<p style= text-align: justify; >A press release by a law firm dated August 20, 2008 stated that regarding the Maiden v. Merge, et al. Securities Litigation has been certified as a class action for purposes of a proposed settlement with Merge Technologies, Inc. (”Merge”) and Richard A. Linden, Scott T. Veech and David Noshay, valued at $16 million in cash. A hearing will be held before the Honorable Rudolph T. Randa at 320 United States Courthouse, 517 East Wisconsin Avenue, Milwaukee, WI 53202 at 2:00 p.m. on November 10, 2008 to determine whether the proposed Settlement should be approved by the Court as fair, reasonable, and adequate, whether the Plan of Allocation is fair and equitable and therefore should be approved in connection with this Settlement, and to consider the application of Lead Counsel for attorneys’ fees and reimbursement of litigation expenses.</p> <p style= text-align: justify; >According to a news report dated May 26, 2008, Defendants have entered into an agreement of settlement. The agreement in principle provides for the settlement, release and dismissal of all claims asserted against Merge and the individual defendants in the litigation. In exchange, Merge Healthcare has agreed to a one time cash payment of $3,025,000 to the plaintiff and Merge’s primary and one of its excess D&amp;O insurance carriers have agreed to a one time cash payment of $12,975,000 to the plaintiff, for a total of $16 million. The settlement is subject to, among other things, the closing of the financing described above, the drafting and execution of the final settlement documents, and the approval of the settlement by the court.</p>
<p style= text-align: justify; >According to an article dated April 3, 2008, a judge has rejected calls by medical software company Merge Technologies Inc. to dismiss a securities fraud suit but has agreed to toss accounting giant KPMG LLP from the case. Judge Rudolph Randa, of the U.S. District Court for the Eastern District of Wisconsin, also dismissed claims against one of the company’s senior executives, but ruled the case could move ahead against Merge’s former chief executive and chief financial officer. In his Monday ruling, the judge said the plaintiffs had presented sufficient evidence that Merge and its top two officers had deceived investors and artificially inflated the company’s stock price. … The claims against KPMG could not survive either, he said.</p>
<p style= text-align: justify; >Several purported shareholder class action lawsuits have been filed against Merge Technologies, Inc. and certain of its executive officers alleging that defendants violated federal securities laws by issuing a series of materially false statements. Specifically, defendants misrepresented that the Company’s merger with Cedara Software Corporation was highly successful while concealing: (i) that Merge lacked adequate internal controls; (ii) the Company’s financial statements for the second and third quarters of 2005 were unreliable; and (iii) that the Company’s financial projections were irresponsible considering the knowledge defendants possessed concerning the Company’s actual financial situation.</p>
<p style= text-align: justify; >The complaint further alleges that on or around March 17, 2006, Merge reported, inter alia: (i) that the accounting improprieties necessitated that management delay the completion of its financial statements for the fiscal year ended December 31, 2005; (ii) that its audit committee, with the assistance of outside counsel, was investigating anonymous complaints; (iii) that it anticipates a report of material weaknesses in the Company’s internal control over financial reporting; (iv) the suspension of its registration statement on Form S-3 relating to issuance of common stock upon exchange of exchangeable shares of “Merge/Cedara ExchangeCo Ltd.;” and (v) that its audit committee concluded that its previously issued financial statements for the second and third quarters 2005, should no longer be relied upon.</p>
<p style= text-align: justify; >Merge, headquartered in Milwaukee, Wisconsin, engages in the development and delivery of medical imaging and information management software and services. Lead Plaintiff brings federal securities claims against the Company; Richard A. Linden, the Company’s former Chief Executive Officer, President, Director, and Chairman of the Executive Committee; Scott Veech, the Company’s former Chief Financial Officer, Secretary, and Treasurer; David M. Noshay, a former Senior Vice President; and KPMG LLP, Merge’s auditor.</p>
<p style= text-align: justify; >The Consolidated Class Action Complaint alleges that Merge and the individual defendants violated the federal securities laws by improperly and prematurely recognizing revenue and materially overstating Merge’s financial performance over a four-year period. Lead Plaintiff alleges that, throughout the Class Period, Defendants misrepresented Merge’s financial performance through violations of GAAP by entering into secret “side agreements” with customers; shipping products to customers who did not order the products; recognizing revenue for products that did not meet customers’ specifications; recognizing revenue prior to shipping all products included in customers’ contracts; and recognizing revenue on free products provided to customers. Lead Plaintiff alleges securities fraud liability against KPMG LLP arising out of its audits of Merge throughout the Class Period.</p>
<p style= text-align: justify; >The Complaint alleges that, as a result of fraudulent accounting practices, Merge’s stock price surged from between $7 and $8 per share in April 2002 to more than $27 per share by February 2006. Eventually, however, the truth regarding the Company’s financial performance was revealed through several partial disclosures, causing the stock price to plummet. Finally, on August 29, 2006, Merge issued a massive restatement of its previously reported financial results for 2002 through 2005 and revealed that certain former members of management were directly involved in circumventing accounting controls.</p>