SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT (the "Agreement") dated as of September
3, 1999, by and between Merge Technologies Incorporated, a Wisconsin
corporation ("Merge") and Interpra Medical Imaging Network Ltd., an Ontario
corporation (the "Corporation").
RECITALS
A. Merge, 3032854 Nova Scotia Company ("Holdings") and the
Corporation have entered into a Purchase Agreement dated as of September 1, 1999
(the "Purchase Agreement"), pursuant to which, among other transactions, each
shareholder of the Corporation (each, a "Holder," collectively, the "Holders")
shall be issued Exchangeable Non Voting Shares of the Corporation's capital
stock (the "Exchangeable Shares").
B. The Exchangeable Shares are exchangeable into shares of common
stock of Merge, $0.01 par value per share (the "Merge Common Shares"), and shall
otherwise have the rights set forth in the Provisions Attaching to Exchangeable
Shares.
C. As a material inducement to the Corporation to consummate the
transactions contemplated by the Purchase Agreement, Merge and the Corporation
desire to provide for the terms of the exchange of the Exchangeable Shares for
the Merge Common Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties agree as follows:
ARTICLE 1
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE ON LIQUIDATION OF MERGE
1.1 Exchange Right
1.1.1. Merge agrees that subject to compliance with the provisions
of the Act and applicable securities laws and the exercise by Merge or its
Designee of the Retraction Call Right (as defined in the Provisions Attaching to
Exchangeable Shares) and otherwise in compliance with the provisions of Article
6 of the Provisions Attaching to Exchangeable Shares, each Holder of
Exchangeable Shares shall be entitled:
(a) at any time through and including August 31, 2004 during
which, as described in Section 1.3 of this Agreement, the Corporation
is not permitted to redeem all Retracted Shares as described in Section
1.3 of this Agreement, to require Merge or its Designee to
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exchange any or all of the Exchangeable Shares registered in the name
of the Holder (the "Exchange Right") for the Exchangeable Share Price
per Exchangeable Share to be paid in the form of the Exchangeable
Share Consideration (the "Exchange Price"); and
(b) at any time between September 1, 2004 and October 1, 2004
during which, as described in Section 1.3 of this Agreement, the
Corporation is not permitted to redeem all Retracted Shares, to require
Merge or its Designee to exchange any or all of the Exchangeable Shares
registered in the name of the Holder (the "Cash Exchange Right") for
the price of U.S. $4.50 per Exchangeable Share, to be paid in cash (the
"Cash Exchange Price").
1.1.2 If any Holder wishes to exercise his Exchange Right or Cash
Exchange Right, as applicable, in respect of all or any of the Exchangeable
Shares registered in his name, he shall deliver to Merge, in person or by
certified or registered mail, at its principal office (attention: Chief
Financial Officer), or at such other place as may be specified by Merge from
time to time, the Holder Deliveries, and the Retraction Request will constitute
and will be deemed to constitute notice from such Holder to Merge that such
Holder is exercising the Exchange Right with respect to those Retracted Shares
which the Corporation is not permitted to redeem, except that the Retraction
Date shall be deemed to be the "Exchange Date."
1.1.3 Subject to compliance with the provisions of Section 5.9,
on the Exchange Date, Merge or its Designee shall pay or cause to be paid to the
applicable Holder, the Exchange Price or Cash Exchange Price, as applicable, for
each Exchangeable Share surrendered on this Exchange Date for exchange pursuant
to Section 1.1.2. Payment of the total Exchange Price or Cash Exchange Price, as
applicable, for such Exchangeable Shares shall be made by delivery to such
Holder at the registered office of Merge or at such other location as may be
specified by Merge by notice to such Holder of the Exchangeable Share
Consideration (less any Merge Common Shares withheld by Merge or its Designee in
respect of Taxes). As of and with effect from the Exchange Date, such Holder
shall cease to be the holder of such Exchangeable Shares and, subject to Section
5.1 hereof, shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the Exchange Price or Cash
Exchange Price, as applicable, unless payment of the total Exchange Price or
Cash Exchange Price, as applicable, for such Exchangeable Shares shall not be
made in accordance with this provision, in which case the rights of such Holder
shall remain unaffected to the extent payment of the Exchange Price or Cash
Exchange Price, as applicable, has not been made, until the Exchange Price or
Cash Exchange Price, as applicable, has been fully paid in the manner
hereinbefore provided. Upon such payment or deposit of the Exchange Price or
Cash Exchange Price, as applicable, such Holder shall thereafter be considered
and deemed for all purposes to be the holder of the Merge Common Shares
delivered to him.
