Exhibit 10.3
FORM OF REGISTRATION RIGHTS AGREEMENT
          REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of May
[___], 2008, by and between Merge Healthcare Incorporated, a Wisconsin
corporation (the “Company”), and Merrick RIS, LLC, a Delaware limited liability
company (the “Buyer”).
          WHEREAS:
          A. In connection with that certain Securities Purchase Agreement dated
as of even date herewith, by and between the Company, certain of its
subsidiaries and the Buyer (the “Securities Purchase Agreement”), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell on the date hereof to the Buyer certain
shares of the Company’s Common Stock (the “Common Stock”), par value $0.01 per
share.
          B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the “1933 Act”), and
applicable state securities laws.
          NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
          1. DEFINITIONS.
          As used in this Agreement, the following terms shall have the
following meanings:
               (a) “Effective Date” means the date that the Registration
Statement is first declared effective by the SEC.
               (b) “Effectiveness Deadline” means the date that is ninety
(90) days from the Filing Deadline.
               (c) “Filing Deadline” means the date that is thirty (30) days
from the Demand Date (as defined in Section 2(a)).
               (d) “Investor” means the Buyer, any permitted transferee of the
shares of Common Stock to whom the Buyer assigns its rights under this Agreement
in accordance with the provisions of this Agreement (including but not limited
to Section 9) and who agrees to become bound by the provisions of this Agreement
in accordance with Section 9, and any transferee or assignee thereof to whom a
transferee or assignee of the shares of Common Stock, as applicable, assigns its
rights under this Agreement in accordance with the provisions of this Agreement
(including but not limited to Section 9) and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.

 

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               (e) “register,” “registered” and “registration” refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415, and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.
               (f) “Registrable Securities” means (i) 100% of the shares of
Common Stock issued under the Securities Purchase Agreement and (ii) any shares
of capital stock issued or issuable with respect to such shares as a result of
any stock split, stock dividend, recapitalization, exchange, adjustment or
similar event or otherwise, until, in the case of any such security, the
earliest of:
               (i) the date on which such security has been effectively
registered under the 1933 Act and disposed of in accordance with the
Registration Statement relating thereto;
               (ii) the date on which such security may be resold without
restriction pursuant to Rule 144 or any successor provision thereto; or
               (iii) the date on which such security has been publicly sold
pursuant to Rule 144 or any successor provision thereto.
               (g) “Registration Statement” means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
               (h) “Required Holders” means the holders of at least a majority
of the Registrable Securities.
               (i) “Rule 415” means Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous or delayed basis.
               (j) “SEC” means the United States Securities and Exchange
Commission.
          Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
          2. REGISTRATION.
               (a) Mandatory Registration. Subject to Section 2(h), upon the
written request by the Required Holders to the Company (the date of such
request, the “Demand Date”), the Company shall prepare and, as soon as
practicable but in no event later than the Filing Deadline, file with the SEC
the Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities (the date of such filing, the “Filing Date”). In the
event that Form S-3 is unavailable to the Company for such a registration, the
Company shall use such other form as is available to the Company for such a
registration on Form S-1 or another appropriate form reasonably acceptable to
the Required Holders, subject to the provisions of Section 2(d). The

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Registration Statement prepared pursuant hereto shall register for resale that
number of shares of Common Stock equal to the number of Registrable Securities
as of the trading day immediately preceding the date the Registration Statement
is initially filed with the SEC, subject to adjustment as provided in Section
2(e) and Section 2(h), and shall contain the “Selling Stockholders” section and
“Plan of Distribution” in substantially the form attached hereto as Annex I
(except if otherwise required pursuant to written comments received from the SEC
upon a review of the Registration Statement). The Company shall use its
reasonable best efforts to have the Registration Statement declared effective by
the SEC as soon as practicable, but in no event later than the Effectiveness
Deadline. By 9:30 am (New York time) on the second Business Day following the
Effective Date, the Company shall file with the SEC in accordance with Rule 424
under the 1933 Act the final prospectus to be used in connection with sales
pursuant to such Registration Statement.
               (b) Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor’s Registrable Securities, each transferee that becomes an Investor
shall be allocated a pro rata portion of the then remaining number of
Registrable Securities included in the Registration Statement for such
transferor. Any shares of Common Stock included in the Registration Statement
and which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors which are covered by such Registration Statement. In no
event shall the Company include any securities other than Registrable Securities
on any Registration Statement filed pursuant to Section 2(a) hereof without the
prior written consent of the Required Holders.
               (c) Legal Counsel. Subject to Section 5 hereof, the Investors
holding at least a majority of the Registrable Securities shall have the right
to select one legal counsel to review and oversee any registration pursuant to
this Section 2 (“Legal Counsel”), which shall be McDermott Will & Emery LLP or
such other counsel as thereafter designated by the holders of at least a
majority of the Registrable Securities. The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company’s and the
Investors’ obligations under this Agreement.
               (d) Ineligibility for Form S-3. In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on Form S-1 or another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.

