Document:

EX-4.2 AMENDMENT TO THAT CERTAIN RIGHTS AGREEMENT

Exhibit 4.2

FIRST AMENDMENT TO RIGHTS AGREEMENT

     THIS FIRST AMENDMENT TO RIGHTS AGREEMENT (“Amendment”), dated as of the
21st day of May, 2008, by and between Merge Healthcare Incorporated f/k/a Merge
Technologies Incorporated, a Wisconsin corporation (the “Company”), and American Stock
Transfer & Trust Co. as rights agent (the “Rights Agent”), constitutes the First Amendment
to the Rights Agreement, dated as of September 6, 2006, by and between the Company and the Rights
Agent. Capitalized terms used herein and not otherwise defined shall have the respective meanings
ascribed to such terms in the Rights Agreement.

     WHEREAS, the Company and its subsidiaries and Merrick RIS, LLC, a Delaware limited liability
company (“Buyer”) have proposed to enter into a Securities Purchase Agreement to be dated
as of the date hereof (the “Purchase Agreement”);

     WHEREAS, the Company desires to amend the Rights Agreement to render it inapplicable to the
purchase by Buyer of shares of Common Stock pursuant to the Purchase Agreement and the other
transactions contemplated by the Purchase Agreement;

     WHEREAS, the Company deems the Amendment to be necessary and desirable and in the best
interests of the holders of the Rights and has duly approved this Amendment;

     WHEREAS, no Person has become an Acquiring Person;

     WHEREAS, Section 27 of the Rights Agreement provides that prior to such time as any Person
becomes an Acquiring Person, the Company may, and the Rights Agent shall if the Company so directs,
supplement or amend any provision of the Rights Agreement without the approval of any holders of
certificates representing Common Shares of the Company, subject to certain limitations provided
therein; and

     WHEREAS, the Company desires to amend the Rights Agreement as set forth herein and hereby
directs the Rights Agent to execute this Rights Amendment.

     NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:

     1. The Rights Agreement is hereby amended by:

          (a) Adding the following sentence at the end of the definition of “Acquiring Person” in
Section 1(a) of the Rights Agreement:

“Notwithstanding any of the terms of the foregoing definition, none of Michael Ferro,
Merrick or his or its Affiliates or Associates shall be deemed to be an “Acquiring Person”
for any purposes of this Agreement unless such persons in the aggregate shall become the
Beneficial Owner of more than 40% of the Common Shares of the Company other than as a result
of (A) action by the Company or any other stockholders not caused, directly or

 

 

indirectly, by such Persons, (B) as a result of an acquisition of Common Shares by the
Company, which by reducing the number of shares outstanding, increases the proportionate
number of shares Beneficially Owned by such Persons or (C) the purchase or the right to
purchase by such Persons of newly issued shares of Common Stock of the Company, pursuant to
the preemptive right contained in the Purchase Agreement.

          (b) Adding the following subsections at the end of Section 1:

          (o) “Merrick” shall mean Merrick RIS, LLC a Delaware limited liability company.

          (r) “Purchase Agreement” shall mean the Securities Purchase Agreement, dated May 21,
2008 by and among Merrick, the Company and those subsidiaries of the Company listed on the
Schedule of Subsidiaries attached thereto.

          (c) Adding the following sentence at the end of the definition of “Distribution Date” in
Section 3(a) of the Rights Agreement:

“Notwithstanding any of the terms of the foregoing definition, no “Distribution Date” will
occur as a result, directly or indirectly, of (i) the approval, execution, delivery or
performance of the Purchase Agreement, (ii) the public announcement of such approval,
execution, delivery or performance of the Purchase Agreement or (iii) the consummation of
the transactions contemplated by the Purchase Agreement.”

          (d) Adding the following sentence at the end of the definition of “Shares Acquisition Date” in
Section 1(m) of the Rights Agreement:

“Notwithstanding any of the terms of the foregoing definition, no “Shares Acquisition Date”
will occur as a result, directly or indirectly, of (i) the approval, execution, delivery or
performance of the Purchase Agreement, (ii) the public announcement of such approval,
execution, delivery or performance of the Purchase Agreement or (iii) the consummation of
the transactions contemplated by the Purchase Agreement.”

     2. The term “Agreement” as used in the Rights Agreement shall mean the Rights Agreement, as
amended by this Amendment, or as it may from time to time be amended in the future by one or more
other written amendment or modification agreements entered into pursuant to the applicable
provisions of the Rights Agreement.

     3. This Amendment shall constitute a certificate from an appropriate officer of the Company
that this Amendment satisfies the terms of Section 27 of the Rights Agreement, and the Company
hereby directs American Stock Transfer & Trust Co., in its capacity as Rights Agent and in
accordance with the terms of Section 27 of the Rights Agreement, to execute this Amendment.

     4. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns.

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     5. This Amendment shall be governed by and construed and enforced in accordance with the laws
of the State of Wisconsin applicable to contracts made and to be performed entirely within such
State.

     6. Except as expressly herein amended, the terms and conditions of the Rights Agreement shall
remain in full force and effect.

[Signatures appear on the following page.]

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     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Rights Agreement to
be duly executed as of the date first above written.

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	MERGE HEALTHCARE INCORPORATED
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Kenneth D. Rardin
	 

	 	 	 	 
	 

	 	Name:
	 	Kenneth D. Rardin
	 

	 	Its:
	 	Chief Executive Officer
	 
	 	 	 	 
	 	 	RIGHTS AGENT:
	 
	 	 	 	 
	 	 	AMERICAN STOCK TRANSFER & TRUST CO.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Herbert J. Lemmer
	 

	 	 	 	 
	 

	 	Name:
	 	Herbert J. Lemmer
	 

	 	Its:
	 	Vice President

[Signature Page—Amendment to Rights Agreement]EX-10.1 SECURITIES PURCHASE AGRMT DATED 5/02/2008

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 21, 2008, is entered
into by and among Merge Healthcare Incorporated, a Wisconsin corporation (“Parent”) and its
subsidiaries listed on the Schedule of Companies (together with Parent, each a “Company”
and collectively, the “Companies”), and Merrick RIS, LLC, a Delaware limited liability company
(“Buyer”).

     WHEREAS:

     A. Each of the Companies and Buyer is executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the “1933 Act”), and Regulation D (“Regulation D”) promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.

     B. The Companies have authorized a new series of senior secured term notes of the Companies
(the “Term Notes”).

     C. Buyer wishes to purchase, and the Companies wish to sell, upon the terms and conditions
stated in this Agreement, $15,000,000 in principal amount of Term Notes, in substantially the form
attached hereto as Exhibit A.

     D. In connection with the sale of the Term Notes, and as an inducement to Buyer to purchase
the Securities (as defined below), Parent wishes to issue to Buyer at Closing, upon the terms and
conditions stated in this Agreement, 6,800,000 shares (the “Note Shares”) of common stock, par
value $0.01 per share, of Parent (or any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of such common stock) (the “Common
Stock”).

     E. In addition to the Term Notes and the Note Shares, at the Closing the Parent will issue and
the Buyer will purchase up to an additional 14,285,715 shares of Common Stock at a price per share
of $0.35 (the “Purchased Shares” and, together with the Note Shares, the “Shares”).;

     F. At the Closing, Parent and Buyer shall execute and deliver a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the “Registration Rights
Agreement”), pursuant to which Parent will provide certain registration rights with respect to the
Shares under the 1933 Act and the rules and regulations promulgated thereunder, and applicable
state securities laws.

     G. At the Closing, the Companies and Buyer will execute and deliver a Pledge and Security
Agreement (US), substantially in the form attached hereto as Exhibit C-1 (the “Security
Agreement (US)”) and a Pledge and Security Agreement (Canada) substantially in the form attached
hereto as Exhibit C-2 (the “Canadian Security Agreement”, and together with the Security
Agreement (US), the “Security Agreement”), pursuant to which the assets and shares of the Companies
will be pledged as Collateral (as defined in the Term Notes) to secure the Term Notes.

 

 

     H. Contemporaneously with the execution and delivery of this Agreement, the Companies and
Buyer are executing and delivering a Fee Letter, substantially in the form attached hereto as
Exhibit D (the “Fee Letter”), pursuant to which the Companies shall pay and reimburse Buyer
for fees and expenses incurred in connection with the transactions contemplated hereunder.

     I. On the date hereof, the Buyer and the Company have entered into an Escrow Agreement (the
“Escrow Agreement”) with SunTrust Bank, pursuant to which the Buyer has made a good faith deposit
of $1,000,000 (the “Escrow Amount”), which Escrow Amount shall be released from such escrow in
accordance with the terms of Section 1 hereof or upon termination of this Agreement, upon the terms
set forth in such Escrow Agreement.

