As filed with the Securities and Exchange Commission on September 3, 2003
Registration No. 333-________
--------------------------------------------------------------------------------
United States Securities and Exchange Commission
Washington, D. C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Merge Technologies Incorporated
(Exact name of registrant as specified in its charter)
Wisconsin 39-1600938
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
1126 South 70th Street
Milwaukee, Wisconsin 53214-3151
(414) 977-4000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Richard A. Linden
President and Chief Executive Officer
1126 South 70th Street
Milwaukee, Wisconsin 53214-3151
(414) 977-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies to:
Mitchell D. Goldsmith, Esquire
Dennis B. O'Boyle, Esquire
Brian P. Collins, Esquire
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Chicago, Illinois 60611
(312) 527-4000
(312) 527-3194 (Facsimile)
------------------------------
Approximate date of proposed sale to the public: as soon as practicable after
this Registration Statement has become effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following: _____.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following: X .
-----
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: _____.
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: _____.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following: _____.
CALCULATION OF REGISTRATION FEE
Title of each class Amount to be Proposed Maximum Proposed Maximum Amount of
of securities to be Registered Offering Price Per Aggregate Offering Registration
registered Share Price Fee
Common Stock, par 701,664 (1)(2) $16.20 (3) $11,366,956.80 $920.72
value $0.01
(1) All shares of Common Stock (the "Shares") are being registered for sale by
certain selling shareholders.
(2) Subject to increase (or decrease) in accordance with Rule 416 of Regulation
C to reflect a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in our corporate structure.
(3) Estimated on the basis of the average of the bid and asked prices on August
28, 2003 on the Nasdaq National Market for the Shares pursuant to Rule
457(c).
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 2003
PRELIMINARY PROSPECTUS
701,664 Shares
of
Merge Technologies Incorporated
Common Stock
($0.01 par value)
-- This paragraph is along left margin of this page --
The information in the prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not solicitating an offer to buy
these securities in any state where the offer or sale is not permitted.
This Prospectus relates to the public offering of up to 701,664 shares
of the Common Stock, par value $0.01 per share (hereinafter, the "Shares"), of
Merge Technologies Incorporated, a Wisconsin corporation doing business as
Merge eFilm (hereinafter, "we," "us" or "our"), all of which Shares may be sold
from time to time by the Selling Shareholders (described herein) or their
assignees and transferees.
In July 2003, we sold 701,664 Shares to the Selling Shareholders in an
offering exempt from the registration provisions of the Securities Act of
1933, as amended ("Securities Act"), as a non-public offering. We are obliged
to register such Shares on behalf of these persons.
The Shares trade on the Nasdaq National Market under the symbol
"MRGE." On August 29, 2003, the last reported bid price was $16.49 for the
Shares.
The Selling Shareholders (as hereinafter described) and certain
persons who purchase the Shares from the Selling Shareholders may be deemed
"Underwriters," as that term is defined in the Securities Act, as amended. The
Shares may be offered by the Selling Shareholders in one or more transactions
on the Nasdaq National Market, or in negotiated transactions or a combination
of such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Shares may be sold by the Selling Shareholders either (i) to a broker or dealer
as principal for resale by such broker or dealer for its account pursuant to
this Prospectus (e.g., in transactions with a "market maker"), or (ii) in
brokerage transactions, including transactions in which the broker solicits
purchasers.
We will pay substantially all other expenses of this offering
(including the expense of preparing and duplicating this Prospectus and the
Registration Statement of which it is a part).
These are speculative securities. You should purchase these securities
only if you can afford a complete loss of your investment.
SEE "RISK FACTORS" ON PAGE 2 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS
____________________________
THIS PROSPECTUS HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL PRIOR TO
ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL. THIS PROSPECTUS DOES NOT CONTAIN AN UNTRUE STATEMENT OF
A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE
STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY ARE MADE, NOT
MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF DOCUMENTS
PURPORTED TO BE SUMMARIZED HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September _____, 2003
DOCUMENTS INCORPORATED BY REFERENCE
-------------------------------------
We are incorporating in this Prospectus by reference the following
documents which we filed with the United States Securities and Exchange
Commission (hereinafter referred to as the "Commission"):
1. Our Annual Report on Form 10-KSB, as amended, for fiscal year
ended December 31, 2002.
2. Our Proxy Statement dated April 14, 2003, for our 2003 Annual
Meeting of Shareholders filed with the Commission on April 14,
2003.
3. Our Quarterly Reports on Form 10-Q, for the quarters ended
March 31, 2003 and June 30, 2003.
4. Our Current Reports on Form 8-K filed on March 6, 2003, March
11, 2003 (amending the Form 8-K for the event dated June 28,
2002), April 22, 2003, April 30, 2003, July 10, 2003, July 29,
2003 and July 30, 2003.
5. Our Form 8-A dated January 9, 1998.
6. All documents which we file subsequently to the foregoing
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), prior to the filing of a post-effective amendment which
indicates that all securities registered have been sold or
which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of
filing of such documents.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which is also deemed to be incorporated
by reference herein modifies or supersedes such statements. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY
PERSON TO WHOM THIS PROSPECTUS HAS BEEN DELIVERED, FROM US. REQUESTS TO
OBTAIN SUCH DOCUMENTS SHOULD BE DIRECTED TO US AT 1126 SOUTH 70TH STREET,
MILWAUKEE, WISCONSIN 53214-3151 (TELEPHONE (414) 977-4000).
Some of the statements included in this Prospectus may be considered
to be "forward looking statements" since such statements relate to matters
which have not yet occurred. For example, phrases such as "we anticipate,"
"believe" or "expect" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the
result which we expected also may not occur or may occur in a different manner,
which may be more or less favorable to us. We do not undertake any 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.
Readers should carefully review the items included under the subsection
Risk Factors, as they relate to forward looking statements, as actual results
could differ materially from those projected in the forward looking statement.
SUMMARY
-----------
Purpose of the Offering. Certain of our shareholders are offering up
to 701,664 of our Shares through this Prospectus. We will not receive any of
the proceeds of the sale of any Shares sold by the Selling Shareholders.
Our Business. We are in the business of integrating radiology images
and information into healthcare enterprise networks. Our products fall into
three distinct categories: connectivity solutions; radiology workflow software
applications; and professional services. Our products and services enhance the
quality of healthcare provided to patients because they improve radiology
workflow efficiencies, reduce healthcare operating costs and improve clinical
decision making processes. We deliver this tangible value to facilities of all
sizes, but we specifically target small to medium size healthcare facilities,
multi-hospital groups, clinics and diagnostic imaging centers by working with
our customers to offer unique, phased, cost effective solutions to solve their
image and information management and radiology workflow needs. We believe that
we have been a key contributor to the development of the industry's standard
network communications protocol known as Digital Imaging Communications in
Medicine ("DICOM"), open medical standards like HL-7 and the Integrated
Healthcare Enterprise ("IHE").
Acquisition of Aurora Technology, Inc.
---------------------------------------
Through one of our wholly owned subsidiaries, Signal Stream, Inc., a
Wisconsin corporation now known as Merge Aurora Solutions Inc. ("Signal
Stream"), we acquired the assets of Aurora Technology Inc., a private Minnesota
corporation ("Aurora"). Aurora was in the business of design, production and
sale of diagnostic radiology products and software that facilitate the viewing,
distribution and storage of digital images. We are utilizing Aurora's assets
in a similar manner as Aurora.
Acquisition of eFilm Medical Inc.
----------------------------------
We also recently purchased 100% of the issued and outstanding shares
of common stock of eFilm Medical, Inc., a Nova Scotia, Canada, company
("eFilm"). eFilm has been in the business of development of medical imaging
workflow product and services and developing innovative medical image viewing
and related solutions within a clinical environment. We are utilizing eFilm's
assets in a similar manner as eFilm.
Recent Acquisition of RIS Logic, Incorporated
----------------------------------------------
On July 17, 2003, we acquired 100% of the outstanding shares of RIS
Logic, Incorporated, an Ohio corporation now known as RIS Logic, Inc. ("RIS
Logic"). RIS Logic provides comprehensive Radiology Information System ("RIS")
software and professional services for imaging centers and hospital radiology
departments to streamline operations and accelerate productivity. These
software solutions combined with professional services and training automate
the entire radiology practice workflow to decrease report turnaround time,
improve cash flow, enhance patient care and improve the operational efficiency
of imaging services.
RIS Logic provides efficient management of single or multi-site imaging
service operations, from scheduling and exam tracking to clinical information
archival, integrated billing, automated dictation/transcription, mammography
tracking and reporting, and radiologist reporting and distribution. This is
accomplished using industry-standard protocols that provide for connectivity,
integration and communication of patient data throughout the single or
multi-site imaging service operation.
RISK FACTORS
--------------
This offering involves a high degree of risk. Prospective investors
should consider carefully, among other things, the following risk factors with
respect to us and this offering.
WE HAVE NOT BEEN CONSISTENTLY PROFITABLE AND THROUGH 2000 INCURRED OPERATING
LOSSES
We incurred net losses of $1,919,970 in fiscal 1998, $2,898,821 in
fiscal 1999 and $5,707,394 in fiscal 2000, respectively. We earned net income
of $1,270,758 and $3,628,895 for the years ended December 31, 2001 and 2002,
respectively. There can be no assurance that we will continue to be profitable
in the future.
OUR OPERATING RESULTS MAY FLUCTUATE BECAUSE OF A VARIETY OF FACTORS
Our operating results are subject to quarterly and other fluctuations
due to a variety of factors. A significant portion of our business is derived
from orders placed by original equipment manufacturers ("OEMs") and direct
sales to healthcare customers. The timing of such orders could cause material
fluctuations in our business and operating results. Additionally, healthcare
capital spending and budgetary cycles could cause material fluctuations in our
direct sales from quarter to quarter. Other factors that may cause our
operating results to fluctuate include changes in sales volumes through our
distribution channels, changes in the mix of products sold, the timing of new
product announcements and introductions by us and our competitors, market
acceptance of new or enhanced versions of our products, availability and cost
of products from our suppliers, competitive pricing pressures, the gain or loss
of significant customers, increased research and development expense associated
with new product introductions and economic conditions generally or in various
geographic areas. All of the above factors are difficult for us to forecast,
and these or other factors can materially affect our operating results for one
quarter or series of quarters. In addition, our gross margins may decrease in
the future as a result of increasing sales of lower margin products or services
and volume discounts. We expect to continue to increase our operating expenses
for personnel, marketing and new product development. If we do not achieve
increased levels of sales commensurate with these increased levels of operating
expenses, our business and operating results will be materially adversely
affected. There can be no assurance that we will be profitable on a quarterly
or annual basis. Fluctuations in operating results may also result in
fluctuations in the price of our Shares.
WE MAY EXPERIENCE INCREASED CREDIT AND PAYMENT RISKS IF WE INCREASE DIRECT
SALES TO END USERS AND DECREASE SALES THROUGH VALUE ADDED RESELLERS
We currently market and sell a significant portion of our products to
OEMs and value added resellers ("VARs"). We have not, in the past, experienced
significant nonpayment or delays in payment on receivables from these
customers. Increased direct sales to end-users, such as hospitals and imaging
centers, may create delays in payment of receivables to us and may also
increase the risk of nonpayment of receivables. We may bear increased interest
expense if we experience delays in receipt of payment on receivables as a
result of increased sales directly to end-users as a percentage of total sales.