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               (e) Sufficient Number of Shares Registered. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) is insufficient to cover all of the Registrable Securities required
to be covered by such Registration Statement or an Investor’s allocated portion
of the Registrable Securities pursuant to Section 2(b), the Company shall amend
the applicable Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover at
least 100% of the number of such Registrable Securities as of the trading day
immediately preceding the date of the filing of such amendment or new or
additional Registration Statement, in each case, as soon as practicable, but in
any event not later than twenty (20) days after the Company becomes aware of the
necessity therefor. The Company shall use its reasonable best efforts to cause
such amendment and/or new or additional Registration Statement to become
effective as soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a Registration
Statement shall be deemed “insufficient to cover all of the Registrable
Securities” if at any time the number of shares of Common Stock available for
resale under the Registration Statement is less than the number of Registrable
Securities. Notwithstanding the foregoing, in the event the Registration
Statement is insufficient to cover all of the Registrable Securities because the
SEC has determined that a registration of the offer and sale of all of the
Registrable Securities may not be made pursuant to Rule 415(a)(1)(i), then the
provisions of Section 2(h) shall apply.
               (f) Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If at any time while there are
Registrable Securities outstanding, subject to Section 2(h), (i) a Registration
Statement covering all the Registrable Securities required to be covered thereby
and required to be filed by the Company pursuant to this Agreement is (A) not
filed with the SEC on or before the Filing Deadline (a “Filing Failure”), or
(B) filed with the SEC but not declared effective by the SEC on or before the
Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(q)) pursuant to such
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, a
suspension or delisting of the Common Stock on its principal trading market or
exchange, or to register a sufficient number of shares of Common Stock) (a
“Maintenance Failure”), then, as relief for the damages to any holder of
Registrable Securities by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall become liable for payment to each holder of Registrable Securities
relating to such Registration Statement an amount in cash equal to one half of
one percent (.5%) of the aggregate outstanding principal amount of such
Investor’s Term Notes (as such term is defined in the Securities Purchase
Agreement) on each of the following dates: (i) the day thirty (30) days after a
Filing Failure and on every thirtieth day (pro rated for periods totaling less
than thirty (30) days) thereafter until such Filing Failure is cured; (ii) the
day of an Effectiveness Failure and on every thirtieth day (pro rated for
periods totaling less than thirty (30) days) thereafter until such Effectiveness
Failure is cured; and (iii) the initial day of a Maintenance Failure and on
every thirtieth day (pro rated for periods totaling less than thirty (30) days)
thereafter until such

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Maintenance Failure is cured; provided, however, that the Additional Interest
Amount shall be increased to one and one-half percent (1.5%) in the event such
Filing Failure, Effectiveness Failure or Maintenance Failure has not been cured
on or before the 90th day following the date any Additional Interest Amount
first became due.
               The payments to which a holder shall be entitled pursuant to this
Section 2(f) are referred to herein as “Registration Delay Payments.”
Registration Delay Payments shall be paid on the earlier of (I) the last day of
the calendar month during which such Registration Delay Payments are incurred
and (II) the third Business Day after the event or failure giving rise to the
Registration Delay Payments is cured. Notwithstanding the foregoing, the amount
of any Registration Delay Payment actually payable shall be an amount yielded by
multiplying the Registration Delay Payment by a fraction, (x) the numerator of
which shall be the number of Registrable Securities beneficially owned by the
Investors on the date such Registration Delay Payment becomes due and payable
and required by Section 2(a) hereof to be registered by the Company, and (y) the
denominator of which shall be the number of Registrable Securities beneficially
owned by the Investors on the date hereof. In the event the Company fails to
make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of one and one-half percent (1.5%) per
month (prorated for partial months) until paid in full. The parties hereto agree
that the additional interest provided in this Section 2(f) constitutes a
reasonable estimate of the damages that may be incurred by Investors by reason
of a Filing Failure, Effectiveness Failure or Maintenance Failure.
               (g) Piggyback Registrations. (i) Each time that the Company
proposes for any reason to register any of its Common Stock under the 1933 Act
(a “Proposed Registration”), other than pursuant to a registration statement on
Form S-4 or Form S-8 (or similar or successor forms), the Company shall promptly
give written notice (the “Piggyback Notice”) of such Proposed Registration to
each of the Investors (which notice shall be given not less than thirty
(30) days prior to the expected effective date of the Company’s registration
statement) and shall offer the Investors the right to include any of their
Registrable Securities in the Proposed Registration. No registration pursuant to
this Section 2(g) shall relieve the Company of its obligations to register
Registrable Securities pursuant to the foregoing provisions of this Section 2.
               (ii) Each Investor shall have twenty (20) days from the date of
receipt of the Piggyback Notice to deliver to the Company a written request
specifying the number of Registrable Securities such Investor intends to sell
and such Investor’s intended method of disposition. Any Investor shall have the
right to withdraw such Investor’s request for inclusion of such Investor’s
Registrable Securities in any registration statement pursuant to this Section
2(g) by giving written notice to the Company of such withdrawal. Subject to
Section 2(g)(iii) and Section 2(h) below, the Company shall include in such
registration statement all such Registrable Securities so requested to be
included therein.
               (iii) If the managing underwriter or underwriters of any Proposed
Registration involving Registrable Securities advises the Company that the total
number of Registrable Securities that the Investors and any other Persons intend
to include in the offering