     J. The Term Notes and the Shares are collectively referred to herein as the “Securities”.

     NOW, THEREFORE, each Company and Buyer hereby agree as follows:

     1. PURCHASE AND SALE OF NOTES AND SHARES.

          Closing. Subject to the satisfaction (or waiver) of the conditions set forth in
Sections 6(a) and 7(a) below, in consideration for Buyer’s payment of the Purchase Price (as
defined below) (i) the Companies shall issue and sell to Buyer, and Buyer agrees to purchase from
the Companies on the Closing Date (as defined below), the Term Notes and a number of Purchased
Shares equal to 14,285,714 and (ii) Parent shall issue to Buyer on the Closing Date the Shares.
The closing (the “Closing”) of the purchase of such Securities by Buyer shall occur at the offices
of McDermott Will & Emery LLP, 227 West Monroe Street, Chicago, Illinois 60606. The date and time
of the Closing (the “Closing Date”) shall be 10:00 a.m., Chicago time, on the date which is one
business day after the satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below other than conditions which by their terms are to be satisfied at the
Closing, which shall be satisfied at the Closing (in each case, or such later date as is mutually
agreed to by the Companies and Buyer). The aggregate purchase price (the “Purchase Price”) of the
Term Notes and Shares to be purchased by Buyer at the Closing shall be equal to $20,000,000. On
the Closing Date, (i) Buyer shall pay the Purchase Price less the amount set forth in the Fee
Letter less $1,000,000 to the Companies for the Term Notes and Shares to be issued and sold to
Buyer at the Closing, by wire transfer of immediately available funds in accordance with the
Companies’ written wire instructions, (ii) the Escrow Agent shall be instructed by the parties to
release the Escrow Amount to the Companies, and (iii) the Companies shall deliver to Buyer (A) the
Term Notes (in the denominations as Buyer shall have requested prior to the Closing) which Buyer is
purchasing, duly executed on behalf of the Companies and registered in the name of Buyer or its
designee and (B) certificates or evidence of electronic registration with Parent’s transfer agent
representing the Shares (in the denominations as Buyer shall have requested prior to the Closing)
which Buyer is purchasing, duly executed on behalf of Parent and registered in the name of Buyer or
its designee.

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     2. BUYER’S REPRESENTATIONS AND WARRANTIES.

          Buyer represents and warrants that:

          (a) No Public Sale or Distribution. Buyer is acquiring the Term Notes and the Shares
for its own account and not with a view towards, or for resale in connection with, the public sale
or distribution thereof in a manner that would violate the 1933 Act, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the representations
herein, Buyer does not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Buyer is acquiring the Securities
hereunder in the ordinary course of its business. Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the Securities.

          (b) Investor Status. Buyer is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D.

          (c) Reliance on Exemptions. Buyer understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Companies are relying in part upon the truth
and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein in order to determine the availability
of such exemptions and the eligibility of Buyer to acquire the Securities.

          (d) Information. Buyer and its advisors, if any, have been furnished with materials
relating to the business, finances and operations of the Companies and materials relating to the
offer and sale of the Securities that have been requested by Buyer and that Buyer deems necessary
to make its decision to purchase the Securities. Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Companies (and have received satisfactory answers
thereto), as they deemed necessary in connection with the decision to purchase the Securities.
Buyer is a sophisticated institutional investor and has substantial knowledge and experience in
financial and business matters and expertise in assessing credit risk. Buyer is capable of
evaluating the merits, risks and suitability of investing in the Securities. Buyer understands
that its investment in the Securities involves a high degree of risk and is able to afford a
complete loss of such investment. Buyer understands that nothing in this Agreement, Parent’s
public filings with the SEC or any other materials presented to Buyer in connection with the
purchase and sale of the Securities constitutes accounting, legal, tax or investment advice. Buyer
has sought such accounting, legal, tax and investment advice as it has considered necessary to make
an informed investment decision with respect to its acquisition of the Securities. Buyer
acknowledges that Parent’s common stock is currently listed on The NASDAQ Global Market (the
“Principal Market”) and Parent is required to file reports containing certain business and
financial information with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “1934 Act”), and that it is able to obtain copies of such
reports.

3

 

          (e) No Governmental Review. Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

          (f) Transfer or Resale. Buyer understands that, except as provided in the
Registration Rights Agreement, the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) Buyer shall have delivered to the
Companies an opinion of counsel, in a generally acceptable form, to the effect that such Securities
to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration, or (C) Buyer provides the Companies with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under
the 1933 Act (or, in each case, a successor rule thereto); provided, however, that the Securities
may be pledged in connection with a bona fide margin account or other loan or financing arrangement
secured by the Securities and such pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and Buyer when effecting a pledge of Securities shall
not be required to provide the Companies with any notice thereof or otherwise make any delivery to
the Companies pursuant to this Agreement or any other Transaction Document (as defined in Section
3(b)), including, without limitation, this Section 2(f).

          (g) Legends. Buyer understands that the certificates or other instruments
representing the Term Notes and, until removed in accordance with the Registration Rights
Agreement, the certificates representing the Shares, except as set forth below, shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of such stock
certificates):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

4

 

The legend set forth above shall be removed and the Companies or Parent, as applicable, shall issue
a certificate without such legend to the holder of the Securities upon which it is stamped, if
(i) such Securities are registered for resale under the 1933 Act, (ii) such Securities are sold,
assigned or transferred pursuant to Rule 144, or such holder provides the Companies or Parent, as
applicable, with reasonable assurance that the Securities can be sold, assigned or transferred
pursuant to Rule 144.

          (h) Residency. Buyer is a resident of Delaware.

          (i) Beneficial Ownership. Assuming the capitalization of Parent set forth in its most
recent SEC Documents, Buyer, together with its “affiliates” and “associates” (each as defined in
Rule 12b-2 of the General Rules and Regulations under the 1934 Act) and “associates” of its
“affiliates”, was immediately prior to the purchase of the Securities hereunder the beneficial
owner (as defined in Rule 13d-3 of the 1934 Act) of no shares of Common Stock and will be the
beneficial owner of not more than 38% of the outstanding shares of Common Stock after giving effect
to the purchase of the Securities hereunder.

          (j) Organization; Validity and Enforceability. Buyer is a Delaware limited liability
company duly organized and validly existing in good standing under the laws of Delaware, and has
the requisite power and authority to enter into and perform its obligations under the Transaction
Documents. This Agreement and the other Transaction Documents to which it is a party have been
duly executed and delivered by Buyer, and constitute the legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

          (k) Financing. On the date hereof Buyer has and, on the Closing Date, Buyer shall
have all funds necessary to pay the Purchase Price less the Escrow Amount.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.

          As an inducement to Buyer to enter into this Agreement and to consummate the transactions
contemplated hereby, each of the Companies jointly and severally represents and warrants to Buyer
that each and all of the following representations and warranties (as modified by the disclosure
schedules delivered to Buyer contemporaneously with the execution and delivery of this Agreement
(the “Schedules”)) are true and correct as of the date hereof and as of the Closing Date. The
Schedules shall be arranged by the Companies in paragraphs corresponding to the sections and
subsections contained in this Section 3.

          (a) Organization and Qualification. The Companies and each of their respective direct
and indirect subsidiaries, all of which are set forth on Schedule 3(a) (each a
“Subsidiary”) are entities duly organized and validly existing in good standing or otherwise under
the laws of the jurisdiction in which they are formed, incorporated or amalgamated, and have the
requisite power and authorization to own their properties and to carry on their business as now
being conducted. Each of the Companies and each of their Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its

5

 

ownership of property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in good standing would
not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any
material adverse effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Companies and their Subsidiaries, taken as
whole, or on the transactions contemplated hereby and by the other Transaction Documents, or on the
authority or ability of each of the Companies to perform its obligations under the Transaction
Documents. Except as set forth on Schedule 3(a), (i) the Companies have no subsidiaries
and (ii) all capital stock or other equity or similar interests of the Subsidiaries is directly or
indirectly owned by Parent.

          (b) Authorization; Enforcement; Validity. Each of the Companies has the requisite
power and authority to enter into and perform its obligations under this Agreement, the Term Notes,
the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5(c)), the Security Agreements, the Escrow Agreement, the Fee Letter and each of the other
agreements entered into by such party in connection with the transactions contemplated by this
Agreement (collectively, the “Transaction Documents”) and to issue the Securities in accordance
with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the
Companies have been duly authorized by each of the Companies’ respective boards of directors (or
other governing body) and the consummation by the Companies of the transactions contemplated hereby
and thereby, including, without limitation, the issuance of the Term Notes by the Companies and the
issuance of the Shares by Parent, have been duly authorized by the Companies’ boards of directors
(or other governing body) and Parent’s Board of Directors, as applicable, and (other than (i) as
may be required by federal securities laws with respect to Parent’s obligations under the
Registration Rights Agreement; (ii) the filing with the SEC of one or more Current Reports on Form
8-K with respect to the transactions contemplated by the Transaction Documents and compliance with
the disclosure requirements of Item 701 of SEC Regulation S-K; (iii) filings under state securities
or “blue sky” laws; (iv) the filing with the SEC of a Form D; (v) the filings and other actions
necessary to perfect any liens granted pursuant to the Security Documents (as defined in the Term
Notes); (vi) the issuance in Canada and filing with the Canadian securities regulatory authorities
of a news release; and (vii) the filing with the Principal Market of a Notification Form for
Listing of Additional Shares and the letter dated May 20, 2008 from the Principal Market relating
to the Financial Viability Exception), no further filing, consent, or authorization is required by
any Company, its board of directors (or other governing body) or its stockholders, except for
filings required to be made by Buyer. This Agreement and the other Transaction Documents have been
duly executed and delivered by each of the Companies party thereto, and constitute the legal, valid
and binding obligations of each of the Companies party thereto, enforceable against each of such
Companies in accordance with their respective terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

          (c) Issuance of Securities. The Term Notes are duly authorized and, upon issuance in
accordance with the terms hereof, shall be validly issued and free from all taxes, liens and
charges with respect to the issue thereof. The Shares are duly authorized, validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens and

6

 

charges with respect to the issue thereof, with the holders being entitled to all rights accorded
to a holder of Common Stock. Assuming the truth and accuracy of, and Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of Buyer set forth in
this Agreement (including but not limited to Section 2(c)), the issuance by the Companies of the
Term Notes and the issuance by Parent of the Shares is exempt from registration under the 1933 Act.

