian, conservator or other such person shall be appointed by Page 4 of 8 Page Note any court to take charge of the Company's or any Subsidiary's affairs, assets or business, and (i) the Company or the subject Subsidiary shall admit to the material allegations of the petition or complaint in such proceeding, or (ii) such involuntary proceeding or appointment shall remain undismissed and unstayed for a period of sixty (60) days; or (d) If any representation or warranty made by the Company in the Purchase Agreement, the Security Agreement or the FDA Certificate shall be determined to have been false or misleading in any material respect as of the date made; or (e) Any failure by the Company to perform or observe any of its covenants contained in (i) the Purchase Agreement other than the covenants in Sections 5.3, 5.4, 5.6, 5.11 (a)-(h) or 5.13(b) or (ii) the Security Agreement, the Registration Rights Agreement or in Sections 5.3, 5.4, 5.6, 5.11(a)-(h) or 5.13(b) of the Purchase Agreement where such failure continues for a period in excess of fifteen (15) days after written notice from the Holder or actual knowledge of the Company of such failure; provided however, that any failure requiring the payment of cash fees under Section 2(c) of the Registration Rights Agreement shall not constitute an Event of Default under this Section 6; or (f) If a final judgment or judgments in an aggregate uninsured amount in excess of $250,000 shall be rendered against the Company or any of its Subsidiaries which is not, within thirty (30) days after the entry thereof, discharged or the execution thereof stayed pending appeal, or within thirty (30) days after the expiration of any such stay, such judgment is not discharged; or (g) Any default with respect to any other indebtedness or liabilities of the Company or any of its Subsidiaries in any amount in excess of (i) $250,000 individually or in the aggregate with respect to indebtedness, (ii) $250,000 individually with respect to liabilities and (iii) $750,000 in the aggregate with respect to liabilities and indebtedness, in each case if the effect of such default is to permit the holder(s) to accelerate the maturity of such indebtedness or liabilities as the case may be; or (h) The occurrence of any levy upon or seizure or attachment of any property of the Company or any of its Subsidiaries having an aggregate fair market value in excess of $250,000, which levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof; or (i) The suspension of all or any substantial portion of the normal business operations of the Company and its Subsidiaries (taken as a whole) for any period in excess of ten (10) consecutive days; or (j) Any liquidation, dissolution or winding up of the Company and its Subsidiaries (taken as a whole) or its business; or (k) Any prepayment under any of the other Notes issued pursuant to the Purchase Agreement unless, simultaneously with such prepayment, the Company makes a prepayment under this Note equal (on a percentage basis) to the portion of such other Note which is then being prepaid; or Page 5 of 8 Page Note (l) The occurrence of any "Event of Default" under and as defined in any of the other Notes issued pursuant to the Purchase Agreement. 7. CONSEQUENCES OF AN EVENT OF DEFAULT. (a) NON-PAYMENT; BANKRUPTCY. If there shall occur any Event of Default specified in subsections (a), (b) or (c) of Section 6 hereof, the unpaid Principal balance of this Note and all accrued Interest thereon shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived. (b) OTHER DEFAULTS. If any other Event of Default shall occur, the Holder may, at its option, by written notice to the Company, declare the entire unpaid Principal balance of this Note and all accrued Interest thereon due and payable, and the same shall thereupon become immediately due and payable without presentment, demand, protest or (except as expressly required hereby) notice of any kind, all of which are expressly waived. (c) FINANCIAL STATEMENTS. Upon the occurrence and during the continuance of any Event of Default, upon the request of the Holder, the Company shall provide to the Holder monthly financial statements of the Company within fifteen (15) days after the end of each month. 8. RESTRICTIONS ON SALE AND TRANSFER. Until thirty (30) days after the expiration of the Post-Closing Commitment, the Holder may not assign or transfer this Note or any right or obligation hereunder. After such date, this Note may only be transferred in amounts of at least $1,000,000 and upon fifteen (15) days prior written notice to the Company. Neither this Note nor any interest or participation herein may be assigned or transferred to Hologic, Inc., General Electric Medical Systems, Philips Medical Systems, Ethicon Endo-Surgery, Inc. or Siemens Medical Solutions; to any other business or entity which directly or indirectly engages in the business of developing, designing, manufacturing, supplying and/or distributing diagnostic medical imaging products competitive with any of the Company's then current product lines; to Morgan Nields or any business or entity in which he is employed or is otherwise involved or has a greater than 5% ownership interest; or to any Affiliate of any of the foregoing. Notwithstanding the foregoing, the Holder shall be entitled to transfer all or any portion of this Note to its Affiliates or to make a distribution of all or any portion of the Notes to its members. 9. PAYMENT; DELIVERY. Any check, draft, money order or other instrument given in payment of all or any portion hereof may be accepted by the Holder and handled in collection in the customary manner, but the same shall not constitute payment hereunder or diminish any rights of the Holder except to the extent that actual cash proceeds of such instrument are unconditionally received by the Holder. 10. COMPLIANCE WITH APPLICABLE LAW. It is expressly stipulated and agreed to be the intent of Company and Holder at all times to comply with the Applicable Law in connection with this Note. All sums paid or agreed to be paid to the Holder for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until Page 6 of 8 Page Note payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the applicable usury ceiling. 11. NOTICES. Any notice under this Note must be in writing, and shall be given or served, unless otherwise expressly provided herein, by depositing the same in the United States Mail, postpaid and certified and addressed to the party to be notified, with return receipt requested, or by delivering the same by courier or in person to such party (or, if the party or parties to be notified be incorporated, to an officer of such party), or by e-mail to the e-mail address set forth below. Notice deposited in the mail, postpaid and certified with return receipt requested, shall be deemed received and effective upon the deposit in a proper United States depository. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purposes of notice, the addresses of the parties for the receipt of notice hereunder are: If to the Company: ------------------ Fischer Imaging Corporation 12300 N. Grant Street Denver, CO 80241 Attention: Harris Ravine Tel No.: (303) 450-4370 Fax No.: (303) 252-4256 If to the Holder: ----------------- ComVest Investment Partners II LLC One North Clematis, Suite 300 West Palm Beach, FL 33401 Attention: Carl Kleidman Tel No.: (561) 868-6070 E-mail: carlk@comvest.com Any party shall have the right from time to time, and at any time, to change its address for the receipt of notice by giving at least five (5) days' prior written notice of the change of its address to the other parties in the manner specified herein. 12. ENTIRE AGREEMENT. This Note, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding between the parties and supersede and preempt any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. 13. SEVERABILITY. Whenever possible, each provision of this Note will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note is held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect under any applicable law, such provision shall thereupon be deemed modified to the extent necessary to render same valid, or excised from this Note, as the situation may require, and this Note 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. Page 7 of 8 Page Note 14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. The provisions of this Note shall be governed 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 irrevocably consents 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 collection or enforcement of this Note, 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 HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION OR PROCEEDING RELATING TO OR FOR THE COLLECTION OR ENFORCEMENT OF THIS NOTE. 15. COUNTERPARTS. This Note may be executed in multiple counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 16. MISCELLANEOUS. No delay or failure by the Holder in exercising any right, power, privilege, or remedy shall be deemed to be a waiver of the same or any part thereof; nor shall any single or partial exercise thereof or any failure to exercise the same in any instance preclude any future exercise thereof, or the exercise of any other right, power, privilege or remedy, and the rights and remedies provided for hereunder are cumulative and not exclusive of any other right or remedy available at law or in equity. Neither any provision of this Note nor any performance hereunder may be amended or waived except pursuant to an agreement in writing signed by the party against whom enforcement thereof is sought. Except as otherwise expressly provided in this Note, the Company hereby waives diligence, demand, presentment for payment, protest, dishonor, nonpayment, default, and notice of any and all of the foregoing. All amounts payable hereunder shall be payable without relief under any applicable valuation and appraisement laws. The Company hereby expressly agrees that this Note, and/or any payment hereunder, may be extended, modified or subordinated (by forbearance or otherwise) from time to time, without in any way affecting the liability of the Company hereunder. 17. COLLECTION COSTS. In the event that the Holder shall, after the occurrence of an Event of Default, turn this Note over to an attorney for collection, the Company shall further be liable for and shall pay to the Holder all collection costs and expenses incurred by the Holder, including reasonable attorneys' fees and expenses; and the Holder may take judgment for all such amounts in addition to all other sums payable hereunder. FISCHER IMAGING CORPORATION By: /s/ --------------------------------------------- Name: Harris Ravine Title: President and Chief Executive Officer Page 8 of 8 Page Note EX-5 6 e1042825.txt SENIOR SECURED PROMISSORY NOTE EXHIBIT 5 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION, IN REASONABLY ACCEPTABLE FORM AND SCOPE, OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS. THE TRANSFER AND SALE OF THIS NOTE IS ALSO RESTRICTED PURSUANT TO SECTION 8 OF THIS NOTE. SENIOR SECURED PROMISSORY NOTE $ 2,000,000 March 30, 2005 FOR VALUE RECEIVED, Fischer Imaging Corporation, a Delaware corporation (the "COMPANY"), hereby promises to pay to the order of ComVest Investment Partners II LLC, a Delaware limited liability company, or registered assigns (the "HOLDER"), the sum of Two Million Dollars ($2,000,000) (the "PRINCIPAL"), with interest thereon, on the terms and conditions set forth herein and in the Note and Warrant Purchase Agreement dated February 22, 2005 between the Company and the Holder (as amended, the "PURCHASE AGREEMENT"). Payments of principal of, interest on and any other amounts with respect to this Senior Secured Promissory Note (this "NOTE") are to be made in lawful money of the United States of America. The amounts due under this Note are secured pursuant to the terms of that certain Security Agreement between the Company and the Holder of even date herewith. The Holder shall release its security interest upon payment in full of the entire Principal balance of this Note and all accrued Interest and other amounts payable hereunder. Notwithstanding any provision of this Note, the Purchase Agreement or any other agreement to the contrary, the Company shall not be required to pay, and the Holder shall not be permitted to contract for, take, reserve, charge or receive, any compensation that constitutes interest under Applicable Law in excess of the maximum amount of interest permitted by Applicable Law. All terms used in this Note but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. The original Holder of this Note will be deemed, by its acceptance hereof, to have agreed to the provisions and to have made the representations and warranties set forth in Article 3 of the Purchase Agreement. 1. INTEREST; PAYMENTS. (a) This Note shall bear interest on Principal amounts outstanding from time to time from the date hereof until maturity at an annual rate of eight and one-half percent (8.50%) ("INTEREST"); provided, however, that upon the occurrence and during the continuance of any Event of Default hereunder, the applicable Interest rate hereunder shall be 11.50% Page 1 of 8 Page Note per annum. All Interest shall be calculated on the basis of a 360-day year counting the actual days elapsed. Accrued Interest shall be payable, commencing November 15, 2005, and quarterly thereafter on each February 15, May 15, August 15 and November 15 thereafter (or, if such day is not a business day, on the next succeeding business day). (b) The Principal of this Note shall be payable (i) in ten (10) equal quarterly installments, each such installment in an amount equal to one (1%) percent of the original Principal amount of this Note, which installments shall be payable commencing February 15, 2006, and shall continue quarterly thereafter on each May 15, August 15, November 15 and February 15 thereafter (or, if such day is not a business day, on the next succeeding business day), and (ii) in an eleventh (11th) and final installment due and payable on August 15, 2008. (c) Anything contained in Sections 1(a) and 1(b) above to the contrary notwithstanding, all unpaid Principal and the accrued and unpaid Interest thereon shall be due and payable on the earlier of (i) August 15, 2008, or (ii) the Sale of the Company (the "MATURITY DATE"). 2. PREPAYMENT. (a) The unpaid Principal balance of this Note, together with all accrued and unpaid Interest, may at the Company's option be prepaid in whole or in part, at any time or from time to time upon fifteen (15) days' prior written notice to the Holder stating the Principal amount to be prepaid and the date on which such prepayment shall be made. (b) Within five (5) business days after the Company's receipt of any Equity Proceeds at any time or from time to time, the Company shall be required to make a prepayment of Principal under this Note in an amount equal to (i) one-half of such Equity Proceeds, multiplied by (ii) a fraction, the numerator of which shall be the Principal balance of this Note as of the date of such prepayment, and the denominator of which shall be the aggregate principal balance of all outstanding Notes as of the date of such prepayment. (c) Within forty-five (45) days after the close of each fiscal quarter (60 days in the case of the last fiscal quarter of each fiscal year) commencing with the fiscal quarter ending December 31, 2005, the Company shall be required to make a prepayment of Principal under this Note in an amount equal to (i) one-half of the positive Excess Cash Flow (if any) for such fiscal quarter, multiplied by (ii) a fraction, the numerator of which shall be the Principal balance of this Note as of the close of such fiscal quarter, and the denominator of which shall be the aggregate principal balance of all outstanding Notes as of the close of such fiscal quarter issued pursuant to the Purchase Agreement. (d) Any and all prepayments of Principal hereunder shall be applied to the remaining installments under Section 1 above in inverse order of maturity. Each prepayment of Principal shall be accompanied by all accrued Interest on the Principal amount prepaid accrued to the date of prepayment. 3. DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: Page 2 of 8 Page Note 7(a) "APPLICABLE LAW" means that law in effect from time to time and applicable to this Note which lawfully permits the contracting, charging, taking, reserving and/or collection of the highest permissible lawful, non-usurious rate of interest or amount of interest on or in connection with this Note. (b) "EBITDA" means, for the subject fiscal quarter, the sum of the following, determined in accordance with generally accepted accounting principles consistently applied and on a consolidated basis for the Company and its Subsidiaries: (i) Net Income, plus (ii) the sum of the following to the extent deducted in determining Net Income: (A) income and franchise taxes, (B) interest expense, and (C) depreciation, amortization, impairment of good will or other intangible assets, and other non-cash charges (including, without limitation, any impairment or similar charges), minus (iii) any non-cash gains. (c) "EQUITY PROCEEDS" means the aggregate proceeds (which, to the extent received in a form other than cash, shall be deemed to be a cash amount equal to the fair market value of the non-cash proceeds) received by or on behalf of the Company or any of its Subsidiaries at any time and from time to time from or in respect of the issuance and/or exercise of any equity securities and/or any options, warrants, convertible securities or other rights to purchase or acquire equity securities of the Company or any Subsidiary other than (i) issuances of securities under any Option Plan or similar plan approved by the stockholders of the Company, (ii) the exercise of any option granted or to be granted under any Option Plan or similar plan approved by the stockholders of the Company or (iii) the exercise of the Warrants, in each case net of any underwriting commissions, placement agent fees and other reasonable expenses paid or incurred by the Company in respect thereof (exclusive of any amounts paid or payable to officers, directors or other affiliates of the Company or any Subsidiary). (d) "EXCESS CASH FLOW" means, for the subject fiscal quarter, the sum of the following, determined in accordance with generally accepted accounting principles consistently applied and on a consolidated basis for the Company and its Subsidiaries: (i) EBITDA, minus (ii) income and franchise taxes to the extent paid or due and payable in cash, minus (iii) interest expense to the extent paid or due and payable in cash, minus (iv) all net principal payments made in respect of indebtedness for money borrowed (excluding mandatory prepayments hereunder measured by Excess Cash Flow), minus (v) capital expenditures paid in cash (including principal payments made under capitalized leases and purchase money financing of capital assets) up to a maximum of $312,500 per fiscal quarter, plus (vi) without limitation of Section 5.12(c) of the Purchase Agreement, net cash proceeds of any new borrowings (other than borrowings represented by Notes issued pursuant to the Purchase Agreement and borrowings solely for the purchase of capital assets within the limitations of Section 5.12(1) of the Purchase Agreement). (e) "NET INCOME" means, with respect to any fiscal quarter, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis and accordance with generally accepted accounting principles consistently applied, provided that, for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (i) any restoration of any contingency reserve, except to the extent that provision for such reserve was made out of income during the subject fiscal quarter, and/or (ii) any amounts deducted for amortization of depreciation to the extent resulting from the write-up of any asset. Page 3 of 8 Page Note (f) "PERSON" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, Section 13D group, or a governmental entity (or any department, agency or political subdivision thereof). (g) "SALE OF THE COMPANY" means any transaction or series of transactions pursuant to which any Person(s) other than the Holder acquire(s) (i) interests in the Company (or the surviving or resulting entity in such transaction or transactions) possessing more than fifty percent (50%) of the voting power (other than voting rights accruing only in the event of a default, breach or event of noncompliance), whether by merger, consolidation, reorganization, combination, issuance, sale or transfer of the Company's capital stock, or otherwise, or (ii) more than fifty percent (50%) of the Company's and its Subsidiaries' assets determined on a consolidated basis (measured by either book value in accordance with generally accepted accounting principles consistently applied or fair market value determined in the reasonable good faith judgment of the Company's Board of Directors). (h) "SUBSIDIARY" means, at the time as of which any determination is being made, any entity in which the Company owns, either directly or indirectly through Subsidiaries, a general partner's interest, or shares of stock or membership interests having a majority of the general voting power in electing the board of directors or managers of such entity. 4. PRIORITY OF NOTE. This Note shall be senior in right of payment to all classes of the Company's capital stock, including but not limited to, the Common Stock and any shares of preferred stock of the Company, shall be pari passu in right of payment to any and all other Notes issued pursuant to the Purchase Agreement, and shall be senior to all other indebtedness of the Company. 5. TIME OF THE ESSENCE. It is agreed that time is of the essence on this Note. 6. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event of Default": (a) The Company shall default in the payment when due of any Principal of or Interest on this Note whether on a scheduled payment date, at maturity, by reason of any mandatory prepayment in accordance with Section 2(b) or Section 2(c), or by acceleration or otherwise, and such default shall continue for fifteen (15) business days in the case of a default with respect to a mandatory prepayment under Section 2(c) or five (5) business days in any other case; or (b) The Company or any of its Subsidiaries (i) shall admit in writing its inability to pay its debts as they mature, or (ii) shall make a general assignment for the benefit of creditors, or (iii) shall be adjudicated bankrupt or insolvent, or (iv) shall commence a voluntary proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect; or (c) An involuntary proceeding shall be commenced against the Company or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or a receiver, liquidator, trustee, custodian, conservator or other such person shall be appointed by Page 4 of 8 Page Note any court to take charge of the Company's or any Subsidiary's affairs, assets or business, and (i) the Company or the subject Subsidiary shall admit to the material allegations of the petition or complaint in such proceeding, or (ii) such involuntary proceeding or appointment shall remain undismissed and unstayed for a period of sixty (60) days; or (d) If any representation or warranty made by the Company in the Purchase Agreement, the Security Agreement or the FDA Certificate shall be determined to have been false or misleading in any material respect as of the date made; or (e) Any failure by the Company to perform or observe any of its covenants contained in (i) the Purchase Agreement other than the covenants in Sections 5.3, 5.4, 5.6, 5.11 (a)-(h) or 5.13(b) or (ii) the Security Agreement, the Registration Rights Agreement or in Sections 5.3, 5.4, 5.6, 5.11(a)-(h) or 5.13(b) of the Purchase Agreement where such failure continues for a period in excess of fifteen (15) days after written notice from the Holder or actual knowledge of the Company of such failure; provided however, that any failure requiring the payment of cash fees under Section 2(c) of the Registration Rights Agreement shall not constitute an Event of Default under this Section 6; or (f) If a final judgment or judgments in an aggregate uninsured amount in excess of $250,000 shall be rendered against the Company or any of its Subsidiaries which is not, within thirty (30) days after the entry thereof, discharged or the execution thereof stayed pending appeal, or within thirty (30) days after the expiration of any such stay, such judgment is not discharged; or (g) Any default with respect to any other indebtedness or liabilities of the Company or any of its Subsidiaries in any amount in excess of (i) $250,000 individually or in the aggregate with respect to indebtedness, (ii) $250,000 individually with respect to liabilities and (iii) $750,000 in the aggregate with respect to liabilities and indebtedness, in each case if the effect of such default is to permit the holder(s) to accelerate the maturity of such indebtedness or liabilities as the case may be; or (h) The occurrence of any levy upon or seizure or attachment of any property of the Company or any of its Subsidiaries having an aggregate fair market value in excess of $250,000, which levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof; or (i) The suspension of all or any substantial portion of the normal business operations of the Company and its Subsidiaries (taken as a whole) for any period in excess of ten (10) consecutive days; or (j) Any liquidation, dissolution or winding up of the Company and its Subsidiaries (taken as a whole) or its business; or (k) Any prepayment under any of the other Notes issued pursuant to the Purchase Agreement unless, simultaneously with such prepayment, the Company makes a prepayment under this Note equal (on a percentage basis) to the portion of such other Note which is then being prepaid; or Page 5 of 8 Page Note (l) The occurrence of any "Event of Default" under and as defined in any of the other Notes issued pursuant to the Purchase Agreement. 7. CONSEQUENCES OF AN EVENT OF DEFAULT. (a) NON-PAYMENT; BANKRUPTCY. If there shall occur any Event of Default specified in subsections (a), (b) or (c) of Section 6 hereof, the unpaid Principal balance of this Note and all accrued Interest thereon shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived. (b) OTHER DEFAULTS. If any other Event of Default shall occur, the Holder may, at its option, by written notice to the Company, declare the entire unpaid Principal balance of this Note and all accrued Interest thereon due and payable, and the same shall thereupon become immediately due and payable without presentment, demand, protest or (except as expressly required hereby) notice of any kind, all of which are expressly waived. (c) FINANCIAL STATEMENTS. Upon the occurrence and during the continuance of any Event of Default, upon the request of the Holder, the Company shall provide to the Holder monthly financial statements of the Company within fifteen (15) days after the end of each month. 8. RESTRICTIONS ON SALE AND TRANSFER. Until thirty (30) days after the expiration of the Post-Closing Commitment, the Holder may not assign or transfer this Note or any right or obligation hereunder. After such date, this Note may only be transferred in amounts of at least $1,000,000 and upon fifteen (15) days prior written notice to the Company. Neither this Note nor any interest or participation herein may be assigned or transferred to Hologic, Inc., General Electric Medical Systems, Philips Medical Systems, Ethicon Endo-Surgery, Inc. or Siemens Medical Solutions; to any other business or entity which directly or indirectly engages in the business of developing, designing, manufacturing, supplying and/or distributing diagnostic medical imaging products competitive with any of the Company's then current product lines; to Morgan Nields or any business or entity in which he is employed or is otherwise involved or has a greater than 5% ownership interest; or to any Affiliate of any of the foregoing. Notwithstanding the foregoing, the Holder shall be entitled to transfer all or any portion of this Note to its Affiliates or to make a distribution of all or any portion of the Notes to its members. 9. PAYMENT; DELIVERY. Any check, draft, money order or other instrument given in payment of all or any portion hereof may be accepted by the Holder and handled in collection in the customary manner, but the same shall not constitute payment hereunder or diminish any rights of the Holder except to the extent that actual cash proceeds of such instrument are unconditionally received by the Holder. 10. COMPLIANCE WITH APPLICABLE LAW. It is expressly stipulated and agreed to be the intent of Company and Holder at all times to comply with the Applicable Law in connection with this Note. All sums paid or agreed to be paid to the Holder for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until Page 6 of 8 Page Note payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the applicable usury ceiling. 11. NOTICES. Any notice under this Note must be in writing, and shall be given or served, unless otherwise expressly provided herein, by depositing the same in the United States Mail, postpaid and certified and addressed to the party to be notified, with return receipt requested, or by delivering the same by courier or in person to such party (or, if the party or parties to be notified be incorporated, to an officer of such party), or by e-mail to the e-mail address set forth below. Notice deposited in the mail, postpaid and certified with return receipt requested, shall be deemed received and effective upon the deposit in a proper United States depository. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purposes of notice, the addresses of the parties for the receipt of notice hereunder are: If to the Company: Fischer Imaging Corporation 12300 N. Grant Street Denver, CO 80241 Attention: Harris Ravine Tel No.: (303) 450-4370 Fax No.: (303) 252-4256 If to the Holder: ComVest Investment Partners II LLC One North Clematis, Suite 300 West Palm Beach, FL 33401 Attention: Carl Kleidman Tel No.: (561) 868-6070 E-mail: carlk@comvest.com Any party shall have the right from time to time, and at any time, to change its address for the receipt of notice by giving at least five (5) days' prior written notice of the change of its address to the other parties in the manner specified herein. 12. ENTIRE AGREEMENT. This Note, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding between the parties and supersede and preempt any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. 13. SEVERABILITY. Whenever possible, each provision of this Note will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note is held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect under any applicable law, such provision shall thereupon be deemed modified to the extent necessary to render same valid, or excised from this Note, as the situation may require, and this Note 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. Page 7 of 8 Page Note 14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. The provisions of this Note shall be governed 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 irrevocably consents 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 collection or enforcement of this Note, 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 HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION OR PROCEEDING RELATING TO OR FOR THE COLLECTION OR ENFORCEMENT OF THIS NOTE. 15. COUNTERPARTS. This Note may be executed in multiple counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 16. MISCELLANEOUS. No delay or failure by the Holder in exercising any right, power, privilege, or remedy shall be deemed to be a waiver of the same or any part thereof; nor shall any single or partial exercise thereof or any failure to exercise the same in any instance preclude any future exercise thereof, or the exercise of any other right, power, privilege or remedy, and the rights and remedies provided for hereunder are cumulative and not exclusive of any other right or remedy available at law or in equity. Neither any provision of this Note nor any performance hereunder may be amended or waived except pursuant to an agreement in writing signed by the party against whom enforcement thereof is sought. Except as otherwise expressly provided in this Note, the Company hereby waives diligence, demand, presentment for payment, protest, dishonor, nonpayment, default, and notice of any and all of the foregoing. All amounts payable hereunder shall be payable without relief under any applicable valuation and appraisement laws. The Company hereby expressly agrees that this Note, and/or any payment hereunder, may be extended, modified or subordinated (by forbearance or otherwise) from time to time, without in any way affecting the liability of the Company hereunder. 