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exceeds the number that can be sold in such offering without being likely to
have a material adverse effect on the price, timing or distribution of the
Common Stock offered or the market for the Common Stock, then the Common Stock
to be included in such underwritten offering shall include the number of
Registrable Securities that such managing underwriter or underwriters advises
the Company in writing can be sold without having such adverse effect, with such
number to be allocated (A) first, to the Company, (B) second, pro rata among the
Investors who have requested participation in such underwritten offering and
(iii) third, any other holder of Common Stock of the Company. The pro rata
allocations for each Investor who has requested participation in such
underwritten offering shall be the product of (a) the aggregate number of
Registrable Securities proposed to be sold by all Investors in such underwritten
offering multiplied by (b) the fraction derived by dividing (x) the number of
Registrable Securities owned on the Closing Date by such Investor by (y) the
aggregate number of Registrable Securities owned on the Closing Date by all
Investors participating in the underwritten offering. All participating
Investors shall have the opportunity to share pro rata that portion of such
priority allocable to any Investor(s) not so participating.
               (h) If the SEC shall determine that a registration of the offer
and sale of all of the Registrable Securities may not be made pursuant to
Rule 415(a)(1)(i) (a “Primary Offering Determination”), then notwithstanding
anything to the contrary in this Section 2, the number and amount of Registrable
Securities to be included in the applicable Registration Statement shall be
reduced in accordance with this Section 2(h) to the maximum number and amount of
Registrable Securities whose offer and sale may be registered under the 1933 Act
in reliance on such rule. The Registrable Securities included in such
Registration Statement shall be allocated among all Investors in accordance with
Section 2(b). If the number or amount of Registrable Securities included in any
Registration Statement is reduced pursuant to this Section 2(h), then (1) the
Company, to the extent not prohibited by the SEC, shall file a subsequent
Registration Statement with respect to the remaining Registrable Securities on
or before earlier of (i) the sixty fifth (65) day after the Company acquires
actual knowledge that the Investors named in the previously filed Registration
Statement have resold substantially all of the Registrable Securities included
in such Registration Statement; (ii) the one-hundred-and-eightieth (180th) day
after the date the previously filed Registration Statement became effective
under the 1933 Act; or (iii) such later date as may be required by the SEC (in
each case such date shall be a “Filing Deadline” with respect to such
Registration Statement); and (2) the Company shall use its reasonable best
efforts to cause such subsequent Registration Statement to become effective
under the 1933 Act as promptly as practicable, but in any event by the date
(which shall be deemed to be the “Effectiveness Deadline Date” with respect to
such subsequent Registration Statement) that is ninety (90) days after the date
such subsequent Registration Statement is required to be filed with the SEC
pursuant to this Section 2(h).
               3. RELATED OBLIGATIONS.
          In connection with its obligations pursuant to Section 2, the Company
shall have the following obligations:
               (a) The Company shall use its reasonable best efforts to respond
to written comments received from the SEC upon a review of the Registration
Statement within

