EX-4.1 TERM NOTE, DATED JUNE 4, 2008






Exhibit 4.1




     THE ISSUANCE AND SALE OF 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, OR (B) AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH
ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SUCH 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.



SENIOR SECURED TERM NOTE




	 	 	 
	Issuance Date: June 4, 2008

	 	Principal: U.S. $15,000,000






     FOR VALUE RECEIVED, each of Merge Healthcare Incorporated, a Wisconsin corporation (“Parent”),
Cedara Software (USA) Limited, a Delaware corporation, Merge eMed, Inc., a Delaware corporation,
Cedara Software Corp., an Ontario corporation, Cedara Software Limited, an Ontario corporation,
Merge Technologies Holdings Co., a Nova Scotia unlimited company, eFilm Medical Inc., an Ontario
corporation, Merge Cedara ExchangeCo Limited, an Ontario corporation, each as subsidiaries of
Parent (each, including Parent, an “Issuer” and together, including Parent, the “Issuers”), and
each Person (as defined below) other than the Issuers which are parties hereto or which becomes a
party hereto pursuant to the joinder provisions of Section 24 hereof (hereinafter each of the
Issuers and such other Persons are collectively referred to as the “Companies” or individually
referred to as a “Company”) hereby, jointly and severely, promises to pay to the order of Merrick
RIS, LLC, a Delaware limited liability company, or its registered assigns (the “Holder”) the amount
set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption or
otherwise), the “Principal”) upon the Maturity Date (as defined below), acceleration, redemption,
or when otherwise due (in each case in accordance with the terms hereof) and to pay interest
(“Interest”) on any outstanding Principal at a rate equal to 13.00% per annum (the “Interest
Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same
becomes due and payable, whether upon an Interest Date (as defined below) or the Maturity Date,
acceleration, redemption, or otherwise (in each case in accordance with the terms hereof). This
Senior Secured Term Note (including all Senior Secured Term Notes issued in exchange, transfer, or
replacement hereof, collectively, the “Term Note”) is issued pursuant to the Securities Purchase
Agreement (as defined below) on the Closing Date (as defined below). Certain capitalized terms
used herein are defined in Section 22 or in the Securities Purchase Agreement, as applicable.



 









 





     1. PAYMENTS OF PRINCIPAL. On the Maturity Date, the Companies shall pay to the Holder
an amount equal to the Principal, as well as all accrued but unpaid Interest. The “Maturity Date”
shall June 4, 2010.



     2. INTEREST; INTEREST RATE. Interest on this Term Note shall commence accruing on the
Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and
shall be payable in arrears for each Payment Quarter on the first day of the succeeding Payment
Quarter during the period beginning on the Issuance Date and ending on, and including, the Maturity
Date (each, an “Interest Date”). Interest shall be payable on each Interest Date, to the record
holder of this Term Note on the applicable Interest Date, in cash (“Cash Interest”). Prior to the
payment of Interest on an Interest Date, Interest on this Term Note shall accrue at the Interest
Rate. Upon the occurrence and during the continuance of an Event of Default, the Interest Rate
shall be increased to eighteen and a half percent (18.5%). In the event that such Event of Default
is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be
effective as of the date of such cure; provided that the Interest as calculated and unpaid at such
increased rate during the continuance of such Event of Default shall continue to apply to the
extent relating to the days after the occurrence of such Event of Default through and including the
date of cure of such Event of Default. The Holder acknowledges that, on the Issuance Date, the
Companies paid the Holder the first two Interest payments due hereunder. For the purposes of the
Interest Act (Canada) and disclosure thereunder, (i) whenever any interest or fee to be paid
hereunder or in connection herewith is to be calculated on the basis of any period of time that is
less than a calendar year, the yearly rate of interest to which the rate used in such calculation
is equivalent is the rate so used multiplied by the actual number of days in the calendar year in
which the same is to be ascertained and divided by 365, (ii) the rates of interest under this Note
are nominal rates, and not effective rates or yields, and (iii) the principle of deemed
reinvestment of interest does not apply to any interest calculation under this Agreement.



     3. RIGHTS UPON EVENT OF DEFAULT.



          (a) Event of Default. Each of the following events shall constitute an “Event of
Default”:




               (i) any of the Companies’ failure to pay to the Holder any amount of Principal, Interest, Late
Charges (as defined below) or other amounts when and as due under this Term Note (including,
without limitation, any of the Companies’ failure to pay any redemption payments or amounts
hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement), or
any other agreement, document, certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby, except in the case of a failure to pay Interest and
Late Charges when and as due, in which case only if such failure continues for a period of at least
five (5) Business Days;




               (ii) any default occurs and is continuing under, or any redemption of or acceleration prior to
maturity of, any Indebtedness of the Companies or any of their Subsidiaries in excess of $50,000;
provided, that in the event that any such acceleration of Indebtedness is rescinded by the holders
thereof prior to acceleration of this Term Note, no Event of Default shall exist as a result of
such rescinded acceleration;




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               (iii) any of the Companies, pursuant to or within the meaning of Title 11, U.S. Code, the
Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada), the
Winding-Up and Restructuring Act (Canada) or any similar federal, foreign, provincial or state law
for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an involuntary case, (C) consents to the
appointment of a receiver, receiver—manager, manager, trustee, assignee, liquidator or similar
official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors, or (E)
admits in writing that it is generally unable to pay its debts as they become due;




               (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law,
which is not rescinded, vacated, overturned, or otherwise withdrawn within thirty (30) days after
the entry thereof, and that (A) is for relief against any of the Companies or any of their
Subsidiaries in an involuntary case, (B) appoints a Custodian of any of the Companies or any of
their Subsidiaries, or (C) orders the liquidation of any of the Companies or any of their
Subsidiaries;




               (v) a final judgment or judgments for the payment of money are rendered against any of the
Companies or any of their Subsidiaries and which judgments are not, within thirty (30) days after
the entry thereof, paid, bonded, discharged or stayed pending appeal, or are not discharged within
thirty (30) days after the expiration of such stay, unless such judgment is covered by insurance or
an indemnity from a credit worthy party, so long as the applicable Company or Subsidiary provides
the Holder a written statement from such insurer or indemnity provider (which written statement
shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by
insurance or an indemnity and such Company or Subsidiary will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;