17. COLLECTION COSTS. In the event that the Holder shall, after the occurrence of an Event of Default, turn this Note over to an attorney for collection, the Company shall further be liable for and shall pay to the Holder all collection costs and expenses incurred by the Holder, including reasonable attorneys' fees and expenses; and the Holder may take judgment for all such amounts in addition to all other sums payable hereunder. FISCHER IMAGING CORPORATION By:/s/ Harris Ravine --------------------------------------------- Name: Harris Ravine Title: President and Chief Executive Officer Page 8 of 8 Page Note EX-7 7 e1037500.txt A&R WARRANT TO PURCH SHARES OF CS EXHIBIT 7 NO. WC-1A THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION, IN REASONABLY ACCEPTABLE FORM AND SCOPE, OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS. FISCHER IMAGING CORPORATION AMENDED AND RESTATED WARRANT TO PURCHASE SHARES OF COMMON STOCK (EXPIRES FEBRUARY 22, 2010) Warrant No. -WC-1A 2,000,000 Shares of Common Stock FOR VALUE RECEIVED, subject to the provisions set forth below, the undersigned, Fischer Imaging Corporation, a Delaware corporation (the "COMPANY"), hereby certifies that ComVest Investment Partners II LLC, a Delaware limited liability company or its registered assigns (the "HOLDER"), is entitled to purchase from the Company up to two million (2,000,000) fully paid and non-assessable shares (the "WARRANT SHARES") of the Company's common stock, $0.01 par value per share (the "COMMON SHARES"), for cash at a price of four dollars and twenty five cents ($4.25) per share (the "EXERCISE PRICE") at any time from and after the Exercise Date (as defined below) and until 5:00 p.m. (Mountain time) on February 22, 2010 (the "EXPIRATION DATE") upon surrender to the Company at its principal office (or at such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed with the Notice of Exercise attached hereto duly filled in and signed and, if applicable, upon payment in cash or by check of the aggregate Exercise Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment as provided in Section 3 of this Warrant. For purposes of this Warrant, "EXERCISE DATE" means the first to occur of (i) an Option Triggering Event (as defined below), (ii) the entering into of an Option Triggering Event Agreement (as defined below), (iii) the delivery by the Holder to the Company of a written agreement pursuant to which the Holder agrees not to resell any Warrant Shares to the public prior to August 23, 2005 or (iv) August 23, 2005. This Warrant amends and restates in its entirety the Warrant No. WC-1 issued to the Holder dated February 22, 2005, the surrender of which is hereby acknowledged by the Company and the Holder. 1. EXERCISE OF WARRANT. 1.1 EXERCISE. This Warrant shall be exercisable from the Exercise Date until the Expiration Date, and this Warrant shall expire on the Expiration Date. Upon exercise of this Warrant, the Exercise Price shall be payable in cash or check. This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional Warrant Shares. If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form to this Warrant, in the name of the Holder, evidencing the right to purchase the number of Warrant Shares as to which this Warrant has not been exercised, which new Warrant shall be signed by an appropriate officer of the Company. The term "Warrant" as used herein shall include any subsequent Warrant issued as provided herein. 1.2 EXERCISE PROCEDURES; DELIVERY OF CERTIFICATE. Upon surrender of this Warrant with a duly executed Notice of Exercise in the form of Annex A attached hereto, together with payment of the Exercise Price for the Warrant Shares purchased, at the Company's principal executive offices (the "Designated Office"), the Holder shall be entitled to receive a certificate or certificates for the Warrant Shares so purchased. The Company agrees that the Warrant Shares shall be deemed to have been issued to the Holder as of the close of business on the date on which this Warrant shall have been surrendered together with the Notice of Exercise and payment for such Warrant Shares. 1.3 CASHLESS EXERCISE. In lieu of payment of the Exercise Price, a Holder may exercise this Warrant, in whole or in part, by presentation and surrender of this Warrant to the Company, together with a Cashless Exercise Form attached hereto as Annex B (or a reasonable facsimile thereof) duly executed (a "CASHLESS EXERCISE"). Acceptance by the Company of such presentation and surrender shall be deemed a waiver of the Holder's obligation to pay all or any portion of the Exercise Price, as the case may be. In the event of a Cashless Exercise, the Holder shall exchange this Warrant for that number of Common Shares determined by multiplying the number of Common Shares for which this Warrant is being exercised by a fraction, the numerator of which shall be the difference between (i) the higher of (A) $7.10 or (B) the then current market price per Common Share and (ii) the Exercise Price, and the denominator of which shall be the higher of (i) $[7.10] or (ii) the then current market price per Common Share. For purposes of any computation under this Section l.3, the then current market price per Common Share at any date shall be deemed to be the average for the ten (10) consecutive business days immediately prior to the Cashless Exercise of the daily closing prices of the Common Shares on the principal national securities exchange on which the Common Shares are admitted to trading or listed, or if not listed or admitted to trading on any such exchange, the last reported sales prices as included for quotation on Nasdaq, or if not included for quotation on Nasdaq, the average of the highest reported bid and lowest reported asked prices as reported by the National Association of Securities Dealers, Inc. Automated Quotations System, or if not then publicly traded, the fair market price of the Common Shares as determined, in good faith, by the Board of Directors of the Company. 1.4 HOLDER'S PUT OPTION. (a) Subject to, and in accordance with, the provisions of this Section 1.4, the Holder shall have the right and option (the "PUT OPTION") to require the Company to redeem and purchase from the Holder all or any portion of this Warrant. The Put Option shall be exercisable from time to time for all or part of the Warrant Shares, as provided in Sections 1.4(b) or 1.4(c). The purchase price (the "OPTION PURCHASE PRICE") shall be $0.90 multiplied by the number of Warrant Shares as to which this Put Option is then being exercised. (b) The Put Option shall be exercisable at any time and from time to time after the occurrence of an Option Triggering Event. If the Holder desires to exercise a Put Option after an Option Triggering Event, the Holder shall surrender this Warrant, together with a Put Option Exercise Form attached hereto as Annex C (or a reasonable facsimile thereof) duly executed, to the Company at the Designated Office. Within five (5) business days after its receipt 2 of the surrendered Warrant and the Put Option Exercise Form, the Company shall purchase from the Holder that portion of this Warrant as shall be specified in the Put Option Exercise Form at the Option Purchase Price and pay the applicable Option Purchase Price to the Holder, either by wire transfer of immediately available funds to the account specified by the Holder in the Put Option Exercise Form or by certified or bank check of immediately available funds delivered to the Holder at the address specified in the Put Option Exercise Form. If the Put Option is exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form to this Warrant, in the name of the Holder, evidencing the right to purchase the number of Warrant Shares as to which the Put Option has not been exercised, which new Warrant shall be signed by an appropriate officer of the Company. (c) Subject to the last sentence of this paragraph (c), the Put Option shall be exercisable at any time and from time to time after the Company has entered into an Option Triggering Event Agreement. If the Holder desires to exercise a Put Option after the Company has entered into an Option Triggering Event Agreement, the Holder shall surrender this Warrant, together with a Put Option Exercise Form (or a reasonable facsimile thereof) duly executed, to the Company at the Designated Office. Immediately prior to the consummation of the transactions contemplated by Option Triggering Event Agreement, the Company shall purchase from the Holder that portion of this Warrant as shall be specified in the Put Option Exercise Form at the Option Purchase Price and pay the applicable Option Purchase Price to the Holder, either by wire transfer of immediately available funds to the account specified by the Holder in the Put Option Exercise Form or by certified or bank check of immediately available funds delivered to the Holder at the address specified in the Put Option Exercise Form. If the Put Option is exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form to this Warrant, in the name of the Holder, evidencing the right to purchase the number of Warrant Shares as to which the Put Option has not been exercised, which new Warrant shall be signed by an appropriate officer of the Company. If the Option Triggering Event Agreement shall be terminated or abandoned without the transactions contemplated thereby being consummated, the Company shall not be required to purchase any part of this Warrant and instead shall return this Warrant to the Holder with a notice in writing to the effect that the Option Triggering Event Agreement has been terminated or abandoned and confirming to the Holder that this Warrant remains in full force and effect. (d) For purposes of this Warrant, "OPTION TRIGGERING EVENT" shall mean any of the following: (i) any Change of Control of the Company (as defined below), including any transaction or series of transactions that result in a Change of Control of the Company; or (ii) any liquidation or dissolution of the Company, or any action (A) by the Company relating to bankruptcy, insolvency, reorganization or relief from creditors seeking to adjudicate it bankrupt or seeking reorganization, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to the Company or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or all or any substantial part of its assets, or making a general assignment for the benefit of its creditors. 3 (e) For purposes of this Warrant, "OPTION TRIGGERING EVENT AGREEMENT" shall mean any agreement by the Company to engage in any transaction or series of transactions that would result in a Change of Control of the Company (but, in the case of the transactions contemplated by Section 1.4(f)(i)(C)(III) (below), only if the agreement to engage in the transaction or series of transactions contemplated thereby is entered into on or prior to December 31, 2005). (f) For purposes of this Warrant, "CHANGE OF CONTROL OF THE COMPANY" shall mean any of the following at any time after the date hereof: (i) the "Sale of the Company", which shall mean any transaction or series of transactions pursuant to which any person(s) (meaning an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, Section 13D group, or a governmental entity (or any department, agency or political subdivision thereof)) other than the Holder acquire(s), directly or indirectly, (A) beneficial ownership of interests in the Company (or the surviving or resulting entity in such transaction or transactions) possessing more than fifty percent (50%) of the outstanding voting power of the Company (on a fully diluted basis), whether by merger, consolidation, reorganization, combination, issuance, sale or transfer of the Company's capital stock, or otherwise, (B) the power, whether through ownership or securities, as trustee or executor, by proxy or other voting arrangement, contract or otherwise, to elect a majority of the board of directors of the Company, or (C) of all or a material portion of (including, without limitation, by the Company granting a license or similar transaction regarding related intellectual property which has the same or similar economic effect to a sale of such assets) (I) the Company's Digital Mammography or SenoScan business, including the sale of inventories or services contracts associated therewith outside the ordinary course of business, (II) the Company's Sterotactic Biopsy Table or MammoTest business, including the sale of inventories or services contracts associated therewith outside the ordinary course of business or (III) the Company's general radiological, electrocardiography or surgical businesses (but, in the case of this clause (III), only if the agreement to engage in such transaction or series of transactions is entered into on or prior to December 31, 2005); or (ii) a majority of the board of directors of the Company shall consist at such time of individuals other than (A) members of the board of directors of the Company on the date hereof and (B) other members of the board of directors of the Company recommended, elected or approved to succeed or become a director of the Company, as the case may be, by a majority of such members referred to in clause (C) or by members so recommended, elected or approved. 2. TRANSFER; ISSUANCE OF STOCK CERTIFICATES; RESTRICTIVE LEGENDS. 2.1 TRANSFER. Each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this 4 Warrant in the form of Annex D attached hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, if any. A Warrant may be exercised by the new Holder for the purchase of Warrant Shares without having a new Warrant issued. Prior to due presentment for registration of transfer thereof, the Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof (notwithstanding any notations of ownership or writing thereon made by anyone other than a duly authorized officer of the Company) for all purposes and shall not be affected by any notice to the contrary. All Warrants issued upon any assignment of Warrants shall be the valid obligations of the Company, evidencing the same rights, and entitled to the same benefits as the Warrants surrendered upon such registration of transfer or exchange. 2.2 STOCK CERTIFICATES. Certificates for the Warrant Shares shall be delivered to the Holder within three (3) business days after the rights represented by this Warrant shall have been exercised pursuant to Section 1, and a new Warrant representing the shares of Common Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within such time. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof including, without limitation, any documentary, stamp or similar tax that may be payable in respect thereof; provided, however, that the Company shall not be required to pay any income tax to which the Holder hereof may be subject in connection with the issuance of this Warrant or the Warrant Shares. 