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five (5) Business Days. The Company shall submit to the SEC, within three
(3) Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff of
the SEC has no further comments on a particular Registration Statement, as the
case may be, a request for acceleration of effectiveness of such Registration
Statement to a time and date not later than two (2) Business Days after the
submission of such request. The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the date as
of which all of the Investors may sell all of the Registrable Securities covered
by such Registration Statement without restriction pursuant to Rule 144 (or
successor thereto) promulgated under the 1933 Act, or (ii) the date on which the
Investors shall have sold all of the Registrable Securities covered by such
Registration Statement (the "Registration Period”). The Company shall ensure
that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.
               (b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period (except pursuant
to Sections 3(f) and 3(q)), and, during such period, comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities of
the Company covered by such Registration Statement until such time as all of
such Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC as
expeditiously as practicable on or following the date on which the 1934 Act
report is filed which created the requirement for the Company to amend or
supplement such Registration Statement.
               (c) The Company shall (A) permit Legal Counsel to review and
comment upon (i) a Registration Statement at least five (5) Business Days prior
to its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects; provided, that, the
failure of any Investor or his, her or its counsel to respond to such proposed
documents within five (5) Business Days after receipt thereof shall be deemed
approval of same. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any

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amendment or supplement thereto without the prior approval of Legal Counsel,
which consent shall not be unreasonably withheld. The Company shall furnish to
Legal Counsel, without charge, copies of any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any
Registration Statement (redacted to eliminate material non-public information,
if any, in such correspondence) The Company shall reasonably cooperate with
Legal Counsel in performing the Company’s obligations pursuant to this
Section 3.
               (d) The Company shall furnish to Legal Counsel and each Investor
whose Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, if
requested by an Investor and not otherwise available on the EDGAR system, at
least one copy of such Registration Statement and any amendments or supplement
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus
(redacted to eliminate material non-public information, if any, in any such
exhibit or other document) and (ii) upon the effectiveness of any Registration
Statement, ten (10) copies of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request).
               (e) The Company shall use its reasonable best efforts to
(i) register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky”
laws of all applicable jurisdictions in the United States, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction, (y) subject itself to
general taxation in any jurisdiction, or (z) file a general consent to service
of process in any jurisdiction in which it is not currently so qualified or
subject to general taxation or has not currently so consented. The Company shall
promptly notify Legal Counsel and each Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or “blue sky” laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
               (f) The Company shall notify Legal Counsel and each Investor in
writing (each such notice to Legal Counsel and the Investors, a “Suspension
Notice”) of the happening of any of the following events, as promptly as
practicable after becoming aware of such event: (i) any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related prospectus or for additional information;
(ii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose;

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(iii) the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) any event or circumstance
which necessitates the making of any changes in the Registration Statement or
prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
include any untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading and (v) the Company determines that, in the good
faith judgment of its Board of Directors, the registration or offering of
Registrable Securities would reasonably be expected to materially adversely
affect or materially interfere with any bona fide material financing of the
Company or any material transaction under consideration by the Company or would
require disclosure of information that has not been and is not otherwise
required to be, disclosed to the public, the premature disclosure of which could
materially adversely affect the Company (provided, that in each case, no such
notice contain any material, nonpublic information), and, subject to
Section 3(q), if applicable, promptly prepare a supplement or amendment to such
Registration Statement to correct any such untrue statement or omission, and
deliver a copy of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may
reasonably request). The Company shall also promptly notify Legal Counsel and
each Investor in writing (i) when any prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness and by overnight mail), (ii) of the
Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate or (iii) that the Investor may
continue use of the applicable registration statement and related prospectus.
               (g) The Company shall use its reasonable best efforts to prevent
the issuance of any stop order or other suspension of effectiveness of the
Registration Statement (other than during an Allowable Grace Period), or the
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension as soon as reasonably practicable
consistent with the provisions of Section 3(f) and to notify Legal Counsel and
each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
               (h) If any Investor is required under applicable securities law
to be described in the Registration Statement as an underwriter, at the
reasonable request of such Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and

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(ii) an opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Investors.
               (i) Upon the written request of any Investor in connection with
any Investor’s due diligence requirements, if any, the Company shall make
available for inspection by (i) any Investor, (ii) Legal Counsel and (iii) one
firm of accountants or other agents retained by the Investors (collectively, the
“Inspectors”), all pertinent financial, corporate and other records
(collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector to fulfill a due diligence obligation by an Investor, and cause the
Company’s chief executive officer, chief financial officer and executive vice
president and secretary to be reasonably available to the Inspectors for
questions regarding the Records and to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree in writing to hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (b) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other Transaction Document. Nothing herein (or in
any other confidentiality agreement between the Company and any Investor) shall
be deemed to limit the Investors’ ability to sell Registrable Securities in a
manner which is otherwise consistent with this Agreement and the other
Transaction Documents, applicable laws and regulations.
               (j) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
               (k) The Company shall use its reasonable best efforts to cause
all the Registrable Securities covered by the Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
               (l) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable pursuant to
the Transaction

