Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
     This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 21,
2008, is entered into by and among Merge Healthcare Incorporated, a Wisconsin
corporation (“Parent”) and its subsidiaries listed on the Schedule of Companies
(together with Parent, each a “Company” and collectively, the “Companies”), and
Merrick RIS, LLC, a Delaware limited liability company (“Buyer”).
     WHEREAS:
     A. Each of the Companies and Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and
Regulation D (“Regulation D”) promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the 1933 Act.
     B. The Companies have authorized a new series of senior secured term notes
of the Companies (the “Term Notes”).
     C. Buyer wishes to purchase, and the Companies wish to sell, upon the terms
and conditions stated in this Agreement, $15,000,000 in principal amount of Term
Notes, in substantially the form attached hereto as Exhibit A.
     D. In connection with the sale of the Term Notes, and as an inducement to
Buyer to purchase the Securities (as defined below), Parent wishes to issue to
Buyer at Closing, upon the terms and conditions stated in this Agreement,
6,800,000 shares (the “Note Shares”) of common stock, par value $0.01 per share,
of Parent (or any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of such common
stock) (the “Common Stock”).
     E. In addition to the Term Notes and the Note Shares, at the Closing the
Parent will issue and the Buyer will purchase up to an additional 14,285,715
shares of Common Stock at a price per share of $0.35 (the “Purchased Shares”
and, together with the Note Shares, the “Shares”).;
     F. At the Closing, Parent and Buyer shall execute and deliver a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit B (the “Registration Rights Agreement”), pursuant to which Parent will
provide certain registration rights with respect to the Shares under the 1933
Act and the rules and regulations promulgated thereunder, and applicable state
securities laws.
     G. At the Closing, the Companies and Buyer will execute and deliver a
Pledge and Security Agreement (US), substantially in the form attached hereto as
Exhibit C-1 (the “Security Agreement (US)”) and a Pledge and Security Agreement
(Canada) substantially in the form attached hereto as Exhibit C-2 (the “Canadian
Security Agreement”, and together with the Security Agreement (US), the
“Security Agreement”), pursuant to which the assets and shares of the Companies
will be pledged as Collateral (as defined in the Term Notes) to secure the Term
Notes.

 

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     H. Contemporaneously with the execution and delivery of this Agreement, the
Companies and Buyer are executing and delivering a Fee Letter, substantially in
the form attached hereto as Exhibit D (the “Fee Letter”), pursuant to which the
Companies shall pay and reimburse Buyer for fees and expenses incurred in
connection with the transactions contemplated hereunder.
     I. On the date hereof, the Buyer and the Company have entered into an
Escrow Agreement (the “Escrow Agreement”) with SunTrust Bank, pursuant to which
the Buyer has made a good faith deposit of $1,000,000 (the “Escrow Amount”),
which Escrow Amount shall be released from such escrow in accordance with the
terms of Section 1 hereof or upon termination of this Agreement, upon the terms
set forth in such Escrow Agreement.
     J. The Term Notes and the Shares are collectively referred to herein as the
“Securities”.
     NOW, THEREFORE, each Company and Buyer hereby agree as follows:
     1. PURCHASE AND SALE OF NOTES AND SHARES.
          Closing. Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6(a) and 7(a) below, in consideration for Buyer’s payment of
the Purchase Price (as defined below) (i) the Companies shall issue and sell to
Buyer, and Buyer agrees to purchase from the Companies on the Closing Date (as
defined below), the Term Notes and a number of Purchased Shares equal to
14,285,714 and (ii) Parent shall issue to Buyer on the Closing Date the Shares.
The closing (the “Closing”) of the purchase of such Securities by Buyer shall
occur at the offices of McDermott Will & Emery LLP, 227 West Monroe Street,
Chicago, Illinois 60606. The date and time of the Closing (the “Closing Date”)
shall be 10:00 a.m., Chicago time, on the date which is one business day after
the satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below other than conditions which by their terms are to be
satisfied at the Closing, which shall be satisfied at the Closing (in each case,
or such later date as is mutually agreed to by the Companies and Buyer). The
aggregate purchase price (the “Purchase Price”) of the Term Notes and Shares to
be purchased by Buyer at the Closing shall be equal to $20,000,000. On the
Closing Date, (i) Buyer shall pay the Purchase Price less the amount set forth
in the Fee Letter less $1,000,000 to the Companies for the Term Notes and Shares
to be issued and sold to Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Companies’ written wire instructions,
(ii) the Escrow Agent shall be instructed by the parties to release the Escrow
Amount to the Companies, and (iii) the Companies shall deliver to Buyer (A) the
Term Notes (in the denominations as Buyer shall have requested prior to the
Closing) which Buyer is purchasing, duly executed on behalf of the Companies and
registered in the name of Buyer or its designee and (B) certificates or evidence
of electronic registration with Parent’s transfer agent representing the Shares
(in the denominations as Buyer shall have requested prior to the Closing) which
Buyer is purchasing, duly executed on behalf of Parent and registered in the
name of Buyer or its designee.

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     2. BUYER’S REPRESENTATIONS AND WARRANTIES.
          Buyer represents and warrants that:
          (a) No Public Sale or Distribution. Buyer is acquiring the Term Notes
and the Shares for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof in a manner that would
violate the 1933 Act, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, Buyer
does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act. Buyer is acquiring the Securities hereunder in the ordinary course
of its business. Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.
          (b) Investor Status. Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D.
          (c) Reliance on Exemptions. Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Companies are relying in part upon the truth and accuracy of, and
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of Buyer to
acquire the Securities.
          (d) Information. Buyer and its advisors, if any, have been furnished
with materials relating to the business, finances and operations of the
Companies and materials relating to the offer and sale of the Securities that
have been requested by Buyer and that Buyer deems necessary to make its decision
to purchase the Securities. Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Companies (and have received
satisfactory answers thereto), as they deemed necessary in connection with the
decision to purchase the Securities. Buyer is a sophisticated institutional
investor and has substantial knowledge and experience in financial and business
matters and expertise in assessing credit risk. Buyer is capable of evaluating
the merits, risks and suitability of investing in the Securities. Buyer
understands that its investment in the Securities involves a high degree of risk
and is able to afford a complete loss of such investment. Buyer understands that
nothing in this Agreement, Parent’s public filings with the SEC or any other
materials presented to Buyer in connection with the purchase and sale of the
Securities constitutes accounting, legal, tax or investment advice. Buyer has
sought such accounting, legal, tax and investment advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities. Buyer acknowledges that Parent’s common stock is
currently listed on The NASDAQ Global Market (the “Principal Market”) and Parent
is required to file reports containing certain business and financial
information with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “1934 Act”), and that it is
able to obtain copies of such reports.

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          (e) No Governmental Review. Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
          (f) Transfer or Resale. Buyer understands that, except as provided in
the Registration Rights Agreement, the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) Buyer shall have delivered to the Companies an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) Buyer
provides the Companies with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act (or, in each case, a successor rule thereto); provided,
however, that the Securities may be pledged in connection with a bona fide
margin account or other loan or financing arrangement secured by the Securities
and such pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and Buyer when effecting a pledge of
Securities shall not be required to provide the Companies with any notice
thereof or otherwise make any delivery to the Companies pursuant to this
Agreement or any other Transaction Document (as defined in Section 3(b)),
including, without limitation, this Section 2(f).
          (g) Legends. Buyer understands that the certificates or other
instruments representing the Term Notes and, until removed in accordance with
the Registration Rights Agreement, the certificates representing the Shares,
except as set forth below, shall bear any legend as required by the “blue sky”
laws of any state and a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

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The legend set forth above shall be removed and the Companies or Parent, as
applicable, shall issue a certificate without such legend to the holder of the
Securities upon which it is stamped, if (i) such Securities are registered for
resale under the 1933 Act, (ii) such Securities are sold, assigned or
transferred pursuant to Rule 144, or such holder provides the Companies or
Parent, as applicable, with reasonable assurance that the Securities can be
sold, assigned or transferred pursuant to Rule 144.
          (h) Residency. Buyer is a resident of Delaware.
          (i) Beneficial Ownership. Assuming the capitalization of Parent set
forth in its most recent SEC Documents, Buyer, together with its “affiliates”
and “associates” (each as defined in Rule 12b-2 of the General Rules and
Regulations under the 1934 Act) and “associates” of its “affiliates”, was
immediately prior to the purchase of the Securities hereunder the beneficial
owner (as defined in Rule 13d-3 of the 1934 Act) of no shares of Common Stock
and will be the beneficial owner of not more than 38% of the outstanding shares
of Common Stock after giving effect to the purchase of the Securities hereunder.
          (j) Organization; Validity and Enforceability. Buyer is a Delaware
limited liability company duly organized and validly existing in good standing
under the laws of Delaware, and has the requisite power and authority to enter
into and perform its obligations under the Transaction Documents. This Agreement
and the other Transaction Documents to which it is a party have been duly
executed and delivered by Buyer, and constitute the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
          (k) Financing. On the date hereof Buyer has and, on the Closing Date,
Buyer shall have all funds necessary to pay the Purchase Price less the Escrow
Amount.
     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
          As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, each of the Companies jointly
and severally represents and warrants to Buyer that each and all of the
following representations and warranties (as modified by the disclosure
schedules delivered to Buyer contemporaneously with the execution and delivery
of this Agreement (the “Schedules”)) are true and correct as of the date hereof
and as of the Closing Date. The Schedules shall be arranged by the Companies in
paragraphs corresponding to the sections and subsections contained in this
Section 3.
          (a) Organization and Qualification. The Companies and each of their
respective direct and indirect subsidiaries, all of which are set forth on
Schedule 3(a) (each a “Subsidiary”) are entities duly organized and validly
existing in good standing or otherwise under the laws of the jurisdiction in
which they are formed, incorporated or amalgamated, and have the requisite power
and authorization to own their properties and to carry on their business as now
being conducted. Each of the Companies and each of their Subsidiaries is duly
qualified as a foreign entity to do business and is in good standing in every
jurisdiction in which its