          (d) No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of the Transaction Documents by the Companies party thereto and the
consummation by the Companies of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Term Notes and the Shares) will not (i) result in a
violation of any Company’s certificate or articles of incorporation or amalgamation or bylaws or
other governing documents, or the terms of any capital stock or other equity interests of Parent or
any of its Subsidiaries; (ii) conflict with, or constitute a breach or default (or an event which
with notice or lapse of time or both, would become a breach or default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which Parent or any of its Subsidiaries is a party; or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and the rules and regulations of the Principal Market) applicable to Parent or any
of the Subsidiaries or by which any property or asset of Parent or any of the Subsidiaries is bound
or affected.

          (e) Consents. No Company or Subsidiary is required to obtain any consent,
authorization, approval, order, license, franchise, permit, certificate or accreditation of, or
make any filing or registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each case in accordance with
the terms hereof or thereof (other than (i) as may be required by federal securities laws with
respect to Parent’s obligations under the Registration Rights Agreement; (ii) the filing with the
SEC of one or more Current Reports on Form 8-K with respect to the transactions contemplated by the
Transaction Documents and compliance with the disclosure requirements of Item 701 of SEC Regulation
S-K; (iii) the filing with the Principal Market of a Notification Form for Listing of Additional
Shares and the letter dated May 20, 2008 from the Principal Market regarding the Financial
Viability Exception; (iv) filings under state securities or “blue sky” laws; (v) the filing with
the SEC of a Form D; (vi) the filings and other actions necessary to perfect any liens granted
pursuant to the Security Documents (as defined in the Term Notes); and (vii) as set forth on
Schedule 3(e)). All consents, authorizations, approvals, orders, licenses, franchises,
permits, certificates or accreditations of, filings and registrations which the Companies or any
Subsidiary are required to obtain on or prior to the Closing Date pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing Date, and each Company is
unaware of any facts or circumstances which might prevent any of the Companies from obtaining or
effecting any of the registration, application or filings pursuant to the preceding sentence.
Except as set forth on Schedule 3(e), Parent is not in violation of the listing
requirements of the Principal Market and has no knowledge of any facts which would reasonably lead
to delisting or suspension of the Common Stock in the foreseeable future.

7

 

          (f) Acknowledgment Regarding Buyer’s Purchase of Securities. Each of the Companies
acknowledges and agrees that Buyer is acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated hereby and thereby and
that Buyer is not (i) an officer or director of any Company, (ii) an “affiliate” of any Company (as
defined in Rule 144) or (iii) to the knowledge of the Companies, a “beneficial owner” of more than
10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). Each of
the Companies further acknowledges that Buyer is not acting as a financial advisor or fiduciary of
any Company (or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by Buyer or any of its
representatives or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to Buyer’s purchase of the Securities. Each
of the Companies further represents to Buyer that each Company’s decisions to enter into the
Transaction Documents to which it is a party have been based solely on the independent evaluation
by such Companies and their respective representatives.

          (g) No General Solicitation; Placement Agent’s Fees. None of the Companies or
Subsidiaries, nor any of their affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Securities. Parent shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions
(other than for Persons engaged by Buyer or their investment advisors) relating to or arising out
of the transactions contemplated hereby. Parent shall pay, and hold Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any such claim. Except as set forth on Schedule 3(g),
no Company has engaged any placement agent or other agent in connection with the sale of the
Securities.

          (h) No Integrated Offering. None of the Companies or Subsidiaries, any of their
affiliates, or any Person acting on their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under circumstances that would
require registration of any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by any of the Companies for purposes of the 1933
Act or any applicable stockholder approval provisions, including, without limitation, under the
rules and regulations of any exchange or automated quotation system on which any of the securities
of Parent or any other Company are listed or designated. None of the Companies or Subsidiaries, or
any of their affiliates or any Person acting on their behalf will take any action or steps referred
to in the preceding sentence that would require registration of any of the Securities under the
1933 Act or cause the offering of the Securities to be integrated with other offerings. Except as
set forth on Schedule 3(h), none of the Companies has a registration statement pending
before the SEC or currently under the SEC’s review.

          (i) U.S. Real Property Holding Corporation. None of the Companies or Subsidiaries is,
nor has it ever been, a U.S. real property holding corporation within the meaning of Section 897 of
the Internal Revenue Code of 1986, as amended, and the Companies will so certify upon the request
of Buyer.

8

 

          (j) Application of Takeover Protections; Rights Agreement. To the extent legally
permissible, each of the Companies and Subsidiaries and its respective board of directors (or other
governing body) has taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under each Company’s and Subsidiary’s
certificate or articles of incorporation (or other governing documents) or the laws of the
jurisdiction of its incorporation or formation which is or could become applicable to any Buyer as
a result of the transactions contemplated by this Agreement, including, without limitation, each
Company’s issuance of the Term Notes, Parent’s issuance of the Shares and Buyer’s ownership of the
Securities. Parent has amended its shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of up to 40% of the issued and outstanding Common Stock of
Parent as such provisions may relate to Buyer.

          (k) SEC Documents; Financial Statements. Parent has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to the Closing Date and
all exhibits included therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC Documents”). Except as
set forth on Schedule 3(k), as of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading. As amended or
supplemented, the financial statements of Parent included in the SEC Documents complied as to form
in all material respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. As amended or supplemented, such financial statements
have been prepared in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of Parent as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).

          (l) Absence of Certain Changes. Except as disclosed in Schedule 3(l), since
December 31, 2007 (the “Diligence Date”), there has been no material adverse change and no material
adverse development in the business, assets, properties, operations, condition (financial or
otherwise), results of operations or prospects of Parent and the Subsidiaries, taken as a whole, or
the Cedara software business, taken as a whole, or Cedara Software Services (India) Private
Limited. Except as disclosed in Schedule 3(l), since the Diligence Date, Parent has not
(i) declared or paid any dividends, (ii) sold any assets other than in the ordinary course of its
business or (iii) had capital expenditures, individually or in the aggregate, in excess of $50,000.
None of the Companies or Subsidiaries has made any filing or in any way sought
protection or, assuming the transactions contemplated hereby occur, has any present intention
of filing pursuant to any bankruptcy law nor does any of the Companies or Subsidiaries have any

9

 

knowledge that its creditors intend to initiate involuntary bankruptcy proceedings. Parent and the
Subsidiaries on a consolidated basis do not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of cash to be payable on or in
respect of its debt. Parent and the Subsidiaries on a consolidated basis, as of the Closing Date,
and after giving effect to the transactions contemplated hereby to occur at the Closing, will not
be Insolvent (as defined below). For purposes of this Section 3(l), “Insolvent” means, with
respect to Parent and the Subsidiaries, taken as a whole (i) the present fair saleable value of
their assets is less than the amount required to pay their total Indebtedness (as defined in
Section 3(s)), as applicable, (ii) such companies are unable to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured,
(iii) such companies intend to incur or believe that they will incur debts that would be beyond
their ability to pay as such debts mature or (iv) such companies have unreasonably small capital
with which to conduct the business in which they are engaged as such business is now conducted and
is proposed to be conducted.

          (m) No Undisclosed Events, Liabilities, Developments or Circumstances. Since December
31, 2007, except for the transactions contemplated by the Transaction Documents and except as set
forth on Schedule 3(m), no event, liability, development or circumstance has occurred or
exists, or is currently contemplated as reasonably likely to occur following the Closing Date with
respect to any of the Companies or their respective Subsidiaries, business, properties, prospects,
operations or financial condition, that would be required to be disclosed by Parent under
applicable securities laws on a Current Report on Form 8-K which has not been publicly announced.