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Documents, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.
               (m) If requested by an Investor and if the Company’s counsel
deems such inclusion not inconsistent with the 1933 Act or the 1934 Act or other
applicable law, the Company shall (i) as soon as practicable incorporate in a
prospectus supplement or post-effective amendment such information as an
Investor reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as soon
as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by an Investor holding any Registrable Securities.
               (n) The Company shall make generally available to its security
holders as soon as practicable, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the 1933
Act) covering a twelve-month period beginning not later than the first day of
the Company’s fiscal quarter next following the effective date of a Registration
Statement.
               (o) The Company shall otherwise use its reasonable best efforts
to comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
               (p) Within two (2) Business Days after the Registration Statement
which covers Registrable Securities is declared effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
               (q) Notwithstanding anything to the contrary herein, at any time
after the Effective Date, (A) upon any event or circumstance which necessitates
the making of any changes in the Registration Statement or prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so
that, in the case of the Registration Statement, it will not include any untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the prospectus, it will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or (B) if the Company determines that, in the good faith

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judgment of its Board of Directors, the registration or offering would
reasonably be expected to materially adversely affect or materially interfere
with any bona fide material financing of the Company or any material transaction
under consideration by the Company or would require disclosure of information
that has not been and is not otherwise required to be, disclosed to the public,
the premature disclosure of which could materially adversely affect the Company,
the suspension pursuant to the Company’s Suspension Notice will not trigger any
payment or liability for payment by the Company of any Registration Delay
Payments otherwise payable or owing by the Company pursuant to Section 2(f) of
this Agreement (a “Grace Period”); provided, that the Company shall (i) promptly
notify the Investors in writing of the existence of a Grace Period in conformity
with the provisions of this Section 3(q) (provided, that in each notice the
Company will not disclose the content of such material, non-public information
to the Investors) and the date on which the Grace Period will begin, and (ii) as
soon as such date may be determined, promptly notify the Investors in writing of
the date on which the Grace Period ends; and, provided, further, that no Grace
Period shall exceed thirty (30) consecutive days and during any three hundred
sixty five (365) day period such Grace Periods shall not exceed an aggregate of
sixty (60) days and the first day of any Grace Period must be at least five
(5) trading days after the last day of any prior Grace Period (each, an
“Allowable Grace Period”). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include the
later of the date the Investors receive the notice referred to in clause
(ii) and the date referred to in such notice. For the avoidance of doubt, no
Maintenance Failure shall occur during an Allowable Grace Period. The provisions
of Section 3(g) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale, and delivered
a copy of the prospectus included as part of the applicable Registration
Statement, in each case prior to the Investor’s receipt of the Suspension Notice
related to the Grace Period and for which the Investor has not yet settled.
          4. OBLIGATIONS AND COVENANTS OF THE INVESTORS.
               (a) At least five (5) Business Days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor in writing of any additional information the Company requires from
each such Investor. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect and maintain the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.

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               (b) Each Investor, by such Investor’s acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor’s election to exclude all of such Investor’s
Registrable Securities from such Registration Statement.
               (c) Each Investor agrees that, upon receipt of any Suspension
Notice from the Company, such Investor will immediately discontinue disposition
of Registrable Securities pursuant to any Registration Statement covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or receipt of
notice from the Company in writing that no supplement or amendment is required.
Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities under all of the
circumstances described in the last sentence of Section 3(q).
               (d) Each Investor acknowledges that there may occasionally be
times when the Company must suspend the use of the prospectus forming a part of
the Registration Statement, and each Investor covenants and agrees that it will
not make any sale of Registrable Securities under the Registration Statement
without complying with the provisions of this Agreement (including but not
limited to the prohibition on sales after the Effective Date beginning with
delivery of a Suspension Notice to such Investor and ending at the time the
Company gives such Investor written notice that such Investor may thereafter
effect sales pursuant to said prospectus or an amended or supplemented
prospectus forming part of a Registration Statement) and each Investor covenants
and agrees that it will comply with any applicable prospectus delivery
requirements of the 1933 Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement. Upon receipt of a
Suspension Notice, each Investor will refrain from selling any Registrable
Securities pursuant to a Registration Statement until the Investor’s receipt of
copies of a supplemented or amended prospectus prepared and filed by the
Company, or until it is advised in writing by the Company that the current
prospectus may be used.
               (e) Upon a request by the Company, each Investor will, as soon as
practicable, but in no event later than two (2) Business Days after such
request, notify the Company whether such Investor continues to hold Registrable
Securities.
          5. EXPENSES OF REGISTRATION.
          All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse the Investors for up to $10,000.00 for the fees
and disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement.