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ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, “Material Adverse Effect” means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Companies and their
Subsidiaries, taken as whole, or on the transactions contemplated hereby and by
the other Transaction Documents, or on the authority or ability of each of the
Companies to perform its obligations under the Transaction Documents. Except as
set forth on Schedule 3(a), (i) the Companies have no subsidiaries and (ii) all
capital stock or other equity or similar interests of the Subsidiaries is
directly or indirectly owned by Parent.
          (b) Authorization; Enforcement; Validity. Each of the Companies has
the requisite power and authority to enter into and perform its obligations
under this Agreement, the Term Notes, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(c)), the
Security Agreements, the Escrow Agreement, the Fee Letter and each of the other
agreements entered into by such party in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”) and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Companies have been
duly authorized by each of the Companies’ respective boards of directors (or
other governing body) and the consummation by the Companies of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Term Notes by the Companies and the issuance of the Shares by Parent, have
been duly authorized by the Companies’ boards of directors (or other governing
body) and Parent’s Board of Directors, as applicable, and (other than (i) as may
be required by federal securities laws with respect to Parent’s obligations
under the Registration Rights Agreement; (ii) the filing with the SEC of one or
more Current Reports on Form 8-K with respect to the transactions contemplated
by the Transaction Documents and compliance with the disclosure requirements of
Item 701 of SEC Regulation S-K; (iii) filings under state securities or “blue
sky” laws; (iv) the filing with the SEC of a Form D; (v) the filings and other
actions necessary to perfect any liens granted pursuant to the Security
Documents (as defined in the Term Notes); (vi) the issuance in Canada and filing
with the Canadian securities regulatory authorities of a news release; and
(vii) the filing with the Principal Market of a Notification Form for Listing of
Additional Shares and the letter dated May 20, 2008 from the Principal Market
relating to the Financial Viability Exception), no further filing, consent, or
authorization is required by any Company, its board of directors (or other
governing body) or its stockholders, except for filings required to be made by
Buyer. This Agreement and the other Transaction Documents have been duly
executed and delivered by each of the Companies party thereto, and constitute
the legal, valid and binding obligations of each of the Companies party thereto,
enforceable against each of such Companies in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.
          (c) Issuance of Securities. The Term Notes are duly authorized and,
upon issuance in accordance with the terms hereof, shall be validly issued and
free from all taxes, liens and charges with respect to the issue thereof. The
Shares are duly authorized, validly issued, fully paid and nonassessable and
free from all preemptive or similar rights, taxes, liens and

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charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock. Assuming the truth and accuracy
of, and Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth in this Agreement
(including but not limited to Section 2(c)), the issuance by the Companies of
the Term Notes and the issuance by Parent of the Shares is exempt from
registration under the 1933 Act.
          (d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Companies party
thereto and the consummation by the Companies of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Term
Notes and the Shares) will not (i) result in a violation of any Company’s
certificate or articles of incorporation or amalgamation or bylaws or other
governing documents, or the terms of any capital stock or other equity interests
of Parent or any of its Subsidiaries; (ii) conflict with, or constitute a breach
or default (or an event which with notice or lapse of time or both, would become
a breach or default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which Parent or any of its Subsidiaries is a party; or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and the rules and
regulations of the Principal Market) applicable to Parent or any of the
Subsidiaries or by which any property or asset of Parent or any of the
Subsidiaries is bound or affected.
          (e) Consents. No Company or Subsidiary is required to obtain any
consent, authorization, approval, order, license, franchise, permit, certificate
or accreditation of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof (other than (i) as may be required by federal
securities laws with respect to Parent’s obligations under the Registration
Rights Agreement; (ii) the filing with the SEC of one or more Current Reports on
Form 8-K with respect to the transactions contemplated by the Transaction
Documents and compliance with the disclosure requirements of Item 701 of SEC
Regulation S-K; (iii) the filing with the Principal Market of a Notification
Form for Listing of Additional Shares and the letter dated May 20, 2008 from the
Principal Market regarding the Financial Viability Exception; (iv) filings under
state securities or “blue sky” laws; (v) the filing with the SEC of a Form D;
(vi) the filings and other actions necessary to perfect any liens granted
pursuant to the Security Documents (as defined in the Term Notes); and (vii) as
set forth on Schedule 3(e)). All consents, authorizations, approvals, orders,
licenses, franchises, permits, certificates or accreditations of, filings and
registrations which the Companies or any Subsidiary are required to obtain on or
prior to the Closing Date pursuant to the preceding sentence have been obtained
or effected on or prior to the Closing Date, and each Company is unaware of any
facts or circumstances which might prevent any of the Companies from obtaining
or effecting any of the registration, application or filings pursuant to the
preceding sentence. Except as set forth on Schedule 3(e), Parent is not in
violation of the listing requirements of the Principal Market and has no
knowledge of any facts which would reasonably lead to delisting or suspension of
the Common Stock in the foreseeable future.

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          (f) Acknowledgment Regarding Buyer’s Purchase of Securities. Each of
the Companies acknowledges and agrees that Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and that Buyer is not
(i) an officer or director of any Company, (ii) an “affiliate” of any Company
(as defined in Rule 144) or (iii) to the knowledge of the Companies, a
“beneficial owner” of more than 10% of the shares of Common Stock (as defined
for purposes of Rule 13d-3 of the 1934 Act). Each of the Companies further
acknowledges that Buyer is not acting as a financial advisor or fiduciary of any
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by
Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to Buyer’s purchase of the Securities. Each of the Companies further
represents to Buyer that each Company’s decisions to enter into the Transaction
Documents to which it is a party have been based solely on the independent
evaluation by such Companies and their respective representatives.
          (g) No General Solicitation; Placement Agent’s Fees. None of the
Companies or Subsidiaries, nor any of their affiliates, nor any Person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities. Parent shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by Buyer or their investment advisors) relating to or
arising out of the transactions contemplated hereby. Parent shall pay, and hold
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney’s fees and out-of-pocket expenses) arising in connection
with any such claim. Except as set forth on Schedule 3(g), no Company has
engaged any placement agent or other agent in connection with the sale of the
Securities.
          (h) No Integrated Offering. None of the Companies or Subsidiaries, any
of their affiliates, or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by any of the Companies for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of Parent or any other Company
are listed or designated. None of the Companies or Subsidiaries, or any of their
affiliates or any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings. Except as set forth on Schedule 3(h), none of
the Companies has a registration statement pending before the SEC or currently
under the SEC’s review.
          (i) U.S. Real Property Holding Corporation. None of the Companies or
Subsidiaries is, nor has it ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Companies will so certify upon the request of Buyer.