               (vi) any of the Companies breaches any representation, warranty, covenant, or other term or
condition of any Transaction Document, except, in the case of a breach of a covenant or other term
or condition of any Transaction Document which is curable, only if such breach continues for a
period of at least five (5) consecutive Business Days, other than a breach of Sections 8 of this
Term Note, for which there shall be no cure period;




               (vii) any breach or failure in any respect to comply with the provisions of Section 5 this
Note;




               (viii) any Company or Subsidiary consummates a Fundamental Transaction contrary to the
provisions of Section 4 of this Term Note;




               (ix) the repudiation by any of the Companies of any of its obligations under any Security
Document, or any Security Document or any term thereof shall cease to be, or is asserted by any
Company not to be, a legal, valid and binding obligation of any Company enforceable in accordance
with its terms;




               (x) any Lien against the Collateral intended to be created by any Security Document shall at
any time be invalidated, subordinated or otherwise cease to be in



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full force and effect, for whatever reason, or any security interest purported to be created
by any Security Document shall cease to be, or shall be asserted by any Company not to be, a valid,
first priority perfected Lien (to the extent that any Transaction Document obligates the parties to
provide such a perfected first priority Lien, and except to the extent Permitted Liens have
priority) in the Collateral (except as expressly otherwise provided under and in accordance with
the terms of such Transaction Document);




               (xi) any provision of any Security Document shall at any time for any reason be declared to be
null and void, or the validity or enforceability thereof shall be contested by any Company, or a
proceeding shall be commenced by any Company, or by any governmental authority having jurisdiction
over such Company, seeking to establish the invalidity or unenforceability thereof, or any Company
shall deny that any Company has any liability or obligation purported to be created under any
Security Document;




               (xii) any Event of Loss in excess of $250,000 that is not fully covered by insurance, the
proceeds of which are paid to the Company within 60 days of such Event of Loss and which proceeds
are used to replace such asset within 30 days of receipt thereof or otherwise used to make a
Permitted Redemption;




               (xiii) the failure of the Parent’s Common Stock to be traded or quoted on the New York Stock
Exchange, the NASDAQ Global Market, the NASDAQ Capital Market or the American Stock Exchange;




               (xiv) the occurrence of any Material Adverse Effect;




               (xv) the failure of the applicable Registration Statement required to be filed pursuant to the
Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is
sixty (60) days after the applicable Effectiveness Deadline (as defined in the Registration Rights
Agreement), or, while the applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable
Registration Statement lapses for any reason (including, without limitation, the issuance of a stop
order) or is unavailable to any holder of the Term Notes for sale of such holder’s Registrable
Securities (as defined in the Registration Rights Agreement) which are required to be included in
such Registration Statement in accordance with the terms of the Registration Rights Agreement, and
such lapse or unavailability continues for a period of twenty (20) consecutive days or for more
than an aggregate of thirty (30) days in any 365-day period (other than days during an Allowable
Grace Period (as defined in the Registration Rights Agreement)).




          (b) Redemption Right. Promptly after the occurrence of an Event of Default with
respect to this Term Note, the Companies shall deliver written notice thereof via facsimile and
overnight courier (an “Event of Default Notice”) to the Holder. At any time after the earlier of
the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of a Event of
Default, the Holder may require the Companies to redeem all or any portion of this Term Note (as
“Event of Default Redemption”) by delivering written notice thereof (the “Event of Default
Redemption Notice”) to the Companies, which Event of Default Redemption Notice shall indicate the
portion of this Term Note the Holder is electing to redeem; provided, that upon



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the occurrence of any default described in Section 3(a)(iii) or 3(a)(iv), this Term Note shall
automatically, and without any action on behalf of the Holder, be redeemed by the Companies. Each
portion of this Term Note subject to redemption by the Companies pursuant to this Section 3(b)
shall be redeemed by the Companies at a price equal to the Redemption Premium plus accrued and
unpaid Interest and accrued and unpaid Late Charges and Interest with respect to such portion of
this Term Note subject to redemption (the “Event of Default Redemption Price”). Redemptions
required by this Section 3(b) shall be made in accordance with the provisions of Section 7.




     4. RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.



          (a) Assumption. None of the Companies or any of their Subsidiaries shall enter into
or be party to a Fundamental Transaction unless (i) the Fundamental Transaction would result in a
Change of Control and the Companies comply with the provisions of Section 4(b), or (ii) if the
Fundamental Transaction does not result in a Change of Control, the Successor Entity assumes in
writing all of the obligations of the applicable Company under this Term Note and the other
Transaction Documents in accordance with the provisions of this Section 4(a) pursuant to written
customary assumption agreements in form and substance reasonably satisfactory to the Holder prior
to, or simultaneously with, such Fundamental Transaction, including agreements to deliver to each
holder of Term Notes in exchange for such Term Notes a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to the Term Notes, including,
without limitation, having a principal amount and interest rate equal to the principal amounts and
the interest rates of the Term Notes held by such holder and having similar ranking to the Term
Notes, and satisfactory to the Holder. Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Term Note referring to the “Companies” shall refer
instead to the Successor Entity and each of the Companies then an affiliate thereof), and may
exercise every right and power of the Companies and shall assume all of the obligations of the
Companies under this Term Note with the same effect as if such Successor Entity had been named as
the Companies herein. The provisions of this Section shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any limitations on the
redemption of this Term Note.



          (b) Redemption Right. No later than 5 days prior to the consummation of a Change of
Control, but in any event not prior to the public announcement of such Change of Control, the
Companies shall deliver written notice thereof via facsimile and overnight courier to the Holder (a
“Change of Control Notice”). At any time during the period beginning after the Holder’s receipt of
a Change of Control Notice and ending on the date which is thirty (30) days after the consummation
of such Change of Control), the Holder may require the Companies to redeem all or any portion of
this Term Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the
Companies, which Change of Control Redemption Notice shall indicate the portion of this Term Note
the Holder is electing to redeem. The portion of this Term Note subject to redemption pursuant to
this Section 4 shall be redeemed by the Companies at a price equal to 120% (or, if the Change of
Control results in the payment of consideration to the holders of Common Stock of the Company equal
to or exceeding $1.75 per share (as adjusted



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for any combinations, splits, recapitalizations and the like with respect to such shares),
100%) of the sum of the amount being redeemed together with accrued and unpaid Interest with
respect to such amount and accrued and unpaid Late Charges with respect to such amount and Interest
(the “Change of Control Redemption Price”). Redemptions required by this Section 4 shall be made
in accordance with the provisions of Section 7 and shall have priority to payments to stockholders
in connection with a Change of Control.