2.3 RESTRICTIVE LEGEND. Except as otherwise provided in this Section 2, each certificate for Warrant Shares initially issued upon the exercise of this Warrant and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION IN FORM AND FROM COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED." Notwithstanding the foregoing, the legend requirements of this Section 2.3 shall terminate as to any particular Warrant Shares when (i) the Warrant Shares are transferred pursuant to an effective resale registration statement, as contemplated in the Registration Rights Agreement between the Company and the Holder of even date herewith, or (ii) the Company shall have received from the Holder thereof an opinion of counsel in form and substance reasonably acceptable to the Company that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by this Section 2.3 shall terminate, the Holder or subsequent transferee, as the case may be, shall be entitled to receive from the 5 Company without cost to such Holder or transferee a certificate for the Warrant Shares without such restrictive legend. 3. ADJUSTMENT OF NUMBER OF SHARES; EXERCISE PRICE; NATURE OF SECURITIES LSSUABLE UPON EXERCISE OF WARRANTS. 3.1 EXERCISE PRICE; ADJUSTMENT OF NUMBER OF SHARES. The Exercise Price and the number of shares purchasable hereunder shall be subject to adjustment from time to time as hereinafter provided; provided, however, that, notwithstanding the below, in no case shall the Exercise Price be reduced to below the par value of the class of stock for which this Warrant is exercisable at such time. 3.2 ADJUSTMENTS UPON DISTRIBUTION, SUBDIVISION OR COMBINATION. If the Company, at any time or from time to time after the issuance of this Warrant, shall (i) make a dividend or distribution on its shares of Common Stock payable in shares of Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at that time and the number of Warrant Shares into which the Warrant is exercisable at that time shall be proportionately adjusted effective as of the record date for the dividend or distribution or the effective date of the subdivision, combination or reclassification. 3.3 ADJUSTMENT UPON OTHER DISTRIBUTIONS. If the Company, at any time or from time to time after the issuance of this Warrant, makes a distribution to the holders of the Common Stock payable in securities of the Company other than shares of Common Stock, then, in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares, the amount of such securities of the Company which would have been received if the portion of the Warrant so exercised had been exercised for Warrant Shares on the date of such event, subject to adjustments subsequent to the date of such event with respect to such distributed securities which shall be on terms as nearly equivalent as practicable to the adjustments provided in this Section 3 and all other adjustments under this Section 3. 3.4 ADJUSTMENT UPON MERGER, CONSOLIDATION OR EXCHANGE. If at any time or from time to time after the issuance of this Warrant there is any merger, consolidation, arrangement or statutory share exchange of the Company with or into any other person or company, then, in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant the kind and amount of shares and other securities and property (including cash) which would have been received upon such merger, consolidation, arrangement or statutory share exchange by the Holder if the portion of the Warrant so exercised had been exercised for Warrant Shares immediately prior to such merger, consolidation, arrangement or statutory share exchange, subject to adjustments for events subsequent to the effective date of such merger, consolidation, arrangement or statutory share exchange with respect to such shares and other securities which shall be on terms as nearly equivalent as practicable to the adjustments provided in this Section 3 and all other adjustments under this Section 3. 6 3.5 ADJUSTMENTS FOR RECAPITALIZATION OR RECLASSIFICATION. If, at any time or from time to time after the issuance of this Warrant, the Warrant Shares issuable upon exercise of the Warrant are changed into the same or a different number of securities of any class of the Company, whether by recapitalization, reclassification or otherwise (other than a merger, consolidation, arrangement or statutory share exchange provided for elsewhere in this Section 3), then, in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant the kind and amount of securities or other property which would have been received in connection with such recapitalization, reclassification or other change by the Holder if the portion of the Warrant so exercised had been exercised immediately prior to such recapitalization, reclassification or change, subject to adjustments for events subsequent to the effective date of such recapitalization, reclassification or other change with respect to such securities which shall be on terms as nearly equivalent as practicable to the adjustments provided in this Section 3 and all other adjustments under this Section 3. 3.6 EXTRAORDINARY DIVIDENDS OR DISTRIBUTIONS. If, at any time or from time to time after the issuance of this Warrant, the Company shall declare a dividend or any other distribution upon the Common Stock payable otherwise than out of current earnings, retained earnings or earned surplus and otherwise than in shares of Common Stock, then the Exercise Price in effect immediately prior to such declaration shall be reduced by an amount equal, in the case of a dividend or distribution in cash, to the amount thereof payable per share of Common Stock or, in the case of any other dividend or distribution, to the value thereof per share of Common Stock at the time such dividend or distribution was declared, as determined by the Board of Directors of the Company in good faith. Such reductions shall take effect as of the date on which a record is taken for the purposes of the subject dividend or distribution, or, if a record is not taken, the date as of which the holders of record of Common Stock entitled to such dividend or distribution are to be determined. 3.7 ADJUSTMENT UPON ISSUANCE OF SHARES OF COMMON STOCK BELOW EXERCISE PRICE. (a) If the Company, at any time or from time to time, issues or sells any Additional Shares of Common Stock (as defined below), other than as provided in the foregoing subsections of this Section 3, for a price per share (which, in the case of options, warrants, convertible securities or other rights, includes the amounts paid therefor plus the exercise price, conversion price or other such amounts payable thereunder) that is less than the then applicable Exercise Price, then and in each such case, the then applicable Exercise Price shall automatically be reduced as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Exercise Price by a fraction (i) the numerator of which shall be (A) the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale, plus (B) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Exercise Price, and (ii) the denominator of which shall be the number of shares of Common Stock deemed outstanding (as defined below) immediately prior to such issue or sale plus the total number of Additional Shares of Common Stock so issued; provided, however, that upon the expiration or other termination of options, warrants, or other rights to purchase or acquire shares of Common Stock, and upon the expiration or termination of the right to convert or exchange convertible or exchangeable securities (whether 7 by reason of redemption or otherwise), if any thereof shall not have been exercised, converted or exchanged, as applicable, the number of shares of Common Stock deemed to be outstanding pursuant to this Section 3.7(a) shall be reduced by the number of shares as to which options, warrants, and rights to purchase or acquire shares of Common Stock shall have expired or terminated unexercised, and as to which conversion or exchange rights shall have expired or terminated unexercised, and such number of shares shall no longer be deemed to be outstanding; and the Exercise Price then in effect shall forthwith be readjusted and thereafter be the price that it would have been had adjustment been made on the basis of the issuance only of the shares of Common Stock actually issued. For purposes of the preceding sentence, the number of shares of Common Stock deemed to be outstanding as of a given date shall be the sum of (A) the number of shares of Common Stock actually outstanding, (B) the number of Shares for which the Warrant could be exercised on the day immediately preceding the given date, and (C) the number of shares of Common Stock which could be obtained through the exercise or conversion of all other rights, options and convertible securities outstanding on the day immediately preceding the given date. "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common Stock, and all options, warrants, convertible securities or other rights to purchase or acquire shares of Common Stock, issued by the Company other than (A) shares of Common Stock and/or options, warrants or other Common Stock purchase rights for up to an aggregate of 300,000 shares of Common Stock (such number to be subject to adjustment in accordance with Section 3.2 above), where such options, warrants or other rights are issued both (i) with exercise prices per share of Common Stock at the then-current fair market value of a share of Common Stock, as determined in good faith by the Board of Directors of the Company or the Compensation Committee thereof, and (ii) to employees, officers or directors of, or consultants to, the Company or any subsidiary pursuant to stock purchase or stock option plans or other arrangements that are approved by the Company's Board of Directors or the Compensation Committee and (B) shares of Common Stock issued pursuant to the exercise of options, warrants or convertible securities outstanding as of the date hereof. (b) In the event that the exercise price, conversion price, purchase price or other price at which shares of Common Stock are purchasable pursuant to any options, warrants, convertible securities or other rights to purchase or acquire Common Stock is reduced at any time or from time to time (other than under or by reason of provisions designed to protect against dilution), then, upon such reduction becoming effective, the Exercise Price then in effect hereunder shall forthwith be decreased to such Exercise Price as would have been obtained had the adjustments made and required under this Section 3.7 upon the issuance of such options, warrants, convertible securities or other rights been made upon the basis of (and the total consideration received therefor) (A) the issuance of the number of shares of Common Stock theretofore actually delivered upon the exercise, conversion or exchange of such options, warrants, convertible securities or other rights, (B) the issuance of all of the Common Stock and all other options, warrants, convertible securities and other rights to purchase or acquire Common Stock issued after the issuance of the modified options, warrants, convertible securities or other rights, and (C) the original issuance at the time of the reduction of any such options, warrants, convertible securities or other rights then still outstanding. (c) In no event shall an adjustment under this Section 3.7 be made if it would result in an increase in the then applicable Exercise Price. 8 3.8 ADJUSTMENT OF OPTION PURCHASE PRICE. At any time there is an adjustment to the number of Warrant Shares underlying this Warrant, the Company shall adjust the Option Purchase Price proportionately so that the consideration to be received by the Holder in connection with the exercise of the Put Option would not be less than would be received by the Holder had such adjustment to the number of Warrant Shares not occurred. 3.9 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or Option Purchase Price is adjusted, the Company shall promptly deliver to the Holder a certificate of adjustment, setting forth the Exercise Price and/or Option Purchase Price after adjustment, a brief statement of the facts requiring the adjustment and the computation by which the adjustment was made. The certificate of adjustment shall be conclusive evidence of the correctness of the adjustment. 3.10 SUCCESSIVE ADJUSTMENTS. The provisions of this Section 3 shall be applicable successively to each event described herein which may occur subsequent to the issuance of this Warrant and prior to the exercise in full of this Warrant. 4. REGISTRATION; EXCHANGE AND REPLACEMENT OF WARRANT; RESERVATION OF SHARES. The Company shall keep at the Designated Office a register in which the Company shall provide for the registration, transfer and exchange of this Warrant. The Company shall not at any time, except upon the dissolution, liquidation or winding-up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. The Company may deem and treat the person in whose name this Warrant is registered as the Holder and owner hereof for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration or transfer as provided in this Section 4. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and (in case of loss, theft or destruction) of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will (in the absence of notice to the Company that the Warrant has been acquired by a bona fide purchaser) make and deliver a new Warrant of like tenor, in lieu of this Warrant without requiring the posting of any bond or the giving of any security. The Company shall at all times reserve and keep available out of its authorized shares of capital stock, solely for the purpose of issuance upon the exercise of this Warrant, such number of shares of Common Shares as shall be issuable upon the exercise hereof. The Company covenants and agrees that, upon exercise of this Warrant and payment of the Exercise Price therefor, if applicable, all Warrant Shares issuable upon such exercise shall be duly and validly authorized and issued, fully paid and non-assessable. 9 5. INVESTMENT REPRESENTATIONS. The Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise of this Warrant, the securities acquired by the Holder upon exercise hereof are for the account of the Holder or are being acquired for its own investment and account and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any portion thereof), except in compliance with applicable federal and state securities laws. 6. FRACTIONAL WARRANTS AND FRACTIONAL SHARES. If the number of Warrant Shares purchasable upon the exercise of this Warrant is adjusted pursuant to Section 3 hereof, the Company shall nevertheless not be required to issue fractions of shares, upon exercise of this Warrant or otherwise, or to distribute certificates that evidence fractional shares. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share as may be prescribed, in good faith, by the Board of Directors of the Company. 7. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No Holder of this Warrant shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Warrant Shares that may at any time be issuable upon exercise of this Warrant, nor shall anything contained herein be construed to confer upon the Holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or subscription rights, until such Holder shall have exercised this Warrant and been issued Warrant Shares or deemed to have been issued Warrant Shares in accordance with the provisions hereof. 8. SALES OF COMPANY SECURITIES. The Holder agrees that for a period of three (3) years from the date of this Warrant, it will not, and will cause its Affiliates not to, sell short, sell short against the box, engage in any other similar derivative transactions or otherwise effect any sales of securities of the Company except for sales which are covered through the delivery of the Warrant Shares. 9. NOTICES. Any notice which is required to be given by this Warrant must be in writing, and shall be given or served, unless otherwise expressly provided herein, by depositing the same in the United States Mail, postpaid and certified and addressed to the party to be notified, with return receipt requested, or by delivering the same by courier or in person to such party (or, if the party or parties to be notified be incorporated, to an officer of such party). Notice deposited in the mail, postpaid and certified with return receipt requested, shall be deemed received and effective upon the deposit in a proper United States depository. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purposes of notice, the addresses of the parties for the receipt of notice hereunder are: 10 If to the Company: Fischer Imaging Corporation 12300 N. Grant Street Denver, CO 80241 Attention: Harris Ravine Tel No.: (303) 450-4370 Fax No.: (303) 252-4256 If to the Holder: ComVest Investment Partners II LLC One North Clematis, Suite 300 West Palm Beach, Florida 33401 Attention: Carl Kleidman Telephone: (561) 868-6070 e-mail: carlk@comvest.com Any party shall have the right from time to time, and at any time, to change its address for the receipt of notice by giving at least five (5) days' prior written notice of the change of its address to the other parties in the manner specified herein. 10. SUCCESSORS. All the covenants, agreements, representations and warranties contained in this Warrant shall bind the parties hereto and their respective heirs, executors, administrators, distributees, successors, assigns and transferees. 11. LAW GOVERNING. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. 12. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Warrant sets forth the entire understanding of the parties with respect to the transactions contemplated hereby. The failure of any party to seek redress for the violation or to insist upon the strict performance of any term of this Warrant shall not constitute a waiver of such term and such party shall be entitled to enforce such term without regard to such forbearance. This Warrant may be amended, and any breach of or compliance with any covenant, agreement, warranty or representation may be waived, only if the Company has obtained the written consent or written waiver of the Holder, and then such consent or waiver shall be effective only in the specific instance and for the specific purpose for which given. 13. SEVERABILITY; HEADINGS. If any term of this Warrant as applied to any person or to any circumstance is prohibited, void, invalid or unenforceable in any jurisdiction, such term shall, as to such jurisdiction, be ineffective to the extent of such prohibition or invalidity without in any way affecting any other term of this Warrant or affecting the validity or enforceability of this Warrant or of such provision in any other jurisdiction. The Section headings in this Warrant have been inserted for purposes of convenience only and shall have no substantive effect. 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the 22nd day of February, 2005. FISCHER IMAGING CORPORATION By: ---------------------------------------------- Name: Harris Ravine Title: President and Chief Executive Officer 12 ANNEX A NOTICE OF EXERCISE (TO BE EXECUTED UPON PARTIAL OR FULL EXERCISE OF THE WITHIN WARRANT) The undersigned hereby irrevocably elects to exercise the right to purchase __________ shares of Common Stock of Fischer Imaging Corporation covered by the within Warrant according to the conditions hereof and herewith makes payment of the Exercise Price of such shares in full in the amount of $______________. By: --------------------------------------- (Signature of Registered Holder) Dated: ANNEX B CASHLESS EXERCISE FORM (TO BE EXECUTED UPON PARTIAL OR FULL EXERCISE OF WARRANTS PURSUANT TO SECTION 1.3 OF THE WARRANT) The undersigned hereby irrevocably elects to surrender ____________ shares of Common Stock of Fischer Imaging Corporation purchasable under the Warrants for such shares of Common Stock issuable in exchange therefor pursuant to the Cashless Exercise provisions of the within Warrants, as provided for in Section 1.3 of such Warrant. Please issue a certificate or certificates for such Common Stock in the name of, and pay cash for fractional shares in the name of: (Please print name, address, and social security number/tax identification number:) and, if said number of shares of Common Stock shall not be all the shares of Common Stock purchasable thereunder, that a new Warrant for the balance remaining of the shares of Common Stock purchasable under the within Warrants be registered in the name of the undersigned Holder or its transferee as below indicated and delivered to the address stated below. Dated: ----------------------------- Name of Warrant Holder or transferee: ------------------------------------------------------------------ (Please print) Address: ------------------------------------------------------------------------ Signature: ----------------------------------------------------------------------- NOTICE: The signature on this form must correspond with the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. ANNEX D ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint _______________________ attorney-in-fact to register such transfer onto the books of Fischer Imaging Corporation maintained for the purpose, with full power of substitution in the premises. Dated: Print Name: ----------------------------- ----------------------------- Signature: ------------------------------ Witness: -------------------------------- NOTICE: The signature on this assignment must correspond with the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. ANNEX C PUT OPTION EXERCISE FORM (TO BE EXECUTED UPON PARTIAL OR FULL EXERCISE OF THE PUT OPTION PURSUANT TO SECTION 1.4 OF THE WARRANT) The undersigned hereby irrevocably elects to require Fischer Imaging Corporation to purchase [all] [a portion] of the Warrant No. WC-1A [representing the right to receive ____________ Warrant Shares] pursuant to the Put Option provisions of the within Warrant, as provided for in Section 1.4 of such Warrant. Please send cash in the amount of the applicable Option Purchase Price (either by wire transfer of immediately available funds or bank or certified check of immediately available funds) to: (Please print name, address, and social security number/tax identification number:) Wire transfer instructions: (insert wire instructions) and, if said Warrant is not to be purchased in full, please send a new Warrant for the right to purchase the balance remaining of the Warrant Shares purchasable under the within Warrant to be registered in the name of the undersigned Holder or its transferee as below indicated and delivered to the address stated below. Dated: ----------------------------- Name of Warrant Holder or transferee: ------------------------------------------------------------------ (Please print) Address: ------------------------------------------------------------------------ Signature: ----------------------------------------------------------------------- NOTICE: The signature on this form must correspond with the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-8 8 e1042502.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 8 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated as of February 22, 2005 (this "AGREEMENT"), is made between Fischer Imaging Corporation, a Delaware corporation (the "COMPANY"), and ComVest Investment Partners II LLC, a Delaware limited liability company ("COMVEST"). RECITALS WHEREAS, pursuant to a Note and Warrant Purchase Agreement, dated as of the date hereof, between the Company and ComVest (the "PURCHASE AGREEMENT"), the Company has agreed to issue to ComVest a warrant (the "WARRANT") to purchase up to 2,000,000 shares (the "SHARES") of common stock of the Company, $0.01 par value per share ("COMMON STOCK"), in accordance with the terms of the Purchase Agreement and the Warrant. WHEREAS, to induce ComVest to execute and deliver the Purchase Agreement, the Company has agreed to provide to ComVest and its permitted assigns certain registration rights under the Securities Act (as defined below), and applicable state securities laws. NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the Company and ComVest hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "AGREEMENT" shall have the definition provided in the introductory paragraph. (b) "BLACKOUT PERIOD" shall have the definition provided in Section 2(a). (c) "BUSINESS DAYS" shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York or the City of Denver. (d) "CLAIMS" shall have the definition provided in Section 8(a). (e) "COMMON STOCK" shall have the definition provided in the Recitals. (f) "COMPANY" shall have the definition provided in the introductory paragraph. (g) "COMVEST" shall have the definition provided in the introductory paragraph. (h) "COMVEST INDEMNIFIED PERSON" shall have the definition provided in Section 8(a). 1 (i) "EFFECTIVE DATE" means the day that the Registration Statement required to be filed under Section 2 is declared effective by the SEC. (j) "FILING DATE" means the day that the Registration Statement required to be filed under Section 2 is filed with the SEC. (k) "HOLDER" means a holder or holders of Registrable Securities. (l) "OUTSIDE DATE" shall have the definition provided in Section 2(a). (m) "PIGGYBACK SALE" shall have the definition provided in Section 3. (n) "PURCHASE AGREEMENT" shall have the definition provided in the Recitals. (o) "REGISTRATION DOCUMENTS" shall have the definition provided in Section 2(e). (p) "REGISTRABLE SECURITIES" shall mean (i) the Shares and the shares of Common Stock or other securities issued or issuable to ComVest or its permitted transferee or designee (x) upon exercise of the Warrant, or (y) upon any distribution with respect to, any exchange for or any replacement of such Warrant, or (z) upon any conversion, exercise or exchange of any securities issued in connection with any such distribution, exchange or replacement; (ii) securities issued or issuable upon any stock split, stock dividend, recapitalization or similar event with respect to such shares of Common Stock; and (v) any other security issued as a dividend or other distribution with respect to, in exchange for, or in replacement of, the securities referred to in the preceding clauses. (q) "REGISTRATION PERIOD" shall mean, with respect to a Registration Statement, the period of time from the effective date of such Registration Statement until such date as is the earlier of (i) the date on which all of the Registrable Securities covered by such Registration Statement shall have been sold or (ii) the date on which the Registrable Securities under such Registration Statement (in the opinion of counsel to ComVest and reasonably acceptable to legal counsel for the Company) may be immediately sold without restriction (including without limitation as to volume restrictions by each holder thereof) without registration under the Securities Act. (r) "REGISTRATION STATEMENT" means a registration statement or registration statements of the Company filed under the Securities Act covering Registrable Securities. (s) "RULE 144" shall have the definition provided in Section 8. (t) "SEC" means the U.S. Securities and Exchange Commission, or any successor thereto. (u) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. (v) "SHARES" shall have the definition provided in the Recitals. 2 (w) "TRANSACTION DOCUMENTS" shall mean this Agreement, the Purchase Agreement, the Notes (as defined in the Purchase Agreement) and the Warrant. (x) "VIOLATIONS" shall have the definition provided in Section 8(a). (y) "WARRANT" shall have the definition provided in the Recitals. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Purchase Agreement. 2. SHELF REGISTRATION. (a) The Company shall prepare and file with the SEC, not later than four (4) months from the date of this Agreement, a Registration Statement or Registration Statements (as necessary) on a form that is appropriate under the Securities Act (and, if available, pursuant to Rule 415), covering the resale of all of the Registrable Securities, in an amount sufficient to cover the resale of the Shares and additional shares of Common Stock issuable pursuant to the anti-dilution provisions of the Warrant. (b) The Company shall use all reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event not earlier than the date that is six months from the date of this Agreement but not later than the date that is eight (8) months after the date of this Agreement (the "OUTSIDE DATE"). (c) If (i) the Registration Statement is not declared effective by the Outside Date or (ii) the Registration Statement required to be filed by the Company pursuant to this Section shall cease to be available for use by ComVest as a selling stockholder (x) as provided under Section 2(f) hereof where such unavailability continues for a period in excess of five (5) days beyond the allowed time period or (y) for any other reason including, without limitation, by reason of a stop order, a material misstatement or omission in such Registration Statement or the information contained in such Registration Statement having become outdated and continues to be unavailable for a period in excess of ten (10) days, and ComVest is not in material breach of its obligations under this Agreement or any of the Transaction Documents, then the Company shall pay to ComVest a cash fee equal to $50,000 for each 30-day period or part thereof during which any of the events described in clauses (i) or (ii) above occurs and is continuing (the "BLACKOUT PERIOD"). Each such payment shall be due within five days of the end of each 30-day period of the Blackout Period until the termination of the Blackout Period and within five (5) days after such termination. Such payments shall constitute ComVest's exclusive remedy for such events. The Blackout Period shall terminate upon the effectiveness of the Registration Statement in the case of clause (i) above and upon notice from the Company that the Registration Statement is again available in the case of clause (ii) above. (d) The Company shall use its best efforts to keep each Registration Statement effective at all times during the applicable Registration Period. (e) If any offering pursuant to a Registration Statement, pursuant to Section 2 hereof, involves an underwritten offering (which may only be with the consent of the Company), 3 ComVest shall have the right to select legal counsel and an investment banker or bankers and manager or managers to administer to the offering, which investment banker or bankers or manager or managers shall be reasonably satisfactory to the Company. (f) If the Registrable Securities are registered for resale under an effective Registration Statement, ComVest shall cease any distribution of such shares under such Registration Statement: (i) for a period of up to six (6) months if (x) such distribution would require the public disclosure of material non-public information concerning any transaction or negotiations involving the Company or any of its affiliates that, in the reasonable judgment of the Company's Board of Directors, would materially interfere with such transaction or negotiations or (y) such distribution would otherwise require premature disclosure of information that, in the reasonable judgment of the Company's Board of Directors, would adversely affect or otherwise be detrimental to the Company; provided that the Company shall not invoke this clause (i) more than twice in any twelve (12) month period and only for an aggregate of six (6) months in any such twelve (12) month period; and (ii) not more than once in any 12-month period, for up to 30 days, upon the request of the Company if the Company proposes to file a registration statement under the Securities Act for the offering and sale of securities for its own account in an underwritten offering and the managing underwriter therefor shall advise the Company in writing that in its opinion the continued distribution of the Registrable Securities would adversely affect the offering of the securities proposed to be registered for the account of the Company. The Company shall promptly notify ComVest at such time as (i) such transactions or negotiations have been otherwise publicly disclosed or terminated, or (ii) such non-public information has been publicly disclosed or counsel to the Company has determined that such disclosure is not required due to subsequent events. (g) The Company shall permit ComVest's counsel to review such Registration Statement, and all amendments and supplements thereto (as well as all requests for acceleration or effectiveness thereof and any correspondence between the Company and the SEC relating to the Registration Statement) (collectively, the "REGISTRATION DOCUMENTS") a reasonable period of time prior to their filing with the SEC, and not file (or send) any Registration Documents in a form to which such counsel reasonably objects and will not request acceleration of such Registration Statement without prior notice to such counsel. The sections of such Registration Statement covering information with respect to ComVest, ComVest's beneficial ownership of securities of the Company or ComVest's intended method of disposition of Registrable Securities shall conform to the information provided to the Company by ComVest. 