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          (j) Application of Takeover Protections; Rights Agreement. To the
extent legally permissible, each of the Companies and Subsidiaries and its
respective board of directors (or other governing body) has taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under each Company’s and
Subsidiary’s certificate or articles of incorporation (or other governing
documents) or the laws of the jurisdiction of its incorporation or formation
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, each Company’s
issuance of the Term Notes, Parent’s issuance of the Shares and Buyer’s
ownership of the Securities. Parent has amended its shareholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of up to
40% of the issued and outstanding Common Stock of Parent as such provisions may
relate to Buyer.
          (k) SEC Documents; Financial Statements. Parent has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the Closing Date and all exhibits included therein and
financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC Documents”). Except
as set forth on Schedule 3(k), as of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted 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. As amended or supplemented, the financial statements of
Parent included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. As amended or supplemented, such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of Parent as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
          (l) Absence of Certain Changes. Except as disclosed in Schedule 3(l),
since December 31, 2007 (the “Diligence Date”), there has been no material
adverse change and no material adverse development in the business, assets,
properties, operations, condition (financial or otherwise), results of
operations or prospects of Parent and the Subsidiaries, taken as a whole, or the
Cedara software business, taken as a whole, or Cedara Software Services (India)
Private Limited. Except as disclosed in Schedule 3(l), since the Diligence Date,
Parent has not (i) declared or paid any dividends, (ii) sold any assets other
than in the ordinary course of its business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $50,000. None of the Companies or
Subsidiaries has made any filing or in any way sought protection or, assuming
the transactions contemplated hereby occur, has any present intention of filing
pursuant to any bankruptcy law nor does any of the Companies or Subsidiaries
have any

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knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings. Parent and the Subsidiaries on a consolidated basis do not intend
to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its
debt. Parent and the Subsidiaries on a consolidated basis, as of the Closing
Date, and after giving effect to the transactions contemplated hereby to occur
at the Closing, will not be Insolvent (as defined below). For purposes of this
Section 3(l), “Insolvent” means, with respect to Parent and the Subsidiaries,
taken as a whole (i) the present fair saleable value of their assets is less
than the amount required to pay their total Indebtedness (as defined in
Section 3(s)), as applicable, (ii) such companies are unable to pay their debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such companies intend to incur or
believe that they will incur debts that would be beyond their ability to pay as
such debts mature or (iv) such companies have unreasonably small capital with
which to conduct the business in which they are engaged as such business is now
conducted and is proposed to be conducted.
          (m) No Undisclosed Events, Liabilities, Developments or Circumstances.
Since December 31, 2007, except for the transactions contemplated by the
Transaction Documents and except as set forth on Schedule 3(m), no event,
liability, development or circumstance has occurred or exists, or is currently
contemplated as reasonably likely to occur following the Closing Date with
respect to any of the Companies or their respective Subsidiaries, business,
properties, prospects, operations or financial condition, that would be required
to be disclosed by Parent under applicable securities laws on a Current Report
on Form 8-K which has not been publicly announced.
          (n) Conduct of Business; Regulatory Permits. None of the Companies nor
any Subsidiary is in violation of any term of or in default under its
certificate or articles of incorporation or amalgamation or bylaws or other
governing documents. Except as set forth on Schedule 3(n), none of the Companies
nor any Subsidiary is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to any of the Companies or any
Subsidiary and, in the case of Company Exchange Co., including, the Toronto
Stock Exchange. Without limiting the generality of the foregoing, except as set
forth on Schedule 3(n), Parent is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no knowledge of any
facts or circumstances that would reasonably lead to delisting or suspension of
the Common Stock by the Principal Market in the foreseeable future. During the
one (1) year period prior to the Closing Date, (i) the Common Stock has been
designated for quotation on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) except
as set forth on Schedule 3(n), Parent has received no communication, written or
oral, from the SEC or the Principal Market regarding the suspension or delisting
of the Common Stock from the Principal Market. Each of the Companies and each
Subsidiary possesses all consents, authorizations, approvals, orders, licenses,
franchises, permits, certificates, accreditations and permits issued by the
appropriate regulatory authorities necessary to conduct their respective
businesses and none of the Companies nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such consents,
authorizations, approvals, orders, licenses, franchises, permits, certificates,
accreditations or permits.

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          (o) Foreign Corrupt Practices. Except as set forth on Schedule 3(o),
none of the Companies nor any Subsidiary, nor any director, officer, agent,
employee or other Person acting on behalf of any of the Companies or any
Subsidiary has, in the course of its actions for, or on behalf of, any of the
Companies or Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
(iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
          (p) Sarbanes-Oxley Act. Parent is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the Closing Date, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the Closing Date,
except where the failure to be in compliance would not have a Material Adverse
Effect.
          (q) Transactions With Affiliates. Except as set forth on
Schedule 3(q), none of the officers, directors or employees of any of the
Companies or any of the Subsidiaries is presently a party to any transaction
with any of the Companies of any of the Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Companies, any corporation, partnership, trust or other entity
in which any such officer, director, or employee has a substantial interest or
is an officer, director, trustee or partner.
          (r) Equity Capitalization. The authorized capital stock of Parent
consists of (i) 100,000,000 shares of Common Stock and (ii) 5,000,000 shares of
preferred stock, par value $0.01 per share (the “Preferred Stock”) of which
1,000,000 shares are designated Series A preferred stock, 1,000,000 shares are
designated Series B Junior Participating Stock, one share is designated Special
Voting preferred stock, one share is designated Series 2 Special Voting
preferred stock, and one share is designated Series 3 Special Voting preferred
stock. As of the date of this Agreement, (i) 34,030,195 shares of Common Stock
are issued and outstanding (all of which are validly issued, fully paid and
nonassessable) of which 1,792,495 are Restricted Shares, (ii) other than one
share of Series 3 Special Voting preferred stock, no shares of Preferred Stock
are issued and outstanding, (iii) no shares of Common Stock or Preferred Stock
are held in the treasury of the Company, (iv) 12,115,826 shares of Common Stock
were reserved for issuance pursuant to the Stock Plans, (v) 1,688,475 shares of
Common Stock are reserved for issuance pursuant to the terms and conditions
applicable to the Exchangeable Shares, (vi) 1,000,000 shares of Common Stock are
reserved for issuance pursuant to the terms of the Series A preferred stock and
(vii) 1,000,000 shares of Common Stock are reserved for issuance pursuant to the
terms of the Series B Junior Participating Stock. The authorized share capital
of Company ExchangeCo consists of unlimited common shares, preferred shares and
Exchangeable Shares of which 697 common shares, no preferred shares and
13,210,154 Exchangeable Shares are issued and outstanding. Each of the
above-mentioned outstanding Exchangeable Shares has been duly allotted and
issued and is fully paid and non-assessable. There are no declared but

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unpaid dividends on any share of any class or series of capital stock of the
Company or any Exchangeable Share. “Company ExchangeCo” is defined as Merge
Cedara ExchangeCo Limited, an indirect subsidiary of the Company, organized
under the laws of the Province of Ontario and “Exchangeable Shares” are those
shares of capital stock of Company ExchangeCo issued under and with the rights
defined in the Plan of Arrangement, the Support Agreement and the Voting and
Exchange Agreement to which Company ExchangeCo is a party. The authorized shares
or other equity interests of each Subsidiary, as well as the number of such
shares or other equity interests of each Subsidiary issued and outstanding, as
of the Closing Date are as set forth on the Schedule of Companies. All of such
outstanding shares of capital stock or other equity interests of the Companies
(other than Parent) and Subsidiaries have been duly authorized, validly issued
and are fully paid and nonassessable. Except as set forth on Schedule 3(r):
(i) none of any Company’s or any Subsidiary’s share capital or other equity
interest is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by such Company or Subsidiary;
(ii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any share capital
or other equity interest of any of the Companies or Subsidiaries, or contracts,
commitments, understandings or arrangements by which any of the Companies or
Subsidiaries is or may become bound to issue additional share capital or other
equity interest of such Company or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any share
capital or other equity interest of any of the Companies or Subsidiaries;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of any of the Companies or Subsidiaries or by which any of the Companies or
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with any of the Companies or Subsidiaries; (v) there are no
agreements or arrangements under which any of the Companies or Subsidiaries is
obligated to register the sale of any of its securities under the 1933 Act
(except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of any of the Companies or Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which any of the Companies or Subsidiaries is
or may become bound to redeem a security of any of the Companies; (vii) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (viii) none of the
Companies or Subsidiaries has any stock appreciation rights or “phantom stock”
plans or agreements or any similar plan or agreement; and (ix) none of the
Companies or Subsidiaries has any liabilities or obligations required to be
disclosed in the SEC Documents but not so disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Companies’ or Subsidiaries’
respective businesses. Schedule 3(r) contains true, correct and complete copies
of (i) each Company’s or Subsidiary’s certificate or articles of incorporation
or amalgamation (or other applicable governing document), as amended and as in
effect on the Closing Date, (ii) each Company’s or Subsidiary’s bylaws, as
amended and as in effect on the Closing Date (or other applicable governing
document), and (iii) the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights
of the holders thereof in respect thereto.

