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<ITEMS>7.01
<ITEMS>9.01
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<STREET1>501 GRANDVIEW DRIVE
<STREET2>STE 100
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<STATE>CA
<ZIP>94080
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<DESCRIPTION>FORM 8-K DATED 11-24-04
<TEXT>
================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                 ______________

                                    FORM 8-K
                                 ______________

                                 CURRENT REPORT
     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


       Date of Report (Date of earliest event reported): November 24, 2004

                           ACCUIMAGE DIAGNOSTICS CORP.
             (Exact Name of Registrant as Specified in Its Charter)

          NEVADA                         0-26555              33-0713615
(State or Other Jurisdiction of        (Commission         (I.R.S. Employer
Incorporation or organization)         File Number)        Identification No.)

400 OYSTER POINT BOULEVARD, SUITE 201, SOUTH SAN FRANCISCO, CALIFORNIA     94080
             (Address of Principal Executive Offices)                 (Zip Code)

                                 (650) 875-0192
              (Registrant's telephone number, including area code)

   501 GRANDVIEW DRIVE, SUITE 100, SOUTH SAN FRANCISCO, CALIFORNIA 94080-4920
          (Former name or former address, if changed since last report)

Check  the  appropriate  box  below  if the  Form  8-K  filing  in  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

|_|      Written communications pursuant to Rule 425 under the Securities Act
         (17 CFR 230.425)

|_|      Soliciting material pursuant to Rule 14a-12 under the Exchange Act
         (17 CFR 240.14a-12)

|_|      Pre-commencement communications pursuant to Rule 14d-2(b) under the
         Exchange Act (17 CFR 240.14d-2(b))

|_|      Pre-commencement communications pursuant to Rule 13e-4(c) under the
         Exchange Act (17 CFR 240.13e-4(c))


================================================================================


<PAGE>


ITEM 1.01.  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

         AccuImage  Diagnostics  Corp.  (the  "Company")  entered  into a Merger
Agreement (the "Merger Agreement"),  dated as of November 24, 2004, by and among
the Company,  Merge Technologies  Incorporated,  a Nevada corporation ("Merge"),
ADI Acquisition  Corp., a Wisconsin  corporation and wholly owned  subsidiary of
Merge  ("Acquisition  Sub"), and Aviel Faliks, the principal  shareholder of the
Company ("Mr.  Faliks"),  providing for the merger of  Acquisition  Sub with and
into the Company (the  "Merger"),  with the Company  continuing as the surviving
corporation  (the "Merger  Agreement").  Following the Merger,  the Company will
continue as a wholly owned  subsidiary of Merge.  The Boards of Directors of the
Company and Merge have approved the Merger and the Merger Agreement.

         Pursuant  to the terms of the  Merger  Agreement,  shareholders  of the
Company will receive cash for their shares of the  Company's  common stock equal
to  approximately  $0.10 per share of common stock, or a total of  approximately
$6.0  million.  Consummation  of the Merger is subject to customary  conditions,
including approval by the Company's shareholders.  The parties expect the Merger
to be completed in the first quarter of 2005.  The Merger  Agreement is attached
hereto as Exhibit 99.1.

         In connection with the Merger Agreement,  Mr. Faliks has entered into a
voting  agreement  with  Merge  in which  he has  agreed  to vote his 59% of the
Company's  common  stock in favor of the Merger (the  "Voting  Agreement").  The
Voting  Agreement  is  subject  to  termination  under  certain   circumstances,
including  termination of the Merger  Agreement by the Board of Directors of the
Company  pursuant to the Board of Directors'  fiduciary  duties to the Company's
shareholders. The Voting Agreement is attached hereto as Exhibit 99.2.

ITEM 7.01.  REGULATION FD DISCLOSURE.

         On November 24, 2004, the Company issued a news release announcing that
it had  entered  into a Merger  Agreement  with Merge,  Acquisition  Sub and Mr.
Faliks. The full text of the news release is attached as Exhibit 99.3.

         The  information  in this Item 7.01 of this Current Report on Form 8-K,
including  Exhibit 99.3  attached  hereto,  is being  furnished and shall not be
deemed  "filed" for  purposes of Section 18 of the  Securities  Exchange  Act of
1934, as amended,  nor shall it be  incorporated  into future  filings under the
Securities  Act of 1933,  as amended,  or under the  Securities  Exchange Act of
1934,  as amended,  unless  expressly  set forth in such future filing that such
information is to be considered "filed" or incorporated by reference therein.

ITEM 9.01  FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits.

         99.1     Merger  Agreement  dated November 24, 2004, by and among Merge
                  Technologies  Incorporated,  ADI  Acquisition  Corp.,
                  AccuImage Diagnostics Corp. and Aviel Faliks.

         99.2     Voting, Proxy and Option Agreement dated November 24, 2004, by
                  and between Merge Technologies  Incorporated and Aviel
                  Faliks.

         99.3     Press Release of AccuImage Diagnostics Corp. dated November
                  24, 2004.


<PAGE>

                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Company  has duly  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized.

                           ACCUIMAGE DIAGNOSTICS CORP.



                                     By:  /s/ AVIEL FALIKS
                                        _____________________________________
                                          Aviel Faliks, Chairman of the Board

Dated:  November 24, 2004



<PAGE>



                                  EXHIBIT INDEX

         EXHIBIT
         NUMBER   DESCRIPTION
         ______   ___________

         99.1     Merger  Agreement  dated November 24, 2004, by and among Merge
                  Technologies  Incorporated,  ADI Acquisition Corp., AccuImage
                  Diagnostics Corp. and Aviel Faliks.

         99.2     Voting,  Proxy and Option Agreement dated November 24, 2004,
                  by and between Merge Technologies  Incorporated and Aviel
                  Faliks.

         99.3     Press Release of AccuImage Diagnostics Corp. dated November
                  24, 2004.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ex99-1.txt
<DESCRIPTION>MERGER AGREEMENT DATED NOVEMBER 24, 2004, ...
<TEXT>
                                                                    EXHIBIT 99.1


        ===============================================================





                                MERGER AGREEMENT



                                  BY AND AMONG



                        MERGE TECHNOLOGIES INCORPORATED,

                             ADI ACQUISITION CORP.,

                           ACCUIMAGE DIAGNOSTICS CORP.

                                       AND


         THE PRINCIPAL SHAREHOLDER OF ACCUIMAGE DIAGNOSTICS CORPORATION







                                NOVEMBER 24, 2004





        ===============================================================


<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

RECITALS   ..................................................................1

SECTION 1. DEFINITIONS.......................................................1

SECTION 2. THE MERGER; CLOSING; EFFECTIVE TIME...............................8

          2.1. THE MERGER....................................................8

          2.2  CLOSING.......................................................8

          2.3  EFFECTIVE TIME................................................9

          2.4  CHARTER AND BYLAWS............................................9

          2.5. DIRECTORS AND OFFICERS........................................9

          2.6  EFFECT OF THE MERGER ON SHARES................................9

          2.7  EXCHANGE OF SHARES FOR MERGER CONSIDERATION..................11

          2.8  ADJUSTMENT FOR CLOSING BALANCE SHEET.........................12

          2.9      HOLDBACK.................................................13

SECTION 3.  REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE PRINCIPAL
               SHAREHOLDER..................................................13

          3.1  ORGANIZATION.................................................14

          3.2  AUTHORIZATION OF TRANSACTION.................................14

          3.3  NONCONTRAVENTION; CONSENTS...................................14

          3.4. CAPITALIZATION...............................................15

          3.5  FINANCIAL STATEMENTS; SEC FILINGS............................16

          3.6  UNDISCLOSED LIABILITIES......................................18

          3.7  SUBSEQUENT EVENTS............................................19

          3.8  ACCOUNTS RECEIVABLE..........................................20

          3.9  TAX MATTERS..................................................20

          3.10 CONTRACTS....................................................22

          3.11 REAL PROPERTY................................................24

          3.12 INVENTORY....................................................25

          3.13 TITLE AND RELATED MATTERS....................................26

          3.14 INTELLECTUAL PROPERTY........................................26

          3.15 LITIGATION...................................................27

          3.16 EMPLOYEE BENEFITS............................................27

                                      -i-

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)
                                                                            PAGE

         3.17  LABOR RELATIONS; EMPLOYEES...................................29

         3.18  ENVIRONMENTAL MATTERS........................................30

         3.19  LEGAL COMPLIANCE.............................................32

         3.20  PERMITS......................................................32

         3.21    AFFILIATE AGREEMENTS.......................................33

         3.22  INSURANCE....................................................33

         3.23 BANK ACCOUNTS AND POWERS......................................33

         3.24 BROKERS' FEES.................................................34

         3.25 CERTAIN PAYMENTS..............................................34

         3.26 CUSTOMER RELATIONSHIPS........................................34

         3.27 VENDORS.......................................................34

         3.28 BOARD APPROVAL................................................35

         3.29 BOOKS AND RECORDS.............................................35

         3.30 ANTITRUST LAW COMPLIANCE......................................35

         3.31 PRODUCT LIABILITY.............................................35

         3.32 FULL DISCLOSURE...............................................36

         3.33 INTERNAL CONTROL OVER FINANCIAL REPORTING.....................36

         3.34 COMPLIANCE WITH SOX...........................................36

SECTION 4. REPRESENTATIONS AND WARRANTIES OF MERGE..........................37

         4.1  ORGANIZATION..................................................37

         4.2  AUTHORIZATION OF TRANSACTION..................................37

         4.3  NONCONTRAVENTION; CONSENTS....................................37

SECTION 5. PRE-CLOSING COVENANTS............................................37

         5.1  GENERAL.......................................................38

         5.2  NOTICES AND CONSENTS..........................................38

         5.3  CARRY ON IN ORDINARY COURSE...................................38

         5.4 NO DEFAULT.....................................................39

         5.5  FULL ACCESS...................................................39

         5.6  NOTICE OF DEVELOPMENTS........................................40

         5.7  NO SOLICITATION OF TRANSACTIONS...............................40

                                      -ii-

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)

                                                                            PAGE
         5.8 TAX MATTERS....................................................42

         5.9 NEW OEM CONTRACTS..............................................42

         5.10  PROXY STATEMENT..............................................43

         5.11 COMPANY SHAREHOLDERS' MEETING.................................44

         5.12 MISSING RECORDS...............................................44

SECTION 6. POST-CLOSING COVENANTS...........................................44

          6.1 GENERAL.......................................................44

         6.2  LITIGATION SUPPORT............................................44

         6.3  AGREEMENTS REGARDING TAX MATTERS..............................45

         6.4 CONFIDENTIAL INFORMATION.......................................45

         6.5  COVENANT NOT TO COMPETE; SOLICITATION.........................46

         6.6  PAYMENT OF PRINCIPAL SHAREHOLDER'S NOTE.......................46

SECTION 7. CLOSING CONDITIONS...............................................46

         7.1 CONDITIONS TO OBLIGATION OF MERGE..............................46

         7.2  CONDITIONS TO OBLIGATION OF THE COMPANY AND ITS SHAREHOLDERS..49

SECTION 8. REMEDIES FOR BREACHES OF THIS AGREEMENT..........................50

         8.1 SURVIVAL.......................................................50

         8.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF MERGE................50

         8.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY..........51

         8.4 INDEMNIFICATION PROCEDURES.....................................51

         8.5 BASKET; CAP; SOLE SOURCES OF INDEMNIFICATION...................52

         8.6 RIGHT OF SET-OFF...............................................52

         8.7 DISPUTE RESOLUTION.............................................52

SECTION 9. TERMINATION......................................................53

         9.1  TERMINATION...................................................53

         9.2 EFFECT OF TERMINATION..........................................54

SECTION 10. MISCELLANEOUS...................................................55

         10.1 PRESS RELEASES AND ANNOUNCEMENTS..............................55

         10.2  EXPENSES; TRANSFER TAXES.....................................55

                                     -iii-

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)
                                                                            PAGE

         10.3  WAIVER.......................................................56

         10.4  FURTHER ASSURANCES...........................................56

         10.5  NO THIRD-PARTY BENEFICIARIES.................................56

         10.6  SUCCESSORS AND ASSIGNS.......................................56

         10.7  SEVERABILITY.................................................57

         10.8  COUNTERPARTS; FACSIMILE SIGNATURES...........................57

         10.9  DESCRIPTIVE HEADINGS; CONSTRUCTION...........................57

         10.10  NOTICES.....................................................57

         10.11  ENTIRE AGREEMENT............................................58

         10.12  AMENDMENTS..................................................59

         10.13  TIME OF ESSENCE.............................................59

         10.14  INCORPORATION OF EXHIBITS AND SCHEDULES.....................59
         10.15  ATTORNEYS' FEES; GOVERNING LAW..............................59



<PAGE>





                                    EXHIBITS

Consulting Agreement...............................................Exhibit A
Escrow Agreement...................................................Exhibit B
Items for Opinion of Counsel of Company............................Exhibit C
Items for Opinion of Counsel to Merge..............................Exhibit D

                                    SCHEDULES

Subsidiaries and Affiliates........................................Schedule 3.1
Liens and Encumbrances; Consents...................................Schedule 3.3
Capitalization ....................................................Schedule 3.4
Company Financial Statements.......................................Schedule 3.5
Undisclosed Liabilities............................................Schedule 3.6
Conduct of Business................................................Schedule 3.7
Accounts Receivable................................................Schedule 3.8
Tax Matters........................................................Schedule 3.9
Contracts .........................................................Schedule 3.10
Leases.............................................................Schedule 3.11
Title..............................................................Schedule 3.13
Intellectual Property..............................................Schedule 3.14
Litigation.........................................................Schedule 3.15
Employee Benefit Plans.............................................Schedule 3.16
Labor Relations; Employees  .......................................Schedule 3.17
Legal Compliance...................................................Schedule 3.19
Permits............................................................Schedule 3.20
Affiliate Agreements...............................................Schedule 3.21
Insurance..........................................................Schedule 3.22
Bank Accounts......................................................Schedule 3.23
Customers .........................................................Schedule 3.26
Vendors............................................................Schedule 3.27
Internal Controls Over Financial Reporting.........................Schedule 3.33


<PAGE>

                                MERGER AGREEMENT

         THIS MERGER AGREEMENT (the  "AGREEMENT") is made and entered into as of
the 24th day  November,  2004 by and among MERGE  TECHNOLOGIES  INCORPORATED,  a
Wisconsin  corporation  ("MERGE"),  ADI ACQUISITION  CORP., a Nevada corporation
("ACQUISITION SUB"), ACCUIMAGE DIAGNOSTICS CORP., a Nevada corporation (together
with its  subsidiaries  and  predecessors,  the  "COMPANY"),  and  AVIEL  FALIKS
("PRINCIPAL SHAREHOLDER").

                                    RECITALS

         A. The Company is  presently  engaged in the  business of  development,
marketing and support of software for the visualization, analysis and management
of  medical  imaging  data whose  primary  function  is to  enhance  physicians'
interpretation  of  data  from  medical  imaging  modalities  such  as  computed
tomography  ("CT"),   magnetic  resonance  ("MR")  and  ultrasound  through  the
application of  three-dimensional  ("3D") computer graphics and image processing
technologies (collectively the "Business").

         B. The  respective  boards of directors  of each of MERGE,  ACQUISITION
SUB, and the COMPANY have  determined  that the merger of  Acquisition  Sub with
into the Company (the "Merger") upon the terms and subject to the conditions set
forth in this Agreement is advisable and have approved the Merger.

         C. The Principal  Shareholder owns 34,050,000  Shares of the Company on
the date hereof and has  entered in a Voting,  Proxy and Option  Agreement  with
Merge on the date hereof (the "Voting  Agreement")  approving the Merger and the
transactions contemplated by this Agreement, subject to the conditions set forth
in the Voting Agreement.

         D. The  parties  desire to make  certain  representations,  warranties,
covenants and agreements as set forth in this Agreement.

          NOW,  THEREFORE,  in consideration of the mutual agreements  contained
herein and for other good and  valuable  consideration,  the value,  receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

                             SECTION 1. DEFINITIONS

          For purposes of this Agreement,  the following terms have the meanings
set forth below:

         "ACQUISITION  PROPOSAL"  means any offer or  proposal  made by a Person
other than Merge or Acquisition  Sub  concerning any (a) merger,  consolidation,
business  combination  or  similar  transaction  involving  the  Company  or any
subsidiary  of the  Company  pursuant to which the  stockholders  of the Company
immediately  prior to such transaction  would own less than 85% of the aggregate

                                       1

<PAGE>

voting power of the entity  surviving or resulting from such transaction (or the
ultimate  parent  entity  thereof),   (b)  sale,   exclusive  license  or  other
disposition,   directly  or  indirectly,   of  assets  of  the  Company  or  its
subsidiaries  representing 15% or more of the consolidated assets of the Company
and its subsidiaries;  (c) issuance, sale or other disposition of securities (or
rights to purchase,  or instruments  convertible into, or exchangeable for, such
securities) by the Company  representing  15% or more of the voting power of the
Company;  or (d)  transaction  in  which  any  Person  or  group  shall  acquire
beneficial  ownership (as defined in Rule 13d-3 under the Exchange  Act), or the
right to acquire beneficial  ownership of 15% or more of the outstanding capital
stock of the Company.

         "AFFILIATE"  has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.

         "AFFILIATED  GROUP"  means any  affiliated  group within the meaning of
Section 1504(a) of the Code or any similar provision of state,  local or foreign
Law.

         "AGREEMENT"  means this  Merger  Agreement,  as the same may be amended
from time to time in accordance with the terms hereof.

         "ANCILLARY   AGREEMENTS"  means  the  Voting   Agreement,   the  Escrow
Agreement,  the Consulting Agreement,  and any Employment Agreement to be signed
at Closing by an employee of the Company and Merge or any  Affiliate of Merge or
a Principal Shareholder.

         "CODE" means the Internal Revenue Code of 1986, as amended.

         "COMPANY"   means   AccuImage   Diagnostics   Corporation,   a   Nevada
corporation, its subsidiaries and its predecessors.

         "CONSULTING  AGREEMENT'  means the Consulting  Agreement in the form of
EXHIBIT A between Merge and Principal Shareholder to be signed at Closing.

         "CONTRACTS"  means,  collectively,  all leases,  licenses,  agreements,
purchase orders, indentures,  contracts, commitments, bids and proposals, Plans,
guarantees,  letters of credit, bonds, notes,  mortgages,  indemnities,  and all
orders outstanding for the purchase or provision of materials, goods or services
by the Company, in each case whether written or oral,  including those listed on
SCHEDULE 3.10, to which the Company is a party.

         "EMPLOYEE  PENSION  BENEFIT  PLAN" has the meaning set forth in Section
3(2) of ERISA.

           "EMPLOYEE  WELFARE BENEFIT PLAN" has the meaning set forth in Section
3(1) of ERISA.

                                       2

<PAGE>

         "ENVIRONMENTAL,   HEALTH,  AND  SAFETY  LIABILITIES"  means  any  cost,
damages, expense, liability, obligation or other responsibility, including those
of the foregoing  which are latent,  contingent or potential in nature,  arising
from or under any Environmental Law and consisting of or relating to:

                  (a) any environmental,  health or safety matters or conditions
                      (including on-site or off-site contamination, occupational
                      safety and health,  and regulation of chemical  substances
                      or products);

                  (b) fines, penalties, judgments, awards, settlements, legal or
                      administrative   proceedings,   damages,  losses,  claims,
                      demands  and   response,   investigative,   remedial,   or
                      inspection   costs   and   expenses   arising   under  any
                      Environmental Law;

                  (c) financial  responsibility  under any  Environmental Law or
                      any Law  related  to  occupational  safety  and health for
                      cleanup   costs  or  corrective   action,   including  any
                      investigation,  cleanup,  removal,  containment  or  other
                      remediation   or   response   actions   required   by  any
                      Environmental  Law  (whether  or not such  action has been
                      required or  requested by any  Governmental  Entity or any
                      other Person) and for any natural resource damages; or

                  (d) any  other  compliance,   corrective,   investigative,  or
                      remedial measures required under any Environmental Law.

         The terms "removal" and "remediation," and "responsive  action" include
the types of activities covered by the United States Comprehensive Environmental
Response,  Compensation,  and Liability Act, 42 U.S.C. Section 9601 et. seq., as
amended ("CERCLA").

         "ENVIRONMENTAL  LAW" means any Law with respect to the  preservation of
the environment or the promotion of worker health and safety,  including any Law
relating to Hazardous  Materials,  drinking water,  surface water,  groundwater,
wetlands, landfills, open dumps, storage tanks, underground storage tanks, solid
waste, waste water,  storm water run-off,  noises,  odors, air emissions,  waste
emissions or wells.  Without limiting the generality of the foregoing,  the term
encompasses  each of the  following  statutes  and the  regulations  promulgated
thereunder,  and any similar  applicable  state,  local or foreign Law,  each as
amended  (a)  CERCLA,  (b) the  Solid  Waste  Disposal  Act,  (c) the  Hazardous
Materials  Transportation  Act,  (d) the Toxic  Substances  Control Act, (e) the
Clean Water Act, (f) the Clean Air Act, (g) the Safe Drinking Water Act, (h) the
National  Environmental  Policy Act of 1969,  (i) the Superfund  Amendments  and
Reauthorization  Act of 1986,  (j) Title  III of the  Superfund  Amendments  and
Reauthorization Act, (k) the Federal Insecticide,  Fungicide and Rodenticide Act
and (l)  the  provisions  of the  Occupational  Safety  and  Health  Act of 1970

                                       3

<PAGE>

relating to the  handling of and  exposure to  Hazardous  Materials  and similar
substances.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended.

         "ESCROW AGENT" means The Capital Trust Company of Delaware.

         "ESCROW  AGREEMENT' means the Escrow  Agreement among Merge,  Principal
Shareholder and the Escrow Agent, in  substantially  the form of EXHIBIT B to be
signed prior to Closing.

         "GAAP" means United States generally accepted accounting principles, as
in effect as of the date of this Agreement.

         "GOVERNMENTAL  ENTITY"  means any  government  or any  agency,  bureau,
board, commission, court, department, official, political subdivision,  tribunal
or other  instrumentality  of any government,  whether federal,  state or local,
domestic or foreign.

         "HAZARDOUS  ACTIVITY"  means the  distribution,  generation,  handling,
importing,  management,   manufacturing,   processing,  production,  refinement,
Release,  storage,  transfer,  transportation,  treatment or use  (including any
withdrawal or other use of  groundwater)  of Hazardous  Materials in, on, under,
about or from the  facilities  or any part thereof into the  environment,  other
than in  ordinary  use in  compliance  with Laws,  and any other act,  business,
operation  or  thing  that  poses an  unreasonable  risk of harm to  persons  or
property  on or off  the  facilities,  or  that  may  affect  the  value  of the
facilities of the Company.

         "HAZARDOUS MATERIALS" means each and every element, compound,  chemical
mixture,  contaminant,  pollutant,  material,  waste or other  substance that is
defined,  determined or identified as hazardous or toxic under any Environmental
Law or the Release of which is prohibited under any  Environmental  Law. Without
limiting the generality of the  foregoing,  the term will include (a) "hazardous
substances" as defined in CERCLA, the Superfund  Amendments and  Reauthorization
Act of 1986, or Title III of the Superfund  Amendments and  Reauthorization  Act
and regulations promulgated  thereunder,  each as amended, (b) "hazardous waste"
as  defined  in  the  Solid  Waste  Disposal  Act  and  regulations  promulgated
thereunder,  each as  amended,  ( c)  "hazardous  materials"  as  defined in the
Hazardous   Materials   Transportation  Act  and  the  regulations   promulgated
thereunder,  each as amended,  (d) "chemical substance or mixture" as defined in
the Toxic Substances Control Act and regulation promulgated thereunder,  each as
amended, (e) petroleum and petroleum products and byproducts and (f) asbestos.