3. PIGGYBACK SALES. At any time after the date that is six months from the date hereof, whenever the Company proposes to register any Common Stock under the Securities Act, either in a primary distribution by the Company or a secondary distribution by any of its security holders, the Company will give prompt written notice to ComVest of its intention to effect such a registration and will include in the offering all Registrable Securities with respect to which the Company has received a written request for inclusion in the registration within fifteen (15) 4 Business Days after receipt of the Company's notice (a "PIGGYBACK SALE"). Notwithstanding the foregoing, the Company may withdraw any registration statement referred to in this Section 3 without thereby incurring liability to ComVest. 4. RESTRICTIONS ON PIGGYBACK SALE RIGHTS. (a) ComVest will not be entitled to effect a Piggyback Sale with respect to a registration statement (i) on Form S-4 or Form S-8 under the Securities Act (or any successor or replacement forms) or (ii) in connection with a registration the primary purpose of which is to register debt securities. (b) If either: (i) the managing underwriter, in the case of an underwritten registration under which a Piggyback Sale is requested, advises the Company that in its opinion or (ii) in the case of a registration not being underwritten, for which a Piggyback Sale is requested, the Company reasonably and in good faith determines, that the number of securities proposed to be sold by the Company in such registration plus the number of shares subject to the Piggyback Sale request plus the securities of all other selling security holders to be included in such registration exceeds the number which can be effectively sold in such offering (the "MAXIMUM NUMBER OF SHARES"), the Company will include in such registration first the securities the Company proposes to register, second the Registrable Securities for which the Piggy Back Sale is requested and third the securities of the other selling security holders, up to the Maximum Number of Shares. The Company will not hereafter enter into any agreement which is inconsistent with the rights of priority provided for in this paragraph (b). 5. OBLIGATIONS OF THE COMPANY. With respect to any registration of Registrable Securities required by Section 2 or Section 3, the Company will use its reasonable best efforts to effect the registration in accordance with the intended method of disposition thereof and in connection with the registration of the Registrable Securities, to use its reasonable best efforts to: (a) Prepare and file with the SEC a Registration Statement for such Registrable Securities and such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectuses used in connection with the Registration Statement, as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during the applicable Registration Period, to comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement; (b) Promptly furnish, after such Registration Statement is prepared, filed with the SEC, publicly disseminated and distributed and received by the Company, to ComVest and its legal counsel, a copy of any such Registration Statement, each preliminary prospectus, each final prospectus, and all amendments and supplements thereto and such other documents as ComVest may reasonably request in order to facilitate the disposition of its Registrable Securities; 5 (c) As soon as practicable for the Company and its counsel, but no later than two (2) Business Days after receipt thereof, furnish to ComVest and its counsel copies of all correspondence between the Company and the SEC with respect to any Registration Statement or amendment or supplement thereto filed pursuant to this Agreement; (d) (i) Register and qualify the Registrable Securities covered by the Registration Statements under such other securities or blue sky laws, if applicable, of such United States' jurisdictions as ComVest may reasonably request, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof at all relevant times during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all relevant times during the Registration Period and (iv) take all other actions necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subsection (d) be obligated to be so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; (e) List such securities on any national securities exchanges or quotation systems on which the Common Stock of the Company is then listed, and file any filings required by such securities exchanges or systems; (f) Notify ComVest and (if requested by ComVest) confirm such advice in writing, (i) when or if the prospectus or any prospectus supplement or post-effective amendment has been filed with the SEC, and, with respect to any Registration Statement or any post-effective amendment, when the same has been declared effective by the SEC, (ii) of any request by the SEC for amendments or supplements to a Registration Statement or the prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and (v) of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (g) If (i) the matters contemplated by clause (iii) of paragraph (f) above occur, prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of such Registration Statement at the earliest possible time and (ii) any fact contemplated by clause (v) of paragraph (f) above shall exist, promptly prepare a supplement or post-effective amendment to the Registration Statement or the related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchaser of the Registrable Securities, the prospectus will not contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading; 6 (h) If the Company has consented to an underwritten offering and such offering is underwritten, at the request of ComVest, furnish on the date that Registrable Securities are delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to ComVest, stating that such registration statement is effective under the Securities Act and that (A) to the knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act and (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements or other financial data contained therein) and (ii) a letter dated such date from the Company's independent public accountants addressed to the underwriters and to ComVest, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five (5) Business Days prior to the date of such letter) with respect to such registration as such underwriters may reasonably request; (i) Cooperate with ComVest to facilitate the timely preparation and delivery of certificates for the Registrable Securities offered and sold pursuant to the Registration Statement and to enable such certificates for the Registrable Securities to be issued in such denominations or amounts, as the case may be, as ComVest may reasonably request, and registered in such names as ComVest may request; and, within five (5) Business Days after receiving notice from ComVest or its representatives of a sale of Registrable Securities under the Registration Statement, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to ComVest) an appropriate instruction and opinion of such counsel, satisfactory to the Company, and ComVest and its legal counsel; (j) Enter into customary agreements (including, in the case of an underwritten offering, underwriting agreements in customary form, and including provisions with respect to indemnification and contribution in customary form and consistent with the provisions relating to indemnification and contribution contained herein) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in connection therewith: (i) make such representations and warranties to ComVest and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings; (ii) to the extent requested and customary for the relevant transaction, enter into a securities sales agreement with ComVest and such representative of ComVest as ComVest shall select relating to the Registration and providing for, among other things, the appointment of such representative as agent for ComVest for the purpose of soliciting purchases 7 of Registrable Securities, which agreement shall be customary in form, substance and scope and shall contain customary representations, warranties and covenants; and (iii) deliver such customary documents and certificates as may be reasonably requested by ComVest whose Registrable Securities are being sold or by the managing underwriters, if any. (k) In connection with any underwritten offering, make appropriate officers of the Company available to ComVest for meetings with prospective purchasers of the Registrable Securities and prepare and present to potential investors customary "road show" material in each case in accordance with the recommendations of the underwriters and in all respects in a manner consistent with other new issuances of securities in an offering of a similar size to such offering of the Registrable Securities. 6. OBLIGATIONS OF COMVEST TO PROVIDE INFORMATION. In connection with the registration of the Registrable Securities, ComVest shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably requested in writing by the Company to effect the registration of such Registrable Securities, and ComVest shall execute any customary documents in connection with such registration as the Company and its legal counsel may reasonably request. At least ten (10) Business Days prior to the first anticipated filing date of the Registration Statement and any subsequent prospectus supplement or post-effective amendment, the Company shall notify ComVest in writing of the information the Company requires of ComVest to be included in the Registration Statement, prospectus supplement or post-effective amendment. 7. EXPENSES OF REGISTRATION. The Company shall pay all expenses and fees incurred in connection with each registration pursuant to Sections 2 and 3 of this Agreement, excluding underwriters' discounts and commissions, but including without limitation all registration, filing and qualification fees, word processing, duplicating, printers' and accounting fees (including the expenses of any special audits or "comfort" letters required by or incident to such performance and compliance), fees of the NASD or listing fees, messenger and delivery expenses, all fees and expenses of complying with state securities or blue sky laws, fees and disbursements of counsel for the Company, fees and expenses of the Company and the underwriters relating to "road show" investor presentations, except that ComVest shall bear and pay the (i) underwriting commissions and discounts applicable to securities offered for its account in connection with any registrations, filings and qualifications made pursuant to this Agreement and (ii) any fees and expenses incurred in respect of counsel or other advisors to ComVest. 8. INDEMNIFICATION. In the event any Registrable Securities are included in a Registration Statement under this Agreement: (a) The Company will indemnify and hold harmless ComVest, its investment advisor and sub-advisors, its officers, directors, members, partners and shareholders, and each person, if any, who controls ComVest within the meaning of the Securities Act or the Exchange Act (each, a "COMVEST INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities or 8 expenses (joint or several) incurred (collectively, "CLAIMS") to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission to state therein any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state or foreign securities law or any rule or regulation under the Securities Act, the Exchange Act or any state or foreign securities law (the matters in foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). The Company shall, subject to the provisions of Section 8(b) and 8(c) below, reimburse ComVest, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees for counsel to ComVest and other reasonable costs and expenses incurred by it in connection with the investigation or defense of any such violation or Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 8(a) shall not (i) apply to any Claim to the extent it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in connection with such Registration Statement, preliminary prospectus, final prospectus or amendments or supplements thereto, in each case which is made reliance upon and conformity with information furnished in writing to the Company by or on behalf of any ComVest Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (ii) with respect to any preliminary prospectus, inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the final prospectus, as then amended or supplemented, if such final prospectus was timely made available by the Company pursuant to Section 5(b) hereof; (iii) be available to the extent that such Claim is based upon a failure of ComVest to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 5(b) hereof; or (iv) apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of ComVest Indemnified Person and shall survive the transfer of the Registrable Securities by ComVest pursuant to Section 9. (b) ComVest will indemnify the Company and its officers, directors and employees against any Claims arising out of or based upon an untrue statement or alleged untrue statement or omission or alleged omission made in connection with a Registration Statement, preliminary prospectus, final prospectus or amendments or supplements thereto to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged 9 omission was made in reliance upon and in conformity with information furnished in writing to the Company, by or on behalf of ComVest, expressly for use in connection with the preparation of the Registration Statement (including any modifications, amendments or supplements thereto), subject to such limitations and conditions as are applicable to the indemnification provided by the Company in this Section 8; provided, however, that in no event shall any indemnity by ComVest under this Section 8 exceed the amount of the net proceeds received by ComVest in connection with the offering effected through such Registration Statement. (c) Promptly after receipt by an indemnified person under this Section 8 of notice of the commencement of any action (including any governmental action), such indemnified person shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 8, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and to the extent that the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the indemnified person, provided, however, that an indemnified person shall have the right to retain its own counsel with the reasonable fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the indemnified person and the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified person and any other party represented by such counsel in such proceeding. In such event, the Company shall pay for only one legal counsel for ComVest, and such legal counsel shall be selected by ComVest. The failure to deliver written notice to an indemnifying party within a reasonable time after the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified person under this Section 8, except to the extent that the indemnifying party is materially prejudiced in its ability to such action. The indemnification required by this Section 8 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. (d) No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified person of an unconditional and irrevocable release from all liability in respect of such claim or litigation. (e) Notwithstanding the foregoing, to the extent that any provisions relating to indemnification or contribution contained in the underwriting agreements entered into among the Company, the underwriters and ComVest in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in such underwriting agreements shall be controlling as to the Registrable Securities included in the public offering. 