1.2 Automatic Exchange on Liquidation of Merge.
1.2.1 Merge shall give each Holder notice of each of the
following events at the time set forth below:
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(a) in the event of any determination by the Board of Directors
of Merge to institute voluntary liquidation, dissolution or winding up
proceedings with respect to Merge or to effect any other distribution
of assets of Merge among its shareholders for the purpose of winding up
its affairs, at least 15 days prior to the proposed effective date of
such liquidation, dissolution or winding up or other distribution; and
(b) immediately, upon the earlier of (i) receipt by Merge of
notice of, or (ii) Merge otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or distribution of assets of
Merge among its shareholders for the purpose of winding up its affairs.
1.2.2 In order to enable each Holder to participate in the
distribution of assets of Merge in connection with any of the events set forth
in Section 1.2.1(a) or 1.2.1(b) above (a "Liquidation Event"), on the fifth
Business Day (the "Automatic Exchange Date") prior to the date on which Merge
shall be liquidated all of the then outstanding Exchangeable Shares shall be
automatically exchanged for Merge Common Shares (the "Automatic Exchange"). To
effect the Automatic Exchange, Merge or its Designee shall purchase each
Exchangeable Share outstanding on the Automatic Exchange Date held by each
Holder, and each Holder shall sell all Exchangeable Shares at such time, for a
purchase price per share (the "Liquidation Amount") equal to the Exchangeable
Share Price on the last Business Day prior to the Automatic Exchange Date (less
any Taxes or U.S. Taxes).
1.2.3 On the Automatic Exchange Date, Merge or its Designee shall
pay or cause to be paid to each Holder, the Liquidation Amount for each
Exchangeable Share upon presentation and surrender at the registered office of
Merge (attention: Chief Financial Officer), or at such other place as may be
specified by Merge from time to time, of the Holder Deliveries. Payment of the
total Liquidation Amount for such Exchangeable Shares shall be made by delivery
to the applicable Holder of the Exchangeable Share Consideration (less any Merge
Common Shares withheld by Merge or its Designee in respect of Taxes). As of and
with effect from the Automatic Exchange Date, each Holder shall cease to be the
holder of the Exchangeable Shares exchanged on such date and, shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive his total Liquidation Amount, unless payment of his
total Liquidation Amount shall not be made upon presentation and surrender of
the share certificates representing such Exchangeable Shares in accordance with
the foregoing provisions, in which case the rights of such Holder shall remain
unaffected to the extent payment of his total Liquidation Amount has not been
made, until his total Liquidation Amount has been fully paid in the manner
hereinbefore provided. Merge or its Designee shall have the right to deposit or
cause to be deposited in a custodial account with any chartered bank or trust
company in Canada (the "Liquidation Amount Depositary"), the Liquidation Amount
in respect of the Exchangeable Shares represented by certificates that have not
been surrendered on the Automatic Exchange Date. Immediately upon making such
deposit, Merge shall give notice thereof to such Holder. The Exchangeable Shares
in respect of which such deposit shall have been made shall be deemed to be
exchanged as of the date of such deposit and, subject to Section 5.1 hereof, the
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rights of such Holder with respect to such Exchangeable Shares shall thereafter
be limited to the right to receive the Liquidation Amount deposited against
presentation and surrender of the certificates representing such Exchangeable
Shares to the Liquidation Amount Depositary. Upon such payment or deposit of the
Liquidation Amount, such Holder shall thereafter be considered and deemed for
all purposes to be the holder of the Merge Common Shares either (i) delivered to
him, or (ii) deposited with the Liquidation Amount Depositary.
1.3 Exercise of Exchange Right Subsequent to Retraction. If a
Holder has exercised his right under Article 6 of the Provisions Attaching to
Exchangeable Shares of the Corporation to require the Corporation to redeem any
or all of the Exchangeable Shares held by such Holder (the "Retracted Shares"),
provided that Merge or its Designee shall not have exercised the Retraction Call
Right (as hereinafter defined) with respect to the Retracted Shares, and such
Holder is notified by the Corporation pursuant to Section 6.6 of the Provisions
Attaching to Exchangeable Shares that the Corporation will not be permitted as a
result of solvency requirements or other provisions of applicable law, including
securities laws, to redeem all such Retracted Shares, the Corporation hereby
agrees to immediately notify Merge of such prohibition against the Corporation
redeeming all of the Retracted Shares and to immediately forward or cause to be
forwarded to Merge all relevant materials delivered by such Holder to the
Corporation (including, without limitation, a copy of the Retraction Request
delivered pursuant to Section 6.1 of the Provisions Attaching to Exchangeable
Shares) in connection with such requested retraction of the Retracted Shares. In
any such event, the Retraction Request will constitute and will be deemed to
constitute notice from such Holder to Merge that such Holder is exercising the
Exchange Right with respect to those Retracted Shares which the Corporation is
not permitted to redeem, and subject to compliance with applicable securities
laws, Merge or its Designee agrees to purchase such Retracted Shares in
accordance with the provisions of Section 1.1.3.