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          (s) Indebtedness and Other Contracts. Except as disclosed on
Schedule 3(s), none of Parent or any Subsidiary (i) has any outstanding
Indebtedness, (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(iii) is in violation of any term of or in default under any contract, agreement
or instrument relating to any Indebtedness, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of Parent’s officers, has or is expected to have a Material
Adverse Effect, except as otherwise disclosed in Schedule 3(s). For purposes of
this Agreement: (w) “Indebtedness” of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued, undertaken
or assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted
accounting principles) (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (I) banker’s acceptances; (J) the
balance deferred and unpaid of the purchase price of any property or services
due more than six months after such property is acquired or such services are
completed; (K) Hedging Obligations; and (L) if and to the extent any of the
preceding items (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of any of the Companies or
Subsidiaries prepared in accordance with generally accepted accounting
principles. In addition, the term “Indebtedness” includes all Indebtedness of
others secured by a Lien on any assets of any of the Companies or the
Subsidiaries (whether or not such Indebtedness is assumed by the Companies or
such Subsidiaries) and, to the extent not otherwise included, the guarantee by
any of the Companies or any Subsidiaries of any Indebtedness of any other
Person. (x) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (y) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a

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government or any department or agency thereof, and (z) “Hedging Obligations”
means, with respect to any specified Person, the obligations of such Person
under: (i) interest rate swap agreements (whether from fixed to floating or from
floating to fixed), interest rate cap agreements and interest rate collar
agreements; (ii) other agreements or arrangements designed to manage interest
rates or interest rate risk; and (iii) other agreements or arrangements designed
to protect such Person against fluctuations in currency exchange rates or
commodity prices.
          (t) Absence of Litigation. Except as set forth in Schedule 3(t), there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency (including, without limitation, the SEC),
self-regulatory organization or body pending or, to the knowledge of any Company
or Subsidiary, threatened against or affecting any Company or any Subsidiary,
the Common Stock or any of the Companies’ or the Subsidiaries’ officers or
directors which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto.
          (u) Insurance. Except as set forth in Schedule 3(u), each of the
Companies and each of the Subsidiaries is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Companies believes to be prudent and customary in the
businesses in which the Companies and the Subsidiaries are engaged. None of the
Companies nor any of the Subsidiaries has been refused any insurance coverage
sought or applied for and none of the Companies nor any of the Subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
          (v) Employee Relations. None of the Companies nor any Subsidiary is a
party to any collective bargaining agreement or employs any member of a union.
Each of the Companies and each Subsidiary believes that its relations with its
employees are good. No executive officer of any of the Companies nor any
Subsidiary has notified such company that such officer intends to leave such
company or otherwise terminate such officer’s employment with such company. No
executive officer of any of the Companies, to the knowledge of the Companies or
any of the Subsidiaries, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant. Each of the Companies and
each Subsidiary is in compliance with all federal, state, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
          (w) Title. Each of the Companies and each Subsidiary has good and
marketable title to all real property and good and marketable title to all
personal property owned by it which is material to its respective businesses, in
each case free and clear of all liens, encumbrances and defects except as set
forth on Schedule 3(w) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Companies and their Subsidiaries. Any real property and
facilities held

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under lease by any of the Companies or any of the Subsidiaries are held by it
under valid, subsisting and enforceable leases with such exceptions as are not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Companies or the
Subsidiaries.
          (x) Intellectual Property Rights. Except as set forth on
Schedule 3(x), each of the Companies and the Subsidiaries owns or possesses
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual Property Rights”) necessary to
conduct its respective businesses as now conducted. No Company’s or Subsidiary’s
Intellectual Property Rights have expired or terminated since December 31, 2007,
or are expected to expire or terminate, within three years from the Closing
Date. None of the Companies nor any of the Subsidiaries has any knowledge of any
infringement by any of the Companies or Subsidiaries of Intellectual Property
Rights of others. Except as set forth on Schedule 3(x), there is no claim,
action or proceeding being made or brought, or to the knowledge of each of the
Companies, being threatened, against any of the Companies or any of the
Subsidiaries regarding its Intellectual Property Rights. Each of the Companies
is unaware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. Each of the Companies
and each of the Subsidiaries has taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property
Rights.
          (y) Environmental Laws. Each of the Companies and each of the
Subsidiaries (i) is in compliance with any and all Environmental Laws (as
hereinafter defined), (ii) has received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct its respective
businesses and (iii) is in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i),
(ii) and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, provincial, municipal, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
          (z) Subsidiary Rights. Except as set forth on Schedule 3(z), Parent or
one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital and other equity securities of its Subsidiaries.
          (aa) Investment Company. None of the Companies or Subsidiaries is, or
is an affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

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          (bb) Tax Status. Except as set forth on Schedule 3(bb), each of the
Companies and each of the Subsidiaries (i) has made or filed all foreign,
federal, state, provincial and municipal income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. Except as set forth on Schedule 3(bb), there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of each of the Companies and Subsidiaries know of no basis for
any such claim.
          (cc) Internal Accounting and Disclosure Controls. Except as set forth
on Schedule 3(cc), Parent maintains 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 generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. Except as set forth on Schedule 3(cc), Parent maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the 1934
Act) that are effective in ensuring that information required to be disclosed by
Parent in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by
Parent in the reports that it files or submits under the 1934 Act is accumulated
and communicated to Parent’s management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure. Except as
set forth on Schedule 3(cc), during the twelve months prior to the Closing Date,
none of the Companies or Subsidiaries has received any notice or correspondence
from any accountant relating to any potential material weakness in any part of
the system of internal accounting controls of any of the Companies or
Subsidiaries.
          (dd) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between any of the Companies or any of the
Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by Parent in its 1934 Act filings and is not so
disclosed or that otherwise would be reasonably likely to have a Material
Adverse Effect.
          (ee) Ranking of Term Notes. No Indebtedness of any of the Companies or
any of their Subsidiaries, will rank senior to the Term Notes in right of
payment, whether with respect to payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.
          (ff) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and

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transfer of the Securities to be sold to Buyer hereunder will be, or will have
been, fully paid or provided for by the Companies, and all laws imposing such
taxes will be or will have been complied with.
          (gg) Manipulation of Price; Securities.
                    (i) Neither any of the Companies nor any of the
Subsidiaries, nor any officer, director or affiliate of any of the Companies or
any of the Subsidiaries, and to each such Person’s knowledge, no one acting on
its behalf has, (i) taken, directly or indirectly, any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of Parent or any other Subsidiary to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities (except for customary placement
fees payable in connection with this transaction), or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of Parent or such Subsidiary (except for customary placement fees
payable in connection with this transaction).
                    (ii) Since the Diligence Date, neither any officer or
director of any of the Companies or any of the Subsidiaries, nor any affiliate
of any officer or director of any of the Companies or any of the Subsidiaries or
anyone acting on their behalf has sold, bid, purchased or traded in the Common
Stock of Parent.
          (hh) Creation, Perfection, and Priority of Liens. The Security
Documents are effective to create in favor of Buyer, for the benefit of Buyer, a
legal, valid, binding, and enforceable security interest and Lien (as defined
below), and a perfected first priority security interest and Lien (to the extent
that the Security Agreement and Term Notes obligate each Company and each
Subsidiary to provide such a perfected first priority security interest and
Lien, and except to the extent Permitted Liens have priority), in the Collateral
described therein as security for the obligations under the Term Notes to the
extent that a legal, valid, binding, and enforceable security interest and Lien
in such Collateral may be created under applicable law, and the State of
Registration (as defined in the Term Notes), including without limitation, the
uniform commercial code as in effect in any applicable jurisdiction (“UCC”) or
the personal property security act in effect in any applicable jurisdiction
(“PPSA”). The term “Lien” shall mean any mortgage, lien, pledge, security
interest, hypothec, conditional sale or other title retention agreement, charge
or other security interest or encumbrance of any kind, whether or not filed,
recorded or otherwise perfected under applicable law, including any conditional
sale or other title retention agreement or any lease in the nature thereof; any
option or other agreement to sell or give a security interest therein and any
filing of, or agreement to file, any financing statement under the UCC or PPSA
(or equivalent statutes of any jurisdiction).
          (ii) Disclosure. Each of the Companies understands and confirms that
Buyer will rely on the foregoing representations in effecting transactions in
securities of the Companies. This Agreement together with the Transaction
Documents, including the Schedules and Exhibits thereto, taken as a whole do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth on
Schedule 3(ii), each press release issued by Parent during the twelve
(12) months preceding the Closing

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Date did not at the time of release 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 are made, not misleading. Except for the transactions and other
actions contemplated by the Transaction Documents, no event or circumstance has
occurred or information exists with respect to Parent or any of its Subsidiaries
or its or their business, properties, prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by Parent but which has not been so publicly
announced or disclosed.
          (jj) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by any
of the Companies or Subsidiaries to arise, between any of the Companies or
Subsidiaries and the accountants and lawyers formerly or presently employed by
any of the Companies or Subsidiaries which could affect the ability of any of
the Companies or Subsidiaries to perform any of its obligations under any of the
Transaction Documents, and each of the Companies or Subsidiaries is current with
respect to any fees owed to its accountants and lawyers.
          (kk) Acknowledgement Regarding Buyer’s Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding, it is
understood and acknowledged by Parent that Buyer has not been asked by Parent to
agree, nor has any Buyer agreed, to, after the Closing, desist from purchasing
or selling, long and/or short, securities of Parent, or “derivative” securities
based on securities issued by Parent or to hold the Securities for any specified
term. Parent acknowledges that such aforementioned activities do not constitute
a breach of any of the Transaction Documents.
     4. COVENANTS.
          (a) Commercially Reasonable Efforts. Each party shall use commercially
reasonable best efforts to timely satisfy each of the conditions to be satisfied
by it as provided in Sections 6 and 7 of this Agreement.
          (b) Form D and Blue Sky. The Companies agree to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to Buyer promptly after such filing. Each of the Companies shall, on or
before the Closing Date, take such action as such Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to Buyer at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to Buyer on or prior to the Closing Date. Each of the
Companies shall make all filings and reports relating to the offer and sale of
the Securities required under applicable securities or “Blue Sky” laws of the
states of the United States following the Closing Date.
          (c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Shares and
none of the Term Notes is outstanding (the “Reporting Period”), Parent shall
file all reports required to be filed with the SEC pursuant to the 1934 Act, and
Parent shall not terminate its status as an issuer required to