     5. COMPANY REDEMPTIONS.



          (a) Permitted Redemption. The Companies may elect to pay to the Holder of this Term
Note the Permitted Redemption Amount (as defined below), subject to and in accordance with the
terms of this Section 5(a), by redeeming the Principal, in whole or in part (but, other than as
such relates to an Event of Loss or as set forth in Section 8(h), in minimum increments of Five
Hundred Thousand Dollars ($500,000)), in accordance with this Section 5(a), (a “Permitted
Redemption”). On or prior to the date which is the second (2nd) Business Day prior to the date of
redemption pursuant to this Section 5(a) (the “Redemption Date”), the Companies shall deliver
written notice (each, a “Permitted Redemption Notice”) to the Holder stating the amount which the
Companies elect to redeem pursuant to a Permitted Redemption (the “Permitted Redemption Amount”),
which Permitted Redemption Amount shall be equal to (i) (A) if the Redemption Date is prior to the
1 year anniversary date of the Issuance Date or (B) (1) if the Redemption Date is on or after the 1
year anniversary of the Issuance Date and (2) one of the Companies has entered into a
confidentiality agreement, letter of intent or definitive agreement relating to a potential Change
of Control or otherwise has knowledge that a Change of Control may exist or is reasonably likely to
exist within 60 days after the Redemption Date, 120% of the outstanding Principal being redeemed,
or (ii) other than as set forth in Section 5(a)(i) if the Redemption Date is on or after the 1 year
anniversary date of the Issuance Date, 118% of the outstanding Principal being redeemed, and in
each case, together with accrued and unpaid Interest with respect to such Permitted Redemption
Amount and accrued and unpaid Late Charges with respect to such Permitted Redemption Amount and
Interest; provided, however, that if a Permitted Redemption is made simultaneously with, or within
5 Business Days of, a Change of Control that results in the payment of consideration to the holders
of Common Stock of the Company equal to or exceeding $1.75 per share (as adjusted for any
combinations, splits, recapitalizations and the like with respect to such shares), the redemption
price shall equal 100% of the Principal, plus accrued Interest of Late Charges. A Permitted
Redemption Notice may be revoked prior to consummation of the Permitted Redemption. The Companies
shall redeem the applicable Permitted Redemption Amount of this Debenture pursuant to this Section
5(a) together with the corresponding Permitted Redemption Amounts of the Other Debentures pursuant
to the corresponding provisions of the Other Debentures. If the Companies elect to redeem pursuant
to a Permitted Redemption, then the Permitted Redemption Amount which is to be paid to the Holder
on the applicable Permitted Redemption Date shall be redeemed by the Companies on such Permitted
Redemption Date, and the Companies shall pay to the Holder on such Permitted Redemption Date, by
wire transfer of immediately available funds, an amount in cash equal to the Permitted Redemption
Amount.



     6. NON-CIRCUMVENTION. Each Company hereby covenants and agrees that no Company will,
by amendment of its articles or certificate of Incorporation or amalgamation, bylaws, or other
governing documents, or through any reorganization, transfer of



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assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Term Note, and will at all times in good faith carry out all of the
provisions of this Term Note and take all action as may be required to protect the rights of the
Holder of this Term Note.




     7. HOLDER REDEMPTIONS.



          (a) Mechanics. Upon an Event of Default Redemption, the Companies shall deliver the
applicable Event of Default Redemption Price to the Holder within five (5) Business Days after the
Companies’ receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted
a Change of Control Redemption Notice in accordance with Section 4(b), the Companies shall deliver
the applicable Change of Control Redemption Price to the Holder concurrently with the consummation
of such Change of Control if such notice is received prior to the consummation of such Change of
Control and within five (5) Business Days after the Companies’ receipt of such notice otherwise.
In the event of a redemption of less than all of the Principal of this Term Note, the Companies
shall promptly cause to be issued and delivered to the Holder a new Term Note (in accordance with
Section 11(d)) representing the outstanding Principal which has not been redeemed.



          (b) Redemption by Holders. Any Event of Default Redemption Notice or Change of
Control Redemption Notice for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 3(b) or Section 4(b), is to
be delivered to the Companies by the Required Holders. If the Companies receive any Event of
Default Redemption Notice or Change of Control Redemption Notice and the Companies are unable to
redeem all Principal, Interest, Late Charges and other amounts designated in such Redemption
Notice, then the Companies shall redeem a pro rata amount from each holder of the Term Notes
(including the Holder) based on the principal amount of the Term Notes submitted for redemption
pursuant to such Event of Default Redemption Notice or Change of Control Redemption Notice received
by the Companies and shall redeem the remaining Principal, Interest, Late Charges and other amounts
designated in such Redemption Notice as legal funds are available therefor; provided that the
unredeemed portion of such Principal shall accrue interest at rate per annum equal to eighteen and
a half percent (18.5%) in the manner set forth in Section 2 hereof until such amounts are paid to
the Holder.



     8. COVENANTS.



          (a) Rank. All payments due under this Term Note shall be senior in right of payment,
whether with respect to payment of redemptions, interest, damages or upon liquidation or
dissolution or otherwise, to all other current and future Indebtedness of the Companies; provided
that this Term Note shall only rank pari passu in right of payment with respect to Indebtedness
relating to Permitted Liens set forth in subparts (d), (g) and (h) of the definition of Permitted
Liens.



          (b) Incurrence of Indebtedness. So long as this Term Note is outstanding, no Company
shall, and no Company shall permit any of its Subsidiaries to, directly



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or indirectly, create, incur or guarantee, assume, or suffer to exist any Indebtedness, other
than (i) the Indebtedness evidenced by this Term Note and (ii) Permitted Indebtedness.




