SECURITIES PURCHASE AGREEMENT

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.

     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.

          (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.

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

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

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.

          (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.

          (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

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.

          (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

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.

          (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

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