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          6. INDEMNIFICATION.
          In the event any Registrable Securities are included in the
Registration Statement (provided, that for the purpose of this Section 6, the
term “Registration Statement” shall include any preliminary prospectus, final
prospectus, exhibit, supplement or amendment included in or relating to, and any
document incorporated by reference in, the Registration Statement as such term
is defined in Section 1) under this Agreement:
               (a) The Company agrees to indemnify, hold harmless and defend
each Investor, the directors, officers, partners, members, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement (if such
settlement is effected with the written consent of the party from whom
indemnification is sought, which consent shall not be unreasonably withheld,
conditioned or delayed) or expenses, joint or several (collectively, "Claims”),
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened (“Indemnified Damages”), to which
any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) or Indemnified
Damages arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in the Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other “blue sky” laws of
any jurisdiction in which Registrable Securities are offered (“Blue Sky
Filing”), or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in the light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or (iv) any
violation of this Agreement (the matters in the foregoing clauses (i) through
(iv) being, collectively, “Violations”). Subject to Section 6(c), the Company
shall reimburse the Indemnified Persons, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim or
Indemnified Damages sought by an Indemnified Person arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto;

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(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld, conditioned or delayed; and
(iii) shall not apply to the extent that any Claim arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission in the prospectus, if such untrue statement or alleged untrue statement
or omission or alleged omission is corrected in an amendment or supplement to
the prospectus and the seller of Registrable Securities thereafter fails to
deliver such prospectus as so amended or supplemented prior to or concurrently
with the sale of Registrable Securities to the person asserting such Claim after
the Company had furnished such seller with a sufficient number of copies of the
same or if the seller received notice from the Company of the existence of such
untrue statement or alleged untrue statement or omission or alleged omission and
the seller continued to dispose of Registrable Securities prior to the time of
the receipt of either (A) an amended or supplemented prospectus which completely
corrected such untrue statement or omission or (B) a notice from the Company
that the use of the existing prospectus may be resumed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
               (b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person, if
any, who controls the Company within the meaning of the 1933 Act (each, an
“Indemnified Party”) to the same extent and in the same manner as is set forth
in Section 6(a) with respect to the Indemnified Persons, against any Claim or
Indemnified Damages to which any of them may become subject insofar as such
Claim or Indemnified Damages arise out of or are based upon: (i) any Violation,
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Investor expressly for use in connection with such
Registration Statement; or (ii) the use by such Investor of an outdated or
defective prospectus after the Company has notified such Investor in writing
that the prospectus is outdated or defective; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim or Indemnified Damages if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld, conditioned or delayed; provided,
further, however, that an Investor shall be liable under this Section 6(b) for
only that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.

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               (c) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of the written threat of or notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim or Indemnified Damages, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, promptly deliver to the indemnifying
party a written notice of the written threat of or notice of the commencement of
such action. In case any such action is brought against any Indemnified Party or
Indemnified Person and such Indemnified Party or Indemnified Person seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Party or Indemnified
Person shall have the right to retain its own counsel with the fees and expenses
of such counsel for such Indemnified Party or Indemnified Person (as applicable)
to be paid by the indemnifying party, if the defendants in any such action
include both the Indemnified Party or Indemnified Person, on the one hand, and
the indemnifying party, on the other hand, and the Indemnified Party or
Indemnified Person (as applicable) shall have reasonably concluded, based on an
opinion of counsel reasonably satisfactory to the indemnifying party, that the
representation by such counsel of the Indemnified Person or Indemnified Party
(as applicable) and the indemnifying party would be inappropriate due to actual
or potential differing interests between such Indemnified Person or Indemnified
Party and any other party represented by such counsel in such proceeding and/or
that there may be legal defenses available to it and/or any other Indemnified
Party or Indemnified Person which are different from or additional to those
available to the indemnifying party; provided, further, that the indemnifying
party shall not be responsible for the reasonable fees and expenses of more than
one (1) separate legal counsel for all such Indemnified Persons or Indemnified
Parties. In the case of an Indemnified Person, legal counsel referred to in the
immediately preceding sentence shall be selected by the Investors holding at
least 70% of the Registrable Securities included in the Registration Statement
to which the Claim or Indemnified Damages relate. The Indemnified Party or
Indemnified Person shall reasonably cooperate with the indemnifying party in
connection with any negotiation or defense of any such action or Claim or
Indemnified Damages by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or Claim or Indemnified
Damages. The indemnifying party shall keep the Indemnified Party or Indemnified
Person reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim, investigation, inquiry or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability with
respect to such Claim, Indemnified Damages or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or