          (n) Conduct of Business; Regulatory Permits. None of the Companies nor any Subsidiary
is in violation of any term of or in default under its certificate or articles of incorporation or
amalgamation or bylaws or other governing documents. Except as set forth on Schedule 3(n),
none of the Companies nor any Subsidiary is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to any of the Companies or any Subsidiary and, in
the case of Company Exchange Co., including, the Toronto Stock Exchange. Without limiting the
generality of the foregoing, except as set forth on Schedule 3(n), Parent is not in
violation of any of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that would reasonably lead to delisting or suspension of
the Common Stock by the Principal Market in the foreseeable future. During the one (1) year period
prior to the Closing Date, (i) the Common Stock has been designated for quotation on the Principal
Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market
and (iii) except as set forth on Schedule 3(n), Parent has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the
Common Stock from the Principal Market. Each of the Companies and each Subsidiary possesses all
consents, authorizations, approvals, orders, licenses, franchises, permits, certificates,
accreditations and permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses and none of the Companies nor any Subsidiary has
received any notice of proceedings relating to the revocation or modification of any such
consents, authorizations, approvals, orders, licenses, franchises, permits, certificates,
accreditations or permits.

10

 

          (o) Foreign Corrupt Practices. Except as set forth on Schedule 3(o), none of
the Companies nor any Subsidiary, nor any director, officer, agent, employee or other Person acting
on behalf of any of the Companies or any Subsidiary has, in the course of its actions for, or on
behalf of, any of the Companies or Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government
official or employee.

          (p) Sarbanes-Oxley Act. Parent is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the Closing Date, and any
and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of
the Closing Date, except where the failure to be in compliance would not have a Material Adverse
Effect.

          (q) Transactions With Affiliates. Except as set forth on Schedule 3(q), none
of the officers, directors or employees of any of the Companies or any of the Subsidiaries is
presently a party to any transaction with any of the Companies of any of the Subsidiaries (other
than for ordinary course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Companies, any corporation, partnership,
trust or other entity in which any such officer, director, or employee has a substantial interest
or is an officer, director, trustee or partner.

          (r) Equity Capitalization. The authorized capital stock of Parent consists of (i)
100,000,000 shares of Common Stock and (ii) 5,000,000 shares of preferred stock, par value $0.01
per share (the “Preferred Stock”) of which 1,000,000 shares are designated Series A preferred
stock, 1,000,000 shares are designated Series B Junior Participating Stock, one share is designated
Special Voting preferred stock, one share is designated Series 2 Special Voting preferred stock,
and one share is designated Series 3 Special Voting preferred stock. As of the date of this
Agreement, (i) 34,030,195 shares of Common Stock are issued and outstanding (all of which are
validly issued, fully paid and nonassessable) of which 1,792,495 are Restricted Shares, (ii) other
than one share of Series 3 Special Voting preferred stock, no shares of Preferred Stock are issued
and outstanding, (iii) no shares of Common Stock or Preferred Stock are held in the treasury of the
Company, (iv) 12,115,826 shares of Common Stock were reserved for issuance pursuant to the Stock
Plans, (v) 1,688,475 shares of Common Stock are reserved for issuance pursuant to the terms and
conditions applicable to the Exchangeable Shares, (vi) 1,000,000 shares of Common Stock are
reserved for issuance pursuant to the terms of the Series
A preferred stock and (vii) 1,000,000 shares of Common Stock are reserved for issuance
pursuant to the terms of the Series B Junior Participating Stock. The authorized share capital of
Company ExchangeCo consists of unlimited common shares, preferred shares and Exchangeable Shares of
which 697 common shares, no preferred shares and 13,210,154 Exchangeable Shares are issued and
outstanding. Each of the above-mentioned outstanding Exchangeable Shares has been duly allotted
and issued and is fully paid and non-assessable. There are no declared but

11

 

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

12

 

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

13

 

government or any department or agency thereof, and (z) “Hedging Obligations” means, with respect
to any specified Person, the obligations of such Person under: (i) interest rate swap agreements
(whether from fixed to floating or from floating to fixed), interest rate cap agreements and
interest rate collar agreements; (ii) other agreements or arrangements designed to manage interest
rates or interest rate risk; and (iii) other agreements or arrangements designed to protect such
Person against fluctuations in currency exchange rates or commodity prices.

          (t) Absence of Litigation. Except as set forth in Schedule 3(t), there is no
action, suit, proceeding, inquiry or investigation before or by any court, public board, government
agency (including, without limitation, the SEC), self-regulatory organization or body pending or,
to the knowledge of any Company or Subsidiary, threatened against or affecting any Company or any
Subsidiary, the Common Stock or any of the Companies’ or the Subsidiaries’ officers or directors
which questions the validity of this Agreement or any of the other Transaction Documents or any of
the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto
or thereto.

          (u) Insurance. Except as set forth in Schedule 3(u), each of the Companies
and each of the Subsidiaries is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Companies believes to be prudent and
customary in the businesses in which the Companies and the Subsidiaries are engaged. None of the
Companies nor any of the Subsidiaries has been refused any insurance coverage sought or applied for
and none of the Companies nor any of the Subsidiaries has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.

          (v) Employee Relations. None of the Companies nor any Subsidiary is a party to any
collective bargaining agreement or employs any member of a union. Each of the Companies and each
Subsidiary believes that its relations with its employees are good. No executive officer of any of
the Companies nor any Subsidiary has notified such company that such officer intends to leave such
company or otherwise terminate such officer’s employment with such company. No executive officer
of any of the Companies, to the knowledge of the Companies or any of the Subsidiaries, is, or is
now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract
or agreement or any restrictive covenant. Each of the Companies and each Subsidiary is in
compliance with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of employment and wages and
hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.

          (w) Title. Each of the Companies and each Subsidiary has good and marketable title to
all real property and good and marketable title to all personal property owned by it which is
material to its respective businesses, in each case free and clear of all liens, encumbrances and
defects except as set forth on Schedule 3(w) or such as do not materially affect the value
of such property and do not interfere with the use made and proposed to be made of such property by
the Companies and their Subsidiaries. Any real property and facilities held

14

 

under lease by any of
the Companies or any of the Subsidiaries are held by it under valid, subsisting and enforceable
leases with such exceptions as are not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the Companies or the
Subsidiaries.

          (x) Intellectual Property Rights. Except as set forth on Schedule 3(x), each
of the Companies and the Subsidiaries owns or possesses adequate rights or licenses to use all
trademarks, trade names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual Property Rights”) necessary to conduct its
respective businesses as now conducted. No Company’s or Subsidiary’s Intellectual Property Rights
have expired or terminated since December 31, 2007, or are expected to expire or terminate, within
three years from the Closing Date. None of the Companies nor any of the Subsidiaries has any
knowledge of any infringement by any of the Companies or Subsidiaries of Intellectual Property
Rights of others. Except as set forth on Schedule 3(x), there is no claim, action or
proceeding being made or brought, or to the knowledge of each of the Companies, being threatened,
against any of the Companies or any of the Subsidiaries regarding its Intellectual Property Rights.
Each of the Companies is unaware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. Each of the Companies and each of the
Subsidiaries has taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights.

          (y) Environmental Laws. Each of the Companies and each of the Subsidiaries (i) is in
compliance with any and all Environmental Laws (as hereinafter defined), (ii) has received all
permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct its respective businesses and (iii) is in compliance with all terms and conditions of any
such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term “Environmental Laws” means all federal, state, provincial,
municipal, local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice
letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

          (z) Subsidiary Rights. Except as set forth on Schedule 3(z), Parent or one of
its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital and other equity securities
of its Subsidiaries.

          (aa) Investment Company. None of the Companies or Subsidiaries is, or is an affiliate
of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

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          (bb) Tax Status. Except as set forth on Schedule 3(bb), each of the Companies
and each of the Subsidiaries (i) has made or filed all foreign, federal, state, provincial and
municipal income and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. Except as set forth on Schedule 3(bb), there
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of each of the Companies and Subsidiaries know of no basis for any
such claim.

          (cc) Internal Accounting and Disclosure Controls. Except as set forth on Schedule
3(cc), Parent maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles and to maintain
asset and liability accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with the existing assets and
liabilities at reasonable intervals and appropriate action is taken with respect to any difference.
Except as set forth on Schedule 3(cc), Parent maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15 under the 1934 Act) that are effective in ensuring that
information required to be disclosed by Parent in the reports that it files or submits under the
1934 Act is recorded, processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and procedures designed to
ensure that information required to be disclosed by Parent in the reports that it files or submits
under the 1934 Act is accumulated and communicated to Parent’s management, including its principal
executive officer or officers and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. Except as set forth on Schedule
3(cc), during the twelve months prior to the Closing Date, none of the Companies or
Subsidiaries has received any notice or correspondence from any accountant relating to any
potential material
weakness in any part of the system of internal accounting controls of any of the Companies or
Subsidiaries.

          (dd) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between any of the Companies or any of the Subsidiaries and an unconsolidated or other
off balance sheet entity that is required to be disclosed by Parent in its 1934 Act filings and is
not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.

          (ee) Ranking of Term Notes. No Indebtedness of any of the Companies or any of their
Subsidiaries, will rank senior to the Term Notes in right of payment, whether with respect to
payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise.

          (ff) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the sale and

16

 

transfer of the Securities to be sold to Buyer hereunder will be, or will have been, fully paid or
provided for by the Companies, and all laws imposing such taxes will be or will have been complied
with.

          (gg) Manipulation of Price; Securities.