WE MAY NOT BE ABLE TO RESPOND TO TECHNOLOGICAL CHANGE
The markets for our products are characterized by rapid technological
advances and changes in customer requirements and evolving regulatory
requirements and industry standards. Our future prospects will depend, in
part, on our ability to enhance our medical image networking and information
management products in a timely manner and to identify, develop and achieve
market acceptance of new products that address new technologies and standards
and meet customer needs in the medical imaging network and information
management markets. There can be no assurance that we will be able to respond
to technological advances, changes in customer requirements or changes in
regulatory requirements or industry standards or that we will be able to
develop and market new products successfully. We are subject to risks from a
number of sources that could materially affect our ability to respond to
technological change.
WE MAY NOT BE ABLE TO RESPOND TO CHANGES IN OUR INDUSTRY OR TO THE REQUIREMENTS
OF OUR CUSTOMERS
Because the industry in which we operate is subject to rapid
technological change, we must constantly monitor industry conditions, customer
preferences and other matters. Any failure by us to anticipate or to respond
adequately to technological developments in our industry, changes in customer
requirements, changes in regulatory requirements or industry standards, or any
significant delays in the development, introduction or shipment of products,
could have a material adverse effect on our business and operating results.
In anticipation of new product introductions by us or our competitors,
customers could refrain from purchasing our existing products. New products
could render certain of our existing products obsolete. Any of these events
could materially adversely affect our business and operating results. In
addition, third-party payers, such as governmental programs and private
insurance plans, can indirectly affect the pricing or relative attractiveness
of our products by regulating the maximum amount of reimbursement that they
will provide for taking, storing and interpreting medical images. A decrease
in the reimbursement amounts for radiological procedures may decrease the
amount which physicians, clinics and hospitals are able to charge patients
for such services. As a result, adoption of new technologies may slow as
capital investment budgets are reduced, thereby significantly reducing the
demand for our products.
WE SELL OUR PRODUCTS TO A RELATIVELY LIMITED NUMBER OF CUSTOMERS, THE LOSS OF
ONE OR MORE OF WHICH COULD MATERIALLY AND ADVERSELY AFFECT US
We currently sell a material portion of our products to a relatively
limited number of OEMs, VARs and dealers. Aggregate sales to our ten largest
customers represented approximately 70%, 71%, 65%, 60%, 52% and 55% of our net
sales in 1998, 1999, 2000, 2001, 2002 and six months ended June 30, 2003,
respectively. During 1998, Marconi and Konica accounted for approximately 18%
each of our net sales. During 1999, Marconi accounted for 17% of our net sales
and Konica, Philips and Fuji accounted for approximately 11% each of our net
sales. During 2000, Fuji accounted for 14% of our net sales and Philips and
Marconi each accounted for approximately 12% of our net sales. During 2001,
Philips accounted for 16%, GE accounted for 13%, and Fuji accounted for 10% of
our net sales. During 2002, Philips accounted for 18% of our net sales. For
the six months ended June 30, 2003, Philips accounted for 17% of our net sales.
There can be no assurance that our current customers will continue to place
orders with us or that we will be able to obtain orders from new customers.
The loss of any one or more of our major customers could materially adversely
affect our business and operating results. None of our customers are subject
to any minimum purchase requirements, and many of our VAR and OEM customers
offer competitive systems manufactured by third parties. Each of our VAR and
OEM customers and dealers can cease marketing products at their respective
option, and the loss of one or more significant customers could materially
adversely affect our business and operating results.
WE MAY NOT BE ABLE TO EXPAND SUFFICIENTLY OUR SALES FORCE IN ORDER TO INCREASE
OUR SALES TO CUSTOMERS OUTSIDE OF THE UNITED STATES OF AMERICA
An important component of our business plan includes increasing our
sales to customers outside the United States of America, which represented 38%
of our net sales in fiscal 2002 and 41% of our net sales the six months ended
June 30, 2003. In order to increase overseas sales, it may be necessary or
desirable for us to expand our sales force or establish additional offices
outside of the United States of America. The increased costs of hiring new
personnel or establishing offices could have a material adverse effect on our
results of operations and financial condition.
IF WE ARE UNABLE TO RETAIN OUR KEY PERSONNEL, OUR BUSINESS MAY BE HARMED
Our continued success will depend to a significant degree upon the
efforts and abilities of our senior management, in particular, Richard A.
Linden, our President and Chief Executive Officer, William C. Mortimore, our
founder and Chief Strategist, Gregory G. Couch, Vice President and Chief
Technology Officer, Beth Frost-Johnson, Vice President, Marketing, Joseph R.
Gentile, Vice President Sales - Systems Solutions, Catherine M. McCallum, Vice
President - Healthcare Professional Services, Marketing, David M. Noshay, Vice
President, Business Development, William L. Stafford, Vice President, Sales -
OEM/VAR Solutions, Anton van Kimmenade, Vice President Service, Director
European Branch, Daniel H. Quigg, Vice President, and Scott T. Veech, Chief
Financial Officer, Secretary and Treasurer. Of these key personnel, Mr.
Linden, Mr. Mortimore, Mr. Couch, Ms. McCallum, Mr. van Kimmenade, Mr. Quigg
and Mr. Veech have employment agreements with us.
We carry key man life insurance in the amount of $2,000,000 on Richard
A. Linden and $2,000,000 on William C. Mortimore. We do not carry key man
life insurance on any other of our officers or directors. The loss of the
services of any of these persons could have a material adverse effect on us.
BECAUSE COMPETITION FOR QUALIFIED PERSONNEL IS INTENSE, WE MAY NOT BE ABLE TO
RECRUIT OR RETAIN PERSONNEL, WHICH COULD IMPACT THE DEVELOPMENT AND ACCEPTANCE
OF OUR PRODUCTS AND SERVICES
Our ability to carry out our business plan depends, in part, upon our
ability to hire and retain skilled sales and marketing professionals and
engineering specialists. Although we believe we will be able to hire
qualified personnel for such purposes, our inability to do so could materially
adversely affect our ability to market, sell and enhance our product lines.
The market for qualified experienced sales and marketing professionals and
engineering specialists has historically been, and we expect that we will
continue to be, intensely competitive. The inability to recruit and retain
qualified employees could materially adversely affect our results of
operations and financial condition.
WE HAVE BEEN ADVISED THAT A THIRD PARTY HAS THREATENED TO MAKE A CLAIM ON
CERTAIN OF OUR INTELLECTUAL PROPERTY
With the recently consummated acquisition of RIS Logic by merger into
a wholly owned subsidiary of ours, RIS Logic and three of its principal
shareholders have made detailed representations and warranties in the merger
agreement (the "Merger Agreement"), including, but not limited to, the warranty
that none of RIS Logic's intellectual property infringes upon the intellectual
property rights of others. A copy of the Merger Agreement has previously been
filed by us.
An escrow of 173,093 shares of our Common Stock was established at
closing to be the sole source of payment of indemnification claims, other than
with respect to breaches of representations and warranties associated with tax
claims, and the right to use all necessary intellectual property (whether
pursuant to ownership, license, sublicense, contract or permission), in which
event the escrowed shares would be applied as the first source of payment with
respect to such breaches.
RIS Logic has received a demand letter from counsel for Schedule Quest,
Inc. ("Schedule Quest"), alleging that RIS Logic has infringed on
Schedule Quest's Patent No. 6389454 titled "Multi-Family Scheduling System,"
which is a patent addressing computerized handling of patient scheduling. We
have retained patent counsel to address this issue. A preliminary review of
this patent suggests that the RIS Logic patent does not infringe the Schedule
Quest patent, although we cannot provide any assurances in this regard, given
the short time period since our receipt of this notice. Counsel for Schedule
Quest had previously proposed to RIS Logic's counsel that a possible business
arrangement may be achieved. We will analyze our options as to whether we will
choose to contest the patent or seek a license or other accommodation. We
believe that, in all events, that the Merger Agreement holdback is adequate
to cover any potential exposure related to such patent; however, we are
unable to guarantee that this will be the case.
IF THE PROTECTION OF OUR INTELLECTUAL PROPERTY IS INADEQUATE, OUR COMPETITORS
MAY GAIN ACCESS TO OUR TECHNOLOGY AND WE COULD LOSE CUSTOMERS.
We have received U. S. Patent No. 5,740,428 dated April 14, 1998, U. S.
Patent No. 5,950,207 dated September 7, 1999, New Zealand Patent No. 306009
dated February 7, 1996, and Australia Patent No. 704804 dated August 12, 1999,
for one aspect of our Workflow technology. A United States of America patent
has been applied for Distributed Architecture for Health Care Environment,
Patent Application No. 09/151902 underlying our MergeWeb Workflow technology.
We have also applied for additional foreign patents; however, we generally do
not rely solely on patent protection with respect to our products. Instead,
we rely on a combination of copyright and trade secret laws, employee and
third party confidentiality agreements and other measures to protect
intellectual property rights pertaining to our systems and technology. There
can be no assurance, however, that applicable copyright or trade secret laws
or these agreements will provide meaningful protection of our copyrights, trade
secrets, know-how or other proprietary information in the event of any
unauthorized use, misappropriation or disclosure of such copyrights, trade
secrets, know-how or other proprietary information. In addition, the laws of
certain foreign countries do not protect our intellectual property rights to
the same extent as do the laws of the United States of America. There can be
no assurance that third parties will not assert patent, copyright or other
intellectual property infringement claims against us with respect to our
products or technology or other matters. Any such claims against us, with or
without merit, as well as claims initiated by us against third parties, can be
time-consuming and expensive to defend or prosecute and resolve. To date, we
have not initiated any intellectual property infringement claims and no such
claims have been asserted against us.
IF WE FAIL TO COMPLY WITH UNITED STATES OF AMERICA AND FOREIGN REGULATORY
REQUIREMENTS RELATING TO OUR PRODUCTS, WE COULD BE MATERIALLY AND ADVERSELY
AFFECTED
The manufacturing and marketing of our products are subject to
government regulation as medical devices in the United States of America by the
United States Food and Drug Administration (the "FDA") and in other countries
by corresponding foreign regulatory authorities. The process of obtaining and
maintaining required regulatory clearances and approvals is lengthy, expensive
and uncertain. We believe that our success depends upon commercial sales of
improved versions of our products, certain of which cannot be marketed in the
United States of America and other regulated markets unless and until we obtain
clearance or approval from the FDA and its foreign counterparts. Failure to
comply with applicable regulatory requirements could result, among other
things, in warning letters, seizures of our products, total or partial
suspension of our production operations, refusal of the government to grant
market clearance or pre-market approval, withdrawal of approvals or criminal
prosecution.
We are also subject to other federal, state and local laws and
regulations relating to safe working conditions and manufacturing practices.
In addition, sales of our products outside the United States of America are
subject to various foreign regulatory requirements. The extent of government
regulation that might result from any future legislation or administrative
action cannot be predicted. Failure to comply with domestic regulatory
requirements or to obtain any necessary foreign certifications or regulatory
approvals, or any other failure to comply with regulatory requirements outside
the United States of America could have a material adverse effect on our
business, financial condition and results of operations.