         "INTELLECTUAL   PROPERTY"   means,   collectively,    patents,   patent
disclosures,  trademarks,  service  marks,  trade  dress,  logos,  trade  names,
copyrights and mask works,  and all  registrations,  applications,  reissuances,
continuations, continuations-in-part,  revisions, extensions, reexaminations and
associated  goodwill with respect to each of the  foregoing,  computer  software

                                       4

<PAGE>

(including source and object codes), computer programs,  computer data bases and
related  documentation  and  materials,  data,  documentation,   trade  secrets,
confidential  business  information  (including ideas,  formulas,  compositions,
inventions,  know-how,  manufacturing  and production  processes and techniques,
research and development  information,  drawings,  designs, plans, proposals and
technical  data,  financial,  marketing  and business  data and pricing and cost
information)  and  other  intellectual  property  rights  (in  whatever  form or
medium).

         "IRS" means the Internal Revenue Service of the U.S.  Department of the
Treasury.

         "LAW"  means  any  constitutional   provision,   statute,   law,  rule,
regulation, Permit, decree, injunction,  judgment, order, ruling, determination,
finding or writ of any Governmental Entity.

         "LIEN" means any mortgage,  pledge,  security interest,  charge, claim,
suretyship,  attachment,  restriction or encumbrance, other than (a) mechanics',
materialmens' and similar liens with respect to amounts not yet due and payable,
(b)  liens  for Taxes not yet due and  payable  and (c)  liens  securing  rental
payments under capital lease arrangements.

         "NET ASSET VALUE" means total  assets  minus total  liabilities  of the
Company determined in accordance with GAAP.

         "ORGANIZATIONAL  DOCUMENTS"  means,  collectively,  (a) the articles or
certificate of incorporation  and the bylaws of a corporation;  (b) any charter,
operating  agreement and similar  documents  adopted or filed in connection with
the creation,  formation or organization  of a Person;  and (c) any amendment to
any of the foregoing.

         "PBGC" means the Pension Benefit Guaranty Corporation.

         "PERMIT" means any license, permit, franchise, certificate of authority
or order, or any waiver of the foregoing, issued by any Governmental Entity.

         "PLAN" means any written plan, fund, program,  policy,  payroll policy,
contract or  commitment,  whether  qualified or not qualified for federal income
tax  purposes,  whether for the benefit of a single  individual or more than one
individual  whether or not subject to ERISA,  which is (a) an  Employee  Pension
Benefit Plan, (b) an Employee  Welfare Benefit Plan or (c) an incentive,  bonus,
employment,   equity,   retention,   non-competition,   deferred   compensation,
severance,  change in control or ownership or other benefit  compensatory  plan,
fund, program, policy,  agreement,  contract or commitment of the Company or any
Affiliate of the Company for employees, former employees, directors, independent
contractors,  former  independent  contractors  or  their  dependents  or  their
beneficiaries.

                                       5

<PAGE>

         "PERSON" means an individual, a partnership,  a corporation,  a limited
liability  company,  an  association,  a joint stock  company,  a trust, a joint
venture, an unincorporated organization or a Governmental Entity.

         "PROHIBITED  TRANSACTION"  has the  meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.

         "REGULATORY  AGENCY" means (i) the Securities and Exchange  Commission,
(ii) any self-regulatory  organization  (including NASDAQ),  and (iii) any other
federal, state or foreign governmental or regulatory agency or authority.

         "RELATED  PERSON"  means with respect to a particular  individual:  (a)
each other member of such individual's  Family;  (b) any Person that is directly
or  indirectly  controlled  by such  individual  or one or more  members of such
individual's Family; (c) any Person with respect to which such individual or one
or more  members of such  individual's  Family  serves as a  director,  officer,
partner,  executor,  or trustee  (or in a similar  capacity).  "RELATED  PERSON"
means,  with  respect to a specified  Person other than an  individual:  (a) any
Person  that  directly  or  indirectly  controls,   is  directly  or  indirectly
controlled  by, or is directly or  indirectly  under  common  control  with such
specified  Person;  (b) any  Person  that  holds a 5% or more  voting  or equity
interest in such  specified  Person;  (c) each Person that serves as a director,
officer,  partner, executor or trustee of such specified Person (or in a similar
capacity);  (d) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar  capacity);  and (e) any related
Person of any  individual  described  in clause (b) or (c). For purposes of this
definition, the "FAMILY" of an individual includes (i) the individual,  (ii) the
individual's  spouse and former  spouses,  (iii) any other natural person who is
related to the individual or the individual's  spouse as a parent or descendant,
and (iv) any other natural person who resides with such individual.

         "RELEASE"   means  any  spilling,   leaking,   emitting,   discharging,
depositing, escaping, leaching, dumping or other releasing into the environment,
whether intentional or unintentional.

         "SCHEDULES" means,  collectively,  the disclosure schedules attached to
this Agreement,  which are incorporated into the Agreement in their entirety and
made a part thereof.

         "SHARES" means all of the issued and outstanding  voting and non-voting
shares of capital stock of the Company.

         "SHAREHOLDERS" means the owners of all the Shares of the Company.

         "SUPERIOR  PROPOSAL" means any bona fide written offer or proposal made
by a Person  other than  Merge or  Acquisition  Sub that  concerns  any  merger,
consolidation,  tender offer,  exchange offer,  asset acquisition  (including by
exclusive license), stock or other securities issuance,  business combination or

                                       6

<PAGE>

similar transaction involving the Company or any subsidiary of the Company that,
if  consummated,  would  result in a third party (or its  stockholders)  owning,
directly or indirectly, a majority of the Shares then outstanding (or a majority
of the voting power of the shares of capital stock of the surviving  entity in a
merger, or of the direct or indirect parent of the surviving entity in a merger)
or a majority of the assets of the Company  and its  subsidiaries  prior to such
transaction,  which the Board of  Directors  of the Company  determines  in good
faith (after  consultation with a recognized  financial  advisor) to be (i) more
favorable  to the  stockholders  of the Company  from a financial  point of view
(taking into account  probability  of closing and all other terms and conditions
of such proposal and this  Agreement  and any changes to the financial  terms of
this  Agreement  proposed by Merge in response to such offer or otherwise)  than
the Merger; and (ii) reasonably capable of being completed,  taking into account
all  financial,  legal  regulatory  and other aspects of the  proposal,  and the
identity of the Person making the proposal.

         "TAX RETURN" means any return, declaration, report, claim for refund or
information  return or statement  relating to Taxes,  including  any schedule or
attachment thereto.

         "TAX" means any  federal,  state,  local or foreign  net income,  gross
income, gross receipts, sales, use, ad valorem,  transfer,  franchise,  profits,
license, lease, service, service use, withholding,  payroll, employment, excise,
severance,   environmental,   capital  stock,  social  security,   unemployment,
disability,  real  property,  personal  property,   registration,  value  added,
alternative,  add-on minimum,  stamp,  occupation,  premium,  windfall  profits,
customs, duties or other tax, fee, assessment or charge, including any interest,
penalty or addition thereto.

         "TRANSFER  AGENT" means Pacific Stock Transfer  Company,  the Company's
current transfer agent for its Shares.

         In addition,  the following  terms shall have the meanings  ascribed to
them in the section number opposite such term:

         "ACCOUNTS RECEIVABLE"..............................Section 3.8
         "AUDITOR" .........................................Section 2.8
         "BALANCE SHEET"....................................Section 3.8
         "BALANCE SHEET PROCEDURES".........................Section 2.8
         "BASKET AMOUNT"....................................Section 8.5
         "BY-LAWS"..........................................Section 2.4
         "BUSINESS".........................................Recitals
         "CERTIFICATE"......................................Section 2.6(a)
         "CERTIFICATE OF MERGER"............................Section 2.3
         "CHARTER"..........................................Section 2.4
         "CLOSING"..........................................Section 2.2
         "CLOSING DATE".....................................Section 2.2
         "CLOSING DATE BALANCE SHEET".......................Section 2.8
         "COMPANY BALANCE SHEET"............................Section 3.5

                                       7

<PAGE>

         "COMPANY SEC REPORTS"..............................Section 3.5
         "CONSULTING AGREEMENT..............................Section 1
         "DAMAGES"..........................................Section 8.2
         "DISSENTING SHAREHOLDER"...........................Section 2.6
         "DISSENTING SHARES"................................Section 2.6
         "EDGAR"............................................Section 3.5
         "EFFECTIVE TIME"...................................Section 2.3
         "ESCROW AGREEMENT".................................Section 1
         "EXCLUDED SHARES"..................................Section 2.6
         "FILED COMPANY SEC REPORTS"........................Section 3.5
         "FINANCIAL STATEMENTS".............................Section 3.5(b)
         "HOLDBACK".........................................Section 2.9
         "INDEMNIFIED BUYERS"...............................Section 8.2
         "MERGE COMPANIES"..................................Section 2.6(a)
         "MERGER"...........................................Recitals
         "MERGER CONSIDERATION".............................Section 2.3
         "NEVADA SECRETARY".................................Section 2.3
         "NEVADA STATUTE"...................................Section 2.1
         "PRELIMINARY  CLOSING BALANCE SHEET"...............Section 2.8
         "SEC"..............................................Section 3.5(a)
         "SOX"..............................................Section 3.5
         "SURVIVING CORPORATION"............................Section 2.1
         "TARGET AMOUNT"....................................Section 2.8
         "VOTING AGREEMENT..................................Recitals
         "YEAR-END BALANCE SHEET"...........................Section 3.5(e)

                 SECTION 2. THE MERGER; CLOSING; EFFECTIVE TIME

         2.1.     THE MERGER.

         Upon  the  terms  and  subject  to the  conditions  set  forth  in this
Agreement,  at the Effective  Time (as defined in Section 2.3)  Acquisition  Sub
shall be merged with and into the Company and the separate  corporate  existence
of Acquisition  Sub shall  thereupon  cease.  The Company shall be the surviving
corporation in the Merger (sometimes  hereinafter  referred to as the "Surviving
Corporation"),  and the separate corporate existence of the Company with all its
rights, privileges,  immunities, powers and franchises shall continue unaffected
by the Merger. The Merger shall have the effects specified in the Nevada General
Corporation Law (the "Nevada Statute").

         2.2      CLOSING.

         The closing of the Merger (the  "Closing")  shall take place (i) at the
offices of Michael Best & Friedrich  LLP,  100 E.  Wisconsin  Avenue,  Milwaukee
Wisconsin  on the  second  business  day  after  the day on which the last to be
fulfilled or waived of the  conditions set forth in Section 7 shall be satisfied
or waived in accordance with this Agreement (other than those conditions that by
their nature are to be satisfied at the Closing,  but subject to the fulfillment

                                       8

<PAGE>

or waiver of those  conditions)  or (ii) at such other  place and time and/or on
such other date as the  Company  and Merge may agree in  writing  (the  "Closing
Date").

         2.3      EFFECTIVE TIME.

         As soon as  practicable  following the Closing on the Closing Date, the
Company  and Merge will  cause a  certificate  of merger  (the  "Certificate  of
Merger") to be executed,  acknowledged  and filed with the Secretary of State of
the State of Nevada (the "Nevada  Secretary") as provided in Section  92A.200 of
the Nevada Statute.  As part of such filing, a plan of merger in form reasonably
acceptable to Merge and the Company will be filed with the Nevada Secretary. The
Merger shall  become  effective  at the time the  Certificate  of Merger is duly
filed with the Secretary of State of the State of Nevada (the "Effective Time").

         2.4      CHARTER AND BYLAWS.

         The  Certificate  of  Incorporation  of  Acquisition  Sub as in  effect
immediately   prior  to  the  Effective   Time  shall  be  the   certificate  of
incorporation of the Surviving  Corporation (the "Charter"),  until duly amended
as provided  therein or by applicable  Law. The bylaws of Acquisition  Sub as in
effect  immediately  prior to the  Effective  Time  shall be the  bylaws  of the
Surviving Corporation (the "By-Laws"), until duly amended as provided therein or
by applicable Law.

         2.5. DIRECTORS AND OFFICERS.

         The directors of Acquisition Sub at the Effective Time shall,  from and
after the Effective  Time, be the directors of the Surviving  Corporation  until
their  successors  have been duly  elected or appointed  and  qualified or until
their earlier death,  resignation or removal in accordance  with the Charter and
the By-Laws.  The officers of Acquisition Sub at the Effective Time shall,  from
and after the Effective Time, be the officers of the Surviving Corporation until
their  successors  have been duly  elected or appointed  and  qualified or until
their earlier death,  resignation or removal in accordance  with the Charter and
the By-Laws.

         2.6      EFFECT OF THE MERGER ON SHARES.

                  (a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any  Shares of the  Company,  each Share
issued and  outstanding  immediately  prior to the  Effective  Time  (other than
"Excluded Shares" as defined below) shall be converted into the right to receive
the proportionate  share of Six Million Dollars  ($6,000,000) which amount shall
include the Holdback (as defined in Section 2.9) (the "Merger Consideration").

                  Shares owned by Merge,  Acquisition Sub or any other direct or
indirect  Subsidiary of Merge  (collectively,  the "Merge  Companies") or Shares

                                       9

<PAGE>

that are owned by the  Company  or any  direct  or  indirect  subsidiary  of the
Company,  and in each  case  not held on  behalf  of third  parties,  or  Shares
("Dissenting Shares") that are owned by shareholders ("Dissenting Shareholders")
who do not vote to approve the Merger and comply with all the  provisions of the
Nevada  Statute  concerning  the right of holders of Shares to dissent  from the
Merger  and  require  payment  of fair value (as that term is used in the Nevada
Statute)  for  their  Shares  shall be an  "Excluded  Share"  and  collectively,
"Excluded  Shares" for purposes of this  Agreement.  At the Effective  Time, all
Shares  shall no longer be  outstanding  and shall be  canceled  and retired and
shall  cease  to  exist,  and  each  certificate  (a   "Certificate")   formerly
representing  any of such Shares (other than Excluded  Shares) shall  thereafter
represent only the right to receive the Merger Consideration.

                  The   portion  of  the  Merger   Consideration   due  to  each
Shareholder on the Closing Date (other than  Dissenting  Shareholders)  shall be
his or her proportionate ownership of the outstanding Shares as of Closing.

                  (b)  Dissenting  Shares.   Notwithstanding  anything  in  this
Agreement  to the  contrary,  any  Dissenting  Shares  shall not be converted as
described in Section  2.6(a),  but shall be converted  into the right to receive
such  consideration as may be determined to be due to the respective  Dissenting
Shareholders  pursuant to the Nevada Statute.  If, after the Effective Time, any
Dissenting  Shareholder  withdraws  his demand or fails to perfect or  otherwise
loses his rights as a Dissenting  Shareholder  to payment of fair value,  in any
case pursuant to the Nevada Statute,  his Shares shall be deemed to be converted
as of the Effective  Time into the right to receive his  proportionate  share of
the Merger Consideration.  The Company shall give Merge (i) prompt notice of any
demands  for  fair  value  for  Shares  received  by the  Company  and  (ii) the
opportunity to participate in and direct all  negotiations  and proceedings with
respect to any such demands.  The Company  shall not,  without the prior written
consent of Merge,  make any payment with respect to, or settle,  offer to settle
or otherwise  negotiate,  any such  demands.  Any amounts paid to the holders of
Dissenting  Shares  in  excess  of  their  proportionate  share  of  the  Merger
Consideration, and the costs of all proceedings, including attorneys' and expert
witness fees, in resolving the claim of any Dissenting Shareholder,  shall be an
amount to be  indemnified  under Section 8 or paid out of the  Holdback,  at the
option of Merge

                  (c) Cancellation of Shares.  Each Share issued and outstanding
immediately  prior to the Effective Time and owned by any of the Merge Companies
or owned by the Company or any direct or indirect  subsidiary of the Company (in
each case other than Shares that are owned on behalf of third  parties),  shall,
by  virtue of the  Merger  and  without  any  action  on the part of the  holder
thereof, cease to be outstanding,  shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.

                  (d)  Acquisition  Sub. At the  Effective  Time,  each share of
Common  Stock,  par  value  $.01  per  share,  of  Acquisition  Sub  issued  and
outstanding  immediately  prior to the  Effective  Time  shall be  automatically
converted into one share of common stock of the Surviving Corporation.

                                       10

<PAGE>


         2.7      EXCHANGE OF SHARES FOR MERGER CONSIDERATION.

                  (a) Payment Procedures. At the Closing, Merge shall deliver to
the Transfer Agent, for delivery to each of the Shareholders (other than holders
of  Excluded  Shares)  such  Shareholder's  proportionate  share  of the  Merger
Consideration  due at Closing in exchange  for Shares being  surrendered  except
that the Holdback shall be delivered by Merge to the Escrow Agent at Closing for
deposit  pursuant to the Escrow  Agreement.  Upon surrender of a Certificate (or
affidavit of loss in lieu thereof) for  cancellation to the Transfer Agent,  the
holder of such  Certificate  shall be entitled  to receive in exchange  therefor
(after giving effect to any tax withholding  required by Law) (i) a check in the
amount of the holder's  proportionate  share of the Merger  Consideration  based
upon the number of Shares  represented by such Certificate (or affidavit of loss
in  lieu  thereof),  and the  Certificate  so  surrendered  shall  forthwith  be
canceled.  No interest  will be paid or accrued on any amount  payable  upon due
surrender of the Certificates. In the event of a transfer of ownership of Shares
that is not  registered in the transfer  records of the Transfer  Agent, a check
for any cash to be paid upon due  surrender  of the  Certificate  may be paid to
such a  transferee  if the  Certificate  formerly  representing  such  Shares is
presented to the Transfer  Agent,  accompanied by all documents  required by the
Transfer  Agent to evidence and effect such  transfer  and to evidence  that any
applicable stock transfer taxes have been paid or are not applicable.

                  (b)  Transfers.  After the Effective  Time,  there shall be no
transfers on the stock transfer  books  regarding the Company of the Shares that
were outstanding immediately prior to the Effective Time.

                  (c) Lost, Stolen or Destroyed  Certificates.  In the event any
Certificates  shall have been lost,  stolen or destroyed,  upon the making of an
affidavit  of that fact by the Person  claiming  such  Certificates  to be lost,
stolen or destroyed and execution of an indemnity agreement in form satisfactory
to Merge  and the  Transfer  Agent  and  further,  if  required  by Merge or the
Transfer  Agent,  the  posting by such Person of a bond in  customary  amount as
indemnity  against  any claim that may be made  against it with  respect to such
Certificates,  the Transfer Agent may issue in exchange for such lost, stolen or
destroyed  Certificates  a check  in the  amount  (after  giving  effect  to any
required  tax  withholdings)  proportionate  share of the  Merger  Consideration
represented by such lost, stolen or destroyed Certificate deliverable in respect
of, the Shares represented by such Certificates pursuant to this Agreement.

         2.8      ADJUSTMENT FOR CLOSING BALANCE SHEET.

                  (a)  ADJUSTMENT.  Merge shall be reimbursed by the amount that
the Net Asset Value (as hereinafter defined) of the Company determined as of the
Closing Date is less than $-220,168  (negative  $220,168) (the "Target Amount").
The amount of any such adjustment shall be paid to Merge from the Holdback.

                                       11

<PAGE>

                  (b) NET ASSET VALUE.  For purposes of this  Section,  the term
"Net Asset  Value" means the net asset value  reflected  in the Closing  Balance
Sheet (as hereinafter defined), except that the following shall be excluded from
the calculation of any Net Asset Value: (i) cash received upon exercise of stock
options for Shares  exercised  after  September 30, 2004;  (ii) up to $80,000 of
legal fees incurred by the Company in connection  with the Merger,  as evidenced
by invoices of legal  counsel  for the Company  prepared in a manner  consistent
with past practices;  and (iii) operating  losses of the Company incurred in the
ordinary  course  of  business  from and  after  October  1, 2004 (not to exceed
$40,000 per full calendar month, prorated to the Closing Date).


                  (c) Five days prior to the  Closing  Date,  the  Company  will
prepare a Preliminary  Balance Sheet in accordance  with GAAP which has properly
accrued for all  amounts  owed to vendors and  employees,  current and  previous
management  and properly  reserved for bad debt and all pending,  threatened and
contingent  liabilities  required  to be  reserved  for  under  GAAP  up to  and
including the Closing Date (such balance sheet, the "Preliminary  Balance Sheet"
and such procedures, the "Balance Sheet Procedures"). If the Preliminary Balance
Sheet  indicates that the Net Asset Value is less than the Target Amount,  Merge
may deduct the difference from the Merger Consideration.

                  The final  balance sheet as of  the Closing Date (the "Closing
Date Balance  Sheet") will be prepared by Merge and  delivered to the  Principal
Shareholder within one hundred eighty (180) days after Closing. The Closing Date
Balance Sheet shall be prepared consistent with the Balance Sheet Procedures. If
the  Principal  Shareholder  notifies  Merge within  thirty (30) days  following
receipt  of the  Closing  Date  Balance  Sheet  that the  Principal  Shareholder
disagrees with the Closing Date Balance Sheet, the parties shall attempt in good
faith to resolve such dispute as soon as possible.  If the parties are unable to
resolve such dispute within thirty (30) days after the Merge's receipt of notice
from the  Principal  Shareholder,  such dispute  shall be submitted to a neutral
office of nationally recognized independent  accountants (the "Auditor") jointly
chosen by, and mutually  acceptable to, the Principal  Shareholder and Merge for
the purpose of resolving  the dispute set forth in such  notice.  If the parties
are not able to agree on the Auditor  within thirty (30) days, the Auditor shall
be the Milwaukee Office of Grant Thornton or Deloitte Touche.  The Auditor shall
review and decide the issue or issues that are subject of such dispute within 30
days. The decision of the Auditor shall be binding on the parties.  The fees and
costs of the Auditor  shall be borne equally by the  Principal  Shareholder  and
Merge (50%).  Any amount by which the Net Asset Value, as finally  determined in
the Closing Date Balance  Sheet,  is less than the Target Amount (other than any
amount already withheld from the Merger  Consideration) shall at Merge's option,
either  first be paid  out of the  Holdback  referred  to in  Section  2.9 or be
subject to  indemnification  as provided in Section 8. The Merger  Consideration
shall not be increased if the Closing Date Balance Sheet Net Asset Value shows a
lower net loss than the Target Amount.

                                       12

<PAGE>

         2.9      HOLDBACK.

         $1,000,000 of the Merger  Consideration  shall be deposited by Merge at
Closing  with  the  Escrow  Agent to be  governed  by the  terms  of the  Escrow
Agreement (the  "Holdback").  At the conclusion of the escrow Merge will pay the
Principal  Shareholder  simple  interest  out of its  own  funds  to the  extent
sufficient funds are not in Escrow,  at the rate of five percent (5%) per annum,
on the net adjusted balance of the Holdback outstanding at the end of the escrow
period (i.e.  original  balance  less amounts due to Merge under  Section 2.8 or
Section 8 of this  Agreement)  and due to Principal  Shareholder.  Such interest
will be calculated  from the Closing Date. No interest shall be paid by Merge or
out of the Escrow to  Principal  Shareholder  from and after the Closing Date on
amounts paid to Merge out of the Escrow.