                    (i) Neither any of the Companies nor any of the Subsidiaries, nor any officer, director or
affiliate of any of the Companies or any of the Subsidiaries, and to each such Person’s
knowledge, no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price of any security
of Parent or any other Subsidiary to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the
Securities (except for customary placement fees payable in connection with this transaction), or
(iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of Parent or such Subsidiary (except for customary placement fees payable
in connection with this transaction).

                    (ii) Since the Diligence Date, neither any officer or director of any of the Companies or
any of the Subsidiaries, nor any affiliate of any officer or director of any of the Companies or
any of the Subsidiaries or anyone acting on their behalf has sold, bid, purchased or traded in
the Common Stock of Parent.

          (hh) Creation, Perfection, and Priority of Liens. The Security Documents are
effective to create in favor of Buyer, for the benefit of Buyer, a legal, valid, binding, and
enforceable security interest and Lien (as defined below), and a perfected first priority security
interest and Lien (to the extent that the Security Agreement and Term Notes obligate each Company
and each Subsidiary to provide such a perfected first priority security interest and Lien, and
except to the extent Permitted Liens have priority), in the Collateral described therein as
security for the obligations under the Term Notes to the extent that a legal, valid, binding, and
enforceable security interest and Lien in such Collateral may be created under applicable law, and
the State of Registration (as defined in the Term Notes), including without limitation, the
uniform commercial code as in effect in any applicable jurisdiction (“UCC”) or the personal
property security act in effect in any applicable jurisdiction (“PPSA”). The term “Lien” shall
mean any mortgage, lien, pledge, security interest, hypothec, conditional sale or other title
retention agreement, charge or other security interest or encumbrance of any kind, whether or not
filed, recorded or otherwise perfected under applicable law, including any conditional sale or
other title retention agreement or any lease in the nature thereof; any option or other agreement
to sell or give a security interest therein and any filing of, or agreement to file, any financing
statement under the UCC or PPSA (or equivalent statutes of any jurisdiction).

          (ii) Disclosure. Each of the Companies understands and confirms that Buyer will rely
on the foregoing representations in effecting transactions in securities of the Companies. This
Agreement together with the Transaction Documents, including the Schedules and Exhibits thereto,
taken as a whole do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth on Schedule
3(ii), each press release issued by Parent during the twelve (12) months preceding the Closing

17

 

Date did not at the time of release contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not misleading. Except for
the transactions and other actions contemplated by the Transaction Documents, no event or
circumstance has occurred or information exists with respect to Parent or any of its Subsidiaries
or its or their business, properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement by Parent but which
has not been so publicly announced or disclosed.

          (jj) No Disagreements with Accountants and Lawyers. There are no disagreements of any
kind presently existing, or reasonably anticipated by any of the Companies or Subsidiaries to
arise, between any of the Companies or Subsidiaries and the accountants and lawyers formerly or
presently employed by any of the Companies or Subsidiaries which could affect the ability of any of
the Companies or Subsidiaries to perform any of its obligations under any of the Transaction
Documents, and each of the Companies or Subsidiaries is current with respect to any fees owed to
its accountants and lawyers.

          (kk) Acknowledgement Regarding Buyer’s Trading Activity. Anything in this Agreement
or elsewhere herein to the contrary notwithstanding, it is understood and acknowledged by Parent
that Buyer has not been asked by Parent to agree, nor has any Buyer agreed, to, after the Closing,
desist from purchasing or selling, long and/or short, securities of Parent, or “derivative”
securities based on securities issued by Parent or to hold the Securities for any specified term.
Parent acknowledges that such aforementioned activities do not constitute a breach of any of the
Transaction Documents.

     4. COVENANTS.

          (a) Commercially Reasonable Efforts. Each party shall use commercially reasonable
best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.

          (b) Form D and Blue Sky. The Companies agree to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to Buyer promptly after
such filing. Each of the Companies shall, on or before the Closing Date, take such action as such
Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify
the Securities for sale to Buyer at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to Buyer on or prior to
the Closing Date. Each of the Companies shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.

          (c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Shares and none of the Term Notes is
outstanding (the “Reporting Period”), Parent shall file all reports required to
be filed
with the SEC pursuant to the 1934 Act, and Parent shall not terminate its status as an issuer
required to

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file reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would otherwise permit such termination.

          (d) Use of Proceeds. The Companies will use the proceeds from the sale of the Term
Notes as set forth on Schedule 4(d) which shall include the payment of fees and expenses
pursuant to the Fee Letter set forth as Exhibit D. Except as set forth on Schedule
4(d), no proceeds from the sale of Securities will be used to repay any Indebtedness.

          (e) Financial Information. Parent agrees to send the following to each Investor (as
defined in the Registration Rights Agreement) during the Reporting Period: (i) unless filed or
furnished with the SEC through EDGAR and available to the public through the EDGAR system, within
one Business Day (“Business Day” means any day other than Saturday, Sunday or any other day on
which commercial banks in Chicago, Illinois are authorized or required by law to remain closed)
after the filing thereof with the SEC, a copy of all Annual Reports on Form 10-K or 10-KSB, any
interim reports or any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements for any period other than an annual period, any Current
Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act of Parent and (ii) copies of any notices and other information made
available or given to the stockholders of Parent generally, contemporaneously with the making
available or giving thereof to the stockholders.

          (f) Listing. To the extent Parent’s Registrable Securities (as defined in the
Registration Rights Agreement) are listed upon a national securities exchange or automated
quotation system that provides for the listing of securities, Parent shall promptly secure the
listing of all of the Registrable Securities upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing, if any, of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. Parent shall maintain the Common Stock’s
authorization for quotation on the Principal Market or an alternative trading market. Neither
Parent nor any of its Subsidiaries shall take any action which would be reasonably
expected to result in the delisting or suspension of the Common Stock on the Principal Market.
Parent shall pay all fees and expenses in connection with satisfying its obligations under this
Section 4(f).

          (g) Fees. Parent shall pay Buyer a transaction fee, which amounts, shall be withheld
by Buyer from the purchase price paid by Buyer on the Closing Date, in accordance with the Fee
Letter.

          (h) Pledge of Securities. Each of the Companies acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights Agreement) in
connection with a bona fide margin agreement or other loan or financing arrangement that is secured
by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide any Company with any notice thereof or otherwise make any delivery to any
Company pursuant to this Agreement or any other Transaction Document, including, without
limitation, Section 2(f) hereof unless required in connection with the

19

 

registration of the
Securities or by applicable law. Each of the Companies hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in connection with a pledge of
the Securities to such pledgee by an Investor.

          (i) Disclosure of Transactions and Other Material Information. On or before
8:30 a.m., New York City time, on the second Business Day following the Closing Date, Parent shall
file a Current Report on Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching the material Transaction
Documents entered into on the Closing Date (including, without limitation, this Agreement (and all
schedules to this Agreement), the form of Note, the Security Agreement, the Guarantees, and the
Registration Rights Agreement) (including all attachments, the “8-K Filing”). Subject to the
foregoing, neither any of the Companies nor Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby; provided, however, that
Parent shall be entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial conformity with the
8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided, that in the case of clause (i) Buyer shall be consulted by Parent in
connection with any such press release or other public disclosure prior to its release). Without
the prior written consent of Buyer, none of the Companies shall disclose the name of Buyer or its
affiliates in any filing, announcement, release or otherwise unless required by law.

          (j) Additional Issuances of Securities.

                    (i) For purposes of this Section 4(j), the following definitions shall apply.

                    (1) “Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for shares of Common
Stock, including the Exchangeable Shares.

                    (2) “Options” means any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.

                    (3) “Common Stock Equivalents” means, collectively, Options and Convertible Securities.

                    (ii) From the date hereof until 90 days following the Effective Date (as defined in the
Registration Rights Agreement), none of the Companies shall and shall prevent any Subsidiary
from, directly or indirectly, file any registration statement with the SEC other than the
Registration Statement (as defined in the Registration Rights Agreement) and one or more
registration statements relating to the issuance of Common Stock in exchange for Exchangeable
Shares.

                    (iii) So long as any Term Notes are outstanding, none of the Companies or any other
Subsidiary shall, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its debt, equity or equity equivalent securities,

20

 

including without limitation any debt, preferred stock or other instrument or security that may be, at any time
during its life, and under any circumstance, convertible into or exchangeable or exercisable for shares of Common Stock or Common Stock Equivalents or debt securities (any such offer, sale,
grant, disposition or announcement being referred to as a “Subsequent Placement”) without the
prior written consent of the holders of Term Notes representing not less than a majority of the
aggregate principal amount of the Term Notes then outstanding (the “Required Holders”). In the
event the Required Holders do consent to the Subsequent Placement, the offering Company shall
first comply with this Section 4(j)(iii), as follows:

                    (1) Such Company shall deliver to each holder of a Term Note (a “Holder”) a written
notice (the “Offer Notice”) of any proposed or intended issuance or sale or exchange (the
“Offer”) of the securities being offered (the “Offered Securities”) in a Subsequent
Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or exchanged, and
the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify
the Persons (if known) to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Holders
an amount equal to 75% of the Offered Securities, allocated among such Holders (a) based on
such Holder’s allocable pro rata portion of the aggregate principal amount of Term Notes
outstanding at the time of the Offer, and (b) with respect to each Holder that elects to
purchase its pro rata portion of such Offered Securities, any additional portion of the
Offered Securities attributable to the pro rata portion of other Holders as such Holder
shall indicate it will purchase or acquire should the other Holders subscribe for less than
their pro rata portions (the “Undersubscription Amount”). For purposes of this Agreement, a
Holder’s allocable pro rata portion of any Offered Securities shall be defined as the
“Allocable Portion”.