IF WE BECOME LIABLE TO ANYONE USING ANY OF OUR PRODUCTS, WE COULD SUFFER
FINANCIALLY AND OUR REPUTATION AND CREDIBILITY IN OUR INDUSTRY COULD BE
SERIOUSLY AFFECTED
We have licensing agreements with certain of our customers which
typically contain provisions designed to limit our exposure to potential
product liability claims. However, it is possible that the limitation of
liability provisions contained in our license agreements may not be effective
under the laws of certain jurisdictions. Furthermore, although we try to
include provisions limiting our exposure to product liability in our sales
agreements, we are not always successful in doing so. Moreover, some of our
products are sold without agreements addressing product liability claims at
all. Although we have not experienced any product liability claims to date,
the sale and support of products by us may entail the risk of such claims, and
there can be no assurance that we will not be subject to such claims in the
future. Although we have procured product liability insurance, there can be no
assurance that we will continue to obtain such insurance on favorable terms or
that such insurance will be sufficient to fully protect us against a successful
product liability claim. A successful product liability claim brought against
us could have a material adverse effect on our business, results of operations,
and financial condition. Software products such as those offered by us
occasionally contain errors or failures, especially when first introduced or
when new versions are released. Although we conduct extensive product testing,
we could in the future lose or delay recognition of revenues as a result of
software errors or defects, the failure of our products to meet customer
specifications or otherwise. Although, to date, our business has not been
materially adversely affected by any such errors, defects or failure to meet
specifications, there can be no assurance that defects will not be found in
new products or releases after commencement of commercial shipments or that
such products will meet customer specifications, resulting in loss or deferral
of revenues, diversion of resources, damage to our reputation, or increased
service and warranty and other costs, any of which could have a material
adverse effect upon our business, operating results and financial condition.
WE EXPERIENCE SUBSTANTIAL COMPETITION IN OUR INDUSTRY AND OUR COMPETITORS HAVE
SOME ADVANTAGES OVER US
The markets for our products are highly competitive.
Imaging acquisition and connectivity products. We have several
competitors in the imaging acquisition and connectivity products business.
These products are sold primarily to our OEM and VAR customers who could decide
to build these capabilities internally or source these products from one of our
competitors.
* In the DICOM software development tool business, we primarily
compete directly and indirectly with a number of other
entities, including private companies like LeadTools and the
Radiological Society of North America ("RSNA"), which offers a
version of DICOM (originally developed by Mallinckrodt
Institute of Radiology) as "freeware" available to be
downloaded without charge from the Internet, but which offers
more limited features and no user support.
* We also face competition from picture archiving and
communication systems ("PACS") manufacturers that have
developed some of these tools internally and make them
available to their customers with the purchase of a complete
PACS solution.
* We face competition from two sources concerning our
connectivity products. First, as legacy x-ray devices and
specialty modalities like CTs and MRs are replaced with newer
models, the need for our connectivity products decreases
because connectivity features are built into the new
modalities. Secondly, several small specialty companies
provide similar connectivity products to the OEMs and VARs. We
anticipate competing successfully against these companies based
on our quality, feature set, and service reputation, but there
is no assurance that we will be successful in maintaining our
current run rate for this business line.
Completed PACS workflow solution sales. Our growing end-user PACS
workflow solution sales may put us more directly in competition with some of
our existing VAR customers who resell to end-users our component products as
part of their own complete PACS solution.
Many of our current and potential PACS workflow competitors have
greater resources than we have in areas including finance, research and
development, intellectual property and marketing. Many of these competitors
also have broader product lines and longer standing relationships with
customers in the medical imaging field than those we have.
We believe that our ability to compete successfully depends on a
number of factors both within and outside of our control, including:
* product innovation;
* product quality and performance;
* price;
* experienced sales, marketing and service organizations;
* rapid development of new products and features;
* continued active involvement in the development of DICOM and
other medical communication standards; and
* product and policy decisions announced by our competitors.
There can be no assurance that we will be able to compete successfully
with existing or new competitors.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE
We believe that existing cash, together with the availability under our
working capital line of credit and future cash flows from operations, will be
sufficient to execute our business plan during the next twelve months.
However, any projections of future cash inflows and outflows are subject to
substantial uncertainty. It may be necessary to raise additional capital to
meet long-term liquidity needs. If it is determined that additional capital is
needed, it will be raised by selling additional equity or raising debt from
third party sources. The sale of additional equity or convertible debt
securities could result in dilution to current stockholders. In addition, debt
financing, if available, could involve restrictive covenants, which could
adversely affect operations. There can be no assurance that any of these
financing alternatives, including raising additional capital, will be available
in amounts or on terms acceptable to us. If we are unable to raise any needed
additional capital, we could be required to significantly alter our operating
plan, which could have a material adverse effect on our business, financial
condition and results of operations.
IF WE ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK IN CONNECTION WITH ANY FUTURE
ACQUISITIONS OF BUSINESSES, THE OWNERSHIP IN US, AND THE VALUE OF THE SHARES
OWNED BY INVESTORS COULD BE DILUTED
We may make additional acquisitions of businesses which we believe are
complementary to our business. We may make payment for such acquisitions by
issuing shares of our Common or Preferred Stock or by payment in cash. If we
choose to make payment in the form of shares of our Common or Preferred Stock,
our existing shareholders may experience a dilution in their ownership interest
in us. If we elect to make payment in the form of cash, we would have to
determine whether we will use available cash or obtain additional cash from
traditional bank financing, sources other than banks or the proceeds of the
sale of our Common or Preferred Stock. While using debt to finance
acquisitions may provide greater financial returns, it also brings with it
greater risk. Should there be a downturn in the business of the target (due
to numerous factors which could include normal downturns in the business cycle,
the departure of key employees or key accounts, inability to integrate the
target's operations into our operations, etc.), we may risk loss of our
investment. Lenders and/or equity partners also may impose restrictions upon
the manner in which we conduct our business.
WE MIGHT NOT BE ABLE TO INTEGRATE ANY BUSINESSES WHICH WE ACQUIRE WITH OUR
BUSINESSES
If we should acquire additional businesses, we face the risk that we
may not be able to integrate such acquisitions successfully with our business.
Should we be unable to integrate successfully any new business, we would be
required either to dispose of such acquisition or attempt to change the
operations of such acquisition so that it will integrate with our business.
In either event, our business operations could be materially adversely
affected.
WE WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY ANY OF
THE SELLING SHAREHOLDERS IN THIS OFFERING
We will not receive any of the proceeds from sale of Shares by any of
the Selling Shareholders.
WE DO NOT HAVE ANY INTENTION TO DECLARE OR PAY ANY DIVIDENDS
We do not currently intend to declare or pay any cash dividend on our
Shares in the foreseeable future and we anticipate that earnings, if any, will
be used to finance the development and expansion of our business. Any payment
of future dividends and the amounts thereof will be dependent upon our
earnings, financial requirements and other factors deemed relevant by our
Board of Directors, including our contractual obligations.
ANY ADDITIONAL PREFERRED STOCK WHICH WE ISSUE COULD HAVE RIGHTS AND PREFERENCES
THAT COULD ADVERSELY AFFECT HOLDERS OF OUR COMMON STOCK
Our Articles of Incorporation (the "Articles") authorize the issuance
of "blank check" Preferred Stock with such designations, rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
our Board of Directors will have the authority to issue up to 5,000,000 shares
of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
shareholders. We issued certain shares of our Preferred Stock in connection
with our purchases of Interpra Medical Imaging Network Ltd., a corporation
incorporated under the laws of the Province of Ontario, now known as Merge
Technologies Canada Ltd. (hereinafter referred to as "Interpra"), and eFilm.
As of the date of this Prospectus, we have issued one share of Special Voting
Preferred Stock in connection with a voting trust with a financial institution
(the "Interpra Trustee") established for the benefit of holders of Interpra
Exchangeable Shares (as hereinafter defined), 22,462 of which are outstanding
as of the date of this Prospectus. We also have issued one share of Series 2
Special Voting Preferred Stock in connection with another voting trust with a
financial institution (the "eFilm Trustee") established for the benefit of
holders of eFilm Exchangeable Shares (as hereinafter defined), 336,145 of which
are outstanding as of the date of this Prospectus. There are no other shares
of Preferred Stock of any other series presently outstanding. The Special
Voting Preferred Stock and Series 2 Special Voting Preferred Stock both allow
the Interpra Trustee and the eFilm Trustee to vote at meetings of Common
Stockholders. As of the date of this Prospectus, the Interpra Trustee has
22,462 votes with regard to the Special Voting Preferred Stock and the eFilm
Trustee has 336,145 votes with regard to the Series 2 Special Voting Stock.
The rights of the holders of Shares presently may be materially adversely
affected by the rights of the holders of any additional Preferred Stock that
may be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock. In
addition, if we issue more Preferred Stock with voting rights, the voting
rights of Common Stockholders would be diluted. In any event, the Common
Stockholders' percentage of equity ownership in us will be reduced if we
issue more Preferred Stock.
ANTITAKEOVER MEASURES
Our Articles and Bylaws, along with Wisconsin statutory law, contain
provisions that could discourage potential acquisition proposals and might
delay or prevent a change in control of us. Such provisions could result in
us being less attractive to a potential acquirer and could result in
shareholders receiving less for their Shares than otherwise might be available
in the event of a takeover attempt.
THE COMPANY
-------------
We are in the business of integrating radiology images and information
into healthcare enterprise networks. Our products and services enhance the
quality of healthcare provided to patients because they improve radiology
workflow efficiencies, reduce healthcare operating costs and improve clinical
decision making processes. We deliver this tangible value to facilities of
all sizes, but we specifically target small to medium size healthcare
facilities, multi-hospital groups, clinics and diagnostic imaging centers by
working with our customers to offer unique, phased, cost effective solutions
to solve their image and information management and radiology workflow needs.
We were founded in 1987 and have historically been viewed as a leading
provider of medical diagnostic imaging and information connectivity
technologies and consulting solutions for healthcare facilities worldwide.
Today, we are at the forefront of integrated radiology workflow research and
development bringing software applications to the marketplace that will enable
the seamless integration of images, information, technology and people across
the electronic healthcare enterprise. We believe that our future growth will
be driven by a continued concentration on the core aspects of our business:
targeted sales/marketing activities with broader geographic coverage; modular
product innovation; exceptional professional services; and expanding strategic
partnerships that complement our internal efforts. Our strategy is to provide
a full suite of radiology workflow solutions to our target market, which are
users of electronic image and information management systems in the healthcare
industry, including our existing domestic client base of over 400 healthcare
facilities, and to deliver functionality and value that taps into the $1.3
billion annual market.
Our products fall into three distinct categories: connectivity
solutions; radiology workflow software applications; and professional services.
Connectivity solutions continue to be one of our core competencies to maintain
our market-leading position and long-term OEM/VAR relationships. We continue
our product innovation in this area in order to provide flexible,
state-of-the-art solutions to our OEM/VAR partners who incorporate these
products directly into their new modality equipment offerings. While the
OEM/VAR relationships are central to the distribution of these products, there
is an increasing interest from healthcare organizations to purchase radiology
workflow solutions, including connectivity products, directly from us to
complete their individual image management strategies.
Through our founder and Chairman, William C. Mortimore, we believe
that we have been a key contributor to the development of the industry's
standard network communications protocol known as DICOM, open medical standards
like HL-7 and the IHE framework that has been created through an initiative
co-sponsored by the RSNA and the Healthcare Information and Management Systems
Society ("HIMSS"). The IHE initiative represents a consortium of more than
thirty companies in the Radiology and Healthcare Information Systems fields.
This set of requirements has paved the way for healthcare organizations to
begin in earnest to integrate the complex workflow systems of the radiology
department with the entire healthcare system by using equipment and software
applications that connect the various image and communication components. We
have incorporated these standards in all of our connectivity solutions and
software applications establishing the basis for seamless integration of images
and healthcare information across an organization's intranet or over the
Internet.
Radiology departments and diagnostic imaging centers and their
customers benefit from our solutions in a variety of ways including: (i)
networking of multiple image-producing and image-using devices to eliminate
duplication and reduce the need for capital equipment expenditures to build
digital image and information networks; (ii) creating permanent electronic
archives of diagnostic-quality images to enable the retrieval of these images
and reports at any time in the future; (iii) accessing our modular architecture
of products that allow radiology departments, clinics and diagnostic imaging
centers to build their electronic image and information management systems in
a phased, flexible and cost-effective way; and (iv) delivering the capability
to integrate diagnostic radiology images into the radiologist's report to make
it a permanent part of the patient's electronic medical record.