ARTICLE 2
PURCHASE BY MERGE OR ITS DESIGNEE
2.1 Purchase of Shares. Subject to Section 2.2.1 hereof, on the
Purchase Date Merge or its Designee shall purchase all of the then outstanding
Exchangeable Shares (the "Purchase Right") for an amount per share (the
"Purchase Price") equal to the Exchangeable Share Price on the last Business Day
prior to the Purchase Date, which amount shall be paid in the form of the
Exchangeable Share Consideration (less any Taxes or U.S. Taxes).
2.2 Purchase Procedure.
2.2.1 Thirty days prior to September 30, 2004, Merge or its
Designee shall send or cause to be sent to each Holder and the Corporation a
notice in writing setting forth whether Merge or its Designee has elected, in
its sole discretion, to (i) purchase the then outstanding Exchangeable Shares on
the Purchase Date pursuant to this Article 2, or (ii) cause the Corporation to
redeem such Exchangeable Shares on the Purchase Date pursuant to Article 7 of
the Provisions Attaching to
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Exchangeable Shares. In the event Merge or its Designee shall have elected to
purchase such Exchangeable Shares pursuant to this Article 2, such notice shall
set out the Purchase Price. In the event Merge or its Designee shall have
elected to cause the Corporation to redeem such Exchangeable Shares, such notice
shall contain instructions for the Corporation to take all steps necessary to
redeem the Exchangeable Shares on the Purchase Date and the Corporation shall,
unless prohibited by law, redeem such Exchangeable Shares in accordance with
such instructions and the provisions of Article 7 of the Provisions Attaching to
Exchangeable Shares. If the Corporation is prohibited by law from so redeeming
such Exchangeable Shares, it shall forthwith notify Merge in writing thereof and
Merge or its Designee shall purchase the then outstanding Exchangeable Shares on
the Purchase Date pursuant to this Article 2.
2.2.2 Subject to Section 2.2.1 hereof, on the Purchase Date Merge
or its Designee shall pay or cause to be paid to each Holder the Purchase Price
for each Exchangeable Share upon presentation and surrender at the registered
office of Merge (attention: Chief Financial Officer), or at such other place as
may be specified by Merge from time to time, of the Holder Deliveries. Payment
of the total Purchase Price for such Exchangeable Shares shall be made by
delivery to the applicable Holder at the registered office of Merge or at such
other location as may be specified by Merge by notice to each Holder of the
Exchangeable Share Consideration (less any Merge Common Shares withheld by Merge
or its Designee in respect of Taxes, and, less any Taxes or U.S. Taxes). As of
and with effect from the Purchase Date, each Holder shall cease to be the holder
of such Exchangeable Shares and, subject to Section 5.1 hereof, shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive the Purchase Price, unless payment of the total
Purchase Price for such Exchangeable Shares shall not be made upon presentation
and surrender of share certificates representing such Exchangeable Shares in
accordance with the foregoing provisions, in which case the rights of such
Holder shall remain unaffected to the extent payment of the Purchase Price has
not been made until the Purchase Price has been fully paid in the manner
hereinbefore provided. Merge or its Designee shall have the right, on or after
the Purchase Date, to deposit or cause to be deposited in a custodial account
with any chartered bank or trust company in Canada (the "Purchase Price
Depositary") the Purchase Price in respect of the Exchangeable Shares
represented by certificates that have not at the date of such deposit been
surrendered by such Holder in connection with the Purchase; provided that, in
the event of an acceleration of the Purchase Date pursuant to clause (i) of the
last sentence of the definition of "Purchase Date", Merge or its Designee shall
be required to make such deposit, if any, on the Purchase Date. Immediately upon
making such deposit, Merge or its Designee shall give notice thereof to such
Holder. The Exchangeable Shares in respect of which such deposit shall have been
made shall be deemed to be exchanged as of the date of such deposit and, subject
to Section 5.1 hereof, such Holder's rights with respect to such Exchangeable
Shares shall thereafter be limited to the right to receive the Purchase Price so
deposited against presentation and surrender of the certificates representing
such Exchangeable Shares to the Purchase Price Depositary. Upon such payment or
deposit of the Purchase Price, such Holder shall thereafter be considered and
deemed for all purposes to be the holder of the Merge Common Shares either (i)
delivered to him, or (ii) deposited with the Purchase Price Depositary.