                    (2) To accept an Offer, in whole or in part, such Holder must deliver a written notice
to such Company prior to the end of the tenth Business Day after
such Holder’s receipt of the Offer Notice (the “Offer Period”), setting forth the
portion of such Holder’s Allocable Portion that such Holder elects to purchase and, if such
Holder shall elect to purchase all of its Allocable Portion, the Undersubscription Amount,
if any, that such Holder elects to purchase (in either case, the “Notice of Acceptance”).
If the Allocable Portions subscribed for by all Holders are less than the total of all of
the Allocable Portions, then each Holder who has set forth an Undersubscription Amount in
its Notice of Acceptance shall be entitled to purchase, in addition to the Allocable
Portions subscribed for, the Undersubscription Amount it has subscribed for; provided,
however, that if the Undersubscription Amounts subscribed for exceed the difference between
the total of all the Allocable Portions and the Allocable Portions subscribed for (the
“Available Undersubscription Amount”), each Holder who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Allocable Portion of such Holder bears to the total
Allocable Portions of all Holders that have subscribed for Undersubscription Amounts,
subject to rounding by such Company to the extent its deems reasonably necessary.

21

 

                    (3) Such Company shall have fifteen Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered Securities as
to which a Notice of Acceptance has not been given by the Holders (the “Refused
Securities”), but only to the offerees described in the Offer Notice (if so described
therein) and only upon terms and conditions (including, without limitation, unit prices,
interest rates and transaction fees) that are not more favorable to the acquiring Person or
Persons or less favorable to such Company than those set forth in the Offer Notice.

                    (4) In the event such Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in Section
4(j)(iii)(3) above), then each Holder may, at its sole option and in its sole discretion,
reduce the number or amount of the Offered Securities specified in its Notice of Acceptance
to an amount that shall be not less than the number or amount of the Offered Securities that
such Holder elected to purchase pursuant to Section 4(j)(iii)(2) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered Securities
such Company actually proposes to issue, sell or exchange (including Offered Securities to
be issued or sold to Holders pursuant to Section 4(j)(iii)(3) above prior to such reduction)
and (ii) the denominator of which shall be the original number or amount of the Offered
Securities. In the event that any Holder so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, such Company may not issue, sell
or exchange more than the reduced number or amount of the Offered Securities unless and
until such securities have again been offered to the Holders in accordance with Section
4(j)(iii)(1) above.

                    (5) Upon the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, the purchasing Holders shall acquire from such Company, and such Company
shall issue to such purchasing Holders, the number or
amount of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4(j)(iii)(4) above if the Holders have so elected, upon the terms and
conditions specified in the Offer Notice. The purchase by the Holders of any Offered
Securities is subject in all cases to the preparation, execution and delivery by such
Company and the purchasing Holders of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the purchasing Holders and their
respective counsel.

                    (6) Any Offered Securities not acquired by the Holders or other Persons in accordance
with Section 4(j)(iii)(3) above may not be issued, sold or exchanged until they are again
offered to the Holders under the procedures specified in this Agreement.

                    (iv) The restrictions contained in subsection (iii) of this Section 4(j) shall not apply in
connection with the issuance of equity options or restricted stock for up to 2,000,000 shares
(subject to appropriate adjustment for stock splits, combinations and similar transactions) of
Common Stock under Parent’s existing equity based compensation plans, or the issuance of Common
Stock upon the exercise of certain rights related to the Exchangeable Shares.

22

 

          (k) Rights Agreement. Prior to the Closing Date, Parent shall take all steps
necessary to amend its Rights Agreement, dated as of September 6, 2006 (the “Rights Agreement”) to
provide Buyer, its affiliates, successors and assigns the right to acquire up to 40% of the issued
and outstanding common stock of the Company in the form attached hereto are Exhibit K (the “Rights
Plan Amendment”) without triggering a distribution of rights under the Rights Agreement. The
Parent shall not terminate, waive or amend the Rights Plan Amendment or otherwise amend the Rights
Agreement to adversely affect the rights set forth in this paragraph or in the Rights Plan
Amendment.

          (l) Board Membership.

                    (i) Board Size; Composition. The members of the Board of Directors of Parent (the
“Board”) shall be nominated and appointed, effective upon the Closing, in accordance
with the Articles of Incorporation and the By-Laws of Parent, and the provisions of this
Agreement. The Board shall consist of eleven (11) members with each member’s term expiring at
Parent’s annual meeting of shareholders in 2008. Effective upon the Closing, Parent shall have
caused the persons submitted by Buyer after the date hereof to be appointed to the Board
provided that such persons are on the list of approved director designees submitted by Buyer to
Parent prior the execution of this Agreement.

                    (ii) Designees. Buyer shall have the right to designate individuals for nomination
for election to the Board, and Parent shall cause such individuals to be nominated for election
to the Board, as follows:

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

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

23

 

statement relating thereto,
Parent agrees to recommend that the shareholders elect to the Board the Buyer Designees
nominated for election at such meeting.

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

                    (v) Vacancies.

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

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

24

 

to be U.S. real
property interests, within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended.

          (n) Allocation of Purchase Price for Federal Income Tax Purposes. In accordance with
Treasury regulations section 1.1273-2(h), each Company and Buyer shall allocate the applicable
Purchase Price between the Term Notes and the Shares based upon their relative fair market values.
In making such allocation, the parties hereto shall agree, based upon the advice of their financial
advisors, upon the appropriate methodology to be used for determining the relative fair market
values of the Term Notes and the Shares.

          (o) Stock Certificates. No later than three days after the Closing, Parent shall
deliver to the Buyer certificates or evidence of electronic registration with Parent’s transfer
agent representing the Shares (in such denominations as Buyer shall have requested prior to the
Closing) being purchased by Buyer at the Closing pursuant to this Agreement.

          (p) No later than thirty (30) days after the Closing, the Companies shall deliver Deposit
Account Control Agreements or Block Account Agreements in such forms as are satisfactory to the
Buyer executed by the applicable Companies and each of Lincoln State Bank, The Toronto-Dominion
Bank and RBC or the Companies shall certify that accounts at such institutions have been closed.

     5. REGISTERS; TRANSFER AGENT INSTRUCTIONS.

          (a) Registers. Parent shall maintain at their principal executive offices (or such
other office or agency of the Companies as they may designate by notice to each holder of
Securities), a register for the Term Notes in which Parent shall record the name and address of the
Person in whose name the Term Notes have been issued (including the name and address of each
transferee) and the principal amount of Term Notes held by such Person. Parent shall keep the
register open and available at all times during business hours for inspection of any Buyer or
its legal representatives. Parent shall maintain at its principal executive offices (or such
other office or agency of Parent as it may designate by notice to each holder of Securities), a
register for the Shares in which Parent shall record the name and address of the Person in whose
name the Shares have been issued (including the name and address of each transferee) and the number
of Shares held by such Person. Parent shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal representatives.

          (b) Maintenance of Registers. Notwithstanding anything to the contrary contained
herein, the Term Notes are registered obligations and the right, title, and interest of Buyer and
its assignees in and to such Term Notes shall be transferable only upon notation of such transfer
in the Register. The Term Notes shall only evidence Buyer’s or its assignee’s right, title and
interest in and to the related Term Notes, and in no event is any such Note to be considered a
bearer instrument or obligation. This Section 5(b) shall be construed so that the Term Notes are
at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and
881(c)(2) of the Internal Revenue Code of 1986, as amended, and any related Treasury regulations
promulgated thereunder.

25

 

          (c) Transfer Agent Instructions. Parent shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to the
applicable electronic balance accounts at Parent’s transfer agent, registered in the name of Buyer
or its respective nominee(s), for the Shares in such amounts as specified from time to time by
Buyer to Parent in the form of Exhibit E attached hereto (the “Irrevocable Transfer Agent
Instructions”). Parent warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(c), and stop transfer instructions to give effect to
Sections 2(f) and 2(g) hereof, will be given by Parent to its transfer agent with respect to the
Shares, and that the Shares shall otherwise be freely transferable on the books and records of
Parent, as applicable, and to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of Shares in accordance with
Sections 2(f) and 2(g), Parent shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or, if appropriate, credit shares to the applicable
electronic balance accounts at Parent’s transfer agent or credit shares to the applicable balance
accounts at The Depository Trust Company in such name and in such denominations as specified by
Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue such Securities to Buyer,
assignee or transferee, as the case may be, without any restrictive legend. Each Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a
Buyer. Accordingly, each Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5(c) will be inadequate and agrees, in the event of a breach or
threatened breach by Parent or any Company of the provisions of this Section 5(c), that a Buyer
shall be entitled, in addition to all other available remedies, to seek an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.