We are a Wisconsin corporation and were incorporated on November 25,
1987. Our executive offices are located at 1126 South 70th Street, Milwaukee,
Wisconsin 53214-3151. Our telephone number is (414) 977-4000, and our internet
address is www.merge-efilm.com.
Acquisition of Aurora Technology, Inc.
---------------------------------------
On May 22, 2002, we acquired, through our wholly owned subsidiary,
Signal Stream, the assets of Aurora. Aurora was in the business of design,
production and sale of diagnostic radiology products and software that
facilitate the viewing, distribution and storage of digital images. Its assets
included accounts receivable, inventory, capital equipment and intangible
assets. We are utilizing Aurora's assets in a similar manner as Aurora.
The purchase price was 93,901 non-registered Shares, plus $100,000 in
cash. Twenty percent of the Shares have been held in escrow for twelve months
to secure obligations of Aurora. We filed a registration statement with the
Commission with respect to the 93,901 Shares issued in this transaction.
The consideration was negotiated at arms-length between us and Aurora
and includes a premium over the book value of assets, based on our own
assessment of the market value of Aurora's assets and the benefits of combining
Aurora with us.
Acquisition of eFilm Medical Inc.
----------------------------------
On June 28, 2002, we, Merge Technologies Holdings Co., a Nova Scotia
unlimited liability company ("Merge Holdings"), and eFilm, pursuant to the
terms of a Reorganization Agreement, completed certain transactions wherein,
among other things, we acquired 100% of the issued and outstanding shares of
eFilm common stock. As part of the transactions contemplated under the
Reorganization Agreement, shares of common stock previously outstanding of
eFilm were converted into 1,000,000 exchangeable shares of eFilm (the "eFilm
Exchangeable Shares"). Each eFilm Exchangeable Share is exchangeable and
convertible into one Share. We filed a registration statement with the
Commission with respect to the 1,000,000 Shares made available to the
stockholders of eFilm in exchange of the eFilm Exchangeable Shares at such time
as they elect to make the exchange.
eFilm has been in the business of development of medical imaging
workflow products and services, and developing innovative medical image viewing
and related solutions within a clinical environment. Its assets included
accounts receivable, inventory, capital equipment and intangible assets. We
are utilizing the eFilm assets in a similar manner as eFilm. Prior to this
transaction with eFilm, we entered into a joint development and technology
sharing agreement with eFilm wherein we agreed to cross license certain
technologies and jointly develop image distribution technologies under the
ImageChannelTM label.
The consideration was negotiated at arms-length between us and eFilm
and includes a premium over the book value of assets, based on our own
assessment of the market value of eFilm's assets and the benefits of
combining eFilm with us.
Recent Acquisition of RIS Logic, Incorporated
----------------------------------------------
On July 17, 2003, we acquired 100% of the outstanding shares of RIS
Logic in exchange for 772,000 shares of our common stock, cash of $2,724,000,
the payment of $1,700,000 of liabilities as a closing condition of the sale and
the issuance of 128,000 options to replace existing fully vested options
previously issued to RIS Logic employees from the Merge Technologies
Incorporated 2003 Stock Option Plan. We have filed a registration statement to
register shares issued from said Plan.
RIS Logic has been in the business of the development and sales of RIS
to end user imaging centers. Its assets included accounts receivable, capital
equipment and intangible assets. We intend to utilize the RIS Logic assets in
a similar manner as RIS Logic.
The consideration was negotiated at arms-length between us and RIS
Logic and includes a premium over the book value of assets, based on our own
assessment of the market value of RIS Logic's assets and the benefits of
combining RIS Logic with us.
USE OF PROCEEDS
-----------------
We will not receive any cash proceeds from the sale of any of the
Shares by the Selling Shareholders.
SELLING SHAREHOLDERS
----------------------
The Selling Shareholders or their assignees and transferees may offer
up to 701,664 Shares pursuant to this Prospectus. We will not receive any of
the proceeds from the sale of the Shares by the Selling Shareholders.
The following table sets forth certain information with respect to the Selling
Shareholders and the Shares which they presently own.
Shares to be
Shares Beneficially Shares Beneficially
Owned Prior to Being Owned After
Selling Shareholders Offering Offered Offering (1)
-------------------------------------- -------------------- --------- -------------------------
Number Percent Number Percent
------- ---------- --------- ---------
BayStar Capital II, L.P. (2).......... 100,000 * 100,000 ---- 0
CD Investment Partners, Ltd. (3)...... 25,000 * 25,000 ---- 0
Crestview Capital Fund II, LP (4)..... 83,333 * 83,333 ---- 0
North Sound Legacy International
Ltd. (5)............................ 83,333 * 83,333 ---- 0
North Sound Legacy Institutional Fund
LLC (5)............................. 75,833 * 75,833 ---- 0
North Sound Legacy Fund LLC (5)....... 7,500 * 7500 ---- 0
Pequot Navigator Onshore Fund,
L.P. (6)............................ 45,908 * 45,908 ---- 0
Pequot Scout Fund, L. P. (6).......... 83,832 * 83,832 ---- 0
Pequot Navigator Offshore Fund,
Inc. (6)............................ 36,926 * 36,926 ---- 0
Royal Bank of Canada (7).............. 83,333 * 83,333 ---- 0
Richard P. Kiphart.................... 41,666 * 41,666 ---- 0
Belle Haven Investments, L.P. (8)..... 67,500 * 17,500 50,000 0
Gary M. Glaser........................ 17,500 * 17,500 ---- 0
------- ------- ------
751,664 701,664 50,000
*Less than one percent
(1) Assumes the sale of all Shares offered by this Prospectus.
(2) Scott Derby, Managing Member, exercises voting and investment powers
over these Shares on behalf of this Selling Shareholder.
(3) John D. Ziegelman, Director, exercises voting and investment powers over
these Shares on behalf of this Selling Shareholder.
(4) Richard Levy, Managing Member, exercises voting and investment powers
over these Shares on behalf of this Selling Shareholder.
(5) Thomas MaCauley, Chief Investment Officer, exercises voting and
investment powers over these Shares on behalf of this Selling Shareholder.
(6) Lawrence Carter, Principal, exercises voting and investment powers
over these Shares on behalf of this Selling Shareholder.
(7) Johan Wahlstedt, Managing Director, exercises voting and investment
powers over these Shares on behalf of this Selling Shareholder.
(8) Gary M. Glaser, General Partner, exercises voting and investment powers
over these Shares on behalf of this Selling Shareholder.
Under the Exchange Act, and the regulations thereunder, any person
engaged in a distribution of the Shares offered by this Prospectus may not
simultaneously engage in market-making activities with respect to the Shares
during the applicable "cooling off" period prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Shareholders will be subject to applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M under the Securities Act, in connection with
transactions in the Shares, which provisions may limit the timing of purchases
and sales of Shares.
PLAN OF DISTRIBUTION
----------------------
This Prospectus, as appropriately amended or supplemented, may be used
from time to time by the Selling Shareholders, or their transferees, to offer
and sell the Shares in transactions in which the Selling Shareholders and any
broker-dealer through whom any of the Shares are sold may be deemed to be
Underwriters within the meaning of the Securities Act. We will not receive any
of the proceeds from any such sales. There presently are no arrangements or
understandings, formal or informal, pertaining to the distribution of the
Shares.
We anticipate that resales of the Shares by the Selling Shareholder
will be effected from time to time on the open market in ordinary brokerage
transactions in the Nasdaq National Market, on which the Shares are included
for quotation, in the over-the-counter market, or in private transactions. The
Shares will be offered for sale at market prices prevailing at the time of sale
or at negotiated prices and on terms to be determined when the agreement to
sell is made or at the time of sale, as the case may be. The Shares may be
offered directly by the Selling Shareholders or through brokers or dealers. A
member firm of the National Association of Securities Dealers, Inc. ("NASD")
may be engaged to act as the Selling Shareholders' agent in the sale of the
Shares by the Selling Shareholders and/or may acquire Shares as principal.
Member firms participating in such transactions as agent may receive
commissions from the Selling Shareholders (and, if they act as agent for the
purchaser of such Shares, from such purchaser), such commissions computed, in
appropriate cases, in accordance with the applicable rates of the NASD, which
commissions may be negotiated rates where permissible. Sales of the Shares by
the member firm may be made on the Nasdaq National Market from time to time at
prices related to prices then prevailing.
Participating broker-dealers may agree with the Selling Shareholders to
sell the specified number of Shares at a stipulated price per Share and, to the
extent such broker dealer is unable to do so acting as agent for the Selling
Shareholders, to purchase as principal any unsold Shares at the price required
to fulfill the broker-dealer's commitment to the Selling Shareholders.
Broker-dealers who acquire Shares as principal may thereafter resell such
Shares from time to time in transactions on the Nasdaq National Market, in
negotiated transactions, or otherwise, at market prices prevailing at the time
of sale or at negotiated prices.
Upon the Selling Shareholders notifying us that a particular offer
to sell the Shares is made and a material arrangement has been entered into
with a broker-dealer for the sale of Shares, a supplement to this Prospectus
will be delivered together with this Prospectus and filed pursuant to Rule
424(b) under the Securities Act setting forth with respect to such offer or
trade the terms of the offer or trade, including: (i) the number of Shares
involved; (ii) the price at which the Shares were sold; (iii) any
participating brokers, dealers, agents or member firm involved; (iv) any
discounts, commissions and other items paid as compensation from, and the
resulting net proceeds to, the Selling Shareholders; and (v) other facts
material to the transaction.
Shares may be sold directly by the Selling Shareholders or through
agents designated by the Selling Shareholders from time to time. Unless
otherwise indicated in the supplement to this Prospectus, any such agent
will be acting on a best efforts basis for the period of its appointment.
The Selling Shareholders and any brokers, dealers, agents, member
firm or others that participate with the Selling Shareholders in the
distribution of the Shares may be deemed to be Underwriters within the meaning
of the Securities Act, and any commissions or fees received by such persons and
any profit on the resale of the Shares purchased by such person may be deemed
to be underwriting commissions or discounts under the Securities Act.
DESCRIPTION OF SECURITIES
---------------------------
Our authorized capital stock consists of 30,000,000 shares of Common
Stock, and 5,000,000 shares of Preferred Stock, par value $0.01 per share, of
which we have designated 1,000,000 shares as Series A Preferred Stock, one
share of Special Voting Preferred Stock and one share of Series 2 Special
Voting Preferred Stock. As of August 20, 2003, there were 12,148,914 shares
of Common Stock (inclusive of the Shares held in escrow per the RIS Logic
Merger Agreement), no shares of Series A Preferred Stock, one share of Special
Voting Preferred Stock and one share of Series 2 Special Voting Preferred Stock
outstanding.
The following description of our capital stock is a summary and is
qualified in its entirety by the provisions of our Articles and Bylaws, copies
of which are available for review upon request.
COMMON STOCK
-------------
Holders of Shares are entitled to one vote per share on each matter
submitted to a vote at a meeting of stockholders. The Shares do not have
cumulative voting rights, which means that the holders of a majority of voting
Shares voting for the election of directors can elect all of the members of the
Board of Directors. The Shares have no preemptive rights and no redemption or
conversion privileges. Subject to any preferences of any outstanding Preferred
Stock, the holders of the outstanding Shares are entitled to receive dividends
out of assets legally available at such times and in such amounts as the Board
of Directors may, from time to time, determine, and upon liquidation and
dissolution are entitled to receive all assets available for distribution to
the stockholders. A majority vote of Shares represented at a meeting at which
a quorum is present is sufficient for most actions that require the vote of
stockholders. All of the outstanding Shares are fully-paid and non-assessable.