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corporations relating to the matter for which indemnification has been made. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is materially
prejudiced in its ability to defend such action as a result of such failure.
               (d) No Person involved in the sale of Registrable Securities who
is guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) in connection with such sale shall be entitled to
indemnification from any Person who is not guilty of such fraudulent
misrepresentation.
               (e) The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
               (f) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
Notwithstanding the foregoing, in the event that any of the provisions of
Section 9(k) of the Securities Purchase Agreement and this Section 6 may be
deemed to both be applicable to any of the same losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, the provisions of this Section 6 shall control
and such provisions of Section 9(k) of the Securities Purchase Agreement shall
be inoperative.
          7. CONTRIBUTION.
          To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to, in lieu of
indemnifying such Indemnified Person or Indemnified Party, as applicable, make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 6 of this Agreement, (ii) no Person involved in
the sale of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation; and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities pursuant to such Registration Statement.

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          8. REPORTS UNDER THE 1934 ACT.
          With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration (“Rule 144”), at all times during
which there are Registrable Securities outstanding which have not been
previously (a) sold to or through a broker or dealer or underwriter in a public
distribution, or (b) sold in a transaction exempt from the registration and
prospectus delivery requirements of the 1933 Act under Section 4(l) thereof, in
the case of either clause (a) or clause (b) in such a manner that, upon the
consummation of such sale, all transfer restrictions and restrictive legends
with respect to such shares are removed upon the consummation of such sale, the
Company agrees to:
               (a) make and keep public information available, as contemplated
by Rule 144;
               (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act, so long
as the Company remains subject to such requirements and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and
               (c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investors to sell such securities pursuant to Rule 144 without
registration.
          9. ASSIGNMENT OF REGISTRATION RIGHTS.
          The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such Investor’s
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment;
(ii) the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and
(v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement, including but not limited to
those in Section 9(g) thereof.

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          10. AMENDMENT OF REGISTRATION RIGHTS.
          Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Required Holders. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. 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 this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.
          11. MISCELLANEOUS.
               (a) A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the such record owner of such Registrable Securities.
               (b) 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
a nationally recognized overnight delivery 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 the Company:
Merge Healthcare Incorporated
6737 West Washington Street, Suite 2250,
Milwaukee, Wisconsin 53214—5650
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
Telephone: (404) 881-7000
Facsimile: (404) 881-7777
Attention: W. Scott Ortwein
               If to the Buyer:

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Merrick Ventures, LLC
233 North Michigan Ave., Suite 2330
Chicago, Illinois 60601
Telephone: (312) 994-9410
Facsimile: (312.994.9495
Attention: Justin Dearborn
               If to Legal Counsel:
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
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 a courier or overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
               (c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
               (d) 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. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or

20

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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.
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 HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
               (e) This Agreement, the other Transaction Documents (as defined
in the Securities Purchase Agreement), the Confidentiality Agreement between the
Company and the Buyer and the instruments referenced herein and therein
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
               (f) Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
               (g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
               (h) This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
               (i) 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.
               (j) All consents and other determinations required to be made by
the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders.
               (k) 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.

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               (l) 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.
               (m) The obligations of each Investor hereunder are several and
not joint with the obligations of any other Investor, and no provision of this
Agreement is intended to confer any obligations on any Investor vis-à-vis any
other Investor. Nothing contained herein, and no action taken by any Investor
pursuant hereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.
* * * * * *

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          IN WITNESS WHEREOF, the Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

                  COMPANY:    
 
                MERGE HEALTHCARE INCORPORATED    
 
           
 
  By:        
 
           
 
  Name:        
 
  Title:        

 

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          IN WITNESS WHEREOF, the Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

                  BUYER:    
 
                MERRICK RIS, LLC    
 
           
 
  By:        
 
           
 
  Name:        
 
  Title:        

 

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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attention:
     Re: Merge Healthcare Incorporated
Ladies and Gentlemen:
          [We are][I am] counsel to Merge Healthcare Incorporated, a Wisconsin
corporation (the "Company”), and have represented the Company in connection with
that certain Securities Purchase Agreement, dated as of April [___], 2008 (the
“Securities Purchase Agreement”), entered into by and among the Company and the
buyer named therein (the “Buyer”) pursuant to which the Company issued to the
Buyer shares of its Common Stock (the “Common Stock”). Pursuant to the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement with the Buyer (the "Registration Rights Agreement”) pursuant
to which the Company agreed, among other things, to register the resale of the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the “1933 Act”). In connection with the
Company’s obligations under the Registration Rights Agreement, on
                     ___, 2008, the Company filed a Registration Statement on
Form [S-3] (File No. 333-                    ) (the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the
Registrable Securities which names the Buyer and each of the other holders of
Registrable Securities (the “Holders”) as a selling stockholder thereunder.
          In connection with the foregoing, [we][I] advise you that a member of
the SEC’s staff has advised [us][me] by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
          This letter shall serve as our standing advice to you that you may
issue or reissue shares of Common Stock without legend to the Holders as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
[___], 2008 (the “Transfer Agent Instructions”) and you need not require further
letters from us to effect any future legend-free issuance or reissuance of
shares of Common Stock to the Holders as contemplated by the Transfer Agent
Instructions.