     6. CONDITIONS TO THE COMPANIES’ OBLIGATIONS TO SELL.

          The obligations of the Companies hereunder to issue and sell the Term Notes and Shares to
Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Companies’ sole benefit and may be
waived by the Companies at any time in their sole discretion by providing Buyer with prior written
notice thereof:

          (a) Buyer shall have executed each of the Transaction Documents to which it is a party and
delivered the same to the Companies.

          (b) Buyer shall have delivered to the Companies the Purchase Price (less the amounts withheld
by it pursuant to Section 4(g) or the Fee Letter) for the Term Notes and Shares being purchased by
Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Companies in the funds flow letter (the “Funds Flow Letter”) set forth
on Exhibit J attached hereto.

          (c) The representations and warranties of Buyer shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date, which shall be

26

 

true and
correct as of such specific date), and Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by Buyer at or prior to the Closing Date.

     7. CONDITIONS TO BUYER’S OBLIGATION TO PURCHASE.

          The obligation of Buyer hereunder to purchase the Term Notes and the Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the following conditions,
provided that these conditions are for Buyer’s sole benefit and may be waived by Buyer at any time
in its sole discretion by providing the Companies with prior written notice thereof:

          (a) Each Company, as applicable, shall have executed and delivered to Buyer (A) each of the
Transaction Documents, and (B) the Term Notes (in such denominations as Buyer shall have requested
prior to the Closing) being purchased by Buyer at the Closing pursuant to this Agreement.

          (b) Parent shall have delivered to Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, which instructions shall have been
delivered to and acknowledged in writing by Parent’s transfer agent.

          (c) Buyer shall have received the opinion of Alston & Bird LLP, Foley Lardner LLP, Ogilvy
Renault LLP and McInnes Cooper, the Companies’ outside legal counsels, in substantially the forms
of Exhibit F-1, F-2, F-3 and F-4 respectively.

          (d) Buyer shall have received the opinion of the Companies’ General Counsel, in substantially
the form of Exhibit G.

          (e) Each domestic and Canadian Company shall have delivered to Buyer a certificate evidencing
the formation or incorporation or amalgamation and good standing or otherwise of such Company in
such entity’s jurisdiction of formation or incorporation or amalgamation issued by the Secretary of
State (or comparable governmental office) of such jurisdiction, as of a date reasonably proximate
to the Closing Date.

          (f) Each domestic Company shall have delivered to Buyer a certificate evidencing such
Company’s qualification as a foreign corporation or other entity and good standing or otherwise
issued by the Secretary of State (or comparable governmental office) of each jurisdiction in which
such Company conducts business, as of a date reasonably proximate to the Closing Date.

          (g) Each domestic Company shall have delivered to Buyer a certified copy of such Company’s
certificate or articles of incorporation or amalgamation (or other applicable governing document),
as certified by the Secretary of State (or comparable governmental office) of such entity’s
jurisdiction of formation or incorporation or amalgamation, reasonably proximate to the Closing
Date.

          (h) Each Company shall have delivered to Buyer a certificate, executed by the Secretary (or
other authorized person acceptable to Buyer) of such Company and dated the

27

 

Closing Date, as to
(i) the resolutions consistent with Section 3(b) as adopted by such Company’s board of directors
(or other governing body) in a form reasonably acceptable to Buyer, (ii) such Company’s articles or
certificate of incorporation or amalgamation (or other applicable governing document) and
(iii) such Company’s bylaws (or other applicable governing document), each as in effect at the
Closing, in the form attached hereto as Exhibit H.

          (i) The representations and warranties of each Company shall be true and correct in all
material respects (except for those representation, and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct as of such
specific date), and each Company shall have performed, satisfied or complied in all material
respects with the covenants, agreements and conditions required by this Agreement or the
Transaction Documents to be performed, satisfied or complied with by each Company at or prior to
the Closing Date. Buyer shall have received certificates, executed by the chief executive officer
(or other authorized person acceptable to Buyer) of each Company, dated the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by Buyer, in the form
attached hereto as Exhibit I.

          (j) Parent shall have delivered to Buyer a letter from Parent’s transfer agent certifying the
number of shares of Common Stock and the number of Exchangeable Shares outstanding as of a date
within five days of the Closing Date.

          (k) The Common Stock (I) shall be designated for quotation or listed on the Principal Market
and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market.

          (l) Each of the Companies shall have obtained all governmental, regulatory and third party
consents and approvals, if any, necessary for the sale of the Securities at the Closing.

          (m) Each of the domestic and Canadian Companies shall have obtained or had obligated on the
behalf, and delivered to Buyer searches of Uniform Commercial Code filings or PPSA filings and
other customary Canadian lien searches in the jurisdictions of formation or incorporation of each
of such Companies, the jurisdiction of the chief executive offices of each of such Companies and
each jurisdiction where any Collateral owned by such Companies (as defined in the Security
Agreement) is located or where a filing would need to be made in order to perfect Buyer’ security
interest in the Collateral, copies of the financing statements on file in such jurisdictions and
evidence that no Liens exist other than Permitted Liens.

          (n) Each of the domestic and Canadian companies shall have delivered to Buyer or approved
Buyer’s form, UCC and PPSA financing statements for each appropriate jurisdiction as is necessary,
in Buyer’s reasonable discretion, to perfect Buyer’s security interest in the Collateral.

          (o) Each of the Companies shall have executed and delivered to Buyer the Fee Letter.

28

 

          (p) Parent shall have delivered evidence satisfactory to Buyer in its reasonable discretion of
the amendment to the Rights Agreement as provided in Section 4(k).

          (q) Parent shall deliver the resignations, effective as of the Closing, of 5 members of
Parent’s Board of Directors from the list of approved director resignations submitted to Buyer
prior to the execution of this Agreement.

          (r) The Companies shall have mailed a notice to all its shareholders 10 days prior to the
Closing Date in a form satisfactory to the Buyer in compliance with NASDAQ Rule 4350(i)(2) and
shall have complied with all other directives of NASDAQ in connection with the financial viability
exception set forth in Rule 4350(i)(2).

          (s) There shall not have occurred a Material Adverse Effect.

          (t) Parent shall have complied with Section 4(l)(i).

          (u) Each of the applicable Companies and Silicon Valley Bank shall have executed and delivered
to the Buyer a Deposit Account Control Agreement in the form attached hereto as Exhibit L.

          (v) The Companies shall have delivered to the Buyer, the stock certificates together with
stock powers executed in blank set forth on Schedule 7(v) hereof.

          (w) Each of the Companies shall have delivered to Buyer such other documents relating to the
transactions contemplated by this Agreement as Buyer or its counsel may reasonably request.

     8. TERMINATION.

          (a) In the event that the Closing shall not have occurred on or before twenty-two (22) days
from the date hereof due to any Company’s or Buyer’s failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party’s failure to waive such unsatisfied
conditions(s)), the non-breaching party shall have the option to terminate this agreement with
respect to such breaching party (the date this Agreement is terminated, the “Termination Date”).

          (b) No termination shall relieve a breaching party from any liability resulting from a breach
of this Agreement, and the non-breaching party is entitled to pursue its rights or remedies against
the other party to the extent such rights or remedies may be available at law or in equity.

          (c) In the event any Company or any Subsidiary within one year of the Termination Date
consummates, or enters into any confidentiality agreement, letter of intent, term sheet or any
definitive agreement with respect to, any transaction, or a series of related transactions, which
contemplates the (A) direct or indirect acquisition of assets of the Company and/or its
Subsidiaries equal to more than 50% of the Company’s and its Subsidiaries consolidated assets or to
which more than 50% of their consolidated revenues or earnings are attributable, (B) direct or
indirect acquisition of more than 50% of the equity securities of the

29

 

Company, (C) merger,
consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving more than 50% of the Company’s and its Subsidiaries’ consolidated
assets or more than 50% of the equity securities of the Company, or (D) issuance of any debt or
equity securities (including instruments convertible into equity securities) by the Company and/or
any of its Subsidiaries the gross proceeds of which to the Company and/or any of its Subsidiaries
are greater than, in the case of the issuance of equity securities or any instrument convertible
into equity securities, $1,000,000, and in the case of any debt, the gross proceeds of which to the
Company and/or any of its Subsidiaries are greater than $5,000,000, in each case, the Company
shall immediately pay to Buyer a nonrefundable fee in the amount of $666,666 (the “Breakup Fee”);
provided, however that in no event shall the Company incur an obligation to pay the Breakup Fee in
the event the Company terminates the Agreement and the conditions set forth in Section 7 have been
satisfied or waived by the Buyer (other than closing deliverables set forth in Section 7 which are
to be satisfied at Closing with respect to which the Company is willing and able to deliver at
Closing) and the Companies are not in breach of this Agreement. For the avoidance of doubt, if the
Companies consummate or agree to consummate more than one transaction as described in this Section
8(c), the Buyer shall only be entitled to the Breakup Fee with respect to the first transaction and
is not entitled to additional Breakup Fees each time a subsequent transaction is consummated.