            SECTION 3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
                            THE PRINCIPAL SHAREHOLDER

         The Company and the Principal Shareholder,  jointly and severally prior
to the  Closing,  and the  Principal  Shareholder  by himself from and after the
Closing,  hereby  represent  and  warrant  to,  and  covenant  with,  Merge  and
Acquisition  Sub as of the date of this Agreement and as of the Closing Date, as
follows, it being agreed that a disclosure  applicable to one representation and
warranty shall be deemed to modify and provide  information  with respect to the
other  representations  and  warranties  to which the  disclosure  is reasonably
believed to be relevant without the necessity of repetition:

         3.1      ORGANIZATION.

         The Company is a corporation  duly organized,  validly  existing and in
good standing under the Laws of the State of Nevada. The Company and each of its
Affiliates  is duly  qualified  or licensed to conduct  business  and is in good
standing  under  the  Laws of  each  jurisdiction  where  the  character  of the
properties owned, leased or operated by it or the nature of its activities makes
such  qualification  necessary,  a list of which is set forth on  SCHEDULE  3.1,
except where the failure to so qualify would not have a material  adverse effect
on the business or assets of the Company.  The Company has full corporate  power
and authority necessary to own or lease its assets and property, and to carry on
the Business and to own and use the properties owned and used by it. The Company
has  delivered to Merge copies of the  Organizational  Documents of the Company,
each as amended to date, and each such document is in full force and effect. The
Company is not in violation of its Organizational Documents.  SCHEDULE 3.1 lists
all Affiliates of the Company,  indicating the  jurisdiction of incorporation or
organization  of each  Affiliate.  The  Company  does not  control,  directly or
indirectly,  or have any direct or indirect  ownership or equity interest in any
Person.

         3.2      AUTHORIZATION OF TRANSACTION.

         The execution and delivery of this  Agreement and the  consummation  of
the transactions  contemplated hereby have been duly authorized by all necessary
action  on the part of the  Board of  Directors  of the  Company  and,  prior to
Closing,  will  be  authorized  by  all  necessary  action  on the  part  of the
Shareholders.  The Company and the Principal  Shareholder  have the absolute and

                                       13

<PAGE>

unrestricted  right,  power,  authority and capacity  (including  full corporate
power and  authority) or have taken all  requisite  action to enable the Company
and the  Principal  Shareholder  to execute and deliver this  Agreement  and the
Ancillary Agreements and to perform their obligations  hereunder and thereunder.
This  Agreement has been,  and upon Closing will be, duly executed and delivered
by the Company and the Principal Shareholder.  When duly executed and delivered,
this Agreement  constitutes,  and each of the Ancillary  Agreements delivered in
conjunction  with this Agreement,  when executed and delivered will  constitute,
the valid and legally binding  obligation of the Company and/or of the Principal
Shareholder as the case may be, each  enforceable in accordance  with its terms,
subject to (i) laws of general  application  relating to bankruptcy  insolvency,
and the relief of debtors, and (ii) general equitable principles.

         3.3      NONCONTRAVENTION; CONSENTS.

                  (a) Except as set forth on Schedule  3.3,  the  execution  and
delivery of this  Agreement and the Ancillary  Agreements by the Company and the
Principal Shareholder  contemplated by this Agreement,  and the consummation and
performance  by the Company and the Principal  Shareholder  of the  transactions
contemplated  hereby or  thereby,  will not:  (i)  violate  any Law to which the
Company or the Principal  Shareholder or by which either of them or any of their
respective  properties are bound or affected;  (ii) violate any provision of the
Organizational  Documents  of the  Company;  (iii)  result  in any  breach of or
constitute  a default  (or an event  that  with  notice or lapse of time or both
would become a default) under or impair the Company's rights or alter the rights
or  obligations  of any  third  party  under,  or give to others  any  rights of
termination,  amendment,  acceleration  or  cancellation  of,  or  result in the
creation of a Lien on any of the  properties or assets of the Company,  pursuant
to any Contract,  Permit, or other instrument or obligation to which the Company
is a party or by which the Company or its properties are bound or affected.

                  (b) SCHEDULE  3.3 lists all  consents,  waivers and  approvals
required to be obtained in connection with the  consummation  and performance of
the  transactions  contemplated  hereby under any of the Contracts or Permits to
which the Company or the Principal  Shareholder is a party. No Contract to which
the Company is a party has been  amended to increase  the amount  payable by the
Company  thereunder or otherwise modify the terms thereof in order to obtain any
such consent, approval or authorization.

                  (c) Except as set forth on Schedule 3.3, no consent, approval,
order or  authorization  of or  registration,  declaration  or  filing  with any
Governmental  Entity,  is  required  by or with  respect  to the  Company or the
Principal  Shareholder  in  connection  with the  execution and delivery of this
Agreement  or  the  consummation  of the  transactions  contemplated  hereby  or
thereby.

                                       14

<PAGE>

         3.4. CAPITALIZATION.

                  (a)  SCHEDULE 3.4 sets forth for the Company (i) the number of
shares of authorized  capital stock,  (ii) the number of issued and  outstanding
capital stock of each class of the shares,  (iii) the names of its directors and
elected  officers and (iv) the names each Person owning  options or warrants for
Shares and the number of shares,  options,  warrants, and convertible securities
owned by such  Person and  obtainable  upon  exercise in full of all options and
warrants.  All of the issued  and  outstanding  Shares of  capital  stock of the
Company,  and all Shares  issuable  upon  exercise  of  outstanding  options and
warrants,  have been duly  authorized  and are  validly  issued,  fully paid and
nonassessable  and are not subject to preemptive  rights whether  created by (i)
statute, (ii) the Organizational Documents of the Company or (iii) any agreement
or document to which the Company or any Affiliate thereof is a party or by which
it is bound.  The Principal  Shareholder  holds of record and owns  beneficially
good, valid and marketable title to all of the outstanding Shares of the Company
listed on SCHEDULE 3.4, free and clear of any  restrictions  on transfer  (other
than restrictions  under the Securities Act of 1933, as amended,  and applicable
state  securities  Laws),  Taxes,  Liens,  options,  warrants,  purchase rights,
contracts, agreements, commitments, equities, claims or demands.

                  (b) Except as set forth in SCHEDULE  3.4,  there are no equity
securities,  partnership  or  limited  liability  company  interests  or similar
ownership interests of any class of the Company, or any securities  exchangeable
or convertible  into or exercisable for such equity  securities,  partnership or
limited  liability company  interests or similar  ownership  interests,  issued,
reserved for issuance or  outstanding.  Except for  securities the Company owns,
directly or indirectly, there are no equity securities, partnership interests or
similar  ownership  interests of any class of any subsidiary of the Company,  or
any security  exchangeable  or convertible  into or exercisable  for such equity
securities,  partnership  interests  or  similar  ownership  interests,  issued,
reserved for issuance or outstanding. Except as set forth in SCHEDULE 3.4, there
are  no  outstanding  or  authorized  options,   warrants,   equity  securities,
partnership  or  limited   liability  company  interests  or  similar  ownership
interests,  calls,  rights  (including  purchase  rights,  subscription  rights,
conversion rights,  preemptive rights,  exchange rights, rights related to stock
appreciation,  phantom stock or profit participation, or similar rights), or any
commitments,  contracts or  agreements  (all of the  foregoing of which shall be
terminated  on or before the Closing Date) of any character to which the Company
is a party or by  which it is bound  obligating  the  Company  or the  Principal
Shareholder to issue, deliver,  sell, or cause to be issued,  delivered or sold,
or repurchase, redeem or otherwise acquire, or cause the repurchase,  redemption
or acquisition, of any shares of capital stock, partnership interests or similar
ownership  interests of the Company or obligating the Company to grant,  extend,
accelerate  the  vesting  of or  enter  into any such  option,  warrant,  equity
security, call, right, commitment, contract or agreement.

                  (c) All Shares and all options, warrants, convertible or other
securities  of the Company have been issued in  compliance  with all  applicable
federal and state securities laws and any applicable pre-emptive rights.

                  (d) The Principal Shareholder has good title to his 34,050,000
Shares,  free and  clear  from  any  Lien,  preemptive  right,  voting  trust or
shareholder agreement,  exception,  proxy, option, put, call, or any third-party

                                       15

<PAGE>

right  of any  kind or  nature  whatsoever  except  the  Voting  Agreement.  The
Principal  Shareholder  has full and sole  voting  power  (in the case of voting
Shares owned by such  Person) over his Shares and has the full right,  power and
authority  to deliver his Shares to Merge in exchange  for his pro rata share of
the Merger Consideration in the manner provided for in this Agreement.

         3.5      FINANCIAL STATEMENTS; SEC FILINGS.

                  (a)  The  Company  has on a  timely  basis  filed  all  forms,
reports,  and  documents  required  to be filed by it with  the  Securities  and
Exchange  Commission  ("SEC")  since  January  1, 2001.  SCHEDULE  3.5 lists and
(except to the extent available in full without  redaction on the SEC's web site
through the Electronic Data Gathering,  Analysis and Retrieval  System ("EDGAR")
two days prior to the date of this Agreement)  contains true and complete copies
in the form filed with the SEC of (i) the Company's  Annual Reports on Form 10-K
SB for each fiscal year of the Company  ending on or after  December  31,  1999;
(ii) its  Quarterly  Reports on Form 10-Q SB for each of the first three  fiscal
quarters in each of the fiscal  years of the  Company  referred to in clause (i)
above;  (iii)  all  proxy  statements  relating  to the  Company's  meetings  of
shareholders  (whether annual or special) held, and all  information  statements
relating to  shareholder  consents  since the beginning of the first fiscal year
referred to in clause (i) above; (iv) all certifications and statements required
by (A) Rule 13a-14 or 15d-14 under the  Exchange  Act or (B) 18 U.S.C.  ss. 1350
(Section  906 of the  Sarbanes-Oxley  Act of 2002  ("SOX"))  with respect to any
report  referred to in clause (i) or (ii) above;  (v) all other forms,  reports,
registration  statements,  and other documents (other than preliminary materials
if the corresponding  definitive  materials are contained in Schedule 3.5) filed
by the  Company  with the SEC  since the  beginning  of the  first  fiscal  year
referred to in clause (i) above (the forms,  reports,  registration  statements,
and other documents referred to in clauses (i), (ii), (iii), (iv), and (v) above
are,  collectively,  the "Company SEC Reports"  and, to the extent  available in
full without redaction on the SEC's web site through EDGAR two days prior to the
date of this Agreement, are, collectively, the "Filed Company SEC Reports"); and
(vi) all comment letters received by the Company from the staff of the SEC since
January 1, 2001,  and all  responses to such comment  letters by or on behalf of
the  Company.  All  matters  and  statements  made  in  the  certifications  and
statements  referred  to in clause  (iv) above are  accurate.  The  Company  SEC
Reports (x) were or will be prepared in accordance with the  requirements of the
Securities  Act  and  the  Exchange  Act,  as  applicable,  and  the  rules  and
regulations thereunder and (y) did not at the time they were filed with the SEC,
or will not at the time  they  are  filed  with  the  SEC,  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary in order to make the statements made therein, in the
light of the  circumstances  under  which they were made,  not  misleading.  The
Company maintains  disclosure controls and procedures as required by Rule 13a-15
or 15d-15 under the Exchange Act. Schedule 3.5 contains true and complete copies
of all written  descriptions of and all policies,  manuals,  and other documents
promulgating  such disclosure  controls and  procedures.  Except as disclosed in
Filed Company SEC Reports,  each  director and executive  officer of the Company
has filed with the SEC on a timely basis  complete and accurate  versions of all
statements  required  by  Section  16(a) of the  Exchange  Act and the rules and

                                       16

<PAGE>

regulations  thereunder  since January 1, 2001. As used in this Section 3.5, the
term  "filed"  shall be  broadly  construed  to  include  any  manner in which a
document or information is furnished,  supplied,  or otherwise made available to
the SEC, including, but not limited to, as may be required pursuant to Item 9 or
12 of Form 8-K.

                  (b)  The  financial  statements  of the  Company  included  or
incorporated  by  reference  in any Company SEC Reports  (including  the related
notes) complied as to form, as of the respective dates of filing of such Company
SEC Reports with the SEC, in all material  respects with  applicable  accounting
requirements  and the  rules and  regulations  of the SEC with  respect  thereto
(including,   without  limitation,   Regulation  S-B),  have  been  prepared  in
accordance with GAAP (except, in the case of unaudited financial statements,  to
the extent  permitted by Regulation  SB for  Quarterly  Reports on Form 10-Q-SB)
applied on a consistent  basis throughout the periods involved (except as may be
indicated in the notes  thereto) and fairly present the  consolidated  financial
condition of the Company at the dates  thereof and the  consolidated  results of
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited  statements,  to notes and normal year-end audit adjustments that were
not, or with respect to any such financial  statements  contained in any Company
SEC Reports to be filed  subsequent  to the date hereof are not  expected to be,
material in amount or effect).  Schedule 3.5 lists  copies of the  documentation
creating or governing,  all "off-balance sheet arrangements" (as defined in Item
303(c) of Regulation SB) in effect with respect to the Company during any period
covered by any of the Company SEC Reports  that was  required to be disclosed in
any Company SEC Report.  Odenburg,  Ullakko Murenishi & Company,  LLP, which has
expressed its opinion with respect to the consolidated  financial  statements of
the Company included in Company SEC Reports  (including the related notes) filed
after January 1, 2003, (x) is a registered public accounting firm (as defined in
Section  2(a)(12) of SOX),  (y) to the  Company's  knowledge,  after  reasonable
inquiry,  is and has been  throughout  the  periods  covered  by such  financial
statements  "independent"  with  respect to the  Company  within the  meaning of
Regulation S-X, and (z) to the Company's  knowledge,  after reasonable  inquiry,
is, and has been  throughout the periods  covered by such financial  statements,
with respect to the Company,  in compliance with  subsections (g) through (l) of
Section  10A of the  Exchange  Act.  Pohl  McNabola  Berg & Company  LLP,  which
expressed its opinion with respect to the consolidated  financial  statements of
the Company included in Company SEC Reports  (including the related notes) filed
prior to January 1,  2003,  (y) to the  Company's  knowledge,  after  reasonable
inquiry,  was  throughout  the  periods  covered  by such  financial  statements
"independent"  with respect to the Company within the meaning of Regulation S-X,
and (z) to the Company's knowledge, after reasonable inquiry, was throughout the
periods covered by such financial  statements,  with respect to the Company,  in
compliance with  subsections (g) through (l) of Section 10A of the Exchange Act.
SCHEDULE  3.5  lists all  non-audit  services  performed  by  Odenburg,  Ullakko
Murenishi  & Company,  LLP or Pohl  McNabola  Berg & Company LLP for the Company
since January 1, 2003.

                  (c)  Except  as and to the  extent  set  forth on the  audited
balance  sheet of the Company as of  September  30,  2004,  including  all notes
thereto (the "Year-end  Balance  Sheet")  attached to this Agreement as SCHEDULE

                                       17

<PAGE>

3.5(c),  the Company has no liabilities  or  obligations of any nature  (whether
accrued,  absolute,  contingent,  or  otherwise)  that would be  required  to be
reflected on a balance sheet,  or in the notes  thereto,  prepared in accordance
with GAAP,  except (i) for  liabilities or obligations  incurred in the ordinary
course of business  since  September  30,  2004,  that would not have a material
adverse  effect on the  Company,  or (ii) as  otherwise  reflected  in the Filed
Company SEC Reports.

         3.6      UNDISCLOSED LIABILITIES.

         The  Company  has no  material  liabilities  or  obligations  of a type
required  to be  disclosed  on a balance  sheet or in the  related  notes to the
combined financial statements prepared in accordance with GAAP (whether known or
unknown, absolute or contingent, liquidated or unliquidated, or due or to become
due) except for liabilities and obligations which are: (a) reflected or reserved
for on the  Financial  Statements  or (b) that have arisen since the date of the
last  Year-end  Balance  Sheet in the  ordinary  course of the  operation of the
Company (all of which  material  liabilities  and  obligations  are set forth on
SCHEDULE 3.6 and none of which results from,  arises out of,  relates to, is the
nature of or was caused by any breach of  contract,  breach of  warranty,  tort,
infringement or violation of Law) except as disclosed on such Schedule.


                                       18

<PAGE>


         3.7      SUBSEQUENT EVENTS.

         Since December 31, 2003, there has not been any material adverse change
in  the  business,  condition,   operations,   properties,  assets,  results  of
operations  or  prospects  of  the  Company  nor  has  any  event   occurred  or
circumstance arisen that could reasonably be expected to result in such material
adverse  change.  Except as set forth in SCHEDULE 3.7, since the end of its last
fiscal year, the Company has conducted its business only in the ordinary  course
of business and there has not been any:

                  (a)  single  transaction  in an amount  exceeding  $10,000  or
series of related  transactions that result in expenditures in excess of $25,000
(not including compensation paid in the ordinary course of business);

                  (b)  change in the  Company's  authorized  or  issued  capital
stock; grant of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital stock; grant
of  any  registration  rights;  purchase,   redemption,   retirement,  or  other
acquisition  by the  Company  of  any  shares  of any  such  capital  stock;  or
declaration  or  payment of any  dividend  or other  distribution  or payment in
respect of shares of capital stock;

                  (c) amendment to the Organizational Documents of the Company;

                  (d)  payment  or  increase  by the  Company  of  any  bonuses,
salaries,  or other  compensation  to any  shareholder,  director,  officer,  or
(except  in the  ordinary  course  of  business)  employee  or  entry  into  any
employment,  severance,  separation,  or similar  agreement  with any  director,
officer or employee, except for the salaries and bonuses set forth upon SCHEDULE
3.7, the amount of which  bonuses is consistent  with the past  practices of the
Company;

                  (e)  adoption  of, or increase in the  payments to or benefits
under, any profit sharing,  bonus, deferred  compensation,  savings,  insurance,
pension,  retirement or other Employee Benefit Plan for or with any employees of
the Company;

                  (f) damage to or  destruction or loss of any asset or property
of the Company,  whether or not covered by insurance,  materially  and adversely
affecting the properties,  assets, business, financial condition or prospects of
the Company, taken as a whole;

                  (g)  entry  into,  termination  of,  or  receipt  of notice of
termination of (i) any cooperative,  marketing, license, distributorship,  sales
representative, joint venture, credit or similar agreement, or (ii) any Contract
or  transaction,  or series of related  Contracts or  transactions,  involving a
total commitment by or to the Company of more than $25,000.00,  except for sales
(but not terminations) to customers in the ordinary course of business;

                                       19

<PAGE>

                  (h)  sale  (other  than  sales  in  the  ordinary   course  of
business), lease or other disposition of any asset or property of the Company or
mortgage,  pledge or imposition of any Lien on any material asset or property of
the Company;

                  (i)  cancellation  or waiver of any  claims or rights  with  a
value to the Company in excess of $10,000;

                  (j) material change in the accounting  methods,  principles or
practices used by the Company;

                  (k)  any  revaluation  by the  Company  of any of its  assets,
including  writing down the value of capitalized  inventory or writing off notes
or Accounts  Receivable  (defined  below) other than in the  ordinary  course of
business;

                  (l) agreement,  whether oral or written,  by the Company to do
any of the foregoing; or

                  (m) Contracts  awarded to the Company,  including  those as to
which work has not yet  commenced,  that include prices at levels not reasonably
expected,  to yield profits at the Company's  usual and customary  profitability
margins.

         3.8      ACCOUNTS RECEIVABLE.

         All  accounts  receivable  of the  Company  that  are  included  in the
Year-end  Balance  Sheet or on the  accounting  records of the Company as of the
Closing Date or the  Preliminary  Balance  Sheet  (collectively,  the  "ACCOUNTS
RECEIVABLE")  represent or will  represent  valid  obligations  accounted for in
accordance  with  GAAP  applied  on a basis  consistent  with  that  used in the
preparation  of the  Financial  Statements  arising from sales  actually made or
services  actually  performed  in the  ordinary  course  of  business.  All such
Accounts  Receivable  on the  Preliminary  Balance  Sheet  will be or have  been
collected,  net of the  respective  reserves  shown on the  Preliminary  Balance
Sheet, within 90 days following the Closing Date. The reserves maintained by the
Company are adequate and  calculated  consistent  with past practice and, in the
case of the  reserve  as of the  Closing  Date,  will not  represent  a  greater
percentage  of the Accounts  Receivable  as of the Closing Date than the reserve
reflected in the Year-end  Balance Sheet  representing  the Accounts  Receivable
reflected  therein  and will not  represent  a  material  adverse  change in the
composition of such Accounts Receivable in terms of aging). There is no contest,
claim or right of set-off,  under any  Contract  with any obligor of an Accounts
Receivable  relating  to the amount or  validity  of such  Accounts  Receivable.
SCHEDULE 3.8 contains a complete and accurate list of all Accounts Receivable as
of the date hereof, which list sets forth the aging of such Accounts Receivable.

         3.9      TAX MATTERS.

                  (a) The Company  filed all Tax Returns that it was required to
file and all such Tax Returns  relating to the Company were correct and complete
in all respects.  Except as set forth on SCHEDULE  3.9(a)(1),  all Taxes owed by

                                       20

<PAGE>

the  Company,  whether or not shown on any Tax Return,  have been paid when due.
Except as set forth on  SCHEDULE  3.9(a)(2),  the Company is not  currently  the
beneficiary  of any  extension of time within  which to file any Tax Return.  No
claim  with  respect  to the  Company  has ever been made by an  authority  in a
jurisdiction where the Company does not file Tax Returns that any such entity is
or may be subject to taxation by that  jurisdiction.  There is no Lien affecting
the  Shares or any of the  assets or  properties  of the  Company  that arose in
connection with any failure or alleged failure to pay any Tax.

                  (b) The Company has  withheld  and paid all Taxes  required to
have been  withheld  and paid in  connection  with  amounts paid or owing to any
employee,  independent contractor,  creditor, the Principal Shareholder or other
party.

                  (c) No taxing  authority will assess any additional  Taxes for
any period for which Tax Returns relating to the Company have been filed.  There
is no dispute or claim  concerning  any Tax liability of the Company  claimed or
raised by any authority.  SCHEDULE  3.9(c) lists all federal,  state,  local and
foreign  income Tax  Returns of the  Company  for the past six years,  indicates
those Tax Returns  that have been audited and  indicates  those Tax Returns that
currently  are the subject of audit.  The Company has delivered to Merge correct
and complete copies of all federal income Tax Returns,  examination  reports and
statements of deficiencies  assessed against or agreed to by the Company for the
past three years.

                  (d) The Company has not waived any statute of  limitations  in
respect  of Taxes or  agreed to any  extension  of time  with  respect  to a Tax
assessment or deficiency.

                  (e) All  material  elections  in effect as of the date  hereof
with respect to Taxes  affecting  the Company are set forth on SCHEDULE 3.9. The
Company is not or will not be  required to  recognize  positive  adjustments  to
income pursuant to Section 481 of the Code.

                  (f) There are no  outstanding  rulings  of,  or  requests  for
rulings from, any tax authority  addressed to the Company that are, or if issued
would be, binding on the Company.

                  (g) Except as set forth on SCHEDULE  3.9, the Company is not a
party to any joint venture,  partnership or other  arrangement or contract which
could be treated as a partnership for federal income tax purposes.

                  (h) The Company has not filed a consent under  Section  341(f)
of the Code concerning  collapsible  corporations.  The Company has not made any
payments,  is not  obligated  to make  any  payments  and is not a party  to any
agreement  that under any  circumstances  could obligate it to make any payments
that will not be fully  deductible  under Section 280G of the Code.  The Company
has not been a United States real property holding  corporation with the meaning
of Section  897(c)(2)  of the Code during the  applicable  period  specified  in
Section  897(c)(1)(A)(ii)  of the Code. The Company has disclosed on its federal

                                       21

<PAGE>

income  Tax  Returns  all  positions  taken  therein  that  could give rise to a
substantial  understatement  of federal income Tax within the meaning of Section
6662 of the Code.