                  Very truly yours,    
 
                [ISSUER’S COUNSEL]    
 
           
 
  By:        
 
           

CC: [LIST NAMES OF HOLDERS]

 

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ANNEX I
SELLING STOCKHOLDERS
     The shares of common stock being offered by the selling stockholders are
those issued to the selling stockholders in connection with a private placement
of debentures and shares of common stock. For additional information regarding
such private placement, see “Private Placement of Term Notes and Shares” above.
We are registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the shares of common stock, the selling stockholders have not had
any material relationship with us within the past three years.
     The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of common stock by each of the
selling stockholders. The second column lists the number of shares of common
stock beneficially owned by each selling stockholder.
     In accordance with the terms of registration rights agreement with the
selling stockholders, this prospectus generally covers the resale of shares of
common stock issued to the selling stockholders, as of the trading day
immediately preceding the date this registration statement was initially filed
with the SEC. The third column assumes the sale of all of the shares offered by
the selling stockholders pursuant to this prospectus.
     The selling stockholders may sell all, some or none of their shares in this
offering. See “Plan of Distribution.”

                  Number of Shares of   Maximum Number of Shares   Number of
Shares of     Common Stock Owned   of Common Stock to be Sold   Common Stock
Owned Name of Selling Stockholder   Prior to Offering   Pursuant to this
Prospectus   After Offering
Merrick RIS, LLC
          0

 

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PLAN OF DISTRIBUTION
     We are registering the shares of common stock to permit the resale of these
shares of common stock by the selling stockholders from time to time after the
date of this prospectus. We will not receive any of the proceeds from the sale
by the selling stockholders of the shares of common stock. We will bear all fees
and expenses incident to our obligation to register the shares of common stock.
     The selling stockholders may sell all or a portion of the shares of common
stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,

  •   on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;     •   in the
over-the-counter market;     •   in transactions otherwise than on these
exchanges or systems or in the over-the-counter market;     •   through the
writing of options, whether such options are listed on an options exchange or
otherwise;     •   ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;     •   block trades in which the
broker-dealer will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;     •
  purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;     •   an exchange distribution in accordance with the rules of
the applicable exchange;     •   privately negotiated transactions;     •  
short sales;     •   sales pursuant to Rule 144;

Annex I-2

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  •   broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;     •   a
combination of any such methods of sale; and     •   any other method permitted
pursuant to applicable law.

     If the selling stockholders effect such transactions by selling shares of
common stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the shares of common stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of common
stock short and deliver shares of common stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge shares of common
stock to broker-dealers in connection with bona fide margin accounts secured by
the shares of common stock, which shares broker-dealers could in turn sell if
the selling stockholders default in the performance of their secured
obligations.
     The selling stockholders may pledge or grant a security interest in some or
all of the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, amending, if necessary, the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of common stock in
other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
     The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be “underwriters”
within the meaning of the Securities Act of 1933, and any commission paid, or
any discounts or concessions allowed to, any such broker-dealer may be deemed to
be underwriting commissions or discounts under the Securities Act of 1933. At
the time a particular offering of the shares of common stock is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount of shares of common stock being offered and the terms of the
offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.

Annex I-3

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     Under the securities laws of some states, the shares of common stock may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
     There can be no assurance that any selling stockholder will sell any or all
of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
     The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Securities Exchange Act of 1934, which may limit
the timing of purchases and sales of any of the shares of common stock by the
selling stockholders and any other participating person. Regulation M may also
restrict the ability of any person engaged in the distribution of the shares of
common stock to engage in market-making activities with respect to the shares of
common stock. All of the foregoing may affect the marketability of the shares of
common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
     We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that the selling
stockholders will pay all underwriting discounts and selling commissions, if
any. We will indemnify the selling stockholders against liabilities, including
some liabilities under the Securities Act of 1933, in accordance with the
registration rights agreements, or the selling stockholders will be entitled to
contribution. We may be indemnified by the selling stockholders against civil
liabilities, including liabilities under the Securities Act of 1933, that may
arise from any written information furnished to us by the selling stockholder
specifically for use in this prospectus, in accordance with the related
registration rights agreements, or we may be entitled to contribution.
     Once sold under the registration statement, of which this prospectus forms
a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.

Annex I-4