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ARTICLE 3
DISTRIBUTION ON LIQUIDATION OF THE CORPORATION
3.1 Liquidation Call Right. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, Merge or its Designee
shall have the overriding right (the "Liquidation Call Right") to purchase all,
but not less than all, of the Exchangeable Shares from each Holder for an amount
per share (the "Liquidation Call Price") equal to the Exchangeable Share Price
on the last Business Day prior to the date on which the Corporation's assets
shall be distributed to its shareholders in connection with such liquidation,
dissolution or winding up (the "Liquidation Date"), which amount shall be
satisfied in full by Merge or its Designee causing to be delivered to each
Holder the Exchangeable Share Consideration (less any Taxes or U.S. Taxes).
3.2 Exercise of Liquidation Call Right. To exercise the Liquidation
Call Right, Merge shall notify each Holder and the Corporation of Merge or its
Designee's intention to exercise the Liquidation Call Right (a) in the case of a
voluntary liquidation, dissolution or winding up of the Corporation, at least 15
days before the Liquidation Date, and (b) in the case of an involuntary
liquidation, dissolution or winding up of the Corporation at least five Business
Days before the Liquidation Date . If Merge or its Designee exercises the
Liquidation Call Right, on the Liquidation Date Merge or its Designee will
purchase, and each Holder will sell, all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation Call Price.
3.3 Procedure For Payment of Liquidation Call Price. In the event
Merge or its Designee has exercised the Liquidation Call Right as provided
herein, then on or after the Liquidation Date, Merge or its Designee shall pay
or cause to be paid to each Holder the Liquidation Call Price for each
Exchangeable Share upon presentation and surrender at the registered office of
Merge (attention: Chief Financial Officer), or at such other place as may be
specified by Merge from time to time, of the Holder Deliveries. Payment of the
total Liquidation Call Price for such Exchangeable Shares shall be made by
delivery to the applicable Holder at the address of the such Holder at the
registered office of Merge or at such other location as may be specified by
Merge by notice to such Holder of the Exchangeable Share Consideration (less any
Merge Common Shares withheld by Merge or its Designee in respect of Taxes). In
the event Merge or its Designee has exercised the Liquidation Call Right as
provided herein, then as of and with effect from the Liquidation Date, each
Holder shall cease to be a holder of such Exchangeable Shares and shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive the Liquidation Call Price with respect to each
Exchangeable Share held by him on the Liquidation Date, unless payment of the
total Liquidation Call Price for such Exchangeable Shares shall not be made upon
presentation and, subject to Section 5.1 hereof, surrender of the share
certificates representing such Exchangeable Shares in accordance with the
foregoing provisions, in which case the rights of each Holder shall remain
unaffected to the extent payment of the Liquidation Call Price has not been made
until the Liquidation Call Price has been fully paid in the manner hereinbefore
provided. Merge or its Designee shall have
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the right to deposit or cause to be deposited in a custodial account with any
chartered bank or trust company in Canada (the "Liquidation Call Price
Depositary") the Liquidation Call Price in respect of the Exchangeable Shares
represented by certificates that have not at the date of such deposit been
surrendered by a Holder in connection with the exercise by Merge or its Designee
of the Liquidation Call Right. Immediately upon making such deposit, Merge or
its Designee shall give notice thereof to such Holder. The Exchangeable Shares
in respect of which such deposit shall have been made shall be deemed to be
exchanged on the date of such deposit and, subject to Section 5.1 hereof, such
Holder's rights with respect to such Exchangeable Shares shall thereafter be
limited to the right to receive the Liquidation Call Price so deposited against
presentation and surrender of the certificates representing such Exchangeable
Shares to the Liquidation Call Price Depositary. Upon such payment or deposit of
the Liquidation Call Price, such Holder shall thereafter be considered and
deemed for all purposes to be the holder of the Merge Common Shares either (i)
delivered to him, or (ii) deposited with the Liquidation Call Price Depositary.
ARTICLE 4
EXERCISE OF THE RETRACTION CALL RIGHT
4.1 Retraction. In the event that a Holder has exercised such Holder's
right under Article 6 of the Provisions Attaching to Exchangeable Shares to
require the Corporation to redeem any or all of the Exchangeable Shares held by
him (the "Retraction Right"), Merge or its Designee shall have the overriding
right (the "Retraction Call Right") to purchase all, but not less than all, of
such Exchangeable Shares from such Holder for the Exchange Price or Cash
Exchange Price, as applicable (the "Retraction Call Price").
4.2 Exercise of Retraction Call Right. To exercise the Retraction Call
Right, Merge or its Designee shall notify the applicable Holder and the
Corporation in writing of Merge's or its Designee's intention to exercise such
right within five Business Days after Merge has been notified by the Corporation
that such Holder has exercised the Retraction Right. If Merge or its Designee
exercises the Retraction Call Right, on the Retraction Date Merge or its
Designee will purchase, and such Holder will sell, such Exchangeable Shares for
a price per share equal to the Retraction Call Price.