     9. MISCELLANEOUS.

          (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY.

          (b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to each other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon

30

 

the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.

          (c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

          (d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.

          (e) Entire Agreement; Amendments. This Agreement and the other Transaction Documents
and the Confidentiality Agreement between Parent and Merrick Ventures, LLC supersede all other
prior oral or written agreements between Buyer, the Companies, their affiliates and Persons acting
on their behalf with respect to the matters discussed herein and therein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, none of the Companies or any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by the Companies and
the Required Holders, and any amendment to this Agreement made in conformity with the provisions of
this Section 9(e) shall be binding on Buyer and all holders of Securities, as applicable. No
provision hereof may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities
then outstanding. No consideration shall be offered or paid to any Person to amend or consent
to a waiver or modification of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction Documents or Holders of Term
Notes, as the case may be. None of the Companies has, directly or indirectly, made any agreements
with Buyers relating to the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the foregoing, each
of the Companies confirms that, except as set forth in this Agreement, Buyer has not made any
commitment or promise or has any other obligation to provide any financing to the Companies or
otherwise.

          (f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided, confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

If to Parent or any other Company:

c/o Merge Healthcare Incorporated

6737 West Washington Street, Suite 2250

31

 

Milwaukee, Wisconsin 53214

Facsimile:      (770) 810-7520

Attention:      Chief Financial Officer

With a copy (for informational purposes only) to:

Alston & Bird LLP

1201 West Peachtree Street

Atlanta, Georgia 30309-3424

Telephone:     (404) 881-7000

Facsimile:      (404) 881-7777

Attention:      William S. Ortwein

If to the Transfer Agent:

American Stock Transfer & Trust Co.

59 Maiden Lane

New York, New York 10038

Telephone:     (718) 921-8293

Facsimile:      (718) 921-8334

Attention:      Isaac J. Kagan

If to Buyer:

c/o Merrick Ventures

233 North Michigan Avenue, Suite 2330

Chicago, Illinois 60601

Telephone:     312-994-9410

Facsimile:      312-994-9495

Attention:      Justin Dearborn

With a copy (for informational purposes only) to:

McDermott Will & Emery LLP

227 West Monroe Street

Chicago, Illinois 60606

Telephone:     (312) 984-2121

Facsimile:      (312) 984-7700

Attention:      Mark A. Harris

                     Ryan D. Harris

or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall

32

 

be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clauses (i), (ii) or (iii) above, respectively.

          (g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective permitted successors and assigns, including any
purchasers of the Term Notes. None of the Companies shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the each of the Holders of the Term
Notes, including by way of a Fundamental Transaction (unless the Companies are in compliance with
the applicable provisions governing Fundamental Transactions set forth in the Term Notes). For
avoidance of doubt, notwithstanding any provision in this Agreement or any other Transaction
Document, the Companies are permitted to enter into and consummate a Fundamental Transaction
without the consent of the Holders of the Term Notes or holders of the Shares, so long as the
Companies comply with the provisions governing Fundamental Transactions set forth in the Term
Notes. Buyer may assign some or all of its rights hereunder in connection with transfer of any of
its Term Notes without the consent of the Companies (but only as expressly provided in the Term
Note), in which event such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights, and the Companies shall use their best efforts to ensure that such transferee is
registered as a Holder and that any Liens on the Collateral shall be for the benefit of such Holder
(as well as the other Holders of Term Notes).

          (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.

          (i) Survival. The representations and warranties of the Companies and Buyer contained
in Sections 2 and 3 and the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing.

          (j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

          (k) Indemnification. In consideration of Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Companies’ other obligations under the Transaction Documents, each Company shall jointly and
severally defend, protect, indemnify and hold harmless Buyer and each other holder of any
Securities and all of their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any representation or
warranty

33

 

made by the Companies in this Agreement or any other Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Companies contained in this Agreement or any other Transaction
Documents or any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the Companies) and arising
out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement
or any other Transaction Documents or any other certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of Buyer or
holder of the Securities as an investor in the Companies pursuant to the transactions contemplated
by the Transaction Documents; provided that the Companies shall not be required to indemnify any of
the Indemnitees to the extent Indemnified Liabilities arise or result from a material
misrepresentation or material breach of any representation or warranty made by Buyer or Indemnitee
contained in the Transaction Documents or any other certificate, instrument or document
contemplated by the Transaction Documents or a material breach of a covenant, agreement or
obligation by Buyer or Indemnitee contained in the Transaction Documents or any other certificate,
instrument or document contemplated by the Transaction Documents. To the extent that the foregoing
undertakings by the Companies may be unenforceable for any reason, the Companies shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which
is permissible under applicable law. The indemnification provided in this Section 9(k) shall not
apply to any Indemnified Liabilities which are the subject of the indemnification provided for in
Section 6 of the Registration Rights Agreement, as well as shall not apply to those matters covered
by the express exceptions to indemnification provided by
Section 6 of the Registration Rights Agreement. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall
be the same as those set forth in Section 6 of the Registration Rights Agreement.

          (l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

          (m) Remedies. Buyer and each holder of the Securities and the Companies shall have
all rights and remedies set forth in the Transaction Documents and all rights and remedies which
such holders have been granted at any time under any other agreement or contract and all of the
rights which Buyers and the Companies and holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law. Furthermore, each of
the Companies and Buyer recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the other party. Each of the Companies therefore agrees that the
Companies on the one hand and Buyer on the other hand shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.

34

 

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

[Signature Pages Follow]

35

 

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

	 	 	 	 	 	 	 
	 	 	COMPANIES:
	 
	 	 	 	 	 	 
	 	 	MERGE HEALTHCARE INCORPORATED
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	CEDARA SOFTWARE CORP.
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	CEDARA SOFTWARE LIMITED
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	CEDARA SOFTWARE (USA) LIMITED.
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 

 

 

	 	 	 	 	 	 	 
	 	 	EFILM MEDICAL, INC.
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	MERGE CEDARA EXCHANGE CO. LIMITED
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	MERGE EMED, INC.
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	MERGE TECHNOLOGIES HOLDINGS CO.
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Kenneth D. Rardin
 

Kenneth D. Rardin
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 

 

 

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

	 	 	 	 	 	 	 
	 	 	BUYER:
	 
	 	 	 	 	 	 
	 	 	MERRICK RIS, LLC
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Justin Dearborn
 

Justin Dearborn
	 	 
	 

	 	Title:
	 	Director	 	 

 

 

SCHEDULE OF COMPANIES

Name

Merge Healthcare Incorporated

Merge eMed, Inc.

Cedara Software Corp.

Cedara Software (USA) Limited

Merge Technologies Holdings Co.

eFilm Medical Inc.

Merge Cedara ExchangeCo Limited

Cedara Software Limited

 

 

EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Note
	Exhibit B

	 	Registration Rights Agreement
	Exhibit C-1

	 	Pledge and Security Agreement (US)
	Exhibit C-2

	 	Pledge and Security Agreement (Canada)
	Exhibit D

	 	Fee Letter
	Exhibit E

	 	Form of Irrevocable Transfer Agent Instructions
	Exhibit F-1

	 	Form of Alston & Bird LLP Legal Opinion
	Exhibit F-2

	 	Form of Foley & Lardner LLP Legal Opinion
	Exhibit F-3

	 	Form of Ogilvy Renault LLP Legal Opinion
	Exhibit F-4

	 	Form of McInnes Cooper Legal Opinion
	Exhibit G

	 	Form of Company General Counsel Opinion
	Exhibit H

	 	Form of Secretary’s Certificate
	Exhibit I

	 	Form of Officer’s Certificate
	Exhibit J

	 	Funds Flow Letter
	Exhibit K

	 	Rights Plan Amendment
	Exhibit L

	 	SVB Deposit Account Control Agreement

SCHEDULES

	 	 	 
	Schedule 3(a)

	 	Subsidiaries
	Schedule 3(d)

	 	No Conflicts
	Schedule 3(e)

	 	Consents
	Schedule 3(g)

	 	No General Solicitation; Placement Agent’s Fees
	Schedule 3(h)

	 	No Integrated Offering
	Schedule 3(k)

	 	SEC Documents; Financial Statements
	Schedule 3(l)

	 	Absence of Certain Changes
	Schedule 3(n)

	 	Conduct of Business; Regulatory Permits
	Schedule 3(o)

	 	Foreign Corrupt Practices
	Schedule 3(q)

	 	Transactions with Affiliates
	Schedule 3(r)

	 	Equity Capitalization
	Schedule 3(s)

	 	Indebtedness and Other Contracts
	Schedule 3(t)

	 	Absence of Litigation
	Schedule 3(u)

	 	Insurance
	Schedule 3(w)

	 	Title
	Schedule 3(x)

	 	Intellectual Property Rights
	Schedule 3(z)

	 	Subsidiary Rights
	Schedule 3(bb)

	 	Tax Status
	Schedule 3(cc)

	 	Internal Accounting and Disclosure Controls
	Schedule 3(ii)

	 	Disclosure
	Schedule 4(c)

	 	Use of Proceeds
	Schedule 7(v)

	 	Certificates

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