                  (i) None of the assets or  properties  of the Company  secures
any debt the interest on which is tax-exempt  under Section  103(a) of the Code.
None of the assets or  properties of the Company are  "tax-exempt  use property"
within the meaning of Section 168(h) of the Code. The transactions  contemplated
by this Agreement are not subject to Tax withholding  pursuant to the provisions
of Section 3406 or Subchapter A of Chapter 3 of the Code or any other  provision
of applicable  Law. The Principal  Shareholder  is a United States Person within
the meaning of the Code.

                  (j) Except as set forth on SCHEDULE  3.9, the Company is not a
party to any Tax allocation or Tax sharing agreement. The Company (i) is not and
has not been a member  of an  Affiliated  Group  filing a  consolidated  federal
income Tax Return,  and (ii) has not any  liability  for the Taxes of any Person
under Treasury  Regulation  Section 1.1502-6 (or any similar provision of state,
local or foreign Law), as a transferee or successor, by contract or otherwise.

                  (k) No taxing  authority  will  assess any  additional  income
Taxes against any Affiliated Group for any period during which the Company was a
member of such  group.  There is no dispute or claim  concerning  any income Tax
liability  of any  Affiliated  Group for any  taxable  period  during  which the
Company was a member of such group either (i) claimed or raised by any authority
in writing or (ii) as to which the Company  has  knowledge  based upon  personal
contact with any agent of such  authority.  Except as set forth in SCHEDULE 3.9,
no Affiliated  Group has waived any statute of  limitations  with respect to any
income  Taxes or agreed to any  extension  of time with respect to an income Tax
assessment or deficiency  for any taxable  period during which the Company was a
member of such group.

                  (l) The unpaid  taxes of the Company do not and will not as of
the Closing Date exceed the reserves for tax liability set forth on its Year-end
Balance Sheet.

                  (m) All net  operating  losses  ("NOL's") set forth in the Tax
Returns are valid.

                  (n) No new  material  book  deficiencies  are expected for the
fiscal year ended September 30, 2004.

         3.10     CONTRACTS.

                  (a) Except for the  Contracts  listed on  SCHEDULE  3.10,  the
Company  is not a party to or  otherwise  bound  by any  written  or  oral:  (i)
mortgage,  indenture,  credit agreement,  security agreement,  note, installment
obligation  or  other  instrument  relating  to the  borrowing  of  money;  (ii)
guarantee of any  obligation;  (iii) letter of credit,  bond or other  indemnity
(including letters of credit, bonds or other indemnities as to which the Company

                                       22

<PAGE>

is the beneficiary  but excluding  endorsements of instruments for collection in
the ordinary course of the operation of the Company);  (iv) currency or interest
rate  swap,  collar  or hedge  agreement;  (v)  offset,  countertrade  or barter
agreement;  (vi)  agreement  for the  sale,  lease or other  disposition  by the
Company  to any  Person of any  material  amount of its  assets  other  than the
retirement or other disposition of assets no longer useful to the Company or the
sale of  finished  products  and  spare  parts  in the  ordinary  course  of the
operation of the Company;  (vii) agreement  requiring the payment by the Company
of more than  $10,000 in any  12-month  period for the  purchase or lease of any
machinery, equipment or other capital assets; (viii) agreement providing for the
lease or sublease by the Company (as lessor, sublessor,  lessee or sublessee) of
any real estate or personal property; (ix) distributor,  representative,  broker
or  advertising  agreement  that is not  terminable by the Company at will or by
giving notice of thirty (30) days or less,  without  liability;  (x)  collective
bargaining  agreement,  employment,  change of control,  severance or consulting
agreement or agreement  providing  for  severance  payments or other  additional
rights or benefits  (whether or not  optional);  (xi) joint  venture  agreement;
(xii) agreement  requiring the payment to the Company by any other Person (other
than a division,  unit or  Affiliate of the Company) of more than $10,000 in any
12-month  period for the  purchase of goods or services;  (xiii) any  agreement,
contract or commitment  currently in force  relating to the  acquisition  by the
Company  of assets  not in the  ordinary  course of  business  or any  ownership
interest  in any  corporation,  partnership,  joint  venture  or other  business
enterprise; (xiv) agreement (including purchase orders, work assignment requests
and work assignment  authorizations) between the Company and any other division,
unit or Affiliate of the Company or Shareholder  requiring payments to or by the
Company of more than $10,000 in any 12-month period;  (xv) license or sublicense
agreement  with  respect  to any  item  of  Intellectual  Property  (whether  as
licensor,  licensee,  sublicensor  or  sublicensee);  (xvi)  agreement  imposing
non-competition or exclusive dealing  obligations on the Company which otherwise
contains  any  covenant  that limits the freedom of the Company to engage in any
line of business  anywhere in the world or compete with any Person or grants any
exclusive   distribution  rights;  (xvii)  Contract  that  is  material  to  the
operations,  financial  condition  or  prospects  of the Company and that is not
otherwise reflected on the Schedules;  or (xviii) any Plan,  including any stock
option plan,  stock  appreciation  right plan or stock purchase plan, any of the
benefits  of which will be  increased,  the vesting of benefits of which will be
accelerated,  or amounts which may become payable  (whether  currently or in the
future) to current or former employees,  officers or directors of the Company by
the occurrence of, as a result of or in connection with any of the  transactions
contemplated by this Agreement or the Ancillary Agreements,  or the value of any
of  the  benefits  of  which  will  be  calculated  on the  basis  of any of the
transactions contemplated by this Agreement or any of the Ancillary Agreements.

                  (b) The  Company  has  delivered  or made  available  to Merge
correct and complete copies of each written Contract listed on SCHEDULE 3.10, as
amended to date, and a written summary setting forth the terms and conditions of
each oral  Contract  referred  to on such  Schedule.  Each  Contract is a valid,
binding and enforceable  obligation of the Company, and, to the knowledge of the
Principal Shareholder,  the other party or parties thereto, and is in full force
and effect.  Except as set forth on SCHEDULE  3.10:  (i) neither the Company nor

                                       23

<PAGE>

any other party  thereto  has, to the  knowledge of the  Principal  Shareholder,
breached,  violated or defaulted under, or received notice that it has breached,
violated or defaulted  under,  any Contract set forth on SCHEDULE 3.10;  (ii) no
event,  occurrence or condition  exists that, with the lapse of time, the giving
of notice,  or both, would  constitute a breach,  violation or default under any
Contract listed on SCHEDULE 3.10 by the Company or any other party thereto;  and
(iii) the Company has not waived or released  any of its  material  rights under
any Contract.

         3.11     REAL PROPERTY.

                  (a) The Company does not own any real property.

                  (b)  SCHEDULE  3.11  lists all lease and  sublease  agreements
relating to real  property  leased or subleased by the Company.  With respect to
each such lease and sublease:

                         (i)  such  lease or  sublease  constitutes  the  entire
agreement  to which the  Company  is a party with  respect to the real  property
leased thereunder;

                         (ii) there is no agreement, whether written or oral, to
which the Company is a party that will  shorten the duration of the term of such
lease or sublease as a result of the consummation of the transaction pursuant to
this Agreement;

                         (iii)  the   Company  has  not   assigned,   subleased,
transferred,  conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;

                         (iv) all facilities leased or subleased thereunder have
received all approvals of Governmental Entities (including all Permits) required
in connection  with the operation  thereof and have been operated and maintained
in accordance  with all applicable Laws to the extent operated and maintained by
the Company and to the knowledge of the Company and the Principal Shareholder by
any other party which has contracted with the Company;

                         (v)  there is no  action,  suit or  proceeding  pending
against  the  Company  or, to the any  action,  suit or  proceeding  pending  or
threatened  against  the  Company  or any  third  party  that  would  materially
interfere  with the quiet  enjoyment  of such  leased  real  property  after the
Closing Date;

                         (vi) all facilities leased or subleased  thereunder are
supplied with utilities and other  services  necessary for the operation of such
facilities; and

                  (c)  To  the  knowledge  of  the  Company  and  the  Principal
Shareholder,  no fact or condition exists that is reasonably likely to result in
the  discontinuation of presently available or otherwise necessary water, sewer,
gas,  electric,  telephone,  drainage or other utilities or services relating to
the real property leased by the Company.

                                       24

<PAGE>

                  (d) All of the real  property  leased by the Company,  and all
components  of all  improvements  included  within such  leased  real  property,
including the roofs and structural  elements  thereof and the sprinkler and fire
protection,  heating,  ventilation,  air  conditioning,   plumbing,  electrical,
mechanical,  sewer,  waste  water,  storm water,  paving and parking  equipment,
systems and  facilities  included  therein,  are in good  condition  and repair,
working order and repair and do not require  material  repair or  replacement in
order to serve their intended purposes in all material  respects,  including use
and  operation  consistent  with their  present  use and  operation,  except for
scheduled  maintenance,  repairs and  replacements  conducted or required in the
ordinary  course of the operation of such leased real property.  The Company has
made all material repairs and  replacements  required to be made by it under the
real estate leases and subleases to which the Company is a party.

                  (e)  Other  than  options,  rights of first  refusal  or other
similar  arrangements  in favor of the  Company  under the leases and  subleases
relating to the real property leased by the Company, the Company has not entered
into any  contract,  arrangement  or  understanding  with  respect to the future
ownership,  development,  use,  occupancy  or  operation  of any  parcel of real
property leased by the Company.

                  (f) There are no pending or, to the  knowledge  of the Company
and the  Principal  Shareholder,  threatened  or  contemplated  condemnation  or
eminent domain  proceedings that affect the real property leased by the Company,
and the Company has not received any notice,  oral or written,  of the intention
of any  Governmental  Entity  or  other  Person  to take or use all or any  part
thereof.

                  (g) During the Company' s occupancy, none of the real property
leased by the Company or any part thereof has  suffered  any material  damage by
fire or other casualty that has not been completely restored.

                  (h) The Company has not  received  any written  notice for any
insurance  company  that has issued a policy to the Company  with respect to any
real property leased by the Company  requiring the performance of any structural
or other repairs or alterations to such property.

         3.12     INVENTORY.

         All inventory of the Company, consists of a quality and quantity usable
and salable in the ordinary  course of business,  except for obsolete  items and
items  of  below-standard  quality,  all  of  which  have  been  written-off  or
written-down  to net  realizable  value in the Year-end  Balance Sheet or on the
accounting  records of the Company as of the Closing  Date,  as the case may be.
All inventories not written-off  have been priced at the lower of cost or market
on a first in, first out basis. The quantities of each item of inventory are not
excessive,  but are reasonable in the present  circumstances of the Company. All
work in  progress  of the Company  existing  as of the  Closing,  whether or not
reflected in any of the Year-end  Balance Sheet,  is billable and collectable at

                                       25

<PAGE>

the  Company's  usual and customary  rates and carries the  Company's  usual and
customary profitability margins.

         3.13     TITLE AND RELATED MATTERS.

         Except  as set  forth  on  SCHEDULE  3.13,  the  Company  has  good and
marketable  title,  or,  in the case of  leased  properties  and  assets,  valid
leasehold  interests in, to all the properties and assets  purported to be owned
or leased, respectively,  by it, free and clear of all Liens. The properties and
assets  owned and leased by the Company  include  sufficient  tangible  personal
property to conduct the  business  and  operations  of the Company as  presently
conducted.  All material items of tangible  personal property owned or leased by
the Company are in good operating  condition and repair,  ordinary wear and tear
excepted,  and are suitable for the purposes for which they are presently  being
used and presently  proposed to be used. Each item of tangible personal property
owned or used by the Company  immediately  prior to the Closing will be owned or
available for use by the Company on identical  terms and conditions  immediately
subsequent to the Closing.

         3.14     INTELLECTUAL PROPERTY.

                  (a) The Company owns or has the right to use pursuant to valid
license, sublicense,  Contract or permission all Intellectual Property necessary
or desirable  for their  operations  as presently  conducted  and as the Company
presently proposes to be conducted.  Each item of Intellectual Property owned or
used by the Company  immediately  prior to the Closing will continue to be owned
or available for use by the Company as survivor of the Merger on identical terms
and conditions  immediately  subsequent to the Closing. The execution,  delivery
and performance of this  Agreement,  and the  consummation  of the  transactions
contemplated  hereby  and  thereby,  will not (i)  constitute  a  breach  of any
instrument  or Contract  governing  any  Intellectual  Property,  (ii) cause the
forfeiture or  termination  or give rise to a right of forfeiture or termination
of any  Intellectual  Property or (iii) impair the right of the Company or Merge
to use, sell or license any Intellectual Property or portion thereof.

                  (b) The  Company  has not  interfered  with,  infringed  upon,
misappropriated  or otherwise come into conflict with any Intellectual  Property
rights  of  third  parties.  Neither  the  provision  of  any  service  nor  the
manufacture,  marketing,  license,  sale  or  intended  use  of any  product  or
technology  currently  licensed  or sold or  under  development  by the  Company
violates  any  license or  Contract  between  the Company and any third party or
infringes  any third party  intellectual  property  rights.  The Company has not
received  any  charge,  complaint,  claim,  demand or notice  alleging  any such
interference,  infringement,  misappropriation or violation (including any claim
that the Company must license or refrain  from using any  Intellectual  Property
rights of any third party). No third party has interfered with,  infringed upon,
misappropriated  or otherwise come into conflict with any Intellectual  Property
rights of the Company. Except as set forth on SCHEDULE 3.14, the Company has not
licensed  or  permitted  any  third  party to  exploit  any of the  Intellectual
Property.

                                       26

<PAGE>

                  (c) SCHEDULE 3.14  identifies  each patent or  registration of
Intellectual  Property owned by the Company or for which an application filed by
the Company is pending,  and identifies  each license,  sublicense,  Contract or
permission pursuant to which the Company uses any item of Intellectual Property.

                  (d)  The  Company  and  the  Intellectual  Property  will  not
interfere with,  infringe upon,  misappropriate  or otherwise come into conflict
with any  intellectual  property  rights  of third  parties  as a result  of the
continued  operation  of the  business  of the  Company  now or in the future as
presently conducted or as proposed to be conducted or as otherwise  contemplated
by the Consulting Agreement.

         3.15     LITIGATION.

                  Except as set forth on SCHEDULE  3.15,  the Company is not (a)
subject to any unsatisfied  judgment order, decree,  stipulation,  injunction or
charge or (b) a party to or is  threatened  to be made a party to,  any  charge,
complaint, action, suit, proceeding, hearing or investigation of or in any court
or  quasi-judicial  or  administrative  agency of any federal,  state,  local or
foreign  jurisdiction.   There  are  no  judicial  or  administrative   actions,
proceedings or investigations  pending,  or, to the knowledge of the Company and
the  Principal  Shareholder,  threatened,  that  question  the  validity of this
Agreement or any of the Ancillary  Agreements or any action taken or to be taken
by the Company or Principal Shareholder in connection with this Agreement or any
of the other agreements  contemplated  hereby or that, if adversely  determined,
would  have a  material  adverse  effect  upon the  Company's  or the  Principal
Shareholder's  ability  to enter into or perform  their  obligations  under this
Agreement or any of the other agreements to which they are a party.

         3.16     EMPLOYEE BENEFITS.

         Except  for  Plans of the  Company  disclosed  on  SCHEDULE  3.16,  the
Company,  which for purposes of this Section 3.16 shall  include any  Affiliate,
does  not  sponsor,  maintain,  have any  obligation  to  contribute  to or have
liability  under,  and is not  otherwise  a party to any Plan or other  employee
benefit  arrangements  and payroll  practices.  With respect to each Plan of the
Company and to the extent applicable:

                  (a) Each Plan has been  maintained  and operated in compliance
in all material  respects with its terms and with the  applicable  provisions of
ERISA, the Code,  including  Section 408 thereof,  all regulations,  rulings and
other authority issued  thereunder,  and all other applicable  governmental laws
and  regulations,  including all tax rules for which  favorable tax treatment is
intended;

                  (b)  All  contributions   required  by  Law  or  any  Plan  or
applicable collective bargaining agreement (including all employer contributions
and  employee  salary  reduction  contributions  for any period on or before the
Closing Date) have been made under any such Plan (without  regard to any waivers
granted under Section 412 of the Code to any fund, trust, or account established

                                       27

<PAGE>

thereunder or in connection  therewith) have been made or will have been made by
the due date thereof.  All accrued  contributions,  premiums and other  payments
that would be (without regard to the transactions  contemplated hereby), but are
not yet, due from any of the Company or  associates  to (or under) any Plan have
been adequately and properly provided for on the Preliminary Balance Sheet;

                  (c) The SEP IRA Plan  set  forth on  SCHEDULE  3.16  qualified
under Section 401(a) of the Code prior to its termination in 2004;

                  (d) Except as set forth on SCHEDULE  3.16,  no Plan that is an
Employee  Welfare Benefit Plan provides for continuing  benefits or coverage for
any  participant  or  beneficiary  of a  participant  after  such  participant's
termination of employment,  except to the extent  required by law; and there has
been no violation of Section 4980B of the Code or Sections 601-608 of ERISA with
respect to any such Plan that could result in any material liability;

                  (e)  With  respect  to each  such  Plan,  true,  correct,  and
complete  copies  of the  applicable  following  documents  have  been  filed or
distributed  appropriately  and made  available  to Merge:  (i) all current Plan
documents, and any amendment thereto; (ii) Forms 5500, financial statements, and
actuarial  reports  for the  last  three  (3) plan  years;  (iii)  summary  plan
descriptions;  (iv) the most recent  determination  letter received from the IRS
and (v) the related  trust  agreements,  insurance  contracts  and other funding
agreements that implement such Plans;

                  (f) The Company has never  contributed  to or been required to
contribute to any Multiemployer Plan;

                  (g) SCHEDULE 3.16 includes a workers'  compensation  paid loss
summary  through  October  31, 2004 on an accident  year  basis.  SCHEDULE  3.16
additionally  includes a listing  through the Closing  Date of all open  workers
compensation claims showing claimant name, claim number, description,  paid loss
and case reserve;

                  (h) The Company has never been nor is a party to or  otherwise
bound by any advance  agreement  or similar  arrangement  with any  Governmental
Entity  or  regulatory  body  relating  to  the   allowability,   allocation  or
reimbursement  of benefit costs or other matters in connection  with any Company
Plan;

                  (i) Except as provided on SCHEDULE  3.16, no Plan contains any
provision that would prohibit the  transactions  contemplated  by this Agreement
and  the  Ancillary  Agreements  or  that  would  give  rise  to any  severance,
termination  or  other  payments   solely  as  a  result  of  the   transactions
contemplated by this Agreement and the Ancillary Agreements;

                  (j) Any Plan (or prospective, unaccrued and unvested liability
related  thereto)  is by its  terms  able to be  amended  or  terminated  by the
Company;

                                       28

<PAGE>

                  (k) There are no liabilities  or  obligations  relating to any
individual's  current or former  employment  with the Company or its  Affiliates
arising in  connection  with any  violation of any  applicable  Law prior to the
Closing Date;

                  (l) There have been no Prohibited Transactions with respect to
such Plans,  no fiduciary has any liability for breach of fiduciary  duty or any
other  failure  to act or  comply  in  connection  with  the  administration  or
investment of the assets of such Plans, and no action, suit, proceeding, hearing
or  investigation  with respect to the  administration  or the investment of the
assets of such Plans  (other than  routine  claims for  benefits)  is pending or
threatened.

                  (m)  Neither the Company  nor the  Principal  Shareholder  has
communicated to any employee  (excluding  internal  memoranda to management) any
plan or  commitment,  whether or not legally  binding,  to create any additional
material  Plan or  materially  modify or change any Plan that  would  affect any
employee or  terminated  employee of the Company or any of its  Affiliates  in a
material manner;

                  (n) No individual classified as a non-employee for purposes of
receiving employee benefits (such as an independent contractor, leased employee,
consultant or special  consultant),  regardless of treatment for other purposes,
is eligible to participate in or receive  benefits under any Plan which does not
specifically provide for their participation. A list of all non-employees is set
forth on SCHEDULE 3.16.

                  (o)  Except for the SEP IRA Plan set forth on  SCHEDULE  3.16,
the Company has never sponsored an Employee Pension Benefit Plan.

                  (p) The Company has never self insured any  employee  benefit,
including  employees' health insurance program,  except as disclosed in SCHEDULE
3.16.

         3.17     LABOR RELATIONS; EMPLOYEES.

                  (a) None of the Company's employees are represented by a labor
union or similar  collective  bargaining  organization  in connection with their
employment  by the  Company.  There  are no  controversies  pending  or,  to the
knowledge of the Company and the Principal  Shareholder,  threatened between the
Company and any current or former  employee of the Company or any labor or other
collective  bargaining unit  representing  any current or former employee of the
Company that could reasonably be expected to result in a labor strike,  lockout,
dispute,  slow-down or work stoppage or otherwise have a material adverse effect
on the  financial  condition,  operations  or prospects  of the Company.  To the
knowledge  of  the  Company  and  the   Principal   Shareholder,   there  is  no
organizational  effort presently being made or threatened by or on behalf of any
labor union or collective  bargaining  organization with respect to employees of
the Company.  The Company is and has been in material  compliance  with all Laws
regarding employment  practices,  terms and conditions of employment,  and wages

                                       29

<PAGE>

and  hours  (including   ERISA,  the  Workers   Adjustment  and  Retraining  and
Notification Act or any similar state or local law).

                  (b) SCHEDULE  3.17(b) contains a complete and accurate list of
the  following  information  for  each  employee  or  director  of the  Company,
including each employee on leave of absence or layoff  status:  name; job title;
current  compensation  paid or  payable  and any  change in  compensation  since
December  31,  2003;  vacation  accrued;  and service  credited  for purposes of
vesting and eligibility to participate under the Company's pension,  retirement,
profit-sharing,   thrift-savings,  deferred  compensation,  stock  bonus,  stock
option,  cash bonus,  employee stock ownership  (including  investment credit or
payroll  stock  ownership),  severance  pay,  insurance,  medical,  welfare,  or
vacation plan,  other Employee  Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit Plan or any director plan.

                  (c) No  employee  or director of the Company is a party to, or
is  otherwise   bound  by,  any   agreement  or   arrangement,   including   any
confidentiality,  noncompetition, or Intellectual Property or proprietary rights
agreement,  between  such  employee or director and any other Person that in any
way adversely  affects or will affect the performance of his or her duties as an
employee or director of the Company or the ability of the Company to conduct its
business.  To the  knowledge of the Company and the  Principal  Shareholder,  no
director,  officer, key employee or group of employees of the Company intends to
terminate his or her employment with the Company.

                  (d)  Neither  the  Principal  Shareholder  nor the Company has
guaranteed or promised continuing employment to any employee,  and the Principal
Shareholder  and the Company  understand  that business  conditions will dictate
appropriate employment levels after the Closing.

                  (e) SCHEDULE  3.17(e) contains a complete and accurate list of
the following  information for each retired employee or director of the Company,
or their dependents,  receiving benefits or scheduled to receive benefits in the
future:  name;  pension  benefit;  pension  option  election;   retiree  medical
insurance coverage; retiree life insurance coverage; and other benefits.