          (c) Existence of Liens. So long as this Term Note is outstanding, no Company shall,
and no Company shall permit any of its Subsidiaries to, directly or indirectly, allow or suffer to
exist 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 Company or any of their
Subsidiaries (collectively, “Liens”), other than Permitted Liens.



          (d) Creation, Perfection, and Priority of Liens. Each Company represents and warrants
that the Security Documents are effective to create in favor of the Holder, for the benefit of the
Holder, a legal, valid, binding, and enforceable security interest and Lien, and a first priority
security interest and Lien in the Collateral as security for the obligations under the Term Notes
(other than with respect to Indebtedness relating to Permitted Liens set forth in subparts (d), (g)
and (h) of the definition of Permitted Liens), to the extent that a legal, valid, binding, and
enforceable security interest and Lien in such Collateral may be created under applicable law.



          (e) Restricted Payments. The Parent shall not, directly or indirectly,



               (i) declare or pay any dividend or make any other payment or distribution on account of any
Company’s or Subsidiary’s Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving any Company) or to the direct or indirect
holders of any Company’s or Subsidiary’s Equity Interests in their capacity as such (in each case,
other than to the Company or wholly owned U.S. Subsidiaries of the Company);




               (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation,
in connection with any merger or consolidation involving any Company) any Equity Interests of any
Company or any Subsidiary or any direct or indirect parent of any Company or any Subsidiary in
excess of $50,000 per calendar year (in each case, other than from wholly owned U.S. Subsidiaries
of the Company); or




               (iii) make any prepayment on or with respect to, accelerate the maturity of, or purchase,
redeem, defease or otherwise acquire or retire for value prior to its scheduled maturity any
Indebtedness of any Company or any Subsidiary, except for payments of principal, interest and other
amounts under this Term Note.




          (f) Insurance. The Companies shall furnish Holder with proof reasonably satisfactory
to the Holder that all insurance required under the Security Documents is in full force and effect
at each renewal of any such contract or policy of insurance or upon the Holder’s request.




          (g) Event of Loss; Claims. The Companies shall inform the Holder with reasonable
promptness upon the occurrence of (i) any event which, with or without the passage of time, could
reasonably be expected to constitute an Event of Loss, or (ii) any claim with respect to any
liability filed against the Companies or any of their Subsidiaries.




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          (h) Asset Sales. No Company shall, and no Company shall permit any of its Subsidiaries
to, directly or indirectly, consummate any Asset Sale other than Permitted Asset Sales. The
Companies shall apply the proceeds from such Permitted Asset Sale as follows:




               (i) the first $10,000,000 of Net Proceeds received by the Companies from such Permitted Asset
Sale shall be used by the Companies to make Permitted Redemptions in accordance with Section 5
hereof. Such Permitted Redemptions shall be made within 2 Business Days of the date any of the
Companies receive any such proceeds relating to each such Asset Sale; and




               (ii) after the Companies have made Permitted Redemptions pursuant to clause (i) above in an
amount not less than $10,000,000, the remaining proceeds from such Asset Sale shall be used as
determined by the Board of Directors of the Company.




               Notwithstanding the foregoing, to the extent that the Required Holders in the aggregate with
respect to such Permitted Asset Sale have not received Net Proceeds in the amount set forth in
subpart (i) above and the proceeds of a Permitted Asset Sale are comprised of consideration other
than cash as set forth in the definition of Permitted Asset Sale, the Required Holders shall have
the right to demand that the Company make a Permitted Redemption in accordance with Section 5
hereof with such non-cash proceeds. The amount of such Permitted Redemption attributable to such
proceeds (and the concomitant reduction in the principal amount of the Note pursuant to such
Permitted Redemption) shall be the fair market value thereof determined by the Board of Directors
of the Company in its reasonable discretion, which determination shall be made within 5 Business
Days of the request therefore by the Required Holders prior to the exercise of the rights set forth
in this paragraph. Such Permitted Redemption shall be made within 5 Business Days of the demand
therefore by the Required Holders.




          (i) Use of Proceeds. The Companies shall use the proceeds of sale of the Term Notes
as set forth on Schedule 4(d) to the Securities Purchase Agreement.




          (j) Audit Rights. The Companies shall, upon reasonable notice, subject to reasonable
safety and security procedures, and at the Companies’ sole cost and expense permit the Holder or
its designated representatives, to visit and inspect any of the properties of the Companies and
their Subsidiaries, to examine the books of account of the Companies and their Subsidiaries (and to
make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of
the Companies and their Subsidiaries, and to be advised as to the same by, its and their officers,
and to conduct examinations and verifications (whether by internal commercial finance examiners or,
if the Holder has a reasonable basis that Company-prepared financial information is not accurate,
by independent auditors), all at such reasonable times and intervals as the Holder may reasonably
request.




          (k) Capital Expenditures. The Companies shall not, and shall not permit any of their
Subsidiaries to, make any Capital Expenditures in an amount greater than the amount specifically
set forth in the then effective budget approved by the Board of Directors and delivered by the
Parent to the Holder during any fiscal year of the Companies without the Holder’s prior written
consent, which consent shall not be unreasonably withheld.




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          (l) Litigation and Judgments. The Companies shall give Holder in writing within ten
(10) days of becoming aware thereof, of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting any of the Companies or their Subsidiaries or to which
the Companies or any of their Subsidiaries are or become a party, in each case, to the extent
disclosed on the Schedules to the Purchase Agreement, arising after the date hereof, involving a
claim against any Company stating the nature and status of such litigation or proceedings. The
Companies shall give notice thereof to the Holder, in writing, in form and substance reasonably
satisfactory to the Holder, within ten (10) days of the occurrence of any judgment not covered by
insurance, final or otherwise, against the Companies or their Subsidiaries.