9. CONTRIBUTION. To the extent any indemnification by an indemnifying party is prohibited or limited under applicable law, the indemnifying party agrees to contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified person on the other hand in connection 10 with the statements or omissions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified person shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact on which such Claim is based relates to information supplied by the indemnifying party or by the indemnified person, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the forgoing, (a) no contribution shall be made under circumstances where the payor would not have been liable for indemnification under the fault standards set forth in Section 8, (b) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation and (c) contribution by any seller of Registrable Securities shall be limited in amount to the net proceeds received by such seller from the sale of such Registrable Securities. The Company and ComVest agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section. 10. REPORTS UNDER EXCHANGE ACT. With a view to making available to ComVest the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit ComVest to sell securities of the Company to the public without registration ("RULE 144"), the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) furnish to ComVest so long as ComVest owns the Shares or the Warrant such other information as may be reasonably requested to permit ComVest to sell such securities pursuant to Rule 144 without registration. 11. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by ComVest to any transferee of the Registrable Securities or the Warrant held by ComVest if: (a) the Warrant or the Registrable Securities, as the case may be, are transferred or assigned in accordance with the requirements of Section 5.1(b) of the Purchase Agreement; (b) ComVest agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (c) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of the name and address of such transferee or assignee; (d) at or before the time the Company receives the written notice contemplated by clause; and (e) of this sentence, the transferee or assignee agrees in writing to be bound by all of the provisions contained herein. 11 12. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and ComVest. Any amendment or waiver affected in accordance with this Section 12 shall be binding upon ComVest and the Company. 13. TERMINATION OF REGISTRATION RIGHTS. The obligations of the Company under this Agreement shall terminate on the earlier of (a) the sale of the Registrable Securities pursuant to an effective registration statement or otherwise and (b) with respect to ComVest, if ComVest is eligible to sell under Rule 144(k) under the Securities Act. 14. MISCELLANEOUS. (a) A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities or the Warrant convertible into such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities or Warrant. (b) Any notice which is required to be given by this Agreement must be in writing, and shall be given or served, unless otherwise expressly provided herein, by depositing the same in the United States Mail, postpaid and certified and addressed to the party to be notified, with return receipt requested, or by delivering the same by courier or in person to such party (or, if the party or parties to be notified be incorporated, to an officer of such party). Notice deposited in the mail, postpaid and certified with return receipt requested, shall be deemed received and effective upon the deposit in a proper United States depository. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purposes of notice, the addresses of the parties for the receipt of notice hereunder are: COMPANY: Fischer Imaging Corporation 12300 N. Grant Street Denver, Colorado 80241 Attention: Harris Ravine Tel.: (303) 450-4370 Fax: (303) 252-4256 With copies to: Ronald R. Levine, II Davis Graham & Stubbs LLP 1550 Seventeenth Street, Suite 500 Tel.: 303-892-7514 Fax: 303-892-7400 12 ComVest: ComVest Investment Partners II LLC One North Clematis, Suite 300 West Palm Beach, Florida 33401 Attention: Carl Kleidman Telephone: (561) 868-6070 e-mail: carlk@comvest.com 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 Any party shall have the right from time to time, and at any time, to change its address for the receipt of notice by giving at least five (5) days' prior written notice of the change of its address to the other parties in the manner specified herein. (c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. (d) This Agreement shall be governed by and construed 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. Each of the parties submits to the jurisdiction of the federal courts whose district encompass the Borough of Manhattan, City of New York or the state courts of the State of New York sitting in the Borough of Manhattan, City of New York in connection with any dispute arising under this Agreement or any of the transactions contemplated hereby, and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions (e) This Agreement, together with the other Transaction Documents, supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof, including the Term Sheet dated as of December 29, 2004. (f) Subject to the requirements of Section 11 hereof, this Agreement shall inure for the benefit of and be binding upon the successors and assigns of each of the parties hereto. (g) This Agreement may be signed in two or more counterparts (and by facsimile), each of which shall be deemed an original. (h) The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement. (i) If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of 13 the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. (j) The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to ComVest by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that ComVest shall be entitled, in addition to all other available remedies in law or in equity, to an injunction or injunctions to prevent or cure any breaches of the provisions of this Agreement and to enforce specifically the terms and provisions of this Agreement, without the necessity of showing economic loss and without any bond or other security being required. (k) Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated hereby and thereby. Each of the parties hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other hereto have been induced to enter into this Agreement and the transactions contemplated hereby and thereby, as applicable, by, among other things, the mutual waivers and certifications in this Paragraph (k). 14 IN WITNESS WHEREOF, this Registration Rights Agreement has been duly executed by the undersigned as of the date set forth above. FISCHER IMAGING CORPORATION ------------------------------------------------ Name: Harris Ravine Title: President and Chief Executive Officer COMVEST INVESTMENT PARTNERS II LLC ------------------------------------------------ Name: Title: 15 EX-9 9 e1042491.txt SECURITY AGREEMENT EXHIBIT 9 SECURITY AGREEMENT 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 in favor of ComVest Investment Partners II LLC, a Delaware limited liability company (the "SECURED PARTY"), as contemplated in the Note and Warrant Purchase Agreement (the "PURCHASE AGREEMENT") between the Company and the Secured Party dated of even date herewith. RECITALS: A. Pursuant to 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 in the manner set forth in the Purchase Agreement. B. In order 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 the Secured 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 the terms 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 any bankruptcy, 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 proceeding regardless of whether allowed or allowable in such proceeding), of the Company under the Notes or this Security Agreement (collectively, the "OBLIGATIONS"). C. It is 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, the receipt and sufficiency of which are hereby acknowledged, the Company agrees as follows: ARTICLE 1 SECURITY INTEREST 1.1 Grant of Security Interest. As security for the Obligations, the Company hereby assigns, pledges and grants a 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 or hereafter acquired, including: (a) all equipment (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 time in the State of New York (the "Code")), machinery, vehicles, fixtures, improvements, supplies, furniture, and other fixed assets, all as now owned or hereafter 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) all goods (including all "Goods" as defined in Section 9-102(a)(44) of the Code) and all inventory (including all "Inventory" as defined in Section 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 not limited 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 all substitutions therefor and additions thereto (all of the property described in this clause (b) being hereinafter collectively referred to as "Inventory"); (c) all present and future accounts in which the Company has or hereafter acquires any interest (including all "Accounts" as defined in Section 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 payment and 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 (including tax 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) being hereinafter collectively referred to as "Accounts"); (d) all investment property now owned or hereafter acquired by the Company (including all "Investment Property" as defined in Section 9-102(a)(49) of the Code), including, without limitation, all securities (certificated and uncertificated), securities accounts, securities entitlements, commodity contracts and commodity accounts, and all dividends and distributions paid or payable thereon; provided, however, that with respect to securities constituting capital 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% of the outstanding equity securities of any class of any such issuers; (e) all general intangibles now owned or hereafter acquired by the Company or in which the Company has or hereafter acquires any interest (including all "General Intangibles" as defined in Section 9-102(a)(42) of the Code), including but not limited to, payment intangibles (including all "Payment Intangibles" as defined in Section 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 not prohibited by applicable law), registrations, franchises, corporate or other business records, systems, designs, software, manuals, procedures, drawings, goodwill, logos, indicia, business identifiers, inventions, processes, production methods, proprietary information, know-how and trade-secrets of the Company, and all Owned Intellectual Property, trade-names, copyrights, patents, trademarks 2 (including service marks) and copyright, patent and 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 and other leasing contracts, instruments and documents owned or used by the Company, and any goodwill relating thereto); (f) all other 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) all moneys, 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 in Section 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-l02(a)(29) of the Code), deposits and credits from time to time whether or not in the possession of or under the control of the Secured Party; (h) all commercial tort claims (as defined in Section 9-102(a)(13) of the Code); (i) all books and records relating to any of the foregoing assets or property; and (j) any consideration 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. The property 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) The Company 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 and all 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 of the Code. For purposes of this Section 1.2(a), the Financing Statements shall be deemed to include any amendment, modification, assignment, 3 continuation statement or other similar instrument consistent with the rights granted to Secured Party under this Agreement and the Purchase Agreement. (b) The Company 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 the Secured 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 or evidenced 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 such Collateral 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 to which 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 such Collateral, upon the request of the Secured Party, promptly deliver possession of such Collateral to the Secured Party. ARTICLE 2 REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties. The Company represents and warrants that: (a) The Company 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 encumbrance except (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 or Environmental 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 adequate reserves 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 ordinary course 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 of deposits 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 that such 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 such purchase 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 were acquired by the Company, and (vi) the liens and security interests of the Secured Party pursuant to this Security Agreement (collectively, "PERMITTED LIENS"). 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 the Code (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 4 on the part of 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) the location 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, filing date, 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 within the 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) Except as disclosed or permitted without violation of the Purchase Agreement, the Company has paid or will pay when due all taxes, fees, assessments and other charges now 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 the Company shall have set aside on its books adequate reserves with respect thereto. (d) As a result of the execution and delivery of this Security Agreement and the filing of any financing statements or other documents necessary to assure, preserve and perfect 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 continuing security interest in, the Collateral and such lien shall be superior and prior to all other liens other than the Permitted Liens. (e) All Accounts represent bona fide transactions completed in accordance with the terms and provisions contained in the contracts, agreements, invoices and other documents governing 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 non-material set off, return and similar rights arising in the ordinary course of business. The Company has not made any agreement with any account debtor 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, all account 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 set forth on Schedule B attached hereto. To the Company's knowledge, the goods giving rise to Accounts are not subject to any lien, claim or encumbrance 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) as disclosed or permitted without violation of the Purchase Agreement. (f) All Inventory 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 5 manufacture and/or sell Inventory. Except as disclosed in Schedule 4.15(c) of the Purchase Agreement, 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 subject Inventory 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) None of the Collateral is held by a third party in any location as assignee, trustee, bailee, consignee or in any similar capacity. (h) The Company is a Delaware corporation whose legal name is Fischer Imaging Corporation, whose federal tax identification number is 36-2756787, and whose Delaware organizational identification number is 2266894. 