(See "Certain Statutory and Other Provisions.")
PREFERRED STOCK
---------------
Our Board of Directors may, without further action by our stockholders,
from time to time, issue shares of Preferred Stock in series and may, at the
time of issuance, determine the rights, preferences and limitations of each
series. Any dividend preference of any Preferred Stock which may be issued
would reduce the amount of funds available for the payment of dividends on
Shares. Also, holders of Preferred Stock would normally be entitled to receive
a preference payment in the event of any liquidation, dissolution, or
winding-up of us before any payment is made to the holders of Shares. Under
certain circumstances, the issuance of such Preferred Stock may render more
difficult or tend to discourage a merger, tender offer, proxy contest, the
assumption of control by a holder of a large block of our securities or the
removal of incumbent management. Although we presently have no plans to issue
any additional shares of Preferred Stock, the Board of Directors, without
stockholder approval, may issue Preferred Stock with voting and conversion
rights which could adversely affect the holders of Shares.
Series A Preferred Stock. There presently are no shares of Series A
Preferred Stock outstanding. However, the Certificate of Designations for the
Series A Preferred Stock provides that holders of Series A Preferred Stock are
entitled to receive dividends at the rate of 8% per annum, payable in quarterly
installments in cash or in Shares, at the discretion of our Board of Directors.
If we are liquidated, holders of Series A Preferred Stock are entitled to
receive a liquidation preference in an amount equal to the stated value of the
Series A Preferred Stock less any distributions of assets and funds distributed
to holders of Series A Preferred Stock, including dividends and/or redemption
proceeds from redemptions of Series A Preferred Stock, and including all
accrued and unpaid dividends.
The Series A Preferred Stock ranks senior to the Shares and all other
Preferred Stock which is junior to the Series A Preferred Stock.
The Series A Preferred Stock is convertible, at any time and from time
to time, at the sole discretion of the holder of Series A Preferred Stock, into
Shares at the rate of one share of Series A Preferred Stock for one share of
Common Stock, subject to adjustment as set forth in our Certificate of
Designations for the Series A Preferred Stock. Upon the occurrence of both of
(i) the closing bid price of our Shares at $4.00 or more for thirty (30)
consecutive trading days on the Nasdaq National Market or any other exchange
or trading market on which our Shares are traded, and (ii) registration of the
Shares underlying the Series A Preferred Stock with the Commission, then the
Series A Preferred Stock automatically converts into Shares.
The Series A Preferred Stock will be adjusted in the event of a capital
reorganization or reclassification, consolidation, merger or other business
combination.
Each share of Series A Preferred Stock is entitled to cast a number of
votes equal to the number of Shares into which each share of Series A Preferred
Stock is convertible. Holders of Series A Preferred Stock and Common
Stockholders are entitled to vote as one class on all matters as to which
shareholders are entitled to vote, unless otherwise provided by applicable law.
Special Voting Preferred Stock. In September 1999, we, Merge Holdings,
Interpra, and the principal shareholders of Interpra, pursuant to a Purchase
Agreement (the "Interpra Agreement"), completed certain transactions wherein,
among other things, we acquired 100% of the issued and outstanding shares of
Interpra common stock. As part of the transactions contemplated under the
Interpra Agreement, shares of Interpra common stock previously outstanding
were exchanged for and converted into 420,000 exchangeable shares of Interpra
(the "Interpra Exchangeable Shares"). Each Interpra Exchangeable Share is
exchangeable and convertible into one share of Common Stock. Also in connection
with our acquisition of Interpra, we issued one share of Special Voting
Preferred Stock to the Interpra Trustee pursuant to a Trust Agreement (the
"Interpra Trust Agreement") dated September 3, 1999, to which the Interpra
Trustee, Interpra and we are parties.
The Interpra Trustee, as the holder of the Special Voting Preferred
Stock, is not entitled to receive dividends. If we are liquidated, the holder
of the Special Voting Preferred Stock is entitled to receive a liquidation
preference in an amount equal to the stated value of the Special Voting
Preferred Stock, less any distributions of assets and funds distributed to
the holder of the Special Voting Preferred Stock, including redemption
proceeds from redemptions of the Special Voting Preferred Stock.
The Special Voting Preferred Stock ranks senior to our Shares, pari
passu to the Series 2 Special Voting Preferred Stock (as hereinafter
described), and junior to any other class or series of our capital stock.
The Special Voting Preferred Stock is not subject to redemption,
except that at such time as no Interpra Exchangeable Shares (other than
Interpra Exchangeable Shares owned by us and our affiliates) are outstanding,
and no shares of stock, debt, options or other agreements which could give
rise to the issuance of any Interpra Exchangeable Shares to any person (other
than us and our affiliates) shall exist; then the Special Voting Preferred
Stock shall automatically be redeemed and canceled, for an amount equal to
$0.01 due and payable upon such redemption. Upon any such redemption or
other purchase or acquisition of the Special Voting Preferred Stock by us,
the Special Voting Preferred Stock shall be deemed retired and canceled and
may not be reissued.
The holder of record of the Special Voting Preferred Stock shall be
entitled to cast a number of votes equal to the number of Interpra Exchangeable
Shares outstanding from time to time (other than the Interpra Exchangeable
Shares held by us and our affiliates).
Pursuant to the terms of the Interpra Trust Agreement, during the
term of the Interpra Trust Agreement, we may not, without the consent of the
holders of the Interpra Exchangeable Shares, issue any additional shares of
our Special Voting Preferred Stock. The Special Voting Preferred Stock
entitles the holder of record to a number of votes at meetings of holders of
our Shares equal to the number of Interpra Exchangeable Shares outstanding
from time to time (other than the Interpra Exchangeable Shares held by us and
our affiliates). The Interpra Trustee shall vote the Special Voting Preferred
Stock in accordance with instructions which it has received from the holders
of the Interpra Exchangeable Shares. The voting rights attached to the Special
Voting Preferred Stock shall terminate pursuant to and in accordance with the
Interpra Trust Agreement.
Series 2 Special Voting Preferred Stock. In June 2002, we, Merge
Holdings, eFilm and the principal shareholders of eFilm, pursuant to a
Reorganization Agreement (the "eFilm Agreement") completed certain transactions
wherein, among other things, we acquired 100% of the issued and outstanding
shares of eFilm common stock. As part of the transactions contemplated under
the eFilm Agreement, shares of common stock of eFilm previously outstanding
were exchanged for and converted into 1,000,000 exchangeable shares of eFilm.
Each eFilm Exchangeable Share is exchangeable and convertible into one share
of Common Stock. Also in connection with our acquisition of eFilm, we issued
one share of Series 2 Special Voting Stock to the eFilm Trustee pursuant to
a Trust Agreement (the "eFilm Trust Agreement") dated June 28, 2002, to which
the eFilm Trustee, eFilm and we are a party.
The eFilm Trustee, as the holder of the Series 2 Special Voting
Preferred Stock, is not entitled to receive dividends. If we are liquidated,
the holder of the Series 2 Special Voting Preferred Stock is entitled to
receive a liquidation preference in an amount equal to the stated value of
the Series 2 Special Voting Preferred Stock less any distributions of assets
and funds distributed to the holder of the Series 2 Special Voting Preferred
Stock, including redemption proceeds from redemptions of the Series 2 Special
Voting Preferred Stock.
The Series 2 Special Voting Preferred Stock ranks senior to our
Shares, pari passu to the Special Voting Preferred Stock, and junior to any
other class or series of our capital stock.
The Series 2 Special Voting Preferred Stock shall not be subject to
redemption, except that at such time as no eFilm Exchangeable Shares (other
than eFilm Exchangeable Shares owned by us and our affiliates) shall be
outstanding, and no shares of stock, debt, options or other agreements which
could give rise to the issuance of any eFilm Exchangeable Shares to any person
(other than us and our affiliates) shall exist; then the Series 2 Special
Voting Preferred Stock shall automatically be redeemed and canceled, for an
amount equal to $0.01 due and payable upon such redemption. Upon any such
redemption or other purchase or acquisition of the Series 2 Special Voting
Preferred Stock by us, the Series 2 Special Voting Preferred Stock shall be
deemed retired and canceled and may not be reissued.
The holder of record of the Series 2 Special Voting Share shall be
entitled to cast a number of votes equal to the number of eFilm Exchangeable
Shares outstanding from time to time (other than the eFilm Exchangeable
Shares held by us and our affiliates).
Pursuant to the terms of the eFilm Trust Agreement, during the term
of the eFilm Trust Agreement, we may not, without the consent of the holders
of the eFilm Exchangeable Shares, issue any additional shares of our Series
2 Special Voting Preferred Stock. The Series 2 Special Voting Preferred Stock
entitles the holder of record to a number of votes at meetings of holders of
Shares equal to the number of eFilm Exchangeable Shares outstanding from time
to time (other than the eFilm Exchangeable Shares held by us and our
affiliates). The Trustee shall vote the Series 2 Special Voting Preferred
Stock in accordance with instructions which it has received from the holders
of the eFilm Exchangeable Shares. The voting rights attached to the Series
2 Special Voting Preferred Stock shall terminate pursuant to and in accordance
with the Trust Agreement.
EXCHANGEABLE SHARES
----------------------
Certain former stockholders of eFilm and Interpra were issued shares
exchangeable into shares of our Common Stock. As of the date of this
Prospectus, holders of eFilm Exchangeable Shares have the right to receive up
to 336,145 Shares and holders of Interpra Exchangeable Shares have the right
to receive up to 22,462 Shares.
LIMITATION OF DIRECTOR LIABILITY
---------------------------------
Section 180.0828 of the Wisconsin Business Corporation Law ("WBCL")
provides that officers and directors of domestic corporations may be personally
liable only for intentional breaches of fiduciary duties, criminal acts,
transactions from which the director derived an improper personal profit and
willful misconduct. These provisions may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter shareholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefited us and our shareholders. The employment agreements of
certain directors and officers contain a provision similar to the provisions
of the WBCL.
INDEMNIFICATION
----------------
Under the WBCL, our directors and officers are entitled to mandatory
indemnification from us against certain liabilities and expenses (a) to the
extent such officers or directors are successful in the defense of a
proceeding, and (b) in proceedings in which the director or officer is not
successful in the defense thereof, unless (in the latter case only) it is
determined that the director or officer breached or failed to perform his or
her duties to us and such breach or failure constituted: (i) a willful
failure to deal fairly with us or our shareholders in connection with a matter
in which the director or officer had a material conflict of interest; (ii) a
violation of the criminal law unless the director or officer had reasonable
cause to believe his or her conduct was lawful or had no reasonable cause to
believe his or her conduct was unlawful; (iii) a transaction from which the
director or officer derived an improper personal profit; or (iv) willful
misconduct. The WBCL allows a corporation to limit its obligation to indemnify
officers and directors by providing so in its articles of incorporation. Our
Bylaws provide for indemnification of directors and officers to the fullest
extent permitted by Wisconsin law.
CERTAIN STATUTORY AND OTHER PROVISIONS
---------------------------------------
The provisions of our Bylaws and the WBCL described in this section
may delay or make more difficult acquisitions or changes of control of us not
approved by our Board of Directors. Such provisions have been implemented to
enable us, particularly (but not exclusively) in the initial years of our
existence as a publicly-traded company, to develop our business in a manner
which will foster its long-term growth without disruption caused by the threat
of a takeover not deemed by its Board of Directors to be in our best interests
and our shareholders. Such provisions could have the effect of discouraging
third parties from making proposals involving an acquisition or change of
control of us although such proposals, if made, might be considered desirable
by a majority of our shareholders. Such provisions may also have the effect of
making it more difficult for third parties to cause the replacement of our
current management without the concurrence of the Board of Directors.