4.3 Procedure For Payment of Retraction Call Price. In the event that
Merge or its Designee has exercised the Retraction Call Right with respect to
any Exchangeable Shares as provided herein, then, on or after the Retraction
Date, Merge or its Designee shall pay or cause to be paid to the applicable
Holder the Retraction Call Price for each such Exchangeable Share upon
presentation and surrender at the registered office of Merge (attention: Chief
Financial Officer), or at such other place as may be specified by Merge from
time to time, the Holder Deliveries. Payment of the total Retraction Call Price
for such Exchangeable Shares shall be made by delivery to such Holder at the
registered office of Merge or at such other location as may be specified by
Merge by notice to such Holder of the Exchange Price or Cash Exchange Price, as
applicable. In the event
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Merge or its Designee has exercised the Retraction Call Right as provided
herein, then as of and with effect from the Retraction Date such Holder shall
cease to be a holder of such Exchangeable Shares with respect to which Merge or
its Designee has exercised the Retraction Call Right and, subject to Section 5.1
hereof, shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the Retraction Call Price with
respect to each such Exchangeable Share, unless payment of the total Retraction
Call Price for such Exchangeable Shares shall not have been made upon
presentation and surrender of the share certificates representing such
Exchangeable Shares in accordance with the foregoing provisions, in which case
such Holder's rights shall remain unaffected to the extent the Retraction Call
Price has not been paid until the Retraction Call Price has been fully paid in
the manner hereinbefore provided. Merge or its Designee shall have the right to
deposit or cause to be deposited in a custodial account with any chartered bank
or trust company in Canada (the "Retraction Call Price Depositary") the
Retraction Call Price in respect of the Exchangeable Shares represented by
certificates that have not at the date of such deposit been surrendered by such
Holder in connection with the exercise by Merge or its Designee of the
Retraction Call Right. Immediately upon making such deposit, Merge or its
Designee shall give notice thereof to such Holder. The Exchangeable Shares in
respect of which such deposit has been made shall be deemed to be exchanged as
of the date of such deposit and, subject to Section 5.1 hereof, such Holder's
rights with respect to such Exchangeable Shares shall thereafter be limited to
the right to receive the Retraction Call Price so deposited against presentation
and surrender of the certificates representing such Exchangeable Shares to the
Retraction Call Right Depositary. Upon such payment or deposit of the Retraction
Call Price, such Holder shall thereafter be considered and deemed for all
purposes to be the holder of the Merge Common Shares either (i) delivered to
him, or (ii) deposited with the Retraction Call Price Depositary.
ARTICLE 5
COVENANTS OF MERGE, CORPORATION AND HOLDER
5.1 Right to Dividends. There shall be no payment or adjustment by
Merge, its Designee, if applicable, the Corporation or any Holder on account of
any dividends on any Exchangeable Shares on a Share Exchange in respect of the
Exchangeable Shares exchanged on such occasion. Dividends payable on any such
Exchangeable Shares for which the record date has occurred prior to the date of
exchange or deemed exchange with respect to such Exchangeable Shares shall be
paid by the Corporation, even if the distribution date with respect to such
dividends occurs after such date of exchange or deemed exchange; provided,
however, that, if Merge or its Designee shall have exercised the Liquidation
Call Right and the Liquidation Date occurs after the record date with respect to
such dividends, but prior to the distribution date with respect thereto, each
Holder shall be treated with respect to each Exchangeable Share to be purchased
by Merge or its Designee on the Liquidation Date pursuant to Article 3 hereof,
as if he had been a holder of the Specified Number of Merge Common Shares on
such record date and shall be deemed to have assigned to Merge or its Designee
all rights against the Corporation with respect to such dividends.
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5.2 Stamp or Other Transfer Taxes. Each Holder shall be solely
responsible for the payment of any stamp, documentary, transfer or other like
taxes or charges that may be payable to any governmental body or agency in
respect of the disposition by such Holder to Merge or its Designee of
Exchangeable Shares or the issuance of Merge Common Shares to such Holder
pursuant to a Share Exchange and for any Taxes which must be deducted or
withheld by Merge or its Designee by reason of such Holder being a non resident
of Canada within the meaning of the Income Tax Act (Canada) or otherwise. Except
as aforesaid and as otherwise provided in this Agreement, exchanges of
Exchangeable Shares shall be effected at no cost to the applicable Holder.
5.3 Fractional Shares. Merge or its Designee shall not be required to
deliver fractional Merge Common Shares upon any Share Exchange, but in lieu
thereof shall pay an amount in cash equal to the same fraction of the Current
Market Price of one Merge Common Share at the effective date of the Share
Exchange.