         3.18     ENVIRONMENTAL MATTERS.

                  (a)  The  Company  is,  and at all  times  has  been,  in full
compliance  with,  and has not been and is not in violation of or liable  under,
any Environmental Law. Neither the Company nor the Principal Shareholder has any
basis to expect, nor has either of them or any Person for whose conduct they are
or may be held to be  responsible,  received  any  actual or  threatened  order,
notice  or other  communication  from (i) any  Governmental  Entity  or  private
citizen  acting in the public  interest,  or (ii) the  current or prior owner or
operator  of any  facilities  used,  owned or  operated  by the  Company  or the
property  on which  such  facilities  are,  or were  located,  of any  actual or
potential  violation or failure to comply with any Environmental  Law, or of any

                                       30

<PAGE>

actual  or  threatened   obligation  to  undertake  or  bear  the  cost  of  any
Environmental,  Health,  and  Safety  Liabilities  with  respect  to  any of the
facilities or any other properties or assets (whether real, personal,  or mixed)
in which the Company has or had an interest,  or with respect to any property or
facility  at or to  which  Hazardous  Materials  were  generated,  manufactured,
refined,  transferred,  imported, used or processed by the Company or any Person
for  whose  conduct  it is  found to be  responsible,  or from  which  Hazardous
Materials  have  been  transported,   treated,  stored,  handled,   transferred,
disposed, recycled or received.

                  (b) There are no pending or threatened  claims,  encumbrances,
or other restrictions of any nature,  resulting from any  Environmental,  Health
and Safety  Liabilities or arising under or pursuant to any  Environmental  Law,
with respect to or affecting any of the  facilities or any other  properties and
assets  (whether  real,  personal,  or mixed) in which the Company has or had an
interest.

                  (c) Neither the Principal  Shareholder nor the Company has any
basis to expect, nor has either of them or any Person for whose conduct they are
or may be held responsible,  received, any citation, directive, inquiry, notice,
order,  summons,  warning  or other  communication  that  relates  to  Hazardous
Materials,  Hazardous Activity or any alleged,  actual or potential violation or
failure to comply  with any  Environmental  Law,  or of any  alleged,  actual or
potential  obligations  to  undertake  or bear  the  cost of any  Environmental,
Health,  and Safety  Liabilities  with respect to any of the  facilities  or any
other  properties  or assets  (whether  real,  personal,  or mixed) in which the
Company has or had an  interest,  or with respect to any property or facility to
which  Hazardous  Materials  generated,   manufactured,   refined,  transferred,
imported, used or processed by the Company or any Person for whose conduct it is
found to be  responsible,  have  been  transported,  treated,  stored,  handled,
transferred, disposed, recycled or received.

                  (d) Neither the Principal  Shareholder nor the Company, or any
Person for whose conduct they are or may be held responsible, has Environmental,
Health, and Safety Liabilities with respect to the facilities or with respect to
any other properties and assets (whether real, personal,  or mixed) in which the
Company (or any predecessor) has or had an interest,  or any such other property
or assets.

                  (e)  There are no  Hazardous  Materials,  except  as  properly
stored in compliance with  Environmental  Laws in commercial  containers also in
compliance  therewith for day-to-day use in the ordinary and usual course of the
Company's  business,  present  on or  in  the  environment  at  the  facilities,
including any Hazardous  Materials  contained in barrels,  above or  underground
storage tanks, landfills,  land deposits,  dumps, equipment (whether moveable or
fixed) or other  containers,  either  temporary or  permanent,  and deposited or
located  in land,  water,  sumps or any  other  part of the  facilities  or such
adjoining  property,  or  incorporated  into any  structure  therein or thereon.
Neither  the  Principal  Shareholder  nor the  Company,  or any Person for whose
conduct they are or may be held responsible,  or any other Person, has permitted
or conducted,  or is aware of, any Hazardous  Activity conducted with respect to
the facilities or any other properties or assets,  (whether real,  personal,  or
mixed) in which the Company has or had an interest.

                                       31

<PAGE>

                  (f) There has been no  Release  or,  to the  knowledge  of the
Company  and the  Principal  Shareholder,  threat of  Release  of any  Hazardous
Materials  at or  from  the  facilities  or at any  other  locations  where  any
Hazardous  Materials  were  generated,   manufactured,   refined,   transferred,
produced,  imported, stored,  distributed,  handled, managed, Released, treated,
used or processed from or by the facilities,  or from or by any other properties
and assets (whether real, personal, or mixed) in which the Company has or had an
interest, whether by the Company or any Person.

                  (g) The  Company  has  delivered  to Merge  true and  complete
copies and results of any  reports,  studies,  analyses,  tests,  or  monitoring
possessed  or  initiated by the Company  pertaining  to  Hazardous  Materials or
Hazardous Activities in, on, or under the facilities,  or concerning  compliance
by the  Company,  or by any  Person  for  whose  conduct  it are or may be  held
responsible, with Environmental Laws.

         3.19     LEGAL COMPLIANCE.

         Except as set forth on SCHEDULE  3.19,  the Company has fully  complied
with  all   applicable   Laws  and  no  action,   suit,   proceeding,   hearing,
investigation,  charge,  complaint,  claim,  demand or notice  has been filed or
commenced  against or, to the knowledge of the Principal  Shareholder,  has been
threatened   against  the  Company  alleging  any  failure  to  so  comply.   No
investigation  or review by any  Governmental  Entity is pending  or  threatened
against the  Company  and no  Governmental  Entity has  indicated  in writing or
orally,  an  intention  to conduct the same.  There is no  agreement,  judgment,
injunction,  order or  decree  binding  upon  the  Company,  which  has or could
reasonably  be expected to have the effect of  prohibiting  or impairing (i) any
business  practice of the Company,  (ii) any  acquisition  by or property of the
Company or (iii) the conduct of business by the Company.

         3.20     PERMITS.

         SCHEDULE 3.20  contains a true and complete list and brief  description
of all of the Permits  required  to allow,  in  accordance  with the Laws of any
Governmental  Entity,  the continued  operation of the business as now conducted
(or proposed to be conducted under existing  Contracts),  and the Company is the
authorized legal holder of the Permits. Each of the Permits is valid and in full
force and effect,  the Company is in compliance  with all the  provisions of the
Permits in all material  respects.  The Company has not received notice that any
Governmental  Entity  has  instituted  any  proceedings  for  the  cancellation,
non-renewal or modification of any of the Permits; there is no reason why any of
such  Permits  will,  upon  their  scheduled  expiration  or as a result  of the
Closing,  not be  renewable  or  reissuable  in the  ordinary  course or will be
issuable or reissuable only with the imposition of a material condition.

                                       32

<PAGE>


         3.21     AFFILIATE AGREEMENTS

         SCHEDULE 3.21 sets forth: (i) a list of each and every written Contract
or  arrangement;  (ii) a brief  description  in  reasonable  detail  of all oral
Contracts  or  arrangements  in effect  that  relate to, in either  case (x) the
provision of products or services to the Company by any Principal Shareholder of
the Company,  officer,  director or employee, or any Related Person or Affiliate
of the Company or any Principal  Shareholder of the Company or (y) the provision
of products or services by the Company to the  Principal  Shareholder,  officer,
director  or  employee,  or any Related  Person or  Affiliate  of any  Principal
Shareholder  of the  Company,  officer,  director or  employee.  The Company has
delivered to Merge correct and complete copies of each such written  Contract or
arrangement,  as amended to date. Except as set forth on SCHEDULE 3.21, all such
Contracts and  arrangements  with Related Parties are on terms no less favorable
than those that could be obtained in arms-length  transactions  with non-related
parties.  Except as set forth on SCHEDULE  3.21, no  Shareholder of the Company,
officer,  director or employee of the Company has any interest in any  property,
real or personal,  tangible or intangible, used in or pertaining to the business
of the Company.

         3.22     INSURANCE.

         SCHEDULE 3.22 contains a correct and complete list and  description  by
type of all policies of fire,  liability,  directors' and officers',  errors and
omissions,  workers'  compensation  and other forms of insurance,  including all
group insurance programs, owned or held by the Company. All such policies are in
full force and effect,  and no written notice of cancellation or termination has
been received with respect to any such policy. Except as noted on SCHEDULE 3.22,
all premiums with respect to all insurance  policies  covering all periods up to
and including the date hereof have been paid. Such policies,  (a) are sufficient
for  compliance  with  all  material  requirements  of Law  and of all  material
Contracts  to which the  Company  is a party,  (b) are  valid,  outstanding  and
enforceable  policies as against the Company, (c) provide insurance coverage for
the assets and operations of the Company that, in the reasonable judgment of the
Principal Shareholder and the management of the Company, is adequate in light of
risks of the Company's business as heretofore conducted, (d) will remain in full
force and effect through the respective dates set forth in SCHEDULE 3.22 without
the payment of  additional  premiums and (e) will not in any way be affected by,
or  terminate  or lapse by reason  of,  the  transactions  contemplated  by this
Agreement  or the  Ancillary  Agreements.  The Company has not been  refused any
insurance  with  respect  to its  assets or  operations,  nor has any  insurance
carrier  to which it has  applied  for any such  insurance  or with which it has
carried insurance limited its coverage.

         3.23     BANK ACCOUNTS AND POWERS.

         SCHEDULE  3.23 lists each bank,  trust  company,  savings  institution,
brokerage  firm,  mutual  fund or other  financial  institution  with  which the
Company has an account or safe deposit box relating to the Company and the names
and  identification of all Persons  authorized to draw thereon or to have access
thereto. SCHEDULE 3.23 lists the names of each Person holding powers of attorney
or agency authority from the Company and a summary of the terms thereof.

                                       33

<PAGE>

         3.24     BROKERS' FEES.

         The Principal  Shareholder,  the Company and their agents have not, nor
will they incur, directly or indirectly,  any liability or obligation to pay any
fees or  commissions  to any  broker,  finder  or  agent  with  respect  to this
Agreement or any Ancillary Agreement or of any of the transactions  contemplated
hereby or thereby.

         3.25     CERTAIN PAYMENTS.

         Neither the Company nor any director,  officer,  agent,  or employee of
the Company,  or to the knowledge of the Company and the Principal  Shareholder,
any  Person  associated  with or acting  for or on behalf  of the  Company,  has
directly or indirectly (a) made any contribution,  gift, bribe, rebate,  payoff,
influence payment,  kickback or other payment to any Person,  private or public,
regardless  of form,  whether  in  money,  property  or  services  (i) to obtain
favorable  treatment in securing business,  (ii) to pay for favorable  treatment
for  business  secured,  (iii) to  obtain  special  concessions  or for  special
concessions already obtained,  for or in respect of the Company or any Affiliate
of the  Company,  or  (iv)  in  violation  of any  Law,  or (b)  established  or
maintained any fund or asset that has not been recorded in the books and records
of the Company.

         3.26     CUSTOMER RELATIONSHIPS.

         Except as set forth in SCHEDULE  3.26,  there has not been, and neither
the Company nor the Principal  Shareholder has knowledge of circumstances giving
rise to cause  either of them to  reasonably  believe  that  there  will be, any
adverse  change  in the  Company's  relations  with any of its  customers  since
December 31, 2003, whether as a result of the transactions  contemplated by this
Agreement or the Ancillary Agreements, or otherwise.  SCHEDULE 3.26 sets forth a
true and complete list of the Company's ten (10) largest customer accounts as of
the date  hereof.  No current  customer  of the  Company has advised the Company
that, as a result of the  transactions  contemplated by this Agreement or any of
the Ancillary Agreements,  it is terminating the handling of its business by the
Company,  as a whole  or in part,  or  reducing  its  future  spending  with the
Company.  Except as set forth in SCHEDULE  3.26,  the Company is not involved in
any material claim or controversy with any customer.

         3.27     VENDORS.

         SCHEDULE  3.27  contains an accurate and complete list of the Company's
ten (10)  largest  vendors  as of the date  hereof.  No vendor has  canceled  or
otherwise  terminated,  modified or threatened to cancel or otherwise terminate,
or to modify, its relationship with the Company. Except as set forth on SCHEDULE
3.27, the Company is not involved in any material claim or controversy  with any
vendor.

                                       34

<PAGE>

         3.28     BOARD APPROVAL.

         The  Board  of  Directors  of  the  Company  has  determined  that  the
transactions  contemplated  by this  Agreement  are  fair  to,  and in the  best
interests  of, the Company and the  Shareholders,  and the Board of Directors of
the  Company  has  approved  this  Agreement  and the Voting  Agreement  and the
transactions contemplated thereby.

         3.29     BOOKS AND RECORDS.

         Except as set forth on Schedule 3.29, all accounts, stock record books,
ledgers and other  records  related to the  business  of the  Company  have been
properly  and  accurately  kept  and  completed  in  all  material  respects  in
accordance  with  reasonable  business  practices,  and  there  are no  material
inaccuracies or discrepancies of any kind contained or reflected therein. Except
as set forth on Schedule 3.29, the minute books of the Company contain  accurate
and complete records of all material corporate actions taken by the Shareholders
of the Company,  the Board of Directors and committees of the Board of Directors
which are  required  to be  approved  by them.  To the extent  that any  records
related to the Company are missing  from or not  included in the minute books of
the Company (the "Missing  Records"),  the Company  represents and warrants that
the Missing Records contain or reflect no action,  decisions or practices in any
way inconsistent with the business of the Company as currently conducted or with
the  representations of the Company and the Principal  Shareholder  contained in
this Agreement.

         3.30     ANTITRUST LAW COMPLIANCE.

         The  Company  has not  violated  in any  respect,  received a notice or
charge  asserting any violation,  or engaged in conduct that may be construed as
price  fixing or any other  violation  of the Sherman  Act, the Clayton Act, the
Robinson-Patman Act or the Federal Trade Commission Act, each as amended, or any
other federal or state Law related to antitrust or competition.

         3.31     PRODUCT LIABILITY.

         The  Company  has no  liability,  whether  known  or  unknown,  whether
absolute or contingent, whether liquidated or unliquidated and whether due or to
become due, and there exists no past or present fact,  situation,  circumstance,
status, condition,  activity,  practice,  occurrence,  event, incident,  action,
failure to act or transaction that forms or could form the basis for any present
or future liability,  charge,  complaint,  action,  suit,  proceeding,  hearing,
investigation,  claim or demand against the Company arising out of any injury to
persons  or  property  as a result of the  ownership,  possession  or use of any
product manufactured, sold, leased or delivered by the Company or as a result of
any service provided by the Company.


                                       35
<PAGE>

         3.32     FULL DISCLOSURE.

         All documents and other papers delivered by or on behalf of the Company
or the  Principal  Shareholder  in  connection  with  this  Agreement  are true,
complete,  correct and authentic in all respects.  No representation or warranty
of any of the Principal  Shareholder or the Company contained in this Agreement,
and no  statement  contained  in any  document  or  certificate  required  to be
delivered  by the Company or the  Principal  Shareholder  to Merge or any of its
representatives  pursuant  to the  terms  of  this  Agreement  or the  Ancillary
Agreements  (including  the Schedules  hereto and thereto),  contains any untrue
statement  of a  material  fact or omits to state on an  appropriate  schedule a
material  fact  necessary  to make the  representation,  warranty or  statements
contained herein or therein not misleading. There is no fact that the Company or
the  Principal  Shareholder  have not  disclosed  to Merge in  writing  that the
Company or Principal Shareholder  reasonably believe has or will have a material
adverse  effect on the  financial  conditions,  operations  or  prospects of the
Company  or a  material  adverse  effect on the  ability  of the  Company or the
Principal  Shareholder  of the Company to perform  this  Agreement  or any other
agreements contemplated hereby to which any of them is a party.

         3.33     INTERNAL CONTROL OVER FINANCIAL REPORTING.

         The Company  maintains  books of account which  accurately  and validly
reflect all loans,  mortgages,  collateral,  and other business transactions and
maintain  proper and adequate  internal  control over financial  reporting which
provide  assurance that (a) receipts and expenditures are made and access to the
Company's   assets  is   permitted   only  in   accordance   with   management's
authorization;  (b) the books and records of the Company  accurately  and fairly
reflect in reasonable  detail the transactions and dispositions of the assets of
the Company;  (c) the  reporting  of the assets of the Company is compared  with
existing assets at regular intervals; (d) transactions are recorded as necessary
to permit preparation of financial  statements of the Company in accordance with
GAAP  and  to  maintain  accountability  for  the  assets  of the  Company;  (e)
unauthorized  acquisition,  use, or  disposition of the assets of the Company is
prevented;  and  (f)  accounts,  notes,  and  other  transactions  are  recorded
accurately,  and proper and adequate  procedures  are  implemented to effect the
collection  thereof on a current and timely basis.  Schedule 3.33 identifies all
significant  deficiencies  or material  weaknesses in the internal  control over
financial reporting of the Company.

          3.34    COMPLIANCE WITH SOX.

         The Company is in compliance  with the  provisions of SOX applicable to
it as of the  date  hereof  and has  implemented  such  programs  and has  taken
reasonable  steps,  upon the advice of the  Company's  independent  auditors and
outside counsel,  respectively,  to ensure the Company's future  compliance (not
later than the relevant  statutory and regulatory  deadlines  therefor) with all
provisions  of SOX which shall become  applicable  to the Company after the date
hereof.

                                       36

<PAGE>

               SECTION 4. REPRESENTATIONS AND WARRANTIES OF MERGE

         Merge and  Acquisition Sub represent and warrant to, and covenant with,
the Company and the Principal  Shareholder  as of the date of this Agreement and
as of the Closing Date, as follows:

         4.1      ORGANIZATION.

         Merge  and  Acquisition  Sub are  each a  corporation  duly  organized,
validly  existing and in good standing  under the laws of the State of Wisconsin
and the State of Nevada, respectively.

         4.2      AUTHORIZATION OF TRANSACTION.

         The execution and delivery of this  Agreement and the  consummation  of
the transactions  contemplated hereby have been duly authorized by all necessary
action on the part of the Board of Directors of Merge and Acquisition Sub. Merge
and Acquisition Sub have the absolute and unrestricted right,  power,  authority
and capacity  (including  full corporate  power and authority) or have taken all
requisite action to enable Merge and Acquisition Sub to execute and deliver this
Agreement and to perform their  obligations  hereunder.  This Agreement has been
duly executed and delivered by Merge and Acquisition Sub. When duly executed and
delivered,  this Agreement  constitutes the valid and legally binding obligation
of Merge and Acquisition Sub,  enforceable in accordance with its terms, subject
to (i) laws of general application  relating to bankruptcy  insolvency,  and the
relief of debtors, and (ii) general equitable principles.

         4.3      NONCONTRAVENTION; CONSENTS.

         Neither  the  execution  and the  delivery of this  Agreement,  nor the
consummation  by Merge  and  Acquisition  Sub of the  transactions  contemplated
hereby, will violate any Law to which Merge or Acquisition Sub is subject or any
provision  of the  charter or bylaws of Merge or  Acquisition  Sub.  Neither the
execution and delivery of this  Agreement or any of the Ancillary  Agreements by
Merge and Acquisition  Sub, nor the consummation by Merge and Acquisition Sub of
the transactions contemplated hereby or thereby, will constitute a violation of,
be in conflict with or constitute  or create a default  under,  any agreement or
commitment  to which  Merge  or  Acquisition  Sub is a party or by which  Merge,
Acquisition  Sub or  any  of  their  properties  is  bound  or to  which  Merge,
Acquisition Sub or any of such properties is subject.  Merge and Acquisition Sub
have given all required  notice and obtained all Permits,  consents,  approvals,
authorizations,  qualifications  and  orders  of  Governmental  Entities  as are
required  in  order  to  enable  Merge  and  Acquisition  Sub to  perform  their
obligations under this Agreement and each of the Ancillary Agreements.

                                       37

<PAGE>

                        SECTION 5. PRE-CLOSING COVENANTS

         The parties  agree as follows  with  respect to the period  between the
date of this Agreement and the Closing Date:

         5.1      GENERAL.

         Each of Merge,  the Company and the Principal  Shareholder will use its
reasonable  best  efforts to take all  actions  and to do all things  necessary,
proper  or  advisable  to  consummate  and  make   effective  the   transactions
contemplated by this Agreement (including  satisfying the closing conditions set
forth in Section 7).

         5.2      NOTICES AND CONSENTS.

         Beginning  on the date  hereof,  the  Company  will  give all  required
notices to third  parties  and will  obtain all third  party  consents  that are
required in connection  with the  transactions  contemplated  by this Agreement,
each in form and substance reasonably acceptable to Merge. A copy of such notice
or consent shall be provided to Merge as soon as practicable.

         5.3      CARRY ON IN ORDINARY COURSE.

                  (a) Between the date of this  Agreement  and the Closing Date,
the Company will conduct and carry on its business  only in the ordinary  course
consistent with past practices.  Until such time, the Company also shall use its
commercially reasonable efforts to preserve the Company's assets, relationships,
customers,  clients and  employees  and to preserve for Merge the  integrity and
reputation  of the  Company,  and  shall not take any of the  following  actions
without  the  prior  written  consent  of  Merge,  which  consent  shall  not be
unreasonably withheld:

                         (i) form or cause to be formed any subsidiary;

                         (ii) make any  change  in  any   executive   management
                         personnel;

                         (iii) enter into any contract of  employment  with,  or
                         increase the compensation  paid or payable to, or enter
                         into any new  arrangements  with,  any of its officers,
                         directors,   employees  or  agents  or  pay  or  become
                         committed  to pay any of the  foregoing  any bonuses or
                         other special  compensation  except for  non-management
                         employees in the ordinary course of business;

                         (iv) amend its charter or bylaws;

                         (v)  authorize,  issue or sell,  repurchase,  or become
                         committed to authorize,  issue or sell, or  repurchase,
                         any shares of capital stock or any rights or options to
                         acquire   capital   stock   except   pursuant   to  the
                         acceleration   or   exercise   of  rights  or   options
                         previously granted by the Company;

                                       38

<PAGE>


                         (vi) make any single expenditure in an amount exceeding
                         ten thousand dollars  ($10,000),  or expenditures which
                         in the aggregate  exceed  twenty-five  thousand dollars
                         ($25,000),  or  agree  to  sell,  transfer,  assign  or
                         encumber,  any of the  Company's  assets  except in the
                         ordinary course of business;

                         (vii) pay or declare any dividends to its shareholders;
                         or

                         (viii)   pay,   declare   or   announce   any   capital
                         distribution.

                  (b) Between the date of the  Agreement  and the Closing  Date,
the Company and the Principal Shareholder further agree to:

                         (i) use  their  reasonable  best  efforts  to  preserve
                         intact  the  current  business  of  the  Company,  keep
                         available   the  services  of  the  current   officers,
                         employees  and agents of the Company,  and maintain the
                         relations   and  goodwill  with   customers,   vendors,
                         landlords,  creditors,  employees,  agents  and  others
                         having business relationships with the Company;

                         (ii) confer with Merge concerning  operational  matters
                         of a material nature; and

                         (iii) otherwise report periodically to Merge concerning
                         the status of the  business,  operations,  finances and
                         prospects of the Company.

                           (c) Neither the Company,  the  Principal  Shareholder
nor Merge shall take any action
that could  reasonably  be expected to  adversely  affect its ability to perform
this Agreement.

                           (d) The  Principal  Shareholder  will  not  transfer,
pledge or otherwise dispose of any of
his Shares owned on the date hereof.

                           (e) The Company will not make a voluntary  bankruptcy
filing, an assignment for the
benefit of creditors or take any other similar action.

         5.4      NO DEFAULT.

         The Company  will not commit or omit to take any act which will cause a
termination of or material breach or default under any Contract or obligation to
which the Company is a party or by which its assets are bound.

                                       39

<PAGE>

         5.5      FULL ACCESS.

         Until  the  Closing  Date  and  the  consummation  of the  transactions
contemplated by this Agreement,  the Company and the Principal Shareholder agree
to give reasonable access to Merge and Merge's agents and representatives to all
assets,  properties,  contracts,  personnel, key customers,  suppliers,  agents,
books and records of the Company and/or any other data and  information  related
to the Company as Merge and/or its agents or representatives may reasonably deem
necessary,  and further agree to cause Company's  executive  employees and legal
and financial representatives to meet with Merge at mutually agreeable times and
locations and answer Merge's  questions to the best of their ability,  including
but not limited to their  assessment  of all pending,  threatened  or contingent
claims  or  lawsuits  against  the  Company.   The  Company  shall  also  afford
unrestricted   access  to  all  its  audit   papers  and  allow  Merge  and  its
representatives  the  opportunity to ask questions and receive  answers,  to the
best of their ability, of the appropriate officers and agents of the Company.