Number of Directors; Removal; Vacancies. The Bylaws currently provide
that the number of Directors shall be not less than three nor greater than
eleven. The authorized number of Directors may be changed by amendment of the
Bylaws. The Bylaws also provide that our Board of Directors shall have the
exclusive right to fill vacancies on the Board of Directors, including
vacancies created by expansion of the Board or removal of a Director, and
that any Director elected to fill a vacancy shall serve until the next annual
meeting of shareholders. The Bylaws further provide that Directors may be
removed by the shareholders only by the affirmative vote of the holders of at
least a majority of the votes then entitled to be cast in an election of
Directors. This provision, in conjunction with the provisions of the Bylaws
authorizing the Board to fill vacant Directorships, could prevent shareholders
from removing incumbent Directors and filling the resulting vacancies with
their own nominees.
Amendments to the Articles of Incorporation. The WBCL provides
authority to us to amend our Articles at any time to add or change a provision
that is required or permitted to be included in the Articles or to delete a
provision that is not required to be included in the Articles. Our Board of
Directors may propose one or more amendments to our Articles for submission
to shareholders and may condition its submission of the proposed amendment on
any basis if the Board of Directors notifies each shareholder, whether or not
entitled to vote, of the shareholders' meeting at which the proposed amendment
will be voted upon.
Constituency or Stakeholder Provision. Under Section 180.0827 of the
WBCL (the "Wisconsin Stakeholder Provision"), in discharging his or her duties
to us and in determining what he or she believes to be in our best interests
of, a director or officer may, in addition to considering the effects of any
action on shareholders, consider the effects of the action on employees,
suppliers, customers, the communities in which we operate and any other factors
that the director or officer considers pertinent.
Wisconsin Antitakeover Statutes. Sections 180.1140 to 180.1144 of the
WBCL (the "Wisconsin Business Combination Statute") regulate the broad range
of "business combinations" between a "resident domestic corporation" (such as
us) and an "interested stockholder." The Wisconsin Business Combination
Statute defines a "business combination" to include a merger or share exchange,
or a sale, lease, exchange, mortgage, pledge, transfer or other disposition of
assets equal to at least 5% of the market value of the stock or assets of the
corporation or 10% of its earning power, or the issuance of stock or rights to
purchase stock with a market value equal to at least 5% of the outstanding
stock, the adoption of a plan of liquidation or dissolution and certain other
transactions involving an "interested stockholder," defined as a person who
beneficially owns 10% of the voting power of the outstanding voting stock of
the corporation or who is an affiliate or associate of the corporation and
beneficially owned 10% of the voting power of the then outstanding voting
stock within the last three years. Section 180.1141 of the Wisconsin Business
Combination Statute prohibits a corporation from engaging in a business
combination (other than a business combination of a type specifically excluded
from the coverage of the statute) with an interested stockholder for a period
of three years following the date such person becomes an interested
stockholder, unless the board of directors approved the business combination
or the acquisition of the stock that resulted in a person becoming an
interested stockholder before such acquisition. Accordingly, the Wisconsin
Business Combination Statute's prohibition on business combinations cannot be
avoided during the three year period by subsequent action of the board of
directors or shareholders. Business combinations after the three year period
following the stock acquisition date are permitted only if (i) the board of
directors approved the acquisition of the stock by the interested stockholder
prior to the acquisition date, (ii) the business combination is approved by
a majority of the outstanding voting stock not beneficially owned by the
interested stockholder, or (iii) the consideration to be received by
shareholders meets certain requirements of the statute with respect to
form and amount.
In addition, the WBCL provides in Sections 180.1130 to 180.1133 that
business combinations involving a "significant shareholder" (as defined below)
and a "resident domestic corporation" (such as us) are subject to a two-thirds
supermajority vote of shareholders (the "Wisconsin Fair Price Statute"), in
addition to any approval otherwise required. A "significant shareholder," with
respect to a resident domestic corporation, is defined as a person who
beneficially owns, directly or indirectly, 10% or more of the voting stock of
the corporation, or an affiliate of the corporation which beneficially owned,
directly or indirectly, 10% or more of the voting stock of the corporation
within the last two years. As a result of completing our initial public
offering of our Shares in 1998, we are an "issuing public corporation." Under
Section 180.1131 and Section 180.1132 of the WBCL, the business combinations
described above must be approved by 80% of the voting power of the
corporation's stock and at least two-thirds of the voting power of the
corporation's stock not beneficially held by the significant shareholder who
is party to the relevant transaction or any of its affiliates or associates,
in each case voting together as a single group, unless the following fair
price standards have been met: (i) the aggregate value of the per share
consideration is equal to the higher of (a) the highest price paid for any
Shares of the corporation by the significant shareholder in the transaction
in which it became a significant shareholder of within two years before the
date of the business combination, (b) the market value of the corporation's
shares on the date of commencement of any tender offer by the significant
shareholder, the date on which the person became a significant shareholder
or the date of the first public announcement of the proposed business
combination, whichever is highest, or (c) the highest liquidation or
dissolution distribution to which holders of the shares would be entitled;
and (ii) either cash, or the form of consideration used by the significant
shareholder to acquire the largest number of shares, is offered.
Section 180.1134 of the WBCL (the "Wisconsin Defensive Action
Restrictions") provides that, in addition to the vote otherwise required by
law or the articles of incorporation of an issuing public corporation, the
approval of the holders of a majority of the shares entitled to vote is
required before such corporation can take certain action while a takeover
offer is being made or after a takeover offer has been publicly announced and
before it is concluded. Under the Wisconsin Defensive Action Restrictions,
shareholder approval is required for the corporation to (i) acquire more than
5% of the outstanding voting shares at a price above the market price from any
individual who or organization which owns more than 3% of the outstanding
voting shares and has held such shares for less than two years, unless a
similar offer is made to acquire all voting shares, or (ii) sell or option
assets of the corporation which amount to at least 10% of the market value
of the corporation, unless the corporation has at least three independent
directors (directors who are not officers or employees) and a majority of the
independent directors vote not to have this provision apply to the corporation.
The restrictions described in clause (i) above may have the effect of deterring
a shareholder from acquiring Shares with the goal of seeking to have us
repurchase such shares at a premium over the market price.
Section 180.1150 of the WBCL provides that the voting power of shares
of public Wisconsin corporations such as us held by any person or persons
acting as a group in excess of 20% of the voting power in the election of
directors is limited to 10% of the full voting power of those shares. This
statutory voting restriction does not apply to shares acquired directly from
us or in certain specified transactions or shares for which full voting power
has been restored pursuant to a vote of shareholders.
Certain Antitakeover Effects. Certain provisions of our Articles and
Bylaws may have significant antitakeover effects, including the ability of the
remaining directors to fill vacancies, and the ability of the Board of
Directors to issue "blank check" Preferred Stock which, in turn, allows the
directors to adopt a so-called "rights plan" which would entitle shareholders
(other than a hostile bidder) to acquire our stock at a discount.
The explicit grant in the Wisconsin Stakeholder Provision of
discretion to directors to consider nonshareholder constituencies could, in
the context of an "auction" of us, have antitakeover effects in situations
where the interests of our stakeholders, including employees, suppliers,
customers and communities in which we do business, conflict with the
short-term maximization of shareholder value.
The Wisconsin Fair Price Statute may discourage any attempt by a
shareholder to squeeze out other shareholders without offering an appropriate
premium purchase price. In addition, the Wisconsin Defensive Action
Restrictions may have the effect of deterring a shareholder from acquiring
Shares with the goal of seeking to have us repurchase Shares at a premium. The
WBCL statutory provisions and our Article and Bylaw provisions referenced above
are intended to encourage persons seeking to acquire control of us to initiate
such an acquisition through arms-length negotiations with our Board of
Directors and to ensure that sufficient time for consideration of such a
proposal, and any alternatives, is available. Such measures are also designed
to discourage investors from attempting to accumulate a significant minority
position in us and then use the threat of a proxy contest as a means to
pressure us to repurchase Shares at a premium over the market value. To the
extent that such measures make it more difficult for, or discourage, a proxy
contest or the assumption of control by a holder of a substantial block of
Shares, they could increase the likelihood that incumbent Directors will retain
their positions and may also have the effect of discouraging a tender offer or
other attempt to obtain control of us, even though such attempt might be
beneficial to us and its shareholders.
TRANSFER AGENT
---------------
The transfer agent for our Shares is American Stock Transfer & Trust
Company.
LEGAL MATTERS
---------------
The validity of the issuance of the Shares offered hereby has been
passed on for us by Herrling, Clark, Hartzheim & Siddall, Ltd., as special
securities counsel to us for this offering. We are represented by Shefsky &
Froelich Ltd. for other corporate and securities law matters.
EXPERTS
----------
The consolidated financial statements of Merge Technologies
Incorporated as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The audit report
covering the December 31, 2002 consolidated financial statements refers to the
adoption of the provisions of Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets," on January 1, 2002.
AVAILABLE INFORMATION
We have filed with the Commission a Registration Statement (of which
this Prospectus is a part) on Form S-3 under the Securities Act with respect
to the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement and any amendments thereto, including exhibits filed as
a part thereof, are available for inspection and copying as set forth below.
We are subject to the informational requirements of the Exchange Act,
and in accordance therewith, file reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549.
Copies of this material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N. W., Washington, D. C. 20549, at
prescribed rates. Our Shares are included for quotation on the Nasdaq National
Market and these reports, proxy statements and other information concerning us
may be inspected at the office of the Nasdaq Market, 1735 K Street, N. W.,
Washington, D. C. 20006.
No dealer, salesperson or other person 701,664 SHARES
has been authorized to give any
information or to make any representations
other than those contained in this Prospectus
and, if given or made, such information or
representations must not be relied upon as
having been authorized by the Company. This MERGE TECHNOLOGIES INCORPORATED
Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy to
any person in any jurisdiction in which such
offer or solicitation would be unlawful or to
any person to whom it is unlawful. Neither
the delivery of this Prospectus nor any offer
or sale made hereunder shall, under any
circumstances, create any implication that COMMON STOCK
there has been no change in the affairs of ($0.01 par value)
the Company or that information contained
herein is correct as of any time subsequent
to the date hereof. PROSPECTUS
----------
TABLE OF CONTENTS
-------------------
Page
----
DOCUMENTS INCORPORATED BY REFERENCE.......... 1
SUMMARY...................................... 2
RISK FACTORS................................. 2
THE COMPANY.................................. 9
USE OF PROCEEDS.............................. 11
SELLING SHAREHOLDERS......................... 11
PLAN OF DISTRIBUTION......................... 13
DESCRIPTION OF SECURITIES.................... 13
LEGAL MATTERS................................ 19
EXPERTS...................................... 19
AVAILABLE INFORMATION........................ 19
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a schedule of the estimated expenses to be incurred by
us in connection with the issuance and sale of the securities being registered
hereby.