5.4 Issuance of New Certificates. Subject to compliance with the
provisions of Section 5.9, Merge or its Designee shall deliver or cause to be
delivered to the applicable Holder, one or more certificates representing the
Exchangeable Shares in respect of which the Exchange Right, Cash Exchange Right
or the Retraction Right, as the case may be, was not exercised by such Holder
but which were evidenced by the certificate or certificates delivered to Merge
or its Designee pursuant to Section 1.1.2 or 4.3 hereof.
5.5 Merge Shares.
(a) Merge hereby represents, warrants and covenants that it shall
keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock, a number of Merge Common Shares
equal to the maximum number of Merge Common Shares which may be
issuable from time to time to the Holders upon a Share Exchange.
(b) Whenever Merge or its Designee is required to deliver Merge
Common Shares pursuant to this Agreement, such shares shall be duly
delivered as fully paid and nonassessable and free and clear of any
lien, claim and encumbrance, other than any restriction on transfer
imposed by Section 5.6 hereof and applicable securities laws.
5.6 Restrictions on Transfers of Merge Shares.
(a) As long as a Holder is a director, officer or employee of
Merge or the Corporation or any of their respective subsidiaries, such
Holder shall comply with all Merge policies in force from time to time
concerning the purchase and sale of securities of Merge by directors,
officers or employees of Merge and its subsidiaries to the extent such
policies are applicable to such Holder pursuant to its terms.
(b) The Merge Common Shares (whether acquired pursuant to this
Agreement or otherwise) have not been registered under the U.S.
Securities Act or the Ontario Securities
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Act, and may not be sold, transferred or otherwise disposed: (i) in the
United States or to a U.S. Person unless such shares are registered
under the Securities Act, or an exemption from the registration
requirements of the Securities Act is available; (ii) unless made in
conformity with Rule 144 promulgated by the SEC under the Securities
Act; or (iii) in Canada unless such shares are qualified by prospectus
filed in accordance with the applicable provincial Securities Acts or
an exemption from the prospectus requirements of such provincial
Securities Acts is available. In no event shall any sale, transfer or
other disposition of the Merge Common Shares be permitted in violation
of (i) the rules and regulations of the SEC promulgated under the
Securities Act, or (ii) the Ontario Securities Act and any provincial
securities laws and regulations. In addition, any such Holder who
intends to transfer Merge Common Shares shall use his best efforts not
to sell any such Merge Common Shares to a person (other than a person
who would be entitled to file a Schedule 13G under the U.S. Securities
Exchange Act of 1934, as amended (the "1934 Act"), with respect to such
sale) who would "beneficially own" (as such term is used in the
regulations promulgated pursuant to Section 13(d) of the 1934 Act),
after giving effect to the purchase of such Merge Common Shares, more
than 5% of the Merge Common Shares outstanding at such time.
5.7 Transfer Agent. Merge covenants that it will supply its transfer
agent with duly executed share certificates for the purpose of completing a
Share Exchange.
5.8 Corporation Liquidation. Merge covenants that prior to the
Purchase Date it will use its commercially reasonable best efforts to prevent
the liquidation, dissolution or winding up of the Corporation.
5.9 Non Resident of Canada at Time of Exchange. Notwithstanding the
provisions of any section of this Agreement, in the event that a Holder does not
represent and warrant that he is not a non resident of Canada within the meaning
of the Income Tax Act (Canada) when such Holder or Merge or its Designee is
entitled to exercise any exchange right hereunder or any such exchange occurs
automatically, such Holder shall provide to Merge or its Designee a certificate
pursuant to Section 116 of the Income Tax Act (Canada) or any successor
provision thereto (such certificate being hereinafter referred to as a
"Certificate") having a certificate limit that is not less than fair market
value of the Merge Common Shares which such Holder is entitled to receive upon
such exchange and otherwise conforming in all respects with the provisions of
section 116 of the Income Tax Act (Canada) or any successor provisions thereto.
If such Holder does not provide such Certificate to Merge or its Designee on or
before the date on which the exchange is to occur, Merge or its Designee shall
be entitled to hold back Merge Common Shares having a fair market value equal to
the amount of any Taxes that Merge or its Designee would be required to pay on
behalf of such Holder pursuant to Section 116 of the Income Tax Act (Canada) or
any successor thereto. Merge or its Designee shall be entitled to sell such
Merge Common Shares and to remit the sale price to Revenue Canada on account of
any such Taxes within such time (determined by Merge or its Designee acting
reasonably) as will enable it to comply with the requirements of subsection
116(5) of the Income Tax Act (Canada) or any successor thereto in the event that
such Holder fails to provide such Certificate before such time and such Holder
hereby appoints Merge or its Designee as
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his lawful attorney with full and irrevocable power and authority to execute all
agreements, documents and instruments and to take such other action as may be
required to effect such sale. If such Holder provides such Certificate before
such time, Merge or its Designee shall release to such Holder any Merge Common
Shares so held back or the proceeds from a sale thereof if not remitted to
Revenue Canada.