2.2 Survival. All representations, warranties and agreements of the Company contained in this Security Agreement shall 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. ARTICLE 3 COVENANTS 3.1 Covenants. The Company hereby covenants and agrees with the Secured Party that so long as this Security 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) the Company shall promptly 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 own cost 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 Secured Party 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 than Permitted 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 other casualties, 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, and shall 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 of similar 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 to be 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) and promptly 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 or depreciation; (e) at the Secured Party's request, the Company shall mark any Collateral that is chattel paper with a legend showing the Secured 6 Party's lien and security interest therein or shall 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 its business 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 shall promptly 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 Company shall 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 substantially consistent 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, with respect 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 payment with 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 prior written 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 principal executive office or jurisdiction of incorporation. 3.2 Further Deliveries. The Company hereby covenants and agrees with the Secured Party that so long as this Security 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) the Company 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 with respect 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 any other 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 a deposit 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 Secured Party 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 deliver any 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 the applicable 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 all letter 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 Secured Party 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 of such 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, the Company 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 any material 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 all liens and security interests (whether pursuant to a lease agreement, by statute, or otherwise) which such 7 landlord may have for unpaid rent or otherwise, or obtain such landlord's written consent to a collateral 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 of the 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's account 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 Secured Party) 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 shall execute 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 other than Permitted Liens. 3.3 Intellectual Property. (a) Except as could not reasonably be expected to have a Material Adverse Effect, the Company (either itself or through licensees) (i) will continue to use each registered 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 for non-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 become invalidated 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 become forfeited, 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 whereby any 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 the Company to institute or pursue any reconsideration, lawsuit or appellate proceeding, or to exhaust all available legal or administrative recourses. (b) The Company 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 any material Owned Intellectual Property has become forfeited, abandoned or dedicated to the public, or of any adverse determination (including, without limitation, any adverse determination in, any proceeding 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, any material Owned Intellectual Property or the Company's right to register the same or to own and maintain the same. (c) Whenever the Company, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any material Owned 8 Intellectual 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 the Secured 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 Secured Party'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) Except as 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 and expense, 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 country or 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 does not obligate the Company to institute or pursue any reconsideration, lawsuit or appellate proceeding, or to fully exhaust all available legal or administrative recourses. (e) In the 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 circumstances to 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 such infringement, misappropriation or dilution. ARTICLE 4 REMEDIAL MATTERS 4.1 Event of Default. An "Event of Default"shall exist hereunder (a) if an Event of Default shall occur under 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 performance of any of the covenants, terms, conditions or agreements on the part of the Company contained in this Security Agreement and such non-observance or non-performance continues for a period of thirty (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 account debtors 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 the Secured 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 deemed desirable with respect to any of the Collateral, but shall be 9 under no obligation to do so; and/or (c) extend the time of payment, arrange for payment in installments, or otherwise modify the term 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 so doing 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 after receipt 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 payments and 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 irrevocably authorized (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 equal to, 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) Upon the occurrence and during the continuance of an Event of Default, the Secured Party may: (i) require the Company to assemble the tangible assets that comprise 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 demand and 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 or for 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 of performance 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 notices as 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 to clean-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 sold may 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 not to 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 the same 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 so adjourned. 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 to affect the 10 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 be retained 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 all of 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 again upon 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 in accordance 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 this Section 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 the Obligations (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 and payable 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 property without 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 equity to 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 proceeding by 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. Notwithstanding the foregoing, 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 items constituting 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) If an 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, have all the rights and remedies of a secured party under all applicable provisions of law, including but not limited to the Code. (c) If an 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 the Secured 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 Security Agreement, 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 the Collateral and the Secured Party shall not have any obligation or liability in respect thereof. 11 (d) After the 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 and other 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 also furnish 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 request from time to time. (e) After the 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, payments or 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 or its 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 the Collateral 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 Party with 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 so complying with any such notice and instruction. 4.4 Application of Proceeds. Unless the Secured Party otherwise directs, the proceeds of any sale of Collateral pursuant 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 with the 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 may determine; and (c) 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 powers hereunder 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 duties hereunder 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 duties hereunder. 12 4.6 Certain Waivers; Company Not Discharged. The Company expressly and irrevocably waives (to the extent permitted 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 hereunder are 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 any right 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 in respect 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 of or 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 of the 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 the Notes 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 any part 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 to such of the 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 Security Agreement, or otherwise). ARTICLE 5 MISCELLANEOUS 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 and perfection 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 interests created 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 for the 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 possession thereof 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 a security 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 Secured Party. The Company agrees that, after the occurrence and during the continuance of 13 an Event of Default, it shall upon request of the Secured Party, take any and all actions, to the extent permitted by applicable 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, and specifically, 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 to the 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 own expense 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 result of 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's place 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 extracts therefrom or copies thereof as are reasonably requested. 5.2 Effectiveness. This Security Agreement shall take effect immediately upon execution and delivery by the Company. 5.3 Indemnity; Reimbursement of Secured Party; Deficiency. In connection with the administration and enforcement or 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 and penalties) 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 and disbursements 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 extent provided 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 the Collateral 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 any out-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 this Section 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 willful misconduct 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 Security Agreement. 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 this Section 5.3 shall survive any termination of this Security Agreement and release of liens hereunder. 14 5.4 Continuing Lien. It is the intent of the parties hereto that (a) this Security Agreement shall constitute 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 Agreement and 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 the Post-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 Secured Party, 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 pursuant to the 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 specified herein) 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 an internationally 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, or at 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 Secured Party: ComVest Investment Partners II LLC One North Clematis, Suite 300 West Palm Beach, Florida 33401 ATTENTION: Carl Kleidman Telephone: (561) 868-6070 E-mail: carlk@comvest.com 15 with a copy to: Greenberg Traung, 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 of each 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 nor the 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 may assign 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 be governed 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 irrevocably consents 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 Security Agreement, 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 HEREBY IRREVOCABLY WANES 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 operate as 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 future exercise 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 of any 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, or constitute 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 of this 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 waiver or 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 further notice or demand in similar or other circumstances. 5.10 Amendments. Neither this Security Agreement nor any provision hereof may be amended or modified, and no required performance hereunder may be waived, except pursuant to an agreement or agreements in writing signed by the party to be charged therewith. 16 5.11 Severability. In the event any one or more of the provisions contained in this Security Agreement shall be held 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 to be 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 affected or impaired thereby. 5.12 Counterparts. This Security Agreement may be executed in two or more counterparts, each of which shall constitute 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 of the 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 to affect the construction of, or to be taken into consideration in interpreting, this Security Agreement. 5.14 Interpretation. In the event of any express conflict between this Security Agreement and the Purchase Agreement, 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 not constitute a conflict with the Purchase Agreement. [signatures on following pages] 17 IN WITNESS WHEREOF, this Security Agreement has been duly executed by each of the undersigned as of the date first set forth above. COMPANY: FISCHER IMAGING CORPORATION By: /s/ --------------------------------------------- Name: Harris Ravine Title: President and Chief Executive Officer COMVEST INVESTMENT PARTNERS II LLC By: /s/ --------------------------------------------- Name: Title: SCHEDULE A Location of Asset and Records SCHEDULE B