          (m) Additional Collateral. With respect to any Property acquired after the Issuance
Date by any Company or Subsidiary as to which the Holder does not have a perfected Lien, such
Company shall, or shall cause such Subsidiary to, promptly (i) to the extent such property has a
purchase price or fair market value of greater than $50,000, send written notice to the Holder with
respect thereto at least thirty (30) days after the acquisition thereof, (ii) execute and deliver
to the Holder or its agent such amendments to the Security Documents or such other documents as the
Holder deems necessary or advisable to grant to the Holder a security interest in such Property and
(ii) take all actions necessary or advisable to grant to the Holder a perfected first priority
security interest in such Property, including, without limitation, the filing of Mortgages and UCC
or PPSA financing statements in such jurisdictions as may be required by the Security Documents or
by law or as may be reasonably requested by the Holder.




          (n) Affiliate Transactions. No Company shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any service) with any
Affiliate of any Company or Subsidiary, unless such transaction is on terms that are no less
favorable to such Company or Subsidiary, as the case may be, than those that might be obtained at
the time from a Person who is not an Affiliate. Notwithstanding the foregoing, nothing herein
shall prevent the Companies from making Permitted Investments. Notwithstanding the foregoing,
nothing herein shall prevent the Companies from loaning money to or making investments in
Subsidiaries pursuant to intercompany notes which have been pledged to the Holder pursuant to the
Security Agreement, provided, that the aggregate amounts thereof shall not exceed the amount
specifically set forth in the then effective budget approved by the Board of Directors and
delivered by the Parent to the Holder (such loans and investments referred to herein as
“Intercompany Investments”).




          (o) Compliance with Securities Laws. The Companies shall, and shall cause their
Subsidiaries to, comply, in all material respects, with federal, state and other applicable
securities laws.




          (p) Loans and Investments. The Companies shall not, and shall not permit any
Subsidiary to, purchase or acquire, or make any commitment therefor, any capital stock, equity
interest, or any obligations or other securities of, or any interest in, any Person, or make or
commit to make any advance, loan, extension of credit or capital contribution to or any other
investment in, any Person including any Affiliate of the Companies (unless otherwise



10









 






permitted pursuant to the terms hereof (together, “Investments”), except for Permitted
Investments.




          (q) Financial Covenant. The Parent shall cause: (i) for the fiscal quarter ending
December 31, 2008, Adjusted EBITDA for such fiscal quarter to be greater than $0.00; and (ii) for
each fiscal quarter thereafter, cumulative Adjusted EBITDA for the period from October 1, 2008
through the end of each such fiscal quarter, to be greater than $0.00.




     9. VOTE TO ISSUE, OR CHANGE THE TERMS OF, TERM NOTES. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting of the Required
Holders shall be required for any change or amendment to this Term Note.



     10. TRANSFER. This Term Note may be offered, sold, assigned or transferred by the
Holder with the consent of the Companies, such consent not to be unreasonably withheld or delayed,
provided, however, that such consent shall not be required if an Event of Default has occurred and
is continuing.



     11. REISSUANCE OF THIS TERM NOTE.



          (a) Transfer. If this Term Note is to be transferred, the Holder shall surrender this
Term Note to the Companies, whereupon the Companies will forthwith issue and deliver upon the order
of the Holder a new Term Note (in accordance with Section 11(d)), registered as the Holder may
request, representing the outstanding Principal being transferred by the Holder and, if less than
the entire outstanding Principal is being transferred, a new Term Note (in accordance with Section
11(d)) to the Holder representing the outstanding Principal not being transferred.




          (b) Lost, Stolen or Mutilated Term Note. Upon receipt by the Companies of evidence
reasonably satisfactory to the Companies of the loss, theft, destruction or mutilation of this Term
Note, and, in the case of mutilation, upon surrender and cancellation of this Term Note, the
Companies shall execute and deliver to the Holder a new Term Note (in accordance with Section
11(d)) representing the outstanding Principal.




          (c) Term Note Exchangeable for Different Denominations. This Term Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of the Companies, for
a new Term Note or Term Notes (in accordance with Section 11(d) and in principal amounts of at
least $250,000) representing in the aggregate the outstanding Principal of this Term Note, and each
such new Term Note will represent such portion of such outstanding Principal as is designated by
the Holder at the time of such surrender.




          (d) Issuance of New Term Notes. Whenever the Companies are required to issue a new
Term Note pursuant to the terms of this Term Note, such new Term Note (i) shall be of like tenor
with this Term Note, (ii) shall represent, as indicated on the face of such new Term Note, the
Principal remaining outstanding (or in the case of a new Term Note being issued pursuant to Section
11(a) or Section 11(c), the Principal designated by the Holder which, when added to the principal
represented by the other new Term Notes issued in connection with

11









 








such issuance, does not exceed the Principal remaining outstanding under this Term Note
immediately prior to such issuance of new Term Notes), (iii) shall have an issuance date, as
indicated on the face of such new Term Note, which is the same as the Issuance Date of this Term
Note, (iv) shall have the same rights and conditions as this Term Note, and (v) shall represent
accrued Interest and Late Charges on the Principal and Interest of this Term Note, from the
Issuance Date.




     12. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Term Note shall be cumulative and in addition to all other remedies
available under this Term Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein
shall limit the Holder’s right to pursue actual and consequential damages for any failure by the
Companies to comply with the terms of this Term Note. Amounts set forth or provided for herein
with respect to payments and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Companies (or the performance thereof). Each of the Companies acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Companies therefore agree that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.



     13. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Term Note is
placed in the hands of an attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action to collect amounts due under this
Term Note or to enforce the provisions of this Term Note or (b) there occurs any bankruptcy,
reorganization, receivership of any of the Companies or other proceedings affecting creditors’
rights and involving a claim under this Term Note, then the Companies shall pay the reasonable
costs incurred by the Holder for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, but not limited to,
attorneys’ fees and disbursements (and including and such fees and disbursements related to seeking
relief from any stay, automatic or otherwise in effect under any Bankruptcy Law).



     14. CONSTRUCTION; HEADINGS. This Term Note shall be deemed to be jointly drafted by
the Companies and the Holder and shall not be construed against any Person as the drafter hereof.
The headings of this Term Note are for convenience of reference and shall not form part of, or
affect the interpretation of, this Term Note.



     15. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.