Registration Fee...................... $ 920.72
Accounting Fees and Expenses.......... $ 7,000.00*
Legal Fees and Expenses............... $ 14,000.00*
Printing Expenses..................... $ 100.00*
Transfer Agent and Registrar Fees..... $ 100.00*
Miscellaneous......................... $ 100.00*
-----------
TOTAL................................. $ 22,220.72*
===========
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the WBCL, our directors and officers are entitled to mandatory
indemnification from us against certain liabilities and expenses (a) to the
extent such officers or directors are successful in the defense of a
proceeding, and (b) in proceedings in which the director or officer is not
successful in the defense thereof, unless (in the latter case only) it is
determined that the director or officer breached or failed to perform his or
her duties to us and such breach or failure constituted: (i) a willful failure
to deal fairly with us or our shareholders in connection with a matter in which
the director or officer had a material conflict of interest; (ii) a violation
of the criminal law unless the director or officer had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to believe his
or her conduct was unlawful; (iii) a transaction from which the director or
officer derived an improper personal profit; or (iv) willful misconduct. The
WBCL allows a corporation to limit its obligation to indemnify officers and
directors by providing so in its articles of incorporation. Our Bylaws provide
for indemnification of directors and officers to the fullest extent permitted
by Wisconsin law.
ITEM 16. EXHIBITS
EXHIBIT NO.
-------------
4 Form of Registration Rights Agreement for all Selling Shareholders
5 Opinion of Herrling, Clark, Hartzheim & Siddall, Ltd. regarding
legality
23.1 Consent of KPMG LLP
23.2 Consent of Herrling, Clark, Hartzheim & Siddall, Ltd. (included in
Exhibit 5)
23.3 Consent of Shefsky & Froelich Ltd.
ITEM 17. UNDERTAKINGS
A. The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Act;
(ii) to reflect in the prospectus any facts of event
arising after the effective date of the registration
statement which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
C. Indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES
------------
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the County of Milwaukee, State of Wisconsin, on
September 3, 2003.
MERGE TECHNOLOGIES INCORPORATED
By: /s/ Richard A. Linden
------------------------------------------------
Richard A. Linden
President and Chief Executive Officer
By: /s/ Scott T. Veech
------------------------------------------------
Scott T. Veech
Chief Financial Officer, Treasurer & Secretary
GRANT OF POWER OF ATTORNEY
----------------------------
Each person whose signature appears below as a Director and/or officer
of Merge Technologies Incorporated hereby constitutes and appoints Richard A.
Linden and Scott T. Veech his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all subsequent amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURES TITLE DATE
------------------------------------------------------------------------------------
/s/ William C. Mortimore Chairman of the Board of September 3, 2003
--------------------------- Directors and Chief
William C. Mortimore Strategy Officer
/s/ Richard A. Linden Director, President and September 3, 2003
--------------------------- Chief Executive Officer
Richard A. Linden
/s/ Robert A. Barish, M. D. Director September 3, 2003
---------------------------
Robert A. Barish, M. D.
/s/ Patrice M. Bret, M. D. Director September 3, 2003
---------------------------
Patrice M. Bret, M. D.
/s/ Dennis Brown Director September 3, 2003
---------------------------
Dennis Brown
/s/ Michael D. Dunham Director September 3, 2003
---------------------------
Michael D. Dunham
/s/ Robert T. Geras Director September 3, 2003
---------------------------
Robert T. Geras
/s/ Anna M. Hajek Director September 3, 2003
---------------------------
Anna M. Hajek
/s/ Richard A. Reck Director September 3, 2003
---------------------------
Richard A. Reck
/s/ Frank E. Seidelmann, D.O. Director September 3, 2003
---------------------------
Frank E. Seidelmann
/s/ Scott T. Veech Chief Financial Officer, September 3, 2003
--------------------------- Secretary and Treasurer
Scott T. Veech (Principal Accounting
Officer and Principal
Financial Officer)
-----------
EXHIBIT 4
-----------
MERGE TECHNOLOGIES INCORPORATED
SUBSCRIPTION AGREEMENT
Merge Technologies Incorporated
1126 South 70th Street
Milwaukee, Wisconsin 53214
Ladies and Gentlemen:
I. SUBSCRIPTION
------------------
The undersigned hereby offers and agrees to purchase the number of
shares of Common Stock, par value $.01 per share (the "Shares"), shown on the
signature page hereof, to be issued by Merge Technologies Incorporated, a
Wisconsin corporation (the "Company"), at a price per Share of $12.00 (the
"Purchase Price"); provided, however, that the Company must accept this
Subscription Agreement by no later than 3:30 p.m. Eastern Time on July 23,
2003, subject to a mutually agreed extension to no later than 5:00 p.m. Eastern
Time on July 24, 2003 (the "Extended Acceptance Time"). If the Company does
not accept this Subscription Agreement from the undersigned by the Extended
Acceptance Time, both the Company and the undersigned shall be relieved of any
and all obligations, liabilities and rights pursuant to this Subscription
Agreement. The undersigned has submitted a check or wire transfer of funds
payable to "Merge Technologies Incorporated" aggregating the dollar amount set
forth below, which will result in the number of Shares (rounded up to the next
even share) equal to the subscription amount divided by the Purchase Price.
II. OFFERING AND SALE OF SHARES
----------------------------------
The Company is offering up to $8,000,000 of Shares (the "Offering").
As there is no minimum offering amount, the Company will accept all
subscriptions, as received, for use as set forth in the Company's Confidential
Private Placement Memorandum dated July 18, 2003 (the "Memorandum") and all
supplements thereto, if any. The Shares are being offered by the Company for
sale on the terms described in the Memorandum.
III. ACCREDITATION
---------------------
The Company is offering the Shares to an unlimited number of accredited
investors, as defined in Rule 501 of Regulation D. The undersigned understands
that the Shares will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), or the securities laws of any states (the
"Laws") and are being offered and sold in reliance upon exemptions from
registration under the Securities Act and Laws. To enable the Company to
determine the exemption(s) applicable to the undersigned's purchase of Shares,
the undersigned hereby warrants and represents as follows. PLEASE INITIAL ALL
STATEMENTS WHICH ARE APPLICABLE TO YOU. IF NONE ARE APPLICABLE, YOUR
SUBSCRIPTION CANNOT BE ACCEPTED FOR THE SHARES:
Accredited Entities
-------------------
[ ] a. The undersigned is an organization described in Section
501(c)(3) of the Internal Revenue Code, a corporation,
a Massachusetts or similar business trust, a
partnership or trust (if the trust's purchase of
securities is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of Regulation D under
the Securities Act) that is: (i) not formed for the
specific purpose of acquiring the securities offered;
(ii) has assets in excess of $5,000,000; and (iii) has
the power and authority to execute and comply with the
terms of this Subscription Agreement.
[ ] b. The undersigned is an Accredited Investor (other than
as described above), as defined in Rule 501 of
Regulation D promulgated under the Securities Act.
Note: Investors are advised that included within the
definition of Accredited Investor are the following:
certain institutional investors, including certain
banks, whether acting in their individual or fiduciary
capacities; registered securities broker-dealers;
certain insurance companies; federally registered
investment companies; certain business development
companies (as defined under the Investment Company Act
of 1940); Small Business Investment Companies licensed
by the U.S. Small Business Administration under the
Small Business Act of 1958; certain employee benefit
plans; and private business development companies (as
defined in the Investment Advisers Act of 1940).
[ ] c. The undersigned is an entity in which all of the equity
owners of the entity are themselves Accredited
Investors, as set forth in Rule 501 of Regulation D.
If none of the boxes above are marked, the undersigned, by counterpart
execution hereof, acknowledges that the undersigned meets the criteria of one
of Sections (a) through (c) above unless indicated to the contrary on the
signature page hereof.
IV. OFFERING MATERIALS
-------------------------
The undersigned hereby acknowledges receipt of a copy of the Memorandum
and the Subscription Documents, including this Subscription Agreement and the
Purchaser Questionnaire and a copy of the form of Registration Rights Agreement
appended to the Memorandum.
V. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER
--------------------------------------------------
The undersigned makes the following additional agreements,
representations, declarations, acknowledgments and warranties with the intent
that the same may be relied upon in determining its suitability as a purchaser
of the Shares:
(1) The undersigned agrees that, in the event its principal place
of business changes from that represented in the Purchaser Questionnaire, it
will promptly notify the Company.
(2) The undersigned meets the suitability requirements initialed
in Section III.
(3) The undersigned has received, read, understands and is fully
familiar with the Memorandum and the Subscription Documents.
(4) The Shares subscribed for herein will be acquired solely by
and for the account of the undersigned, for investment purposes, and are not
being purchased for subdivision, fractionalization, resale or distribution;
the undersigned has no contract, undertaking, agreement or arrangement with
any person to sell, transfer or pledge all or any part of the Shares for which
the undersigned hereby subscribes, and the undersigned has no present plans or
intentions to enter into any such contract, undertaking or arrangement. In
order to induce the Company to issue and sell the Shares subscribed for hereby
to the undersigned, the undersigned agrees that the Company will have no
obligation to recognize the ownership, beneficial or otherwise, of such Shares
by anyone but the undersigned.
(5) The undersigned acknowledges that the Shares may not be sold,
transferred, pledged or otherwise disposed of without registration under the
Securities Act or the Laws unless an exemption from registration is available.
Further, the undersigned shall provide, if the Company so requires, an opinion
of counsel satisfactory to the Company, that the intended disposition will not
violate the Securities Act or any Laws or the rules and regulations of the
Securities and Exchange Commission or of any state securities commission
promulgated under such statutes.
(6) The Shares have not been registered under the Securities Act
and cannot be sold or transferred without compliance with the registration
provisions of said Securities Act or compliance with exemptions, if any,
available thereunder. The undersigned understands that the Company has granted
certain registration rights to the undersigned concerning the Shares under a
separate agreement.
(7) The undersigned expressly represents that: (a) it, alone or
with its Purchaser Representative (if applicable), has such knowledge and
experience in financial and business matters, in general, and in investments
of the type described in the Memorandum, in particular, and that it is capable
of evaluating the merits, risks and other facets of the subject investment; (b)
its financial condition is such that it has no need for liquidity with respect
to its investment in the Shares to satisfy any existing or contemplated
undertaking or indebtedness; (c) it is able to bear the economic risk of its
investment in the Shares for an indefinite period of time, including the risk
of losing all of its investment; (d) it has either secured independent tax
advice with respect to its investment in the Shares, upon which it, alone or
with its Purchaser Representative (if applicable), is relying, or it is
sufficiently familiar with the income taxation of corporations that it deemed
such independent advice to be unnecessary; (e) it has participated in other
privately placed investments and/or it , alone or with its Purchaser
Representative (if applicable), has such knowledge and experience in business
and financial matters, has the capacity to protect its own interest in
investments like the subject investment, and is capable of evaluating the
risks, merits and other facets of the subject investment.
(8) The undersigned acknowledges that the Company has made all
available documents pertaining to the investment opportunity described in the
Memorandum available to the undersigned, either through the Company or the
SEC website (www.sec.gov), and/or its Purchaser Representative (if applicable),
and has allowed the undersigned an opportunity to ask questions and receive
answers thereto and to verify and clarify any information contained in the
Memorandum or related documents.
(9) In evaluating the suitability of an investment in the Company,
the undersigned, having been delivered a copy of the Memorandum, acknowledges
that it has relied solely upon the Memorandum, documents and materials
submitted therewith, and independent investigations made by the undersigned
in making the decision to purchase the Shares subscribed for herein, and
acknowledges that no representations or agreements (oral or written), other
than those set forth in the Memorandum, have been made to the undersigned with
respect thereto. The undersigned acknowledges that the Memorandum supersedes
any prior information submitted to him or her regarding the investment
opportunity described in the Memorandum.
(10) The undersigned was not induced to invest by any form of
general solicitation or general advertising including, but not limited to,
the following: (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over the
television or radio; and (ii) any seminar or meeting whose attendees had been
invited by any general solicitation or general advertising.