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file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
          (d) Use of Proceeds. The Companies will use the proceeds from the sale
of the Term Notes as set forth on Schedule 4(d) which shall include the payment
of fees and expenses pursuant to the Fee Letter set forth as Exhibit D. Except
as set forth on Schedule 4(d), no proceeds from the sale of Securities will be
used to repay any Indebtedness.
          (e) Financial Information. Parent agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period: (i) unless filed or furnished with the SEC through EDGAR and available
to the public through the EDGAR system, within one Business Day (“Business Day”
means any day other than Saturday, Sunday or any other day on which commercial
banks in Chicago, Illinois are authorized or required by law to remain closed)
after the filing thereof with the SEC, a copy of all Annual Reports on Form 10-K
or 10-KSB, any interim reports or any consolidated balance sheets, income
statements, stockholders’ equity statements and/or cash flow statements for any
period other than an annual period, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act of Parent and (ii) copies of any notices and other information made
available or given to the stockholders of Parent generally, contemporaneously
with the making available or giving thereof to the stockholders.
          (f) Listing. To the extent Parent’s Registrable Securities (as defined
in the Registration Rights Agreement) are listed upon a national securities
exchange or automated quotation system that provides for the listing of
securities, Parent shall promptly secure the listing of all of the Registrable
Securities upon each national securities exchange and automated quotation
system, if any, upon which the Common Stock is then listed (subject to official
notice of issuance) and shall maintain such listing, if any, of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. Parent shall maintain the Common Stock’s authorization for quotation
on the Principal Market or an alternative trading market. Neither Parent nor any
of its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market. Parent shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
          (g) Fees. Parent shall pay Buyer a transaction fee, which amounts,
shall be withheld by Buyer from the purchase price paid by Buyer on the Closing
Date, in accordance with the Fee Letter.
          (h) Pledge of Securities. Each of the Companies acknowledges and
agrees that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall
be required to provide any Company with any notice thereof or otherwise make any
delivery to any Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof unless required in
connection with the

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registration of the Securities or by applicable law. Each of the Companies
hereby agrees to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by an Investor.
          (i) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York City time, on the second Business Day following the
Closing Date, Parent shall file a Current Report on Form 8-K describing the
terms of the transactions contemplated by the Transaction Documents in the form
required by the 1934 Act and attaching the material Transaction Documents
entered into on the Closing Date (including, without limitation, this Agreement
(and all schedules to this Agreement), the form of Note, the Security Agreement,
the Guarantees, and the Registration Rights Agreement) (including all
attachments, the “8-K Filing”). Subject to the foregoing, neither any of the
Companies nor Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that Parent shall be entitled, without the prior approval of any Buyer,
to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided, that in the case of clause (i) Buyer shall be consulted
by Parent in connection with any such press release or other public disclosure
prior to its release). Without the prior written consent of Buyer, none of the
Companies shall disclose the name of Buyer or its affiliates in any filing,
announcement, release or otherwise unless required by law.
          (j) Additional Issuances of Securities.
                    (i) For purposes of this Section 4(j), the following
definitions shall apply.
                    (1) “Convertible Securities” means any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock, including the Exchangeable Shares.
                    (2) “Options” means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible Securities.
                    (3) “Common Stock Equivalents” means, collectively, Options
and Convertible Securities.
                    (ii) From the date hereof until 90 days following the
Effective Date (as defined in the Registration Rights Agreement), none of the
Companies shall and shall prevent any Subsidiary from, directly or indirectly,
file any registration statement with the SEC other than the Registration
Statement (as defined in the Registration Rights Agreement) and one or more
registration statements relating to the issuance of Common Stock in exchange for
Exchangeable Shares.
                    (iii) So long as any Term Notes are outstanding, none of the
Companies or any other Subsidiary shall, directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its debt,
equity or equity equivalent securities,

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including without limitation any debt, preferred stock or other instrument or
security that may be, at any time during its life, and under any circumstance,
convertible into or exchangeable or exercisable for shares of Common Stock or
Common Stock Equivalents or debt securities (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent Placement”)
without the prior written consent of the holders of Term Notes representing not
less than a majority of the aggregate principal amount of the Term Notes then
outstanding (the “Required Holders”). In the event the Required Holders do
consent to the Subsequent Placement, the offering Company shall first comply
with this Section 4(j)(iii), as follows:
                    (1) Such Company shall deliver to each holder of a Term Note
(a “Holder”) a written notice (the “Offer Notice”) of any proposed or intended
issuance or sale or exchange (the “Offer”) of the securities being offered (the
“Offered Securities”) in a Subsequent Placement, which Offer Notice shall
(w) identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the Persons (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue
and sell to or exchange with such Holders an amount equal to 75% of the Offered
Securities, allocated among such Holders (a) based on such Holder’s allocable
pro rata portion of the aggregate principal amount of Term Notes outstanding at
the time of the Offer, and (b) with respect to each Holder that elects to
purchase its pro rata portion of such Offered Securities, any additional portion
of the Offered Securities attributable to the pro rata portion of other Holders
as such Holder shall indicate it will purchase or acquire should the other
Holders subscribe for less than their pro rata portions (the “Undersubscription
Amount”). For purposes of this Agreement, a Holder’s allocable pro rata portion
of any Offered Securities shall be defined as the “Allocable Portion”.
                    (2) To accept an Offer, in whole or in part, such Holder
must deliver a written notice to such Company prior to the end of the tenth
Business Day after such Holder’s receipt of the Offer Notice (the “Offer
Period”), setting forth the portion of such Holder’s Allocable Portion that such
Holder elects to purchase and, if such Holder shall elect to purchase all of its
Allocable Portion, the Undersubscription Amount, if any, that such Holder elects
to purchase (in either case, the “Notice of Acceptance”). If the Allocable
Portions subscribed for by all Holders are less than the total of all of the
Allocable Portions, then each Holder who has set forth an Undersubscription
Amount in its Notice of Acceptance shall be entitled to purchase, in addition to
the Allocable Portions subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Allocable
Portions and the Allocable Portions subscribed for (the “Available
Undersubscription Amount”), each Holder who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Allocable Portion of such Holder bears
to the total Allocable Portions of all Holders that have subscribed for
Undersubscription Amounts, subject to rounding by such Company to the extent its
deems reasonably necessary.

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                    (3) Such Company shall have fifteen Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Holders (the “Refused Securities”), but only to the offerees
described in the Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices, interest rates and
transaction fees) that are not more favorable to the acquiring Person or Persons
or less favorable to such Company than those set forth in the Offer Notice.
                    (4) In the event such Company shall propose to sell less
than all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4(j)(iii)(3) above), then each Holder may, at its
sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that shall
be not less than the number or amount of the Offered Securities that such Holder
elected to purchase pursuant to Section 4(j)(iii)(2) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities such Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Holders pursuant to
Section 4(j)(iii)(3) above prior to such reduction) and (ii) the denominator of
which shall be the original number or amount of the Offered Securities. In the
event that any Holder so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, such Company may not issue,
sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Holders in accordance with Section 4(j)(iii)(1) above.
                    (5) Upon the closing of the issuance, sale or exchange of
all or less than all of the Refused Securities, the purchasing Holders shall
acquire from such Company, and such Company shall issue to such purchasing
Holders, the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(j)(iii)(4) above if the Holders
have so elected, upon the terms and conditions specified in the Offer Notice.
The purchase by the Holders of any Offered Securities is subject in all cases to
the preparation, execution and delivery by such Company and the purchasing
Holders of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the purchasing Holders and their
respective counsel.
                    (6) Any Offered Securities not acquired by the Holders or
other Persons in accordance with Section 4(j)(iii)(3) above may not be issued,
sold or exchanged until they are again offered to the Holders under the
procedures specified in this Agreement.
                    (iv) The restrictions contained in subsection (iii) of this
Section 4(j) shall not apply in connection with the issuance of equity options
or restricted stock for up to 2,000,000 shares (subject to appropriate
adjustment for stock splits, combinations and similar transactions) of Common
Stock under Parent’s existing equity based compensation plans, or the issuance
of Common Stock upon the exercise of certain rights related to the Exchangeable
Shares.