     16. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Event
of Default Redemption Price, the Change of Control Redemption Price, the



12









 




Permitted Redemption Amount or any other similar or related amount, the Companies shall submit
the disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of
receipt, or deemed receipt, of the applicable notice or dispute in respect of the Event of Default
Redemption Notice, Change of Control Redemption Notice, the Permitted Redemption Notice or any
other similar or related notice or other event giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Companies are unable to agree upon such determination or
calculation within one (1) Business Day of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Companies shall, within one (1) Business Day submit via
facsimile the disputed arithmetic calculations to the Companies’ independent, outside accountant.
The Companies, at the Companies’ expense, shall cause the accountant to perform the determinations
or calculations and notify the Companies and the Holder of the results no later than five (5)
Business Days from the time it receives the disputed determinations or calculations. Such
accountant’s determination or calculation, as the case may be, shall be binding upon all parties
absent demonstrable error.




     17. NOTICES; PAYMENTS.



          (a) Notices. Whenever notice is required to be given under this Term Note, unless
otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Companies shall provide the Holder with prompt written notice
of all actions taken pursuant to this Term Note, including in reasonable detail a description of
such action and the reason therefor.




          (b) Payments. Whenever any payment of cash is to be made by any of the Companies to
any Person pursuant to this Term Note, such payment shall be made in lawful money of the United
States of America by a check drawn on the account or accounts of the Companies and sent via
overnight courier service to such Person at such address as previously provided to the Companies in
writing (which address, in the case of each of the Buyers, shall initially be as set forth in the
Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Companies with prior written notice
setting out such request and the Holder’s wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Term Note is due on any day which is not a Business Day,
the same shall instead be due on the next succeeding day which is a Business Day and, in the case
of any Interest Date which is not the date on which this Term Note is paid in full, the extension
of the due date thereof shall not be taken into account for purposes of determining the amount of
Interest due on such date. Any amount of Principal or other amounts due hereunder or under the
other Transaction Documents, other than Interest, which is not paid when due shall result in a late
charge being incurred and payable by the Companies in an amount equal to interest on such amount at
the rate of eighteen and a half percent (18.5%) per annum from the date such amount was due until
the same is paid in full (“Late Charge”).




     18. CANCELLATION. After all Principal, accrued Interest, Late Charges and other
amounts at any time owed on this Term Note have been paid in full in cash, this Term Note shall
automatically be deemed canceled, shall be surrendered to the Companies for cancellation and shall
not be reissued.



13









 





     19. WAIVER OF NOTICE. To the extent permitted by law, the Companies hereby waive
demand, notice, protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Term Note and the Securities Purchase
Agreement.



     20. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Term Note shall be construed and
enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Term Note and all disputes arising hereunder shall be
governed by, the 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.
The parties hereto (a) agree that any legal action or proceeding with respect to this Term Note or
any other agreement, document, or other instrument executed in connection herewith, shall be
brought in any state or federal court located within the City of New York, , Borough of Manhattan,
in the State of New York, (b) irrevocably waive any objections which either may now or hereafter
have to the venue of any suit, action or proceeding arising out of or relating to this Term Note,
or any other agreement, document, or other instrument executed in connection herewith, brought in
the aforementioned courts, and (c) further irrevocably waive any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient forum.



     21. Waiver of Jury Trial. THE HOLDER AND THE COMPANIES IRREVOCABLY WAIVE THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS TERM NOTE OR
ANY OTHER TRANSACTION DOCUMENT.



     22. CERTAIN DEFINITIONS. For purposes of this Term Note, the following terms shall
have the following meanings:



          (a) “Adjusted EBITDA” means (a) earnings before interest, taxes, depreciation and amortization
of the Parent and its consolidated Subsidiaries prepared in accordance with GAAP plus (b) the sum
of, in each case to the extent included in the calculation of such earnings but without
duplication, (i) losses and charges with respect to extraordinary and non-recurring items; (ii)
losses or charges resulting from hurricanes, floods, tornadoes, earthquakes or other natural
disasters, (iii) all non-cash charges and non-cash losses for such period, including the amount of
any compensation deduction as the result of any grant of Equity Interests to employees, officers,
directors or consultants approved by the Board of Directors; (iv) all cash, costs and expenses,
including expenses relating to legal fees, incurred in connection with (A) the transactions
contemplated by this Note, (B) any acquisition permitted hereby or consented to by the Holder
whether or not such acquisition is completed, (C) any transaction for the issuance of any debt,
equity or convertible security permitted hereby or consented to by the Holder, whether or not such
transaction is completed and (D) any Permitted Asset Sale whether or not such Asset Sale is
completed; (v) fees and costs associated with the early extinguishment of Indebtedness owing to the
Holder, (vi) losses from Permitted Asset Sales, (vii) losses, costs and expenses incurred in
connection with the litigation or any governmental proceedings, investigations or claims set forth
in Schedules to the Purchase Agreement including any monies paid in settlement thereof or to
satisfy any judgments thereon, (viii) restructuring charges

14









 








including, but not limited to, severance payments, lease termination payments and other
early-termination payments under contracts, relocation expenses, site and office closure costs and
other costs and expenses in connection with downsizing minus (c) the sum of, in each case to the
extent included in the calculation of such earnings but without duplication, (i) any credit for
income taxes, (ii) interest income, (iii) gains from extraordinary and non-recurring items for such
period, (iv) any aggregate net gain from Asset Sales and (v) any other non-cash gains or other
items which have been added in determining earnings, including any reversal of a change referred to
in clause (b)(iii) above, by reason of a decrease in the value of any Equity Interests.




          (b) “Affiliate” means, with respect to a specified Person, another Person that directly or
indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.




          (c) “Asset Sale” means (i) the sale, lease, conveyance or other disposition of any assets or
rights other than in the ordinary course of business, and (ii) the sale of debt or Equity Interests
in any of the Parent’s Subsidiaries.




          (d) “Capital Asset” means, with respect to any Person, any tangible, fixed, or capital asset
owned or leased (in the case of a Capital Lease Obligation) by such Person.




          (e) “Capital Expenditures” means, with respect to any Person and any period, all amounts
expended by such Person during such period to acquire or to construct Capital Assets computed in
accordance with GAAP.




          (f) “Capital Lease Obligation” means, at the time any determination is to be made, the amount
of the liability in respect of a capital lease that would at that time be required to be
capitalized on a balance sheet prepared in accordance with GAAP.