         5.6      NOTICE OF DEVELOPMENTS.

         The Company and the Principal Shareholder will each give prompt written
notice to Merge of any material  development  affecting the Company.  Each party
will  give  prompt  written  notice  to the  other of any  material  development
affecting the ability of the parties to consummate the transactions contemplated
by this Agreement or any of the Ancillary Agreements.  No such written notice of
a material  development  will be deemed to have amended the  Schedules,  to have
qualified  the  representations  and  warranties  contained  herein  or  in  the
Ancillary  Agreements,  or to have  cured  any  misrepresentation  or  breach of
warranty that otherwise might have existed  hereunder by reason of such material
development.

         5.7      NO SOLICITATION OF TRANSACTIONS.

                  (a) The  Company  agrees  that it shall  not,  and  shall  not
authorize or permit any of its directors, officers, employees or representatives
to, directly or indirectly:

                      (i) solicit, initiate, encourage,  knowingly facilitate or
induce any inquiry with respect to, or the making,  submission  or  announcement
of, any Acquisition Proposal;

                      (ii)   participate   or  engage  in  any   discussions  or
negotiations  regarding, or furnish to any Person any nonpublic information with
respect to, or take any other action to  facilitate  any inquiries or the making
of any proposal that  constitutes  or may reasonably be expected to lead to, any
Acquisition Proposal,  except to notify such Person as to the existence of these
provisions (except to the extent permitted pursuant to this Section 5.7);

                      (iii)  approve,   endorse  or  recommend  any  Acquisition
Proposal  with  respect to the Company  (except to the extent  permitted by this
Section 5.7); or

                                       40

<PAGE>


                      (iv) enter  into any letter of intent or similar  document
or  any  agreement,  commitment  or  understanding  contemplating  or  otherwise
relating to any  Acquisition  Proposal  or a  transaction  contemplated  thereby
(except for confidentiality agreements permitted pursuant to Section 5.7(c)).

         The  Company   shall   immediately   terminate   all   discussions   or
negotiations,  if any,  with any third party with  respect to, or any that could
reasonably  be  expected  to lead  to or  contemplate  the  possibility  of,  an
Acquisition Proposal.  The Company shall as soon as practicable demand that each
Person which has executed,  since January 1, 2003, a  confidentiality  agreement
with the Company or any of its Affiliates or any of its or their representatives
with respect to such Person's  consideration of a possible  Acquisition Proposal
to  immediately  return or destroy  (which  destruction  shall be  certified  in
writing by such Person to the Company) all confidential  information  heretofore
furnished by the Company or any of its Affiliates or  subsidiaries or any of its
or their  representatives  to such Person or any of its Affiliates or any of its
or their representatives.

                  (b) Promptly  (but in any event within 36 hours) after receipt
of any Acquisition Proposal or any request for nonpublic  information or inquiry
which it reasonably believes could lead to an Acquisition Proposal,  the Company
shall provide Merge with written  notice of the material terms and conditions of
such Acquisition Proposal, request or inquiry, and the identity of the Person or
group making any such Acquisition  Proposal,  request or inquiry,  and a copy of
all written  materials  provided in connection with such  Acquisition  Proposal,
request or  inquiry.  After  receipt  of the  Acquisition  Proposal,  request or
inquiry, the Company shall promptly keep Merge informed in all material respects
of the status and details  (including  material  amendments or proposed material
amendments)  of any such  Acquisition  Proposal,  request or  inquiry  and shall
promptly provide to Merge a copy of all written materials  subsequently provided
in connection with such Acquisition Proposal, request or inquiry.

                  (c) If the Company receives an Acquisition  Proposal which (i)
constitutes  a Superior  Proposal  or (ii) which the Board of  Directors  of the
Company in good faith  concludes  could  reasonably  be  expected to result in a
Superior  Proposal,  the Company shall promptly  provide to Merge written notice
that shall state  expressly  (A) that it has  received an  Acquisition  Proposal
which  constitutes a Superior  Proposal or which could reasonably be expected to
result in a Superior  Proposal,  and (B) the  identity of the party  making such
Acquisition  Proposal and the material terms and  conditions of the  Acquisition
Proposal  (the  "Superior  Proposal  Notice" ) and may then  take the  following
actions (either  directly or through its subsidiaries or any of their respective
directors, officers, employees or representatives):

                      (i)  furnish  nonpublic  information  to the  third  party
making such Acquisition Proposal, provided, that (A) prior to so furnishing, the
Company  receives  from the third  party an executed  confidentiality  agreement
containing customary  standstill  provisions and other terms and conditions that
are no less restrictive to such third party than the terms and conditions of the
nondisclosure  agreement  entered  into  between  Merge  and the  Company  dated
September 22, 2004 and (B) contemporaneously  with furnishing any such nonpublic
information to such third party, the Company  furnishes a copy of such nonpublic

                                       41

<PAGE>


information  to Merge (to the extent  such  nonpublic  information  has not been
previously so furnished); and

                                       42

<PAGE>

                           (ii)  participate  or  engage in any  discussions  or
negotiations with the third party with respect to the Acquisition Proposal.

                  (d) For a period  of not less than five  Business  Days  after
Merge's receipt from the Company of each Superior  Proposal Notice,  the Company
shall, if requested by Merge,  negotiate in good faith with Merge to revise this
Agreement so that the Acquisition  Proposal that constituted a Superior Proposal
no longer constitutes a Superior Proposal.

                  (e)   Notwithstanding   anything  in  this  Agreement  to  the
contrary,  in response to the receipt of a Superior  Proposal  that has not been
withdrawn and continues to  constitute a Superior  Proposal  after the Company's
compliance  with  Section  5.7(d),  the Board of  Directors  of the  Company may
withhold,  withdraw or modify the Company  Recommendation  and, in the case of a
Superior  Proposal  that is a tender or  exchange  offer  made  directly  to its
stockholders,  may recommend that its stockholders accept the tender or exchange
offer (any of the  foregoing  actions,  whether by the Board of  Directors  or a
committee  thereof,  a "Change of  Recommendation"  ) and,  pursuant  to Section
9.1(d),  may terminate this  Agreement,  if both of the following  conditions in
Sections 5.7(e)(i) and 5.7(e)(ii) are met:

                      (i)  the   approval   of  the  Merger  by  the   Company's
stockholders has not been obtained; and

                      (ii) the Board of Directors  of the Company has  concluded
in good faith,  following  the receipt of advice of its outside  legal  counsel,
that, in light of such Superior Proposal,  the failure of the Board of Directors
to effect a Change of  Recommendation  would result in a breach of its fiduciary
obligations to its stockholders under applicable Law.

                  (f) Nothing  contained  in this  Agreement  shall be deemed to
restrict the Company from complying with Rules 14d-9 or 14e-2.

         5.8      TAX MATTERS.

         No new  elections  with  respect  to Taxes,  or any  changes in current
elections  with respect to Taxes,  relating to or affecting  the Company will be
made by the Company after the date of this  Agreement  without the prior written
consent of Merge.

         5.9       NEW OEM CONTRACTS.

         The Company and the  Principal  Shareholder  shall have used their best
efforts to secure new OEM and distribution  contracts,  upon such terms as shall
be approved by Merge in its reasonable discretion.

                                       43

<PAGE>


         5.10     PROXY STATEMENT.

                  (a) As promptly as  practicable  after the  execution  of this
Agreement,  the Company shall prepare a proxy statement  relating to the Company
Stockholders'  Meeting (as defined herein) (together with any amendments thereof
or supplements thereto, the "Proxy Statement"). The Company shall use reasonable
best efforts to cause the Proxy Statement to comply with any requests of the SEC
and to be mailed to the Company's  stockholders as promptly as practicable after
the  Proxy  Statement  shall  have been  cleared  by the SEC.  No filing  of, or
amendment or  supplement  to, the Proxy  Statement  shall be made by the Company
without providing Merge a reasonable  opportunity to review and comment thereon,
which  comments  shall be  considered  in good faith.  The Company  shall advise
Merge,  promptly after it receives notice thereof, of any request by the SEC for
amendment of the Proxy  Statement or comments  thereon and responses  thereto or
requests by the SEC for additional information.

                  (b) The  information  supplied  by  Merge to the  Company  for
inclusion in the Proxy  Statement shall not, at (i) the time the Proxy Statement
(or any  amendment  thereof  or  supplement  thereto)  is  first  mailed  to the
stockholders  of the  Company,  and (ii) the time of the  Company  Stockholders'
Meeting,  contain any untrue  statement of a material  fact or omit to state any
material  fact  required to be stated  therein or necessary in order to make the
statements therein not misleading. If at any time prior to the Closing any event
or  circumstance  relating  to  Merge  or  any  of its  Subsidiaries,  or  their
respective officers or directors,  should be discovered by Merge which should be
set forth in an amendment or a supplement  to the Proxy  Statement,  Merge shall
promptly  inform the Company and, to the extent  required by applicable  Law, an
appropriate  amendment or supplement describing such event or circumstance shall
be promptly filed with the SEC and  disseminated to stockholders of the Company.
All documents  that Merge is  responsible  for filing with the SEC in connection
with the transactions  contemplated  herein will comply as to form and substance
in all material respects with the applicable  requirements of the Securities Act
and the rules and regulations  thereunder and the Exchange Act and the rules and
regulations thereunder.

                  (c) The  information  supplied by the Company for inclusion in
the Proxy  Statement  shall  not,  at (i) the time the Proxy  Statement  (or any
amendment thereof or supplement  thereto) is first mailed to the stockholders of
the Company, and (ii) the time of the Company Stockholders' Meeting, contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated  therein or necessary in order to make the  statements  therein not
misleading.  If at any  time  prior to the  Closing  any  event or  circumstance
relating to the Company or any of its Subsidiaries, or their respective officers
or  directors,  should be discovered by the Company which should be set forth in
an amendment or a supplement to the Proxy Statement,  the Company shall promptly
inform  Merge,  and, to the extent  required by applicable  Law, an  appropriate
amendment or supplement  describing such event or circumstance shall be promptly
filed  with  the  SEC and  disseminated  to  stockholders  of the  Company.  All
documents that the Company is responsible  for filing with the SEC in connection
with the transactions  contemplated  herein will comply as to form and substance
in all material respects with the applicable  requirements of the Securities Act

                                       44

<PAGE>

and the rules and regulations  thereunder and the Exchange Act and the rules and
regulations thereunder.

         5.11     COMPANY SHAREHOLDERS' MEETING.

                  (a) The  Company  shall  duly call and hold a  meeting  of its
stockholders (the "Company Stockholders' Meeting") as promptly as practicable in
accordance with applicable Law following the date the Proxy Statement is cleared
by the SEC and after coordination with Merge, provided that the meeting shall be
held not later than March 20, 2005,  for the purpose of voting upon the adoption
of this  Agreement and approval of the Merger.  In  connection  with the Company
Stockholders' Meeting and the transactions contemplated hereby, the Company will
(i) subject to  applicable  Law,  use its  reasonable  best  efforts  (including
postponing or adjourning the Company Stockholders' Meeting to obtain a quorum or
to  solicit  additional  proxies)  to  obtain  the  necessary  approvals  by its
stockholders of this Agreement and the Merger and (ii) otherwise comply with all
legal requirements applicable to the Company Stockholders' Meeting.

                  (b) The Board of  Directors  of the  Company  shall  recommend
adoption of this Agreement and approval of the Merger by the stockholders of the
Company  (the  "Company  Recommendation").  Subject to Section  5.7, the Company
shall not  withdraw or  adversely  modify (or  propose to withdraw or  adversely
modify)  such  recommendation,  and  the  Proxy  Statement  shall  contain  such
recommendation.

         5.12     MISSING RECORDS.

         The Company  shall use its best  efforts to locate and deliver to Merge
the Missing Records.

         5.13     OPTIONS; WARRANTS.

         The  Company  shall  use its  best  efforts  to  resolve,  in a  manner
         reasonably  satisfactory to Merge, any outstanding options and warrants
         for Shares.

                        SECTION 6. POST-CLOSING COVENANTS

         The parties  agree as follows with respect to the period  following the
Closing Date:

         6.1      GENERAL.

         In case at any time  after  the  Closing  Date any  further  action  is
necessary or desirable to carry out the purposes of this Agreement,  each of the
parties will take such further  action  (including the execution and delivery of
such further  instruments  and  documents) as the other parties  reasonably  may
request,  at the sole cost and  expense  of the  requesting  party  (unless  the
requesting party is entitled to indemnification therefor under Section 8).

                                       45

<PAGE>

         6.2      LITIGATION SUPPORT.

                  (a) In the  event  and  for so  long as any  party  hereto  is
actively contesting or defending against any charge,  complaint,  action, audit,
suit, proceeding, hearing, investigation, claim or demand in connection with (i)
any transaction  contemplated under this Agreement, or (ii) any fact, situation,
circumstance,  status, condition,  activity, practice, plan, occurrence,  event,
incident,  action, failure to act or transaction on or prior to the Closing Date
involving the Company,  the other parties will  cooperate with the contesting or
defending parties and its counsel in the contest or defense,  make available its
personnel and provide such  testimony and access to its books and records as may
be necessary  in  connection  with the contest or defense,  at the sole cost and
expense of the contesting or defending party (unless the contesting or defending
party is entitled to indemnification therefor under Section 8).

                  (b)  Merge  will  cause  the  Surviving   Corporation  or  its
successor to maintain all original books, records, files, documents,  papers and
agreements pertaining to the operations of the Company as conducted prior to the
Closing Date for at least four years  following  the Closing Date or such longer
period as may be required by Law.

         6.3      AGREEMENTS REGARDING TAX MATTERS.

                  (a) Merge shall  prepare or cause to be  prepared  and file or
cause to be filed all Tax Returns  for the Company for all periods  ending on or
prior to the Closing  Date which are filed after the Closing  Date.  The Company
will  ensure that there is an adequate  accrual for the  liability  set forth in
such Tax Returns,  including  the cost of  preparation  thereof,  on the Closing
Balance Sheet.

                  (b) Merge,  the Company and the  Principal  Shareholder  shall
cooperate fully, as and to the extent reasonably requested by the other parties,
in  connection  with the filing of Tax Returns  pursuant to this Section and any
audit,  litigation or other  proceeding with respect to Taxes.  Such cooperation
shall include the  retention and (upon request by one of the other  parties) the
provision of records and information  which are reasonably  relevant to any such
audit, litigation or other proceeding.

                  (c) All tax  sharing  agreements  or similar  agreements  with
respect to or involving  the Company shall be terminated as of the Closing Date,
and after the Closing  Date,  the Company shall not be bound thereby or have any
liability thereunder.

         6.4      CONFIDENTIAL INFORMATION.

         For a period  of ten  years  after  the  Closing  Date,  the  Principal
Shareholder and his Affiliates will treat and hold as such, and will not use for
the benefit of himself or others, any confidential information, in whatever form
or medium,  concerning  the  operations  and affairs of the  Company,  except as
required by them to bring or defend any lawsuit or other proceeding  relating to
the  Company's  operations  prior  to  the  Closing  Date  or  relating  to  the
transactions  contemplated  herein in  accordance  with the  provisions  of this

                                       46

<PAGE>

Section 6.4 and Section 8.4. In the event that the Principal  Shareholder or his
Affiliates  is requested  or required  (by oral  request or written  request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative   demand  or  similar   process)  to  disclose  any   confidential
information,  then the  Principal  Shareholder  will  notify  Merge  promptly in
writing of the  request  or  requirement  so that Merge may seek an  appropriate
protective  order or waive  compliance with this Section 6.4. If, in the absence
of  a  protective  order  or  receipt  of  a  waiver  hereunder,  the  Principal
Shareholder or his Affiliates is, on the advice of outside counsel, compelled to
disclose any confidential  information to any Governmental  Entity or else stand
liable for contempt,  then the Principal  Shareholder  or Affiliate may disclose
such  confidential  information to such Governmental  Entity,  provided that the
Principal  Shareholder or his Affiliates will use their  reasonable best efforts
to  obtain,  at  the  request  of  Merge,  an  order  or  other  assurance  that
confidential treatment will be accorded to such confidential information.

         6.5      COVENANT NOT TO COMPETE; SOLICITATION.

         The Principal  Shareholder  agrees that for a period of five years from
and after the Closing  Date,  he will not engage  directly or  indirectly in the
Business  that the  Company  conducts.  The  "Business",  for  purposes  of this
Agreement, is defined in Recital A set forth at the beginning of this Agreement.
In addition,  for such five (5) year period, the Principal  Shareholder will not
solicit the employment of or hire any current employee of the Company.

         6.6      PAYMENT OF PRINCIPAL SHAREHOLDER'S NOTE.

         At the  Closing,  Merge will cause the Company to repay the  $1,000,000
aggregate  principal  amount demand notes issued by the Company to the Principal
Shareholder, including all accrued and unpaid interest thereon.

                          SECTION 7. CLOSING CONDITIONS

         7.1      CONDITIONS TO OBLIGATION OF MERGE.

         The  obligation  of  Merge  and   Acquisition  Sub  to  consummate  the
transactions  to be performed by it in connection with the Closing is subject to
satisfaction,  or waiver, in Merge's sole discretion, at or prior to Closing, of
each of the following conditions:

                  (a) There being no material  adverse  change in the  Company's
business, operations or prospects.

                  (b)  There  being no  uncovered  material  adjustments  in the
Company's 2003 financial  performance (revenues and net income) or the Company's
year to date 2004.

                  (c) There being no uncovered material changes in the Company's
balance sheet  between the date hereof and the Closing  Date,  including but not
limited to Accounts Receivable collections, increases in debt other than debt to
finance working capital needs, and the like.

                                       47

<PAGE>

                  (d) The Company  obtaining all required  consents to change in
control of the Company  and  assignment  as it relates to all  client,  product,
licensing,  service and asset  Contracts of the Company as set forth on SCHEDULE
3.3.

                  (e) Merge securing employment  agreements with those employees
of the Company set forth on the  schedule  previously  delivered by Merge to the
Company at a compensation  level consistent with similarly situated employees of
Merge.

                  (f) Merge shall have  satisfied  itself that all  employees of
the Company have executed  confidentiality and employee invention  agreements in
form satisfactory to Merge consistent with Merge's current form of agreement.

                  (g) At the Closing, the Principal  Shareholder or the Company,
as the case may be, shall deliver to Merge the following agreements, instruments
or documents (collectively the "Closing Documents"):

                      (1) Certified Articles and Bylaws.

                      (2) Certificate of Chief Executive  Officer of the Company
as to representations and warranties.

                      (3)  Certificate  of  the  Principal   Shareholder  as  to
representations and warranties.

                      (4) Certificate of Merger for filing in Nevada.

                      (5) Good Standing  Certificates  from the  Secretaries  of
State of Nevada and California.


                      (6) A consent from the Company's  independent  accountants
to include the Company's  financial  statements with any and all filing by Merge
after the Closing.

                      (7) The Consulting Agreement with Principal Shareholder.

                      (8)  Certified  resolutions  of the Board of Directors and
the  Shareholders  of the Company,  approving the merger and other  transactions
contemplated herein.

                      (9)  a  certificate   executed  by  the  Company  and  the
Principal Shareholder,  dated as of the Closing Date, to the effect that each of
the conditions specified above, are satisfied in all respects;

                                       48

<PAGE>

                      (10) the Company shall have  delivered to Merge an opinion
of counsel  dated as of the Closing Date from Morris  Manning & Martin LLP, with
respect to the matters set forth in EXHIBIT D attached hereto;

                  (h) the  representations and warranties of the Company and the
Principal  Shareholder  set  forth  in this  Agreement  will,  individually  and
collectively,  be true and  correct in all  material  respects  at and as of the
Closing Date and such parties shall have delivered a certificate to such effect;

                  (i)  the  Company  and the  Principal  Shareholder  will  have
performed and complied with all of their covenants and obligations  hereunder in
all material respects through the Closing Date;

                  (j) there will not be any action,  suit or proceeding  pending
or threatened before any court or quasi-judicial or administrative agency of any
federal,  state, local or foreign  jurisdiction or before any arbitrator wherein
an unfavorable injunction,  judgment,  order, decree, ruling or charge would (i)
prevent consummation of any of the transactions  contemplated by this Agreement,
(ii)  cause  any  of the  transactions  contemplated  by  this  Agreement  to be
interfered with, prevented,  delayed or rescinded following consummation,  (iii)
affect materially and adversely the right of Merge following the Closing Date to
control  the Company as  survivor  of the merger  with  Acquisition  Sub or (iv)
affect  materially  and  adversely,  including  through  the  imposition  of any
divestiture  requirement,  the  right of the  Company  to own its  assets  or to
operate its  business as  presently  operated  and as  presently  proposed to be
operated (and no such injunction, judgment, order, decree, ruling or charge will
be in effect);

                  (k) there must not have been made or  threatened by any Person
other than as disclosed on the stock transfer records of the Company,  any claim
asserting that such Person (i) is the holder or the  beneficial  owner of or has
the right to acquire or to obtain beneficial  ownership of, any stock of, or any
other equity,  voting or ownership interest in, the Company, or (ii) is entitled
to all or any portion of the Merger Consideration  payable for any Shares if the
amount in controversy exceeds $25,000;

                  (l) all actions to be taken by the  Company and the  Principal
Shareholder in connection with consummation of the transactions  contemplated by
this Agreement,  and all certificates,  instruments and other documents required
to effect the transactions  contemplated hereby and thereby,  will be reasonably
satisfactory in form and substance to Merge;

                  (m) holders  of  no  more  than  five   percent  (5%)  of  the
                      outstanding Shares shall have exercised dissenters' rights
                      under the Nevada  Statute and not waived such rights prior
                      to Closing;

                                       49

<PAGE>


                  (n) all  outstanding  options and warrants  for Shares  (other
                      than in the Voting  Agreement) shall have been resolved in
                      a manner reasonably satisfactory to Merge;

                  (o) that certain  Consulting  Arrangement  between the Company
                      and Health Care  Technology  Group dated  January 28, 2004
                      shall have been terminated on or before December 15, 2004;
                      and

                  (p) the  Company  shall  have  entered  into a  consulting  or
                      similar  agreement  with Leon Kaufman  covering the period
                      since  expiration of his prior  agreement with the Company
                      on the same terms and conditions as such prior agreement.


                                       50

<PAGE>


         7.2      CONDITIONS TO OBLIGATION OF THE COMPANY AND ITS SHAREHOLDERS.

         The  obligation  of  the  Company  and  the  Principal  Shareholder  to
consummate the  transactions  to be performed in connection  with the Closing is
subject to satisfaction of the following conditions (any of which may be waived,
in whole or in part, by the Company and the Principal Shareholder):

                  (a) the  representations  and warranties of Merge set forth in
Section 4 will be true and  correct in all  material  respects  at and as of the
Closing Date;

                  (b) Merge will have  performed  and  complied  with all of its
covenants hereunder in all respects through the Closing Date;

                  (c) there will not be any action,  suit or proceeding  pending
or threatened before any court or quasi-judicial or administrative agency of any
federal,  state, local or foreign  jurisdiction or before any arbitrator wherein
an unfavorable injunction,  judgment,  order, decree, ruling or charge would (i)
prevent  consummation of any of the transactions  contemplated by this Agreement
or (ii)  cause any of the  transactions  contemplated  by this  Agreement  to be
rescinded following consummation;

                  (d) Merge will have delivered a certificate to the effect that
each of the conditions specified above is satisfied in all respects;

                  (e) Merge will have delivered the Merger  Consideration (other
than the portion for Dissenting  Shareholders  and any amount  deducted due to a
deficiency in Net Asset Value set forth in the Preliminary Balance Sheet) due at
Closing to the Transfer Agent and the Holdback to the Escrow Agent;

                  (f)  Merge  shall  have  delivered  to  the  Company  and  the
Principal  Shareholder  an opinion of counsel  dated as of the Closing Date from
counsel  for Merge with  respect to the  matters set forth in EXHIBIT E attached
hereto;

                  (g) the  Certificate  of Merger as  provided  in  Section  2.3
hereof; and

                  (h) Merge shall have  executed and  delivered  the  Consulting
Agreement.