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          (k) Rights Agreement. Prior to the Closing Date, Parent shall take all
steps necessary to amend its Rights Agreement, dated as of September 6, 2006
(the “Rights Agreement”) to provide Buyer, its affiliates, successors and
assigns the right to acquire up to 40% of the issued and outstanding common
stock of the Company in the form attached hereto are Exhibit K (the “Rights Plan
Amendment”) without triggering a distribution of rights under the Rights
Agreement. The Parent shall not terminate, waive or amend the Rights Plan
Amendment or otherwise amend the Rights Agreement to adversely affect the rights
set forth in this paragraph or in the Rights Plan Amendment.
          (l) Board Membership.
                    (i) Board Size; Composition. The members of the Board of
Directors of Parent (the “Board”) shall be nominated and appointed, effective
upon the Closing, in accordance with the Articles of Incorporation and the
By-Laws of Parent, and the provisions of this Agreement. The Board shall consist
of eleven (11) members with each member’s term expiring at Parent’s annual
meeting of shareholders in 2008. Effective upon the Closing, Parent shall have
caused the persons submitted by Buyer after the date hereof to be appointed to
the Board provided that such persons are on the list of approved director
designees submitted by Buyer to Parent prior the execution of this Agreement.
                    (ii) Designees. Buyer shall have the right to designate
individuals for nomination for election to the Board, and Parent shall cause
such individuals to be nominated for election to the Board, as follows:

  A.   Buyer shall be entitled to designate (I) five persons for nomination for
election to the Board for so long as the Buyer and its affiliates (including
Michael Ferro and his affiliates) (the “Buyer Parties”) own 30% or more of the
shares of Common Stock outstanding; (II) four persons for nomination to election
to the Board for so long as the Buyer Parties own less than (x) 30% of the
shares of Common Stock outstanding and (y) 23% or more of the shares of Common
Stock outstanding; (III) three persons for nomination to election to the Board
for so long as the Buyer Parties own less than (x) 23% of the shares of Common
Stock outstanding and (y) 16% or more of the shares of Common Stock outstanding;
(IV) two persons for nomination to election to the Board for so long as the
Buyer Parties own less than (x) 16% of the shares of Common Stock outstanding
and (y) 9% or more of the shares of Common Stock outstanding and (V) one person
for nomination to election to the Board for so long as Buyer Parties own less
than (x) 9% of the shares of Common Stock outstanding and (y) 2% or more of the
shares of Common Stock outstanding (collectively, the “Buyer Designees”).

                    (iii) Agreement to Recommend Directors. Parent shall use its
best efforts to cause the Buyer Designees to be elected to the Board. At each
meeting of the shareholders of Parent at which directors of Parent are to be
elected and in each proxy

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statement relating thereto, Parent agrees to recommend that the shareholders
elect to the Board the Buyer Designees nominated for election at such meeting.
                    (iv) Agreement to Vote for Directors. For so long as Buyer
has the right to nominate any Buyer Designees, Buyer agrees to vote, in person
or by proxy, or to act by written consent (if applicable) with respect to, all
shares of Common Stock owned by it to cause the election of all of the directors
nominated by the Nominating and Corporate Governance Committee when nominated
for election to the Board.
                    (v) Vacancies.

  A.   As long as Buyer has any right to designate one or more persons for
nomination for election to the Board, as specified in Section 4(l)(ii), at any
time at which a vacancy shall be created on the Board as a result of the death,
disability, retirement, resignation, removal or otherwise of a Buyer Designee,
the Buyer shall be entitled to designate for appointment by the remaining
directors of Parent under its Articles of Incorporation and Bylaws an individual
to fill such vacancy and to serve as a director on the Board. Each of Parent and
Buyer agrees to take such actions as will result in the appointment to the Board
as soon as practicable of any individual so designated by Buyer.     B.   Buyer
further agrees that (x) it shall not vote, or give any proxy or written consent,
in favor of the removal as a director any director of Parent nominated by the
Nominating and Corporate Governance Committee of Parent (other than its own
designee) without the prior written consent of the Independent Directors, and
(y) except as otherwise set forth in this clause (ii), it shall not give any
proxy with respect to shares of the capital stock of Parent entitling the holder
of such proxy to vote on, or give any proxy or written consent with respect to,
the election of directors unless the holder of such proxy shall have agreed to
comply with the obligations of Buyer under this Agreement.     C.   At any time
at which a vacancy shall be created on the Board as a result of the death,
disability, retirement, resignation, removal or otherwise of an Independent
Director prior to the expiration of his or her term as director, the Nominating
and Corporate Governance Committee shall notify the Board of a replacement and,
provided such replacement would be an Independent Director, each of Parent and
Buyer agrees to take such actions as will result in the appointment of such
replacement Independent Director to the Board as soon as practicable.

          (m) U.S. Real Property Holding Corporation. None of the Companies or
Subsidiaries shall become a U.S. real property holding corporation or permit or
cause its shares

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to be U.S. real property interests, within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended.
          (n) Allocation of Purchase Price for Federal Income Tax Purposes. In
accordance with Treasury regulations section 1.1273-2(h), each Company and Buyer
shall allocate the applicable Purchase Price between the Term Notes and the
Shares based upon their relative fair market values. In making such allocation,
the parties hereto shall agree, based upon the advice of their financial
advisors, upon the appropriate methodology to be used for determining the
relative fair market values of the Term Notes and the Shares.
          (o) Stock Certificates. No later than three days after the Closing,
Parent shall deliver to the Buyer certificates or evidence of electronic
registration with Parent’s transfer agent representing the Shares (in such
denominations as Buyer shall have requested prior to the Closing) being
purchased by Buyer at the Closing pursuant to this Agreement.
          (p) No later than thirty (30) days after the Closing, the Companies
shall deliver Deposit Account Control Agreements or Block Account Agreements in
such forms as are satisfactory to the Buyer executed by the applicable Companies
and each of Lincoln State Bank, The Toronto-Dominion Bank and RBC or the
Companies shall certify that accounts at such institutions have been closed.
     5. REGISTERS; TRANSFER AGENT INSTRUCTIONS.
          (a) Registers. Parent shall maintain at their principal executive
offices (or such other office or agency of the Companies as they may designate
by notice to each holder of Securities), a register for the Term Notes in which
Parent shall record the name and address of the Person in whose name the Term
Notes have been issued (including the name and address of each transferee) and
the principal amount of Term Notes held by such Person. Parent shall keep the
register open and available at all times during business hours for inspection of
any Buyer or its legal representatives. Parent shall maintain at its principal
executive offices (or such other office or agency of Parent as it may designate
by notice to each holder of Securities), a register for the Shares in which
Parent shall record the name and address of the Person in whose name the Shares
have been issued (including the name and address of each transferee) and the
number of Shares held by such Person. Parent shall keep the register open and
available at all times during business hours for inspection of any Buyer or its
legal representatives.
          (b) Maintenance of Registers. Notwithstanding anything to the contrary
contained herein, the Term Notes are registered obligations and the right,
title, and interest of Buyer and its assignees in and to such Term Notes shall
be transferable only upon notation of such transfer in the Register. The Term
Notes shall only evidence Buyer’s or its assignee’s right, title and interest in
and to the related Term Notes, and in no event is any such Note to be considered
a bearer instrument or obligation. This Section 5(b) shall be construed so that
the Term Notes are at all times maintained in “registered form” within the
meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Internal Revenue Code
of 1986, as amended, and any related Treasury regulations promulgated
thereunder.