          (g) “Capital Stock” means (1) in the case of a corporation, corporate stock; (2) in the case
of an association or business entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock; (3) in the case of a partnership or
limited liability company, partnership interests (whether general or limited) or membership
interests; and (4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the issuing Person,
but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether
or not such debt securities include any right of participation with Capital Stock.




          (h) “Change of Control” means, (i) any Fundamental Transaction with respect to the Parent or
(ii) any sale of the assets or Equity Interests of one or more of the Subsidiaries of the Parent
which, when taken together, shall constitute the sale of all or substantially all of the assets of
the Parent (as defined under the laws of the State of New York) other than, in each of (i) and (ii)
(x) any reorganization, recapitalization or reclassification of the shares of Common Stock in which
the voting power of the holders of such Common Stock immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or indirectly, the voting power
of the surviving entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such

15









 








entity or entities, or (y) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of such Company or Subsidiary thereof or (z) any
Permitted Asset Sale.




          (i) “Collateral” means the “Collateral” as defined in the Security Agreement.




          (j) “Control” means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative
thereto.




          (k) “Equity Interests” means Capital Stock and all warrants, options or other rights to
acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable
for, Capital Stock).




          (l) “Event of Loss” means with respect to any property, any of the following: (a) any loss,
destruction or damage of such property or (b) any condemnation, seizure, or taking, by exercise of
the power of eminent domain or otherwise, of such property, or confiscation of such property or the
requisition of the use of such property.




          (m) “Fiscal Quarter” means a fiscal quarter of any fiscal year of the Companies.




          (n) “Fundamental Transaction” means, with respect to any Company or Subsidiary, that such
Company or Subsidiary shall, directly or indirectly, in one or more related transactions, other
than those transactions set forth in items (iv) and (v) of the definition of Permitted Asset Sale,
(i) consolidate or merge with or into (whether or not such Company or Subsidiary is the surviving
corporation) another Person, (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of such Company or Subsidiary to another Person,
(iii) allow another Person (other than the Holder or any Affiliate thereof) to make a purchase,
tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares
of Common Stock (not including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such purchase, tender or
exchange offer), (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock, (v) reorganize, recapitalize or reclassify its Common Stock, or
(vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of
the Exchange Act) (other than the Holder or any Affiliate thereof) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.




          (o) “GAAP” means United States generally accepted accounting principles, consistently applied.




16









 








          (p) “Mortgage” means a mortgage in form and substance reasonably satisfactory to the Holder,
as it may be amended, supplemented or otherwise modified from time to time.




          (q) “Net Proceeds” means all proceeds paid or payable to a Company in respect of an Asset Sale
less reasonable out-of-pocket transaction expenses and taxes incurred in respect thereto not to
exceed in the aggregate $500,000.




          (r) “Payment Quarter” means each of: the period beginning on and including the Issuance Date
and ending on and including every successive three-month anniversary thereof until the Maturity
Date.




          (s) “Permitted Asset Sale” means an Asset Sale, in the case of clauses (i), (ii) and (v)
below, in which no less than 75% of the consideration therefor is paid in cash at the closing
thereof and in which;




     (i) whether in any single transaction or series of related transactions, the assets being
transferred therein have a Fair Market Value of less than $1,000,000 in the aggregate and together
with all other Asset Sales (other than the Permitted Asset Sales set forth in clauses (iv) and (v)
below) from the date hereof having not more than a Fair Market Value of $2,000,000;



     (ii) the sale or lease of products, services or accounts receivable by the Companies or any
Subsidiary in the ordinary course of business and any sale or other disposition of damaged,
worn-out, replaced or obsolete assets by the Companies or any Subsidiary in the ordinary course of
business, in each case, as approved by the Board of Directors;



     (iii) a transfer of assets by the Companies or any Subsidiary to a Company or any U.S.
Subsidiary.



     (iv) the sale or transfer of all or a portion of the assets, including the sale of the Equity
Interests of Subsidiaries of the Parent, comprising the “Europe/Middle East/Asia (EMEA) Division”
of the Parent and its Subsidiaries;



     (v) the sale or transfer of all or a portion of the assets, including the sale of the Equity
Interests of Subsidiaries of the Parent, comprising the Cedara Software Division;



     (vi) Asset Sales consented to in writing by the Required Holders; and



          (t) “Permitted Indebtedness” means (i) Indebtedness, the aggregate principal amount of which
incurred and outstanding (other than pursuant to this Note) shall not exceed $2 million at any time
and that is made expressly subordinate in right of payment to the Indebtedness evidenced by this
Note pursuant to subordination provisions satisfactory to the Holder (such Indebtedness, the
“Subordinated Indebtedness”); (ii) Indebtedness secured by Liens permitted under clause (d) of the
definition of Permitted Liens, (iii) Indebtedness under this Note; (iv) Indebtedness payable to any
Company or any U.S. Subsidiary thereof; provided, however, that such Indebtedness is expressly
subordinated to the prior payment in full in cash of this Note; and (v) Indebtedness existing as of
the date hereof and set forth on Schedule 3(s) hereto (“Existing Indebtedness”);




17









 








          (u) “Permitted Investments” means (a) Investments held by the Companies or any Subsidiary in
cash equivalents subject to a Deposit Account Control Agreement pursuant to the terms of the
Security Agreement; (b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary course of business;
(c) pledges or deposits as required in the ordinary course of business in connection with workmen’s
compensation, unemployment insurance and other social security legislation; (d) advances, loans or
extensions of credit in the ordinary course of business to employees; provided that the aggregate
amount thereof shall not exceed $10,000; (e) any Investment in the Companies or in a U.S.
Subsidiary thereof; and (f) other Investments, so long as the aggregate amount of all such
Investments made since the Closing Date does not at any time exceed $500,000; and (g) Intercompany
Investments.