5.10 Reincorporation of Merge. The parties hereto agree that, in the
event Merge ceases to be a Wisconsin corporation and is reincorporated in
another jurisdiction, the parties hereto shall amend or modify, or cause, or
consent to, the amendment or modification of, such Transaction Documents, and
enter into such additional agreements and execute, or cause the execution of,
such additional documents, as may be required to provide the parties hereto with
substantially the same rights and obligations and economic benefits under the
laws of such jurisdiction of reincorporation.
ARTICLE 6
SUCCESSORS AND ASSIGNS
6.1 Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the respective transferees and
assigns (if the transfer or assignment of this Agreement is permitted
hereunder), or the successors, executors, administrators and legal
representatives of the parties hereto, provided, however, that this Agreement
may not be assigned by the parties hereto in whole or in part except as
otherwise expressly provided herein.
6.2 Merge Successors. Merge shall not enter into any transaction
(whether by way of restructuring, reorganization, consolidation, merger,
transfer, sale, lease or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any other person
or, in the case of a merger, of the continuing corporation resulting therefrom
unless:
(a) (i) such other person or continuing corporation (the "Merge
Successor"), by operation of law, becomes automatically bound by the
terms and provisions of this Agreement, or (ii) if the Merge Successor
does not become so bound, the Merge Successor executes, prior to or
contemporaneously with the consummation of such transaction, an
agreement supplemental hereto and such other instruments (if any) as
are satisfactory to the Majority Holders and, in the opinion of legal
counsel to the Majority Holders, are necessary or advisable to evidence
the assumption by the Merge Successor of the liability for all moneys
payable and property deliverable hereunder and the covenant of such
Merge Successor to pay and deliver or cause to be delivered the same
and its agreement to observe and perform all the covenants and
obligations under this Agreement; and
(b) such transaction shall, to the satisfaction of the Majority
Holders and in the opinion of such legal counsel, be upon such terms as
are required to substantially preserve and
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not to impair in any material respect any of the rights, duties, powers
and authorities of the Majority Holders hereunder.
ARTICLE 7
TERMINATION
7.1 Term. This Agreement shall continue until the earliest to occur of
the following events:
(a) no outstanding Exchangeable Shares are held by any Holder,
and
(b) the execution of an instrument in writing terminating this
Agreement, signed by duly authorized officers or representatives of
Merge and the Corporation and by each Holder.
ARTICLE 8
DEFINITION AND MISCELLANEOUS
8.1 Definitions of Certain Terms. As used herein, the following terms
shall have the following meanings (and any capitalized terms not otherwise
defined herein shall have the meanings given them in the Provisions Attaching to
Exchangeable Shares).
"1934 Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Agreement" is defined in the first paragraph hereof.
"Automatic Exchange" is defined in Section 1.2.2.
"Automatic Exchange Date" is defined in Section 1.2.2.
"Cash Exchange Price" is defined in Section 1.1.1.
"Cash Exchange Right" is defined in Section 1.1.1.
"Certificate" is defined in Section 5.9.
"Corporation" is defined in the first paragraph hereof.
"Designee" means a Subsidiary or Affiliate of Merge.
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"Exchange Date" is defined in Section 1.1.2.
"Exchange Price" is defined in Section 1.1.1.
"Exchange Right" is defined in Section 1.1.1.
"Exchangeable Shares" is defined in the Recitals to this Agreement.
"Holder" is defined in the Recitals to this Agreement.
"Holder Deliveries" means, with respect to any exercise of the Exchange
Right, the Cash Exchange Right, the Automatic Exchange, a Purchase, the
Liquidation Call Right or the Retraction Call Right, the certificates
representing the Exchangeable Shares subject to such exercise, together with one
or more stock transfer powers endorsed in blank by the applicable Holder and
containing a representation and warranty by such Holder that such Holder is not
a non resident of Canada within the meaning of the Income Tax Act (Canada). If
such Holder does not so represent and warrant, the provisions of Section 5.9
shall apply.
"Liquidation Amount" is defined in Section 1.2.2.
"Liquidation Amount Depositary" is defined in Sect ion 1.2.3.
"Liquidation Call Price" is defined in Section 3.1.
"Liquidation Call Price Depositary" is defined in Section3.3.
"Liquidation Call Right" is defined in Section 3.1.
"Liquidation Date " is defined in Section 3.1.
"Liquidation Event" is defined in Section 1.2.2.
"Majority Holders" means at any time the Holders of more than 50% of
the Exchangeable Shares issued and outstanding at such time.
"Merge" is defined in the first paragraph hereof.
"Merge Common Shares" is defined in the Recitals to this Agreement.
"Merge Successor" is defined in Section 6.2.