                  (i)  holders  of  no  more  than  five  percent  (5%)  of  the
outstanding  Shares  shall have  exercised  dissenters'  rights under the Nevada
Statute and not waived such rights prior to Closing.

                  (j) Company Shareholder approval shall be obtained.

                                       51

<PAGE>


               SECTION 8. REMEDIES FOR BREACHES OF THIS AGREEMENT

         8.1      SURVIVAL

         Except  as  otherwise  set  forth  in  Section   8.5(c),   all  of  the
representations  and  warranties  of the Company and the  Principal  Shareholder
contained in Section 3 of this Agreement or in any certificate  delivered by the
Company or the Principal Shareholder pursuant to this Agreement will survive the
Closing and  continue in full force and effect until the fourth  anniversary  of
the Closing Date in the case of the  representations and warranties set forth in
Sections 3.9 (Tax Matters), 3.14 (Intellectual Property),  3.15 (Litigation) and
3.17 (Labor Relations; Employees). All other representations and warranties will
continue  in full force and effect  until the first  anniversary  of the Closing
Date.

         8.2      INDEMNIFICATION PROVISIONS FOR BENEFIT OF MERGE

         Prior to the Closing,  the Company and the  Principal  Shareholder  and
following  the  Closing,  the  Principal  Shareholder  will  indemnify  and hold
harmless Merge, its representatives,  shareholders, and controlling persons and,
after the Closing,  the Acquisition Sub and its  representatives,  shareholders,
and controlling persons  (collectively,  the "INDEMNIFIED BUYERS") for, and will
pay to the Indemnified Buyers the amount of, any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable  attorneys'
fees) or  diminution  of value,  whether or not  involving a  third-party  claim
(collectively,   "DAMAGES"),   arising,  directly  or  indirectly,  from  or  in
connection  with: (i) any breach of any  representation  or warranty or covenant
made by the Company or Principal  Shareholder in this Agreement,  the Schedules,
or any other  certificate or document  delivered by the Company or the Principal
Shareholder pursuant to this Agreement;  (ii) any amounts paid to the holders of
Dissenting  Shares  in  excess  of  their  proportionate  share  of  the  Merger
Consideration and the costs of all proceedings,  including attorneys' and expert
witness fees, in resolving the claim of any  Dissenting  Shareholder,  (iii) any
amount by which  the Net  Asset  Value is less  than the  Target  Amount  (which
payments shall be made pursuant to Section  2.8(a) and not otherwise  subject to
this  Section  8.2  if  made  in  accordance  with  Section  2.8(a)),  (iv)  any

                                       52

<PAGE>

outstanding  options or warrants  for  securities  of the  Company  that are not
identified or resolved to the  satisfaction of Merge as of the Closing,  (v) the
termination  of any employees of the Company  occurring at any time prior to the
Closing   including   any  failure  to  provide  or   deficiency   in  providing
post-employment  benefits and/or  insurance,  (vi) any rights of any landlord of
any property  leased or used by the Company to recapture such property or impose
any  penalty or charge in  connection  with the  Company's  performance  of it's
obligations under this Agreement, or (vii) any claim by any Person for brokerage
or finder's fees or commissions or similar  payments based upon any agreement or
understanding  alleged  to have  been  made by any such  Person  with any of the
Principal  Shareholder  or the Company (or any Person acting on their behalf) in
connection  with the  transactions  set forth herein.  The remedies set forth in
Section 8 are  exclusive  of any other  remedy  available to Merge and the other
Indemnified  Persons for a breach of this Agreement or a claim under Section 8.2
other than an  injunction  for  violation of Section 6.4  (Confidentiality)  and
Section 6.5 (Non-Competition) and Section 9 (Termination), and other than in the
case of fraud or a willful breach by the Company or the Principal Shareholder of
any  representations,  warranties  or  covenants  under  this  Agreement  or the
Ancillary Agreements.

         8.3      INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY

         Merge will indemnify and hold harmless the Company, and its successors,
assigns,  and the  Principal  Shareholder,  and will pay to the  Company  or the
Principal  Shareholder,  as the case may be,  the  amount of any  Damages of the
Company or the Principal Shareholder arising, directly or indirectly, from or in
connection with any breach of any representation or warranty or covenant made by
Merge or  Acquisition  Sub in this  Agreement or in any  certificate or document
delivered  by  Merge  or  Acquisition  Sub  pursuant  to  this  Agreement.  Such
representations   and   warranties   shall  not   survive   the   Closing.   The
indemnification  provisions of this Section 8 are the exclusive remedy available
to the Company and the Principal  Shareholder for breaches of representations or
warranties contained in this Agreement, except in the case of fraud or a willful
breach  by  Merge  or  Acquisition  Sub of any  representations,  warranties  or
covenants under this Agreement.

         8.4      INDEMNIFICATION PROCEDURES

                  (a)  Promptly  after  discovery  or  receipt  of  notice by an
Indemnified  Buyer or the Company or the Principal  Shareholder (in each case an
"INDEMNIFIED PERSON") under this Section 8 of a claim for which indemnity may be
sought,  such  Indemnified  Person  will,  if a claim is to be made  against  an
indemnifying party, give notice to the indemnifying party of the commencement of
such claim,  but the failure to notify the  indemnifying  party will not relieve
the  indemnifying  party of any  liability  that it may have to any  Indemnified
Person,  except to the extent that the indemnifying  party demonstrates that the
defense of such action is prejudiced by the Indemnified Person's failure to give
such notice.

                  (b) If any  proceeding  referred  to in  Section 8 is  brought
against an Indemnified  Person and it gives notice to the indemnifying  party of
the commencement of such proceeding,  the indemnifying  party will pay the costs
of  defending  such  proceeding  including  costs  of  counsel  selected  by the
Indemnified  Person,  which  counsel  shall be  reasonably  satisfactory  to the
indemnifying  party.  The  Indemnified  Person  shall  control  the  defense and
settlement of the proceeding  provided that the Indemnified Person shall consult
with the  indemnifying  party.  The  indemnifying  party will,  unless the claim
involves  Taxes,  be  entitled  to  participate  in such  proceeding  unless the
indemnifying  party is also or could become a party to such  proceeding  and the
Indemnified  Person  determines in good faith that such  participation  would be
inappropriate.


                                       53

<PAGE>


         8.5      BASKET; CAP; SOLE SOURCES OF INDEMNIFICATION

                  (a) No Indemnified  Person will be entitled to indemnification
pursuant to Sections 8.2 or 8.3 unless and until the aggregate amount of Damages
with respect to which such  Indemnified  Person  would  otherwise be entitled to
assert  thereunder  exceeds  $10,000 (the "BASKET  AMOUNT").  When the aggregate
amount of Damages  exceeds  the Basket  Amount,  the  indemnified  party will be
entitled to indemnification  for all Damages,  including those within the Basket
Amount.

                  (b)  Except as  otherwise  set forth in  Section  8.5(c),  the
aggregate  amount  of all  payments  made by the  Principal  Shareholder  to all
Indemnified  Buyers in satisfaction of claims  hereunder after Closing shall not
exceed the aggregate of (i)the Holdback,  (ii)an additional $1,000,000 (not part
of the  Holdback),  and (iii) any  amounts  paid or payable  by Merge  under the
Consulting Agreement (collectively the "Cap"). Principal Shareholder will assume
100% of Damages in all cases, up to the amount of the Cap, except in the case of
Damages  for a breach of Section  3.14  (Intellectual  Property),  Merge and the
Principal Shareholder shall assume Damages in the ratio of 80% for the Principal
Shareholder  and 20% for Merge until the  amounts  under (i) and (ii) above have
been  exhausted,  and  thereafter  100% for the Principal  Shareholder up to the
remainder of the Cap until  Principal  Shareholder has paid the entire Cap. Once
Principal Shareholder has paid the entire Cap, Principal Shareholder  thereafter
will have no  further  liability,  other  than in the case of fraud or a willful
breach by the  Company  or the  Principal  Shareholder  of any  representations,
warranties or covenants under this Agreement or the Ancillary Agreements.

                  (c) In addition to all other  indemnification by the Principal
Shareholder hereunder, Principal Shareholder agrees that the indemnification for
damages  incurred in  connection  with the matters set forth in Section  8.2(iv)
shall:  (i) survive for a period of five years  following  the date on which the
final payment is made to Principal  shareholder  under the Consulting  Agreement
(the "Final Payment") and (ii) the indemnification obligation therefor shall not
exceed the amount of the Final Payment once the Company's  obligations under the
Cap have expired in accordance with Section 8.1.

         8.6      RIGHT OF SET-OFF

         During or after the  expiration of the Holdback  referred to in Section
2.9,  Merge  upon  written  notice  to a  Principal  Shareholder  specifying  in
reasonable  detail the basis for such  set-off,  Merge may set off any amount to
which it reasonably  believes in good faith to be entitled  under this Agreement
against  amounts  otherwise  payable  to the  Principal  Shareholder  under this
Agreement or the Ancillary Agreements.

         8.7      DISPUTE RESOLUTION

         ARBITRATION.ERROR!  BOOKMARK NOT DEFINED.  Any controversy,  dispute or
claim arising out of or relating to this Agreement  (including,  but not limited
to, any claim  regarding  the scope or effect of this Section and any claim that

                                       54

<PAGE>

this Section is invalid or  unenforceable) or the Ancillary  Agreements,  or the
breach  hereof or thereof,  shall be settled by a single  arbitrator  in binding
arbitration conducted in Milwaukee,  Wisconsin in accordance with the Commercial
Arbitration Rules of the American Arbitration  Association ("AAA"), and judgment
upon the award  rendered by the  arbitrator  may be entered in any court  having
jurisdiction thereof. The arbitrator's decision shall be in writing.

         The  arbitrator's   authority  shall  include  the  ability  to  render
equitable  types of relief and, in such event,  any aforesaid court may enter an
order enjoining and/or  compelling such actions or relief ordered or as found by
the arbitrator.  The arbitrator also shall make a determination  regarding which
party's  legal   position  in  any  such   controversy  or  claim  is  the  more
substantially  correct (the "PREVAILING PARTY") and the arbitrator shall require
the other party to pay the legal and other  professional fees and costs incurred
by the Prevailing Party in connection with such  arbitration  proceeding and any
necessary  court action.  However,  notwithstanding  the foregoing,  the parties
expressly  agree that a court of  competent  jurisdiction  may enter a temporary
restraining order or an order enjoining a breach of this Agreement  (including a
breach of Sections  6.4 and 6.5)  pending a final award or further  order by the
arbitrator.  Such remedy,  however,  shall be cumulative and  nonexclusive,  and
shall be in addition to any other remedy to which the parties may be entitled.

                             SECTION 9. TERMINATION

         9.1      TERMINATION

         This  Agreement may be terminated at any time prior to the Closing,  by
action taken or authorized by the Board of Directors of the terminating party or
parties, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of the Company:

                  (a) by mutual written consent of Merge and the Company;

                  (b) by written  notice of either the Company or Merge,  if the
Merger  shall  not have been  consummated  prior to March  31,  2005;  provided,
however,  the right to terminate this Agreement  under this Section 9.1(b) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement  has been the cause of, or results  in,  the  failure of the Merger to
occur on or before such date; provided,  further,  that in the event the failure
of  the  Merger  to  be  consummated  by  such  date  is  caused  by  a  pending
investigation  or review by a Governmental  Entity,  either Merge or the Company
(unless such extending  party or such extending  party's  failure to fulfill any
obligation  under  this  Agreement  has been the cause of, or  results  in,  the
existence or continuance of the pending investigation or review) may extend such
date to April 30, 2005;

                  (c) by written  notice of either the Company or Merge,  if any
Governmental  Entity  shall have issued an order,  decree or ruling or taken any
other action  permanently  restraining,  enjoining or otherwise  prohibiting the
Merger, and such order,  decree,  ruling or other action shall have become final
and nonappealable;

                                       55

<PAGE>

                  (d) by written  notice of either the Company or Merge,  if (i)
the  Board of  Directors  of the  Company  shall  have  withdrawn  or  adversely
modified, or shall have adopted resolutions to withdraw or adversely modify, the
Company Recommendation; or (ii) the Board of Directors of the Company shall have
approved  or  recommended,  or shall  have  adopted  resolutions  to  approve or
recommend,  to the  stockholders of the Company,  an Acquisition  Proposal other
than that contemplated by this Agreement;

                  (e) by written notice of Merge,  if there has been a breach by
the  Company  or the  Principal  Shareholder  of any  representation,  warranty,
covenant or agreement  contained in this  Agreement  which (i) would result in a
failure of the condition  set forth in Section  7.1(a) or 7.1(b) and (ii) cannot
be cured  prior to March 31,  2005,  provided  that  Merge  shall have given the
Company written notice,  delivered at least ten days prior to such  termination,
stating Merge's  intention to terminate this Agreement  pursuant to this Section
9.1(e) and the basis for such termination;

                  (f) by  written  notice  of the  Company,  if there has been a
breach by Merge of any representation, warranty, covenant or agreement contained
in this  Agreement  which (i) would result in a failure of a condition set forth
in  Section  7.2(a) or 7.2(b)  and (ii)  cannot be cured  prior to the March 31,
2005, provided that the Company shall have given Merge written notice, delivered
at least ten days prior to such termination,  stating the Company's intention to
terminate this Agreement  pursuant to this Section 9.1(f) and the basis for such
termination; or

                  (g) by written  notice of either  Merge or the  Company if the
Company  Stockholder  Approval  shall  not have  been  obtained  at the  Company
Stockholders'   Meeting  duly  convened  therefor  (or  at  any  adjournment  or
postponement  thereof)  at which a quorum is  present  and the vote to adopt and
approve this Agreement is taken.

         9.2      EFFECT OF TERMINATION.

                  (a)  Limitation on Liability.  In the event of  termination of
this  Agreement by either the Company or Merge as provided in Section 9.1,  this
Agreement  shall  forthwith  become  void and  there  shall be no  liability  or
obligation on the part of Merge,  Merger Sub or the Company or their  respective
Subsidiaries, officers or directors, except with respect to Articles 8 and 9 and
with respect to any liabilities or damages  incurred or suffered by a party as a
result of the  willful  and  material  breach  by the other  party of any of its
representations,  warranties,  covenants or other  agreements  set forth in this
Agreement.

                  (b)  Termination  Fee.  In the event  that this  Agreement  is
terminated  pursuant to Section 9.1(d), (e) or (g), and an Acquisition  Proposal
with  respect  to the  Company  is  consummated  or the  Company  enters  into a
definitive  agreement with respect to an Acquisition  Proposal,  in either case,
within twenty-four months following the termination of this Agreement,  then the
Company shall pay an amount equal to the greater of (x) five percent (5%) of the

                                       56

<PAGE>

aggregate   consideration   received  in  such  Acquisition   Proposal;  or  (y)
twenty-five percent (25%) of the difference between the aggregate  consideration
received in such Acquisition Proposal and Six Million Dollars ($6,000,000) (such
amount,  the  "Termination  Fee") to Merge  within two  Business  Days after the
earlier of the  consummation  of such  Acquisition  Proposal or  execution  of a
definitive agreement with respect to such Acquisition  Proposal.  In addition to
the foregoing, if (i) this Agreement is terminated pursuant to Section 9.1(e) or
(ii) this Agreement is terminated  pursuant to Sections 9.1 (b),(d) or (g) under
circumstances  in which a  Termination  Fee is not due pursuant to the preceding
sentence, then the Company shall pay Merge an amount equal to the sum of Merge's
reasonable  documented expenses incurred in connection with the Merger.  Payment
of expenses pursuant to the foregoing  sentence shall be made not later than two
Business  Days after  delivery of notice of demand for payment and a  documented
itemization  setting forth in reasonable detail all expenses (which  itemization
may be  supplemented  and  updated  from  time to time by such  party  until the
ninetieth day after such party delivers such notice of demand for payment).

                  (c) All payments  under this Section 9.2 shall be made by wire
transfer of immediately  available funds to an account  designated by Merge. The
Company  acknowledges  that the agreements  contained in this Section 9.2 are an
integral  part of the  transactions  contemplated  by this  Agreement  and that,
without these agreements, Merge would enter into this Agreement. Accordingly, if
the Company  fails  promptly to pay any amount due  pursuant to this Section 9.2
and, in order to obtain such payment,  Merge commences a suit which results in a
judgment  against  the other  party for the fee and  expenses  set forth in this
Section 9.2, such defaulting  party shall pay to the prevailing  party its costs
and expenses (including  reasonable  attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at eight percent
(8%) per annum from the date such payment was required to be made.

                            SECTION 10. MISCELLANEOUS

         10.1     PRESS RELEASES AND ANNOUNCEMENTS

         No party will issue any press release or  announcement  relating to the
subject  matter of this  Agreement  prior to the Closing  Date without the prior
approval of the other party (which approval will not be unreasonably  withheld);
PROVIDED,  HOWEVER, that any party may make any public disclosure it believes in
good faith is  required by Law (in which case the  disclosing  party will advise
the other parties prior to making such disclosure).

         10.2     EXPENSES; TRANSFER TAXES

         Except as otherwise  set forth in Sections 8 and 9 hereof,  the parties
hereto will each bear all their own legal,  accounting,  investment  banking and
other  expenses  incurred  by them or on their  behalf  in  connection  with the
transactions  contemplated by this Agreement,  whether or not such  transactions
are consummated. The Principal Shareholder will pay and hold Merge harmless from

                                       57

<PAGE>

payment of all sales,  use,  transfer,  documentary or stamp taxes and recording
and filing fees  applicable to the assignment of the their Shares to Merge or to
any other  transaction  contemplated  by this  Agreement or any of the Ancillary
Agreements. No expenses incurred by or on behalf of the Principal Shareholder or
any  of  their  Affiliates  (including  the  Company)  in  connection  with  the
transactions  contemplated  by this  Agreement will be paid by or charged to the
Company.

         10.3     WAIVER

         The rights and remedies of the parties to this Agreement are cumulative
and  not  alternative.  Neither  the  failure  nor any  delay  by any  party  in
exercising any right,  power or privilege  under this Agreement or the documents
referred to in this Agreement  will operate as a waiver of such right,  power or
privilege,  and no  single  or  partial  exercise  of any such  right,  power or
privilege  will preclude any other or further  exercise of such right,  power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent  permitted by  applicable  Law, (a) no claim or right arising out of this
Agreement  or the  documents  referred  to in this  Agreement  or the  Ancillary
Agreements  can be discharged by one party,  in whole or in part, by a waiver or
renunciation  of the claim or right unless in writing signed by the other party;
(b) no  waiver  that may be given by a party  will be  applicable  except in the
specific  instance for which it is given;  and (c) no notice to or demand on one
party  will be deemed to be a waiver of any  obligation  of such party or of the
right of the party giving such notice or demand to take further  action  without
notice or demand as provided in this Agreement,  the Ancillary Agreements or the
documents referred to herein or therein.

         10.4     FURTHER ASSURANCES

         The  parties  agree (a) to  furnish  upon  request  to each  other such
further  information,  (b) to  execute  and  deliver  to each  other  such other
documents,  and (c) to do such other acts and things, all as the other party may
reasonably  request for the purpose of carrying  out the  purposes and intent of
this Agreement,  the Ancillary  Agreements and the documents  referred to herein
and therein.

         10.5     NO THIRD-PARTY BENEFICIARIES

         This  Agreement  will not confer any rights or remedies upon any Person
other  than the  Company,  the  Shareholders  and  Merge,  and their  respective
successors and permitted assigns.

         10.6     SUCCESSORS AND ASSIGNS

         No party hereto may assign or delegate  any of such  party's  rights or
obligations  under  or in  connection  with  this  Agreement  or  any  Ancillary
Agreement  without the written  consent of the other parties  hereto;  PROVIDED,
HOWEVER,  that Merge may without  consent assign its rights under this Agreement
after the Closing to any Person acquiring all or substantially  all of the stock
or assets of Acquisition Sub from Merge.  Except as otherwise expressly provided
herein,  all  covenants  and  agreements  contained in this  Agreement or in any

                                       58

<PAGE>

Ancillary Agreement by or on behalf of any of the parties hereto or thereto will
be binding upon and enforceable against the respective successors and assigns of
such  party and will be  enforceable  by and will  inure to the  benefit  of the
respective successors and permitted assigns of such party.

         10.7     SEVERABILITY

         Whenever  possible,  each  provision of this  Agreement  and any of the
Ancillary Agreements,  respectively, will be interpreted in such manner as to be
effective and valid under applicable Law, but if any provision hereof or thereof
is held to be prohibited by or invalid under applicable Law, such provision will
be ineffective  only to the extent of such  prohibition  or invalidity,  without
invalidating  the  remainder  of  this  Agreement  or the  particular  Ancillary
Agreement, respectively.

         10.8     COUNTERPARTS; FACSIMILE SIGNATURES

         This  Agreement  may  be  executed   simultaneously   in  two  or  more
counterparts,  any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.  Facsimile  signatures shall be deemed to be original  signatures for
all purposes under this Agreement.

         10.9     DESCRIPTIVE HEADINGS; CONSTRUCTION

         The parties have  participated  jointly in the negotiation and drafting
of  this  Agreement.  In the  event  an  ambiguity  or  question  of  intent  or
interpretation  arises,  this Agreement shall be construed as if drafted jointly
by the parties  and no  presumption  or burden of proof shall arise  favoring or
disfavoring  any party by virtue of the  authorship  of any  provisions  of this
Agreement.   The  descriptive  headings  of  this  Agreement  are  inserted  for
convenience  only and do not constitute a part of this  Agreement.  The language
used in this Agreement  will be deemed to be the language  chosen by the parties
to  express  their  mutual  intent  and no rule of strict  construction  will be
applied  against any party.  The use of the word  "including"  in this Agreement
means "including without limitation" and is intended by the parties to be by way
of example rather than limitation.

         10.10    NOTICES

         All notices,  demands or other  communications to be given or delivered
under or by reason of the  provisions of this  Agreement  will be in writing and
will be deemed to have been given (i) when delivered personally to the recipient
or when sent to the recipient by telecopy (receipt confirmed), (ii) one business
day after the date sent, when sent to the recipient by reputable express courier
service  (charges  prepaid) or (iii) three  business days after the date mailed,
when mailed to the recipient by certified or  registered  mail,  return  receipt
requested and postage prepaid.  Such notices,  demands and other  communications
will be sent to the parties at the addresses indicated below:

                                       59

<PAGE>

If to the Company or Principal Shareholder:

AccuImage Diagnostics Corporation
400 Oyster Point Boulevard, Suite 201
South San Francisco, CA 94080
Fax:   (650) 875-0194

With a copy (which shall not constitute notice) to:
Robert M. Donlon
Morris Manning & Martin LLP
201 S. College Street
Suite 2300
Charlotte, North Carolina 28244
Fax: (704) 554-5050

If to the Merge Companies:
Merge Technologies Incorporated
1126 S. 70th Street, Suite 107B
Milwaukee Wisconsin 53217
Attn: Richard A. Linden, CEO
Fax: (414) 977-4202

With copies (which shall not constitute notice)to:

Michael Best & Friedrich
Attn: Geoffrey Morgan, Esq.
100 East Wisconsin Avenue, Suite 3300
Milwaukee, Wisconsin  53202
Fax: (414) 277-0656

and

George S. Rosic, Esq.
Suite 800
1603 Orrington Avenue
Evanston, IL 60201
Fax: 847-328-1928

or to such  other  address  or to the  attention  of  such  other  party  as the
recipient party has specified by prior written notice to the other parties.