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          (c) Transfer Agent Instructions. Parent shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable electronic balance accounts at
Parent’s transfer agent, registered in the name of Buyer or its respective
nominee(s), for the Shares in such amounts as specified from time to time by
Buyer to Parent in the form of Exhibit E attached hereto (the “Irrevocable
Transfer Agent Instructions”). Parent warrants that no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this Section 5(c),
and stop transfer instructions to give effect to Sections 2(f) and 2(g) hereof,
will be given by Parent to its transfer agent with respect to the Shares, and
that the Shares shall otherwise be freely transferable on the books and records
of Parent, as applicable, and to the extent provided in this Agreement and the
other Transaction Documents. If a Buyer effects a sale, assignment or transfer
of Shares in accordance with Sections 2(f) and 2(g), Parent shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or, if appropriate, credit shares to the applicable electronic
balance accounts at Parent’s transfer agent or credit shares to the applicable
balance accounts at The Depository Trust Company in such name and in such
denominations as specified by Buyer to effect such sale, transfer or assignment.
In the event that such sale, assignment or transfer involves Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to Buyer,
assignee or transferee, as the case may be, without any restrictive legend. Each
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, each Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(c) will be
inadequate and agrees, in the event of a breach or threatened breach by Parent
or any Company of the provisions of this Section 5(c), that a Buyer shall be
entitled, in addition to all other available remedies, to seek an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
     6. CONDITIONS TO THE COMPANIES’ OBLIGATIONS TO SELL.
          The obligations of the Companies hereunder to issue and sell the Term
Notes and Shares to Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Companies’ sole benefit and may be waived by the
Companies at any time in their sole discretion by providing Buyer with prior
written notice thereof:
          (a) Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Companies.
          (b) Buyer shall have delivered to the Companies the Purchase Price
(less the amounts withheld by it pursuant to Section 4(g) or the Fee Letter) for
the Term Notes and Shares being purchased by Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Companies in the funds flow letter (the “Funds Flow Letter”) set
forth on Exhibit J attached hereto.
          (c) The representations and warranties of Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date, which shall be

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true and correct as of such specific date), and Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Buyer at or prior to the Closing Date.
     7. CONDITIONS TO BUYER’S OBLIGATION TO PURCHASE.
          The obligation of Buyer hereunder to purchase the Term Notes and the
Shares at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for Buyer’s sole benefit and may be waived by Buyer at any time in its sole
discretion by providing the Companies with prior written notice thereof:
          (a) Each Company, as applicable, shall have executed and delivered to
Buyer (A) each of the Transaction Documents, and (B) the Term Notes (in such
denominations as Buyer shall have requested prior to the Closing) being
purchased by Buyer at the Closing pursuant to this Agreement.
          (b) Parent shall have delivered to Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of Exhibit E attached hereto, which
instructions shall have been delivered to and acknowledged in writing by
Parent’s transfer agent.
          (c) Buyer shall have received the opinion of Alston & Bird LLP, Foley
Lardner LLP, Ogilvy Renault LLP and McInnes Cooper, the Companies’ outside legal
counsels, in substantially the forms of Exhibit F-1, F-2, F-3 and F-4
respectively.
          (d) Buyer shall have received the opinion of the Companies’ General
Counsel, in substantially the form of Exhibit G.
          (e) Each domestic and Canadian Company shall have delivered to Buyer a
certificate evidencing the formation or incorporation or amalgamation and good
standing or otherwise of such Company in such entity’s jurisdiction of formation
or incorporation or amalgamation issued by the Secretary of State (or comparable
governmental office) of such jurisdiction, as of a date reasonably proximate to
the Closing Date.
          (f) Each domestic Company shall have delivered to Buyer a certificate
evidencing such Company’s qualification as a foreign corporation or other entity
and good standing or otherwise issued by the Secretary of State (or comparable
governmental office) of each jurisdiction in which such Company conducts
business, as of a date reasonably proximate to the Closing Date.
          (g) Each domestic Company shall have delivered to Buyer a certified
copy of such Company’s certificate or articles of incorporation or amalgamation
(or other applicable governing document), as certified by the Secretary of State
(or comparable governmental office) of such entity’s jurisdiction of formation
or incorporation or amalgamation, reasonably proximate to the Closing Date.
          (h) Each Company shall have delivered to Buyer a certificate, executed
by the Secretary (or other authorized person acceptable to Buyer) of such
Company and dated the

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Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by such Company’s board of directors (or other governing body) in a form
reasonably acceptable to Buyer, (ii) such Company’s articles or certificate of
incorporation or amalgamation (or other applicable governing document) and
(iii) such Company’s bylaws (or other applicable governing document), each as in
effect at the Closing, in the form attached hereto as Exhibit H.
          (i) The representations and warranties of each Company shall be true
and correct in all material respects (except for those representation, and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specific date), and each Company shall have performed, satisfied or
complied in all material respects with the covenants, agreements and conditions
required by this Agreement or the Transaction Documents to be performed,
satisfied or complied with by each Company at or prior to the Closing Date.
Buyer shall have received certificates, executed by the chief executive officer
(or other authorized person acceptable to Buyer) of each Company, dated the
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by Buyer, in the form attached hereto as Exhibit I.
          (j) Parent shall have delivered to Buyer a letter from Parent’s
transfer agent certifying the number of shares of Common Stock and the number of
Exchangeable Shares outstanding as of a date within five days of the Closing
Date.
          (k) The Common Stock (I) shall be designated for quotation or listed
on the Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on the Principal
Market.
          (l) Each of the Companies shall have obtained all governmental,
regulatory and third party consents and approvals, if any, necessary for the
sale of the Securities at the Closing.
          (m) Each of the domestic and Canadian Companies shall have obtained or
had obligated on the behalf, and delivered to Buyer searches of Uniform
Commercial Code filings or PPSA filings and other customary Canadian lien
searches in the jurisdictions of formation or incorporation of each of such
Companies, the jurisdiction of the chief executive offices of each of such
Companies and each jurisdiction where any Collateral owned by such Companies (as
defined in the Security Agreement) is located or where a filing would need to be
made in order to perfect Buyer’ security interest in the Collateral, copies of
the financing statements on file in such jurisdictions and evidence that no
Liens exist other than Permitted Liens.
          (n) Each of the domestic and Canadian companies shall have delivered
to Buyer or approved Buyer’s form, UCC and PPSA financing statements for each
appropriate jurisdiction as is necessary, in Buyer’s reasonable discretion, to
perfect Buyer’s security interest in the Collateral.
          (o) Each of the Companies shall have executed and delivered to Buyer
the Fee Letter.

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          (p) Parent shall have delivered evidence satisfactory to Buyer in its
reasonable discretion of the amendment to the Rights Agreement as provided in
Section 4(k).
          (q) Parent shall deliver the resignations, effective as of the
Closing, of 5 members of Parent’s Board of Directors from the list of approved
director resignations submitted to Buyer prior to the execution of this
Agreement.
          (r) The Companies shall have mailed a notice to all its shareholders
10 days prior to the Closing Date in a form satisfactory to the Buyer in
compliance with NASDAQ Rule 4350(i)(2) and shall have complied with all other
directives of NASDAQ in connection with the financial viability exception set
forth in Rule 4350(i)(2).
          (s) There shall not have occurred a Material Adverse Effect.
          (t) Parent shall have complied with Section 4(l)(i).
          (u) Each of the applicable Companies and Silicon Valley Bank shall
have executed and delivered to the Buyer a Deposit Account Control Agreement in
the form attached hereto as Exhibit L.
          (v) The Companies shall have delivered to the Buyer, the stock
certificates together with stock powers executed in blank set forth on Schedule
7(v) hereof.
          (w) Each of the Companies shall have delivered to Buyer such other
documents relating to the transactions contemplated by this Agreement as Buyer
or its counsel may reasonably request.
     8. TERMINATION.
          (a) In the event that the Closing shall not have occurred on or before
twenty-two (22) days from the date hereof due to any Company’s or Buyer’s
failure to satisfy the conditions set forth in Sections 6 and 7 above (and the
non-breaching party’s failure to waive such unsatisfied conditions(s)), the
non-breaching party shall have the option to terminate this agreement with
respect to such breaching party (the date this Agreement is terminated, the
“Termination Date”).
          (b) No termination shall relieve a breaching party from any liability
resulting from a breach of this Agreement, and the non-breaching party is
entitled to pursue its rights or remedies against the other party to the extent
such rights or remedies may be available at law or in equity.
          (c) In the event any Company or any Subsidiary within one year of the
Termination Date consummates, or enters into any confidentiality agreement,
letter of intent, term sheet or any definitive agreement with respect to, any
transaction, or a series of related transactions, which contemplates the
(A) direct or indirect acquisition of assets of the Company and/or its
Subsidiaries equal to more than 50% of the Company’s and its Subsidiaries
consolidated assets or to which more than 50% of their consolidated revenues or
earnings are attributable, (B) direct or indirect acquisition of more than 50%
of the equity securities of the

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Company, (C) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving more
than 50% of the Company’s and its Subsidiaries’ consolidated assets or more than
50% of the equity securities of the Company, or (D) issuance of any debt or
equity securities (including instruments convertible into equity securities) by
the Company and/or any of its Subsidiaries the gross proceeds of which to the
Company and/or any of its Subsidiaries are greater than, in the case of the
issuance of equity securities or any instrument convertible into equity
securities, $1,000,000, and in the case of any debt, the gross proceeds of which
to the Company and/or any of its Subsidiaries are greater than $5,000,000, in
each case, the Company shall immediately pay to Buyer a nonrefundable fee in the
amount of $666,666 (the “Breakup Fee”); provided, however that in no event shall
the Company incur an obligation to pay the Breakup Fee in the event the Company
terminates the Agreement and the conditions set forth in Section 7 have been
satisfied or waived by the Buyer (other than closing deliverables set forth in
Section 7 which are to be satisfied at Closing with respect to which the Company
is willing and able to deliver at Closing) and the Companies are not in breach
of this Agreement. For the avoidance of doubt, if the Companies consummate or
agree to consummate more than one transaction as described in this Section 8(c),
the Buyer shall only be entitled to the Breakup Fee with respect to the first
transaction and is not entitled to additional Breakup Fees each time a
subsequent transaction is consummated.
     9. MISCELLANEOUS.
          (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY.
          (b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to each other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon

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the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
          (c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
          (d) 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 in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
          (e) Entire Agreement; Amendments. This Agreement and the other
Transaction Documents and the Confidentiality Agreement between Parent and
Merrick Ventures, LLC supersede all other prior oral or written agreements
between Buyer, the Companies, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein and therein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
and therein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, none of the Companies or any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Companies and the Required Holders, and any amendment to this Agreement made
in conformity with the provisions of this Section 9(e) shall be binding on Buyer
and all holders of Securities, as applicable. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the applicable Securities then
outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents or Holders of Term Notes, as the case may be. None of
the Companies has, directly or indirectly, made any agreements with Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, each of the Companies confirms that, except as set forth
in this Agreement, Buyer has not made any commitment or promise or has any other
obligation to provide any financing to the Companies or otherwise.
          (f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided,
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to Parent or any other Company:
c/o Merge Healthcare Incorporated
6737 West Washington Street, Suite 2250

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Milwaukee, Wisconsin 53214
Facsimile:      (770) 810-7520
Attention:      Chief Financial Officer
With a copy (for informational purposes only) to:
Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telephone:     (404) 881-7000
Facsimile:      (404) 881-7777
Attention:      William S. Ortwein
If to the Transfer Agent:
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, New York 10038
Telephone:     (718) 921-8293
Facsimile:      (718) 921-8334
Attention:      Isaac J. Kagan
If to Buyer:
c/o Merrick Ventures
233 North Michigan Avenue, Suite 2330
Chicago, Illinois 60601
Telephone:     312-994-9410
Facsimile:      312-994-9495
Attention:      Justin Dearborn
With a copy (for informational purposes only) to:
McDermott Will & Emery LLP
227 West Monroe Street
Chicago, Illinois 60606
Telephone:     (312) 984-2121
Facsimile:      (312) 984-7700
Attention:      Mark A. Harris
                     Ryan D. Harris
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
overnight courier service shall

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be rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clauses (i), (ii) or
(iii) above, respectively.
          (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective permitted successors
and assigns, including any purchasers of the Term Notes. None of the Companies
shall assign this Agreement or any rights or obligations hereunder without the
prior written consent of the each of the Holders of the Term Notes, including by
way of a Fundamental Transaction (unless the Companies are in compliance with
the applicable provisions governing Fundamental Transactions set forth in the
Term Notes). For avoidance of doubt, notwithstanding any provision in this
Agreement or any other Transaction Document, the Companies are permitted to
enter into and consummate a Fundamental Transaction without the consent of the
Holders of the Term Notes or holders of the Shares, so long as the Companies
comply with the provisions governing Fundamental Transactions set forth in the
Term Notes. Buyer may assign some or all of its rights hereunder in connection
with transfer of any of its Term Notes without the consent of the Companies (but
only as expressly provided in the Term Note), in which event such assignee shall
be deemed to be a Buyer hereunder with respect to such assigned rights, and the
Companies shall use their best efforts to ensure that such transferee is
registered as a Holder and that any Liens on the Collateral shall be for the
benefit of such Holder (as well as the other Holders of Term Notes).
          (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
          (i) Survival. The representations and warranties of the Companies and
Buyer contained in Sections 2 and 3 and the agreements and covenants set forth
in Sections 4, 5 and 9 shall survive the Closing.
          (j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
          (k) Indemnification. In consideration of Buyer’s execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Companies’ other obligations under the Transaction
Documents, each Company shall jointly and severally defend, protect, indemnify
and hold harmless Buyer and each other holder of any Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty

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made by the Companies in this Agreement or any other Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Companies
contained in this Agreement or any other Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Companies) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of this Agreement or any other Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(iii) the status of Buyer or holder of the Securities as an investor in the
Companies pursuant to the transactions contemplated by the Transaction
Documents; provided that the Companies shall not be required to indemnify any of
the Indemnitees to the extent Indemnified Liabilities arise or result from a
material misrepresentation or material breach of any representation or warranty
made by Buyer or Indemnitee contained in the Transaction Documents or any other
certificate, instrument or document contemplated by the Transaction Documents or
a material breach of a covenant, agreement or obligation by Buyer or Indemnitee
contained in the Transaction Documents or any other certificate, instrument or
document contemplated by the Transaction Documents. To the extent that the
foregoing undertakings by the Companies may be unenforceable for any reason, the
Companies shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
The indemnification provided in this Section 9(k) shall not apply to any
Indemnified Liabilities which are the subject of the indemnification provided
for in Section 6 of the Registration Rights Agreement, as well as shall not
apply to those matters covered by the express exceptions to indemnification
provided by Section 6 of the Registration Rights Agreement. Except as otherwise
set forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.
          (l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
          (m) Remedies. Buyer and each holder of the Securities and the
Companies shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which
Buyers and the Companies and holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, each of the Companies and
Buyer recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the other party. Each of the
Companies therefore agrees that the Companies on the one hand and Buyer on the
other hand shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages and without
posting a bond or other security.

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          (n) Payment Set Aside. To the extent that the Companies makes a
payment or payments to Buyer hereunder or pursuant to any of the other
Transaction Documents or Buyer enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to any of the Companies, a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, foreign, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
[Signature Pages Follow]

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     IN WITNESS WHEREOF, Buyer and each Company have caused its respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

                  COMPANIES:
 
                MERGE HEALTHCARE INCORPORATED
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    
 
                CEDARA SOFTWARE CORP.
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    
 
                CEDARA SOFTWARE LIMITED
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    
 
                CEDARA SOFTWARE (USA) LIMITED.
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    

 

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

 

                  EFILM MEDICAL, INC.
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    
 
                MERGE CEDARA EXCHANGE CO. LIMITED
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    
 
                MERGE EMED, INC.
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    
 
                MERGE TECHNOLOGIES HOLDINGS CO.
 
           
 
  By:
Name:   /s/ Kenneth D. Rardin
 
Kenneth D. Rardin    
 
  Title:   Chief Executive Officer    

 

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    IN WITNESS WHEREOF, Buyer and each Company have caused its respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

                  BUYER:
 
                MERRICK RIS, LLC
 
           
 
  By:
Name:   /s/ Justin Dearborn
 
Justin Dearborn    
 
  Title:   Director    

 

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SCHEDULE OF COMPANIES
Name
Merge Healthcare Incorporated
Merge eMed, Inc.
Cedara Software Corp.
Cedara Software (USA) Limited
Merge Technologies Holdings Co.
eFilm Medical Inc.
Merge Cedara ExchangeCo Limited
Cedara Software Limited

 

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EXHIBITS

     
Exhibit A
  Form of Note
Exhibit B
  Registration Rights Agreement
Exhibit C-1
  Pledge and Security Agreement (US)
Exhibit C-2
  Pledge and Security Agreement (Canada)
Exhibit D
  Fee Letter
Exhibit E
  Form of Irrevocable Transfer Agent Instructions
Exhibit F-1
  Form of Alston & Bird LLP Legal Opinion
Exhibit F-2
  Form of Foley & Lardner LLP Legal Opinion
Exhibit F-3
  Form of Ogilvy Renault LLP Legal Opinion
Exhibit F-4
  Form of McInnes Cooper Legal Opinion
Exhibit G
  Form of Company General Counsel Opinion
Exhibit H
  Form of Secretary’s Certificate
Exhibit I
  Form of Officer’s Certificate
Exhibit J
  Funds Flow Letter
Exhibit K
  Rights Plan Amendment
Exhibit L
  SVB Deposit Account Control Agreement

SCHEDULES

     
Schedule 3(a)
  Subsidiaries
Schedule 3(d)
  No Conflicts
Schedule 3(e)
  Consents
Schedule 3(g)
  No General Solicitation; Placement Agent’s Fees
Schedule 3(h)
  No Integrated Offering
Schedule 3(k)
  SEC Documents; Financial Statements
Schedule 3(l)
  Absence of Certain Changes
Schedule 3(n)
  Conduct of Business; Regulatory Permits
Schedule 3(o)
  Foreign Corrupt Practices
Schedule 3(q)
  Transactions with Affiliates
Schedule 3(r)
  Equity Capitalization
Schedule 3(s)
  Indebtedness and Other Contracts
Schedule 3(t)
  Absence of Litigation
Schedule 3(u)
  Insurance
Schedule 3(w)
  Title
Schedule 3(x)
  Intellectual Property Rights
Schedule 3(z)
  Subsidiary Rights
Schedule 3(bb)
  Tax Status
Schedule 3(cc)
  Internal Accounting and Disclosure Controls
Schedule 3(ii)
  Disclosure
Schedule 4(c)
  Use of Proceeds
Schedule 7(v)
  Certificates