          (v) “Permitted Liens” means (a) (a) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings promptly initiated and diligently conducted and
for which adequate reserves have been established in accordance with GAAP; (b) any Lien created by
operation of law, such as materialmen’s liens, mechanics’ liens, arising in the ordinary course of
business with respect to a liability that is not yet due or delinquent or that are being contested
in good faith by appropriate proceedings promptly initiated and diligently conducted, and a reserve
or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor;
(d) Liens upon or in any asset acquired or held by the Company or any of its Subsidiaries to secure
the purchase price of such asset or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such asset in an amount of Indebtedness, when aggregated with the principal
amount (or accreted value, as applicable) of all Indebtedness incurred under clause (ii) of the
definition of Permitted Indebtedness does not exceed the amount set forth in the budget as approved
by the Board of Directors and delivered by the Parent to the Holder at any time outstanding; (e)
Liens securing the Company’s obligations under this Note; (f) leases or subleases and licenses and
sublicenses granted to others in the ordinary course of the Company’s business, not interfering in
any material respect with the business of the Company and its Subsidiaries; (g) Liens arising from
or securing judgments, decrees or attachments (or bonds securing same) in circumstances not
constituting an Event of Default, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within such proceedings may be initiated shall not have
expired; and (h) Liens existing on the date hereof and set forth on Schedule 3(w) hereto.




          (w) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.




          (x) “Property” means any right or interest in or to property of any kind whatsoever, whether
real, personal or mixed and whether tangible or intangible, including, without limitation, Capital
Stock.




          (y) “Redemption Premium” means 120% of the Principal amount; provided, however, that the
Redemption Premium shall not be applicable if the redemption is in connection with the Change of
Control that results in the payment of consideration to the holders

18









 








of Common Stock of the Companies equal to or exceeding $1.75 per share (as adjusted for any
combinations, splits, recapitalizations and the like with respect to such shares).




          (z) “Registrable Securities” shall have the meaning set forth in the Registration Rights
Agreement.




          (aa) “Registration Rights Agreement” means that certain registration rights agreement dated as
of the First Closing Date by and among the Companies and the initial holders of the Term Notes.




          (bb) “Registration Statement” shall have the meaning set forth in the Registration Rights
Agreement.




          (cc) “Required Holders” means the Holders of Term Notes representing at least a majority of
the aggregate principal amount of the Term Notes then outstanding.




          (dd) “Securities Purchase Agreement” means that certain securities purchase agreement dated as
of the Closing Date by and among the Companies and the initial holder of the Term Notes.




          (ee) “Security Agreement” means that certain Pledge and Security Agreement dated as of First
Closing Date by and among the Companies and the initial holders of the Term Notes.




          (ff) “Security Documents” means the Security Agreement, the Mortgages, if any, and all other
instruments, documents and agreements delivered by any of the Companies or any of their
Subsidiaries in order to grant to any holder of a Term Note, a Lien on any real, personal or mixed
Property of the Companies or one of their Subsidiaries as security for the obligations under the
Term Notes.




          (gg) “Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’
equity of the Companies and their Subsidiaries as of that date determined in accordance with GAAP.




          (hh) “State of Registration” means the United States or such other jurisdiction agreed to in
writing, from time to time, by the Holder and the Companies in which the assets of any of the
Companies is from time to time registered in accordance with the terms of this Term Note.




          (ii) “Subsidiary” means any other corporation, limited partnership or other business entity in
which any of the Companies or any Subsidiary thereof owns or controls any equity security or other
interest.




          (jj) “Successor Entity” means the Person, which may be any of the Companies, formed by,
resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made.




19









 








     23. DISCLOSURE. Upon receipt or delivery by any of the Companies of any notice in
accordance with the terms of this Term Note, unless Parent has in good faith determined that the
matters relating to such notice do not constitute material, nonpublic information relating to
itself, the other Companies or their Subsidiaries, Parent shall within one (1) Business Day after
any such receipt or delivery publicly disclose such material, nonpublic information on a Current
Report on Form 8-K or otherwise. In the event that Parent believes that a notice contains
material, nonpublic information relating to itself, the other Companies or their Subsidiaries,
Parent shall so indicate to the Holder contemporaneously with delivery of such notice, and in the
absence of any such indication, the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information relating to Parent or its
Subsidiaries.



     24. JOINDER. The Companies shall notify the Holder within fifteen (15) days after the
formation or acquisition of any Subsidiaries. For any Subsidiaries of the Companies formed or
acquired after the Issuance Date, the Companies shall at their own expense and, if not previously
completed, within fifteen (15) days after notice of such event is required to be provided, cause
each such Subsidiary to execute an instrument of joinder (a “Joinder Agreement”) in form and
substance reasonably acceptable to the Holder obligating such Subsidiary to any or all of the
Transaction Documents deemed necessary or appropriate by the Holder and cause the applicable
Company that owns the equity interests of such Subsidiary to pledge to the Holder 100% of the
equity securities owned by it of each such Subsidiary formed in the United States (and 65% of the
equity securities of any Subsidiary formed outside the United States formed) or acquired after the
Issuance Date and execute and deliver all documents or instruments required thereunder or
appropriate to perfect the security interest created thereby. In the event a party becomes a
Company (the “New Company”) pursuant to the Joinder Agreement, upon such execution the New Company
shall be bound by all the terms and conditions hereof and the other Transaction Documents to the
same extent as though such New Company had originally executed this Term Note and the other
Transaction Documents. The addition of the New Company shall not in any manner affect the
obligations of the other Companies hereunder or thereunder. Each Company hereto acknowledges that
the schedules and exhibits hereto may be amended or modified in connection with the addition of any
New Company to reflect information relating to such New Company.



[Signature Pages Follow]




20









 





     IN WITNESS WHEREOF, each of the Companies has caused this Term Note to be duly executed as of
the Issuance Date set out above.



	 	 	 	 	 
	 	COMPANIES:





MERGE HEALTHCARE INCORPORATED

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	CEDARA SOFTWARE (USA) LIMITED

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	MERGE eMED, INC.

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	CEDARA SOFTWARE CORP.

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	CEDARA SOFTWARE LIMITED

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	eFILM MEDICAL INC.

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	MERGE CEDARA EXCHANGECO LIMITED

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer 	 
	 	 	 	 
	 



	 	 	 	 	 
	 	MERGE TECHNOLOGIES HOLDINGS CO.

 	 
	 	By:  	\s\ Kenneth D. Rardin
 	 
	 	 	Title:  Chief Executive Officer