         10.11    ENTIRE AGREEMENT

         This  Agreement  (including  the  Exhibits  and  Schedules  referred to
herein)  constitutes  the entire  agreement among the parties and supersedes any

                                       60

<PAGE>

prior  understandings,  agreements or  representations  by or among the parties,
written or oral, that may have related in any way to the subject matter hereof.

         10.12    AMENDMENTS

         The  provisions  of this  Agreement  may be amended or waived only by a
written  agreement  executed  and  delivered by each of the parties  hereto.  No
course  of  dealing  between  the  parties  to this  Agreement  or any  delay in
exercising  any rights  hereunder will operate as a waiver of any rights of such
parties.

         10.13    TIME OF ESSENCE

         With  regard to all dates and time  periods set forth or referred to in
this Agreement, time is of the essence.

         10.14    INCORPORATION OF EXHIBITS AND SCHEDULES

         The  Exhibits  and   Schedules   identified   in  this   Agreement  are
incorporated herein by reference and made a part hereof.

         10.15    ATTORNEYS' FEES; GOVERNING LAW

         Except as otherwise  specifically provided herein, the prevailing party
in any  action  or  proceeding  shall  be  entitled  to  receipt  of  reasonable
attorneys'  fees from the  non-prevailing  party in such  action  or  proceeding
seeking to enforce any  provision of, or based on any right arising out of, this
Agreement.   ALL   QUESTIONS   CONCERNING   THE   CONSTRUCTION,   VALIDITY   AND
INTERPRETATION  OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES  HERETO WILL BE
GOVERNED BY THE  INTERNAL  LAW,  AND NOT THE LAW OF  CONFLICTS,  OF THE STATE OF
WISCONSIN.

            IN WITNESS  WHEREOF,  the parties  hereto have  executed and deliver
this Agreement on the date first written above.

ACCUIMAGE DIAGNOSTICS                  MERGE TECHNOLOGIES
CORP.                                  INCORPORATED

By:         /s/ AVIEL FALIKS            By:      /s/ RICHARD LINDEN
   ----------------------------------       ------------------------------------
    Aviel Faliks, President and CEO           Richard Linden, President and CEO


            /s/ AVIEL FALIKS            ADI ACQUISITION CORP.
-------------------------------------
    Aviel Faliks, as                    By:      /s/ RICHARD LINDEN
    Principal Shareholder                   ------------------------------------
                                              Richard Linden, President









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>ex99-2.txt
<DESCRIPTION>VOTING, PROXY AND OPTION AGREEMENT DATED ...
<TEXT>
                                                                    EXHIBIT 99.2


                       VOTING, PROXY AND OPTION AGREEMENT



         THIS VOTING, PROXY AND OPTION AGREEMENT (this "Agreement") is made and
entered into as of November 24, 2004 by and between Aviel Faliks ("Shareholder")
and Merge Technologies Incorporated, a Wisconsin corporation ("Merge").

         WHEREAS, concurrently herewith, Merge, ADI Acquisition Corp., a Nevada
corporation ("Merger Sub"), AccuImage Diagnostics Corp., a Nevada corporation
(together with its subsidiaries, the "Company"), and Shareholder have entered
into a merger agreement (as amended from time to time, the "Merger Agreement")
and, unless otherwise defined herein, capitalized terms used herein shall have
the meanings ascribed thereto in the Merger Agreement; and

         WHEREAS, as of the date hereof, Shareholder is the record and
beneficial owner of that number of shares of common stock of the Company set
forth on the signature page hereof (such shares, together with any other shares
of capital stock of the Company acquired by Shareholder after the date hereof,
being collectively referred to herein as the "Shares; and

         WHEREAS, obtaining appropriate shareholder approval is a condition to
the consummation of the transactions contemplated by the Merger Agreement; and

         WHEREAS, in the event the Merger Agreement is terminated in accordance
with certain provisions of the Merger Agreement, Shareholder desires to grant
Merge an option to purchase the Shares from Shareholder.

         WHEREAS, as an inducement to Merge to enter into the Merger Agreement,
Merge and Shareholder have agreed to enter into this Agreement;

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

         Section 1.        NO SHOP

                           (a) GENERAL. Shareholder will not, and will not
permit any of his Affiliates, attorneys, representatives or agents
(collectively, the "Representatives") to, directly or indirectly, (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, business combination or similar transaction
involving the Company or any purchase or disposition of any amount of the assets
of the Company outside the ordinary course of business or (ii) any purchase or
disposition of any capital stock of the Company in each case other than the
transactions contemplated by the Merger Agreement (an "Alternative
Transaction"), (ii) facilitate, encourage, solicit or initiate discussions,
negotiations or submissions of proposals or offers in respect of an Alternative
Transaction, (iii) furnish or cause to be furnished, to any Person, any
information concerning the business, operations, properties or assets of the

<PAGE>

Company in connection with an Alternative Transaction, or (iv) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.

                           (b) NOTIFICATION. Shareholder shall notify Merge
orally and in writing promptly (but in no event later than twenty-four (24)
hours) after receipt of any proposal or offer from any Person to effect an
Alternative Transaction or any request for non-public information relating to
the Company or for access to the properties, books or records of the Company by
any Person other than Merge. Such notice shall indicate the identity of the
Person making the proposal or offer, or intending to make a proposal or offer or
requesting non-public information or access to the books and records of the
Company, the material terms of any such proposal or offer, or modification or
amendment to such proposal or offer and copies of any written proposals or
offers or amendments or supplements thereto. The Shareholder shall keep Merge
informed, on a current basis, of any material changes in the status and any
material changes or modifications in the material terms of any such proposal,
offer, indication or request.

                           (c) ONGOING DISCUSSIONS. Shareholder shall (and shall
cause his Representatives to) immediately cease and cause to be terminated any
existing discussions or negotiations with any Persons conducted heretofore with
respect to any of the foregoing. The Shareholder agrees not to (and to cause his
Representatives not to) release any third party from the confidentiality and
standstill provisions of any agreement relating to the Company.

         Section 2.        AGREEMENT TO VOTE; DISPOSITIONS; IRREVOCABLE PROXY;
                           OPTIONS.


                           (a) AGREEMENT TO VOTE. Shareholder hereby agrees to
vote the Shares or execute a written consent in respect thereof (i) for approval
and adoption of the Merger Agreement (as amended from time to time) and the
transactions contemplated by the Merger Agreement, as applicable, at any meeting
or meetings of the shareholders of the Company at which the Merger Agreement or
the transactions contemplated thereunder are submitted for the vote of such
Shareholder or in any written consent in respect thereof, (ii) against any
Alternative Transaction, without regard to any Board recommendation to
shareholders concerning such Alternative Transaction, and without regard to the
terms of such Alternative Transaction, (iii) against any agreement, amendment of
any agreement (including the Company's Articles of Incorporation or By-Laws), or
any other action that is intended or could reasonably be expected to prevent,
impede, interfere with, delay, postpone, or discourage the transactions
contemplated by the Merger Agreement, other than those specifically permitted by
this Agreement or the Merger Agreement, or (iv) against any action, agreement,
transaction or proposal that would result in a breach of any representation,
warranty, covenant, agreement or other obligation of the Company in the Merger
Agreement. Any such vote shall be cast (or consent shall be given) by
Shareholder in accordance with the procedures relating thereto so as to ensure

                                       2

<PAGE>

that it is duly counted, including for purposes of determining that a quorum is
present and for the purposes of recording such vote (or consent).

                           (b) RESTRICTIONS ON DISPOSITIONS. Shareholder hereby
agrees that, without the prior written consent of Merge, Shareholder shall not,
directly or indirectly, sell, offer to sell, give, pledge, encumber, assign,
grant any option for the sale of or otherwise transfer or dispose of, or enter
into any agreement, arrangement or understanding to sell, any Shares
(collectively, "Transfer"), and as a condition to any such Transfer which is
consented to by Merge, such transferee shall execute an agreement that is
identical to this Agreement (except to reflect the change of the identity of the
holder of Shares).

                           (c) IRREVOCABLE PROXY. Subject to the last two
sentences of this subsection (c), Shareholder hereby irrevocably appoints Merge
or its designee as Shareholder's agent, attorney and proxy, to vote (or cause to
be voted) the Shares owned by Shareholder in favor of approval of the Merger
Agreement and the transactions contemplated by the Merger Agreement, as
applicable. This proxy is irrevocable and coupled with an interest and is
granted in consideration of the Company, Merge and Merger Sub entering into the
Merger Agreement. In the event that the Shareholder fails for any reason to vote
the Shares in accordance with the requirements of Section 2(a) hereof, then the
proxyholder shall have the right to vote the Shares in accordance with the
provisions of the first sentence of this subsection (c). The vote of the
proxyholder shall control in any conflict between the vote by the proxyholder of
the Shares and a vote by Shareholder of the Shares.

                           (d) INCONSISTENT AGREEMENTS. Shareholder hereby
agrees that, he shall not enter into any agreement, contract or understanding
with any Person prior to the termination of the Merger Agreement directly or
indirectly to vote, grant a proxy or power of attorney or give instructions with
respect to the voting of the Shares in any manner which is inconsistent with
this Agreement.

         Section 3.        REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.

Shareholder represents and warrants to Merge as follows: (i) Shareholder has all
necessary power and authority to execute and deliver this Agreement and to
perform his obligations hereunder; (ii) this Agreement has been duly executed
and delivered by Shareholder; (iii) assuming the due authorization, execution
and delivery of this Agreement by Merge, this Agreement constitutes the legal,
valid and binding agreement of Shareholder, enforceable against Shareholder in
accordance with its terms; (iv) the execution and delivery of this Agreement by
Shareholder does not conflict with or violate any law or agreement binding upon
him, nor require any consent, notification, regulatory filing or approval; (v)
except for restrictions in favor of Merge pursuant to this Agreement,
Shareholder owns, beneficially and of record, all of the Shares free and clear
of any proxy, voting restriction, adverse claim or other lien and has sole
voting power and sole power of disposition with respect to all of the Shares,
with no restrictions on Shareholder's rights of voting or disposition pertaining
thereto and no Person other than Shareholder has any right to direct or approve
the voting or disposition of any of the Shares; and (vi) as of the date hereof,

                                       3

<PAGE>

Shareholder does not own beneficially or of record any securities of the Company
other than the shares of common stock and Options with an aggregate exercise
price all as set forth on the signature page hereof.

         Section 4.        REPRESENTATIONS AND WARRANTIES OF MERGE. Merge
represents and warrants to Shareholder as follows: (i) Merge has all necessary
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder; (ii) this Agreement has been duly executed and delivered
by Merge; (iii) assuming the due authorization, execution and delivery of this
Agreement by Shareholder, this Agreement constitutes the legal, valid and
binding agreement of Merge, enforceable against Merge in accordance with its
terms; (iv) the execution and delivery of this Agreement by Merge does not
conflict with or violate any law or agreement binding upon it, nor require any
consent, notification, regulatory filing or approval; and (v) Merge has filed
all reports and proxy and other statements with the Securities and Exchange
Commission (the "SEC") which are required by the Exchange Act to be filed since
January 1, 2004 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "Merge
SEC Documents").

         Section 5.        FURTHER ASSURANCES. At the request of Merge,
Shareholder shall execute and deliver such additional instruments and other
documents and shall take such further actions as may be necessary or appropriate
to effectuate, carry out and comply with all of his obligations under this
Agreement.

         Section 6.        TERMINATION. Except for the provisions of Section 7
hereof, this Agreement shall terminate upon the termination of the Merger
Agreement in accordance with its terms. The foregoing shall not relieve
Shareholder of any liability for breach of this Agreement.

         Section 7.        OPTION. In the event the Merger Agreement is
terminated pursuant to Sections 9.1 (b), (d), (e) or (g) of the Merger
Agreement, Shareholder hereby grants to Merge an option to purchase all, but not
fewer than all, of the Shares, exercisable for a period of two years from the
date of termination of the Merger Agreement, at an aggregate purchase price of
0.95x the Merger Consideration per Share (the "Option").

         Section 8.        MISCELLANEOUS.

                           (a) EXPENSES. Except as may be otherwise provided in
this Agreement or the Merger Agreement, each party shall bear his or its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.

                           (b) NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed given (i) when
delivered personally. (ii) on the third business day after being mailed by
certified mail, return receipt requested. (iii) the next business day after
delivery to a recognized overnight courier, or (iv) upon transmission and
confirmation of receipt by a facsimile operator if sent by facsimile (and shall
also be transmitted by facsimile to the Persons receiving copies thereof), to
the parties at the following addresses or facsimile numbers (or to such other

                                       4

<PAGE>

address and facsimile number as a party may have specified by notice given to
the other party pursuant to this provision):

                           If to the Shareholder:

                           24 Rozmus Ct.
                           Allendale, NJ  07401
                           Fax:  (212) 750-1525

                           With a copy (which shall not constitute notice) to:
                           Robert M. Donlon
                           Morris Manning & Martin LLP
                           201 S. College Street
                           Suite 2300
                           Charlotte, North Carolina 28244
                           Fax: (704) 554-5050

                           If to Merge:
                           Merge Technologies Incorporated
                           1126 S. 70th Street, Suite 107B
                           Milwaukee Wisconsin 53217
                           Attn: Richard A. Linden, CEO
                           Fax: (414) 977-4202

                           With copies (which shall not constitute notice)to:

                           Michael Best & Friedrich
                           Attn: Geoffrey Morgan, Esq.
                           100 East Wisconsin Avenue, Suite 3300
                           Milwaukee, Wisconsin  53202
                           Fax: (414) 277-0656

                           and

                           George S. Rosic, Esq.
                           Suite 800
                           1603 Orrington Avenue
                           Evanston, IL 60201
                           Fax: 847-328-1928

                           (c) AMENDMENTS, WAIVERS, ETC. This Agreement may not
be amended, changed, supplemented, waived or otherwise modified or terminated
except by an instrument in writing signed by Merge and Shareholder.

                           (d) SUCCESSORS AND ASSIGNS. No party may assign any
of its or his rights or delegate any of its or his obligations under this
Agreement without the prior written consent of the other party, except that

                                       5

<PAGE>

Merge may, without the consent of Shareholder, assign any of its rights and
delegate any of its obligations under this Agreement to any Affiliate of Merge.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties and their
respective successors and assigns, including without limitation any corporate
successor by Merger or otherwise. Notwithstanding any Transfer of Shares
consistent with this Agreement, the transferor shall remain liable for the
performance of all obligations of transferor under this Agreement.

                           (e) NO THIRD PARTY BENEFICIARIES. Nothing expressed
or referred to in this Agreement will be construed to give any Person, other
than the parties to this Agreement, any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provision of this
Agreement, except to a successor or permitted assignee under Section 5(d).

                           (f) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement and understanding between the parties relating to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter other than the Merger Agreement and any other agreement,
document or instrument expressly referenced therein.

                           (g) SEVERABILITY. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
unenforceability of any other provisions of this Agreement.

                           (h) SPECIFIC PERFORMANCE; REMEDIES CUMULATIVE. The
parties hereto acknowledge that money damages are not an adequate remedy for
violations of this Agreement and that any party, in addition to any other rights
and remedies which the parties may have hereunder or at law or in equity, may,
in his or its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunction or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such rights, powers or remedies by such party.

                           (i) NO WAIVER. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with his or its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of his or its right to exercise any such or other right,
power or remedy or to demand such compliance.

                           (j) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Wisconsin without
giving effect to the principles of conflict of laws thereof.

                                       6

<PAGE>

                           (k) JURISDICTION. Each of the parties hereto submits
to the exclusive jurisdiction of any state or federal court of the United States
located in the State of Wisconsin with respect to any claim or cause of action
arising out of this Agreement or the transactions contemplated hereby (and
agrees that no such action, suit or proceeding relating to this Agreement or any
transaction contemplated hereby shall be brought by him or it except in such
courts). Each of the parties hereto, irrevocably and unconditionally, waives
(and agrees not to plead or claim) any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in any state or federal court of the United States located
in the State of Wisconsin, or that any such action, suit or proceeding brought
in any such court has been brought in an inconvenient forum. Shareholder also
agrees that any final and unappealable judgment against such party in connection
with any such action, suit or other proceeding shall be conclusive and binding
on such party and that such award or judgment may be enforced in any court of
competent jurisdiction, either within or outside of the United States. A
certified or exemplified copy of such award or judgment shall be conclusive
evidence of the fact and amount of such award or judgment.


                                       7

<PAGE>


                           (l) WAIVER OF JURY TRIAL. The parties hereto hereby
waive, to the fullest extent permitted by applicable law, any right he or it may
have to a trial by jury in respect of any litigation directly or indirectly
arising out of, under or in connection with this Agreement.

                           (m) COUNTERPARTS. This Agreement may be executed by
facsimile and in any number of counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one instrument. Each
counterpart may consist of a number of copies each signed by less than all, but
together signed by all, the parties hereto.

                  IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date and year first written above.



                                          Merge Technologies Incorporated


                                          By: /s/ RICHARD LINDEN
                                              ---------------------
                                          Name: Richard Linden
                                          Title: President and CEO


                                              /s/ AVIEL FALIKS
                                          -------------------------
                                          Shareholder

                                          Number of Shares Owned:  34,050,000




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>ex99-3.txt
<DESCRIPTION>PRESS RELEASE OF ACCUIMAGE DIAGNOSTICS CORP...
<TEXT>
                                                                    EXHIBIT 99.3

[MERGE FILM LOGO GOES HERE]

[ACCUIMAGE LOGO GOES HERE]



                                                              JOINT NEWS RELEASE
                                                           FOR IMMEDIATE RELEASE
                         Contact: Beth Frost-Johnson, Merge eFilm, SVP-Marketing
                                    Richard Linden, Merge eFilm, President & CEO
                                                                  (414) 977-4000


                MERGE EFILM SIGNS DEFINITIVE AGREEMENT TO ACQUIRE
                           ACCUIMAGE DIAGNOSTICS CORP.
           ACQUISITION ACCELERATES ENTRY INTO ADVANCED VISUALIZATION;
                SETS NEW STANDARD FOR RIS/PACS SOFTWARE SOLUTIONS

         MILWAUKEE, WI AND SOUTH SAN FRANCISCO, CA NOVEMBER 24, 2004 - Merge
Technologies Incorporated (Nasdaq: MRGE), d.b.a. Merge eFilm, a leading global
healthcare software and services company, and AccuImage Diagnostics Corp.
(OTCBB: AIDP.OB), a leader in the development, marketing and support of software
for advanced visualization, analysis and management of medical imaging data from
medical imaging modalities, including state-of-the-art multi-slice CT and MRI,
today announced the signing of a definitive agreement by which Merge eFilm will
acquire AccuImage Diagnostic Corp. The all-cash transaction is valued at
approximately $6 million and is expected to close first quarter of 2005, subject
to satisfaction of customary closing conditions.

         "The acquisition of AccuImage is the next milestone in our strategy to
deliver comprehensive clinical and business workflow solutions to our
customers," said Richard Linden, Merge eFilm President and CEO. "The clinical
depth and capabilities of AccuImage will strengthen the Merge eFilm FUSION
RIS/PACS(TM) value proposition to both our direct and OEM/VAR customers. For
imaging centers, small to medium sized hospitals and clinics, the productivity
and financial advantages of a RIS/PACS solution with advanced visualization
capabilities will be significant."

                                     -MORE-

<PAGE>

         The AccuImage software portfolio, used by radiologists and specialty
physicians such as cardiologists, gastroenterologists, pulmonologists and
orthopedic surgeons, brings value to its customers by reducing the time
physicians need for reviewing and reporting cases, enhancing the interpretation
of studies, and providing additional sources of revenue. AccuImage's advanced
visualization tools released or in development include advanced 3D/4D
visualization, Calcium Scoring, Virtual Colonoscopy, CT Angiography, Lung Nodule
Detection, Subcutaneous Fat Measurement, and Image Stitching. Merge eFilm plans
to incorporate these tools into its FUSION RIS/PACS and FUSION PACS solutions,
providing the market with a unique RIS/PACS and PACS offering that includes
advanced visualization capabilities.

         "The acquisition of AccuImage makes a clear statement about Merge
eFilm's intent to be a leader in single-source software solutions for image and
information management," said Avi Faliks, PhD, and AccuImage's Chief Executive
Officer. "The Merge eFilm solutions are ideally suited for our advanced
visualization applications, and their customer base will bring these clinical
tools to an expanded market. Together, our solutions will accelerate our
customers' productivity and improve the care of the patients they serve."

         Commenting further, Linden said, "AccuImage will create accretive value
for our shareholders and an enhanced value proposition for our customers as we
take full advantage of the synergies between the two companies in 2005. These
advanced visualization tools, when combined with enterprise-wide accessibility
to images and information offered by our PACS and RIS/PACS solutions, reinforce
our strategy of delivering end-to-end clinical and business workflow solutions
that accelerate our customers' productivity."

         Both organizations will demonstrate their solutions at the Radiological
Society of North America (RSNA) Annual Conference next week in Chicago.

                                       ###

<PAGE>


ABOUT MERGE EFILM
Merge eFilm is a global healthcare software and services company focused on
accelerating the productivity of imaging centers, small- to medium-sized
hospitals and clinics with a suite of RIS/PACS products that more efficiently
streamline, integrate and distribute image and information workflow across the
healthcare enterprise. Since 1987, Merge eFilm has leveraged its healthcare
integration and connectivity experience to create workflow solutions that
improve our customers' productivity and enhance the quality of care they
provide. For additional information, visit WWW.MERGE-EFILM.COM

ABOUT ACCUIMAGE
AccuImage Diagnostics Corp. is a leader in the development, marketing and
support of software for visualization, analysis and management of medical
imaging data. AccuImage's software's primary function is to enhance physicians'
interpretation of data from medical imaging modalities, such as computer
tomography and magnetic resonance imaging through the application of three
dimensional computer graphics and image processing technologies. For additional
information, visit the AccuImage website at WWW.ACCUIMAGE.COM






Except for the historical information herein, the matters discussed in this news
release include forward-looking statements made pursuant to the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements may involve a number of risks and uncertainties and
include, without limitation, statements concerning the proposed acquisition;
statements concerning the terms and timing of the acquisition; and statements
concerning management's plans, objectives, strategies and assessment of market
factors. Certain forward-looking statements used in this news release may
include the words: believes, intends, anticipates, expects, and similar
expressions . Forward-looking statements do not constitute guarantees of future
performance. Actual results could differ materially from those projected in the
forward-looking statements based on a number of factors, including, but not
limited to, risks in product and technology development, market acceptance of
new products and continuing product demand, the impact of competitive products
and pricing, ability to integrate acquisitions, unexpected outcomes to any
pending or future litigation, changing economic conditions, credit and payment
risks associated with end-user sales, dependence on major customers, dependence
on key personnel, and other risk factors detailed in filings with the Securities
and Exchange Commission. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect any future events or circumstances.


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