"Person" means an individual, a corporation, partnership, trust, any
other entity and any group (which term includes a "group" as defined in
Section13(d)(3) of the 1934 Act).
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"Provisions Attaching to Exchangeable Shares" is defined in the
Purchase Agreement.
"Purchase Agreement" has the meaning ascribed thereto in the second
paragraph hereof.
"Purchase Date" means September 30, 2004.
"Purchase Price" is defined in Section 2.1.
"Purchase Price Depositary" is defined in Section 2.2.2.
"Purchase Right" is defined in Section 2.1.
"Retracted Shares" is defined in Section 1.3.
"Retraction Call Price" is defined in Section 4.1.
"Retraction Call Price Depositary" is defined in Section 4.3.
"Retraction Call Right" is defined in Section 4.1.
"Retraction Right" is defined in section 4.1.
"Share Exchange" means, with respect to any Exchangeable Share, the
acquisition by Merge or its Designee of such Exchangeable Share, whether
pursuant to exercise (i) by a Holder of the Exchange Right, the Automatic
Exchange, the Purchase Right, or (ii) by Merge or its Designee of the
Liquidation Call Right or the Retraction Call Right.
"Subsidiary" means any corporation, association, or other business
entity a majority (by number of votes on the election of directors) of the
shares of capital stock (or other voting interests) of which is owned, directly
or indirectly, by Merge.
"Taxes" means any taxes that Merge or its Designee may be required to
pay on behalf of, or withhold from, any person pursuant to the Income Tax Act
(Canada) or any successor thereto or pursuant to any applicable provincial tax
legislation.
"U.S. Taxes" means any U.S. dividend withholding taxes that are
required to be withheld.
"Transaction Documents" means this Agreement, the Provisions Attaching
to Exchangeable Shares, the Trust Agreement and the Support Agreement.
8.2 Amendments, Modifications, Etc. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed by duly authorized officers or representatives of
Merge and the Corporation and by the Majority Holders.
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8.3 Changes in Capital of Merge and the Corporation . At all times
after the occurrence of any event effected pursuant to Section 2.5 of the
Support Agreement or Article 11 of the Provisions Attaching to Exchangeable
Shares, as a result of which either the Merge Common Shares or the Exchangeable
Shares or both are in any way changed, this Agreement shall forthwith be amended
and modified as necessary in order that it shall apply with full force and
effect, mutatis mutandis, to all new securities into which the Merge Common
Shares or the Exchangeable Shares or both are so changed and the parties hereto
shall execute, in accordance with Section 8.2, such amendments, modifications
and supplement to this Agreement as are necessary to effect such changes.
8.4 No Waiver. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any party hereof or the right of such party thereafter to enforce
each and every such provision. No waiver of any breach of or non compliance with
this Agreement shall be held to be a waiver of any other or subsequent breach or
non compliance.
8.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Wisconsin (and the federal laws of
the United States applicable therein), without regard to their respective
conflict of law rules.
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8.6 Notices. All notices and other communications hereunder, and any
delivery by a Holder of certificate representing Exchangeable Share, shall be
made in accordance with Article 15 of the Provisions Attaching to Exchangeable
Shares.
8.7 Construction of Agreement. A reference to an Article or Section
shall mean an Article of or a Section in this Agreement unless otherwise
expressly stated. The titles and headings herein are for reference purposes only
and shall not in any manner limit the construction of this Agreement which shall
be considered as a whole. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words,"without
limitation."
8.8 Entire Agreement. This Agreement and the Transaction Documents (i)
constitute the entire agreement, and supersede all other prior agreements and
understandings, both written and oral between the parties with respect to the
subject matter hereof, and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder, except as otherwise
expressly provided herein or therein.
8.9 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity of any other provision of this
Agreement, each of which shall remain in full force and effect.
8.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same Agreement.
8.11 Proportionate Share of Amounts Paid. Notwithstanding any provision
in Sections 1.1.3, 1.2.3, 2.2.2, 3.3 or 4.3, pursuant to the exercise of the
Exchange Right, the Cash Exchange Right, the Automatic Exchange, a Purchase, the
Liquidation Call Right or the Retraction Call Right, each Holder shall be
entitled to receive only the Exchange Price, Cash Exchange Price, Liquidation
Amount, Purchase Price, Liquidation Call Price or the Retraction Call Price with
respect to such Holder's Exchangeable Shares, and not the total amount or price
with respect to all Exchangeable Shares subject to such exercise.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
MERGE TECHNOLOGIES INCORPORATED
By: /s/ William C. Mortimore
---------------------------
Name: William C. Mortimore
Title: President and Chief Executive Officer
INTERPRA MEDICAL IMAGING NETWORK LTD.
By: /s/ Stephen Herman
---------------------------
Title: President