(11) The undersigned expressly acknowledges that: (a) the Shares
are speculative investments that involve a high degree of risk of loss of the
entire investment of the undersigned in the Company; (b) no federal or state
agency has reviewed or passed upon the adequacy or accuracy of the information
set forth in the Memorandum, or made any finding or determination as to the
fairness for investment, or any recommendation or endorsement of the Shares
as an investment; and (c) there are restrictions on the transferability of the
Shares; and, accordingly, it may not be possible for the undersigned to
liquidate its investment in the Shares.
(12) All information that the undersigned has provided concerning
itself and its financial condition is correct and complete as of the date set
forth on the subscription page hereof, and if there should be any material
change in such information prior to the acceptance of its subscription for
the Shares that it is purchasing, he or she will immediately provide such
information to the Company.
(13) In the event the undersigned comes into possession of any
material nonpublic information about the Company, the undersigned agrees
not to directly or indirectly trade or otherwise transfer securities of the
Company until such nonpublic information generally becomes known by the
public, or the person on the other end of the trade confirms in writing the
knowledge of such nonpublic information pursuant to a confidentiality
agreement in form and substance satisfactory to the Company. In this regard,
the undersigned agrees that it will not engage in any transactions involving
the Shares until such time as the Company files a Form 8-K which discloses
the claim that RIS Logic Incorporated received, relating to possible
infringement of a patent, in connection with the merger of RIS Logic
Incorporated into a wholly owned subsidiary of the Company. The Company
undertakes to make such filing no later than July 30, 2003. In the event
that the Company does not make such filing by July 30, 2003, the Company
agrees to pay to the undersigned an amount equal to 2% of the amount of the
undersigned's investment pursuant to this Subscription Agreement (the
"Investment Amount") and an additional amount equal to 2% of the Investment
Amount for each 30 day period after July 30, 2003 that such Form 8-K filing
is not made.
VI. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
----------------------------------------------------
The Company makes the following agreements, representations,
declarations, acknowledgements and warranties with the intent that the same
may be relied upon by the undersigned in connection with the undersigned's
decision to purchase Shares:
(1) The Company is duly organized and validly existing in its state of
incorporation.
(2) The Company has a class of securities registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the Company is current in filing all reports that it is
required to file under the 1934 Act.
VII. LEGEND REQUIREMENTS
--------------------------
FOR ALL INVESTORS:
------------------
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
VIII. INDEMNIFICATION
-------------------------
The undersigned hereby agrees to indemnify the Company, its directors,
officers, agents and employees, and hold each of them harmless against any and
all loss, damage, liability or expense, including reasonable attorneys' fees,
which they or any of them may suffer, sustain or incur by reason of or in
connection with any misrepresentation or breach of warranty or agreement made
by the undersigned thereto, or in connection with the sale or distribution by
the undersigned of the Shares purchased by the undersigned pursuant hereto in
violation of the Securities Act or any Laws.
IX. ACCEPTANCE AND REVOCATION
--------------------------------
The undersigned understands and agrees that this subscription may be
accepted or rejected by the Company, in whole or in part, in its sole and
absolute discretion, and if accepted, the Shares purchased pursuant hereto will
be issued only in the name of the undersigned. The undersigned hereby
acknowledges and agrees that this Subscription Agreement may not be canceled,
revoked or withdrawn, and that this Subscription Agreement and the documents
submitted herewith shall survive: (a) changes in the transactions, documents
and instruments described in the Memorandum that are not material; and (b) the
death or disability of the undersigned; provided, however, that if the Company
shall not have accepted this Subscription Agreement by depositing in the United
States mail, postage prepaid, a written notice of acceptance addressed to the
undersigned at the address set forth on the Purchaser Questionnaire, this
Subscription Agreement and all documents submitted herewith shall automatically
be canceled, terminated and revoked, and all funds heretofore or herewith paid
shall be returned promptly to the undersigned without interest.
X. POWER OF ATTORNEY
-----------------------
By counterpart execution of this Agreement, the undersigned irrevocably
grants to each of Richard Linden, Scott Veech, William Mortimore and any other
executive officer of the Company, a power of attorney to execute in the name,
place and stead of the undersigned the form of Registration Rights Agreement
attached as an exhibit to the Memorandum and any and all amendments thereto as
are approved by the purchasers of a majority of the Shares.
XI. MISCELLANEOUS
--------------------
The undersigned hereby intends that the undersigned's signature hereon
shall constitute a subscription to the Company for the Shares specified on the
signature page of this Subscription Agreement.
This Subscription Agreement, and the representations and warranties
contained herein shall be binding upon the heirs, executors, administrators and
other successors of the undersigned. If there is more than one signatory
hereto, the obligations, representations, warranties and agreements of the
undersigned are made jointly and severally. This Subscription Agreement shall
be governed by the laws of the State of Wisconsin. This Subscription Agreement
may be executed in one or more counterparts, whether by original, photocopy or
facsimile, all of which when taken together will constitute one valid, binding
agreement.
JULY 18, 2003 OFFERING
MERGE TECHNOLOGIES INCORPORATED
COMBINED COUNTERPART SIGNATURE PAGE FOR
SUBSCRIPTION AGREEMENT
FOR CORPORATE/PARTNERSHIP/LIMITED LIABILITY COMPANY
OR TRUST INVESTORS
The undersigned hereby subscribes for the Shares set forth below,
acknowledges that the information contained in the Purchaser Questionnaire is
true and correct and agrees to be bound by the terms of the Subscription
Agreement to which this signature page is a part.
PLEASE NOTE THAT ONE OR MORE BRACKETS ON PAGE 2 MUST BE INITIALED IN ORDER FOR
THIS SUBSCRIPTION TO BE CONSIDERED.
EXECUTED this _____ day of _____________, 2003 at ___________, ______________.
Total investment: $_______________.
Entity:_____________________________________________
By:_________________________________________________
Its:________________________________________
Employer I.D. Number:_______________________
ACCEPTANCE
------------
Accepted this ______ day of __________, 2003 at ____________, ____________.
Time of Acceptance:_______________________.
MERGE TECHNOLOGIES INCORPORATED, a Wisconsin
corporation
By:___________________________
Title:________________________
[TO BE COMPLETED ONLY IF THE SHARES ARE TO BE HELD
IN CORPORATE NAME]
CORPORATE CERTIFICATE
-----------------------
CERTIFICATE OF______________________________________________________
(Name of Corporation)
The undersigned, being the (Assistant) Secretary and keeper of the
minutes of _______________, a ____________ (state) corporation (the
"Corporation"), hereby certifies that the following is a true and complete copy
of resolutions duly adopted by the Board of Directors of the Corporation which
are in full force and effect and have not been superseded or amended.
WHEREAS, the Corporation has decided that it is in its best interests
to make an investment in Merge Technologies Incorporated (the "Company").
NOW, THEREFORE, BE IT:
RESOLVED, that the Corporation hereby is authorized and directed to
make an investment with the Company of the type and to the extent set forth in
the Company's subscription agreement (the "Subscription Agreement").
FURTHER RESOLVED, that the President or any Vice-President of this
Corporation, acting alone, is hereby authorized and directed on behalf of the
Corporation to execute and to deliver the Subscription Agreement, the governing
documents of the Corporation and all other necessary and appropriate documents,
including evidences of indebtedness and the pledging of security therefore, as
may be required under the terms and conditions of the Subscription Agreement,
the governing documents of the Corporation or otherwise, including any
amendments to any of the foregoing and to take such other necessary and
appropriate action, in his or her sole discretion and without further
resolution of this Board of Directors to consummate the purchase of Shares
offered by the Company and to effectuate the terms and intent of these
resolutions.
IN WITNESS WHEREOF, I have executed this certificate as the (Assistant)
Secretary of the Corporation this ________ day of __________________, ______,
and declare that it is truthful and correct.
By:__________________________________________
(Assistant) Secretary
[TO BE COMPLETED ONLY IF THE SHARES ARE TO BE HELD
|IN PARTNERSHIP NAME]
PARTNERSHIP CERTIFICATE
-------------------------
CERTIFICATE OF_______________________________________________________________
(the "Partnership")
The undersigned, constituting all requisite signatories of the
Partnership, a ____________ (state) limited/general (circle one) partnership,
hereby certify as follows:
1. That the Partnership commenced business on___________________,
and was established pursuant to a partnership agreement dated _________________
(the "Agreement").
2. That a true and correct copy of the Agreement is attached
hereto and that, as of the date hereof, the Agreement has not been amended
(except as to any attached amendments) or revoked and is still in full force
and effect.
3. That the requisite partners of the Partnership have determined
that an investment with Merge Technologies Incorporated is of benefit to the
Partnership and has determined to make such investment on behalf of the
Partnership and has full power and authority to do so and thereby bind the
Partnership.
IN WITNESS WHEREOF, we have executed this certificate as the requisite
partners of the Partnership this ______ day of __________________, ______, and
declare that it is truthful and correct.
By:_________________________________
Partner
By:_________________________________
Partner
By:_________________________________
Partner
[TO BE COMPLETED ONLY IF THE SHARES ARE TO BE HELD
IN NAME OF A LIMITED LIABILITY COMPANY]
LIMITED LIABILITY COMPANY CERTIFICATE
---------------------------------------
CERTIFICATE OF_______________________________________________________________
(Name of Limited Liability Company)
The undersigned, constituting all requisite signatories of
________________________ a(n) _______________ (state) limited liability company
(the "Company"), hereby certify as follows:
1. That the Company commenced business on ____________________,
__________ and was established pursuant to an operating agreement dated
_______________ (the "Agreement").
2. That a true and correct copy of the Agreement is attached
hereto and that, as of the date hereof, the Agreement has not been amended
(except as to any attached amendments) or revoked and is still in full force
and effect.
3. That the requisite members of the Company have determined that
an investment in Merge Technologies Incorporated is of benefit to the Company
and have determined to make such investment on behalf of the Company and have
full power and authority to do so and thereby bind the Company.
IN WITNESS WHEREOF, we have executed this certificate as the requisite
members of the Company this ________ day of _________________, ______, and
declare that it is truthful and correct.
By:__________________________________
Member
By:__________________________________
Member
By:__________________________________
Member
[TO BE COMPLETED ONLY IF THE SHARES ARE TO BE HELD
IN NAME OF TRUST]
TRUST CERTIFICATE
-----------------
CERTIFICATE OF______________________________________________________________
(Name of Trust)
The undersigned, being the requisite signatories under the terms of
that certain Trust Agreement (hereinafter referred to as the "Agreement") of
________________ (the "Trust"), hereby certify as follows:
1. That the Trust was established pursuant to the Agreement dated
______________, ________.
2. That a true and correct copy of the Agreement is attached
hereto and that, as of the date hereof, the Agreement has not been amended
(except as to any attached amendments) or revoked and is still in full force
and effect.
3. That the requisite Trustee(s) of the Trust has determined that
an investment in Merge Technologies Incorporated is of benefit to the Trust
and have determined to make such investment on behalf of the Trust and have
full power and authority to do so and thereby bind the Trust.
IN WITNESS WHEREOF, we have executed this certificate as the Trustee(s)
of the Trust this ____ day of ____________________, ______, and declare that
it is truthful and correct.
By:__________________________________
Trustee
By:__________________________________
Trustee
By:__________________________________
Trustee
----------
EXHIBIT 5
----------
August 26, 2003
Merge Technologies Incorporated
1120 S. 70th Street
Suite S107B
Milwaukee, Wisconsin 53214
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special Wisconsin securities counsel to Merge
Technologies Incorporated (the "Company"), in connection with the preparation
and filing of the registration statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and the prospectus
contained therein with respect to registering 701,664 shares (the "Shares"),
which are being offered on behalf of selling shareholders. In connection with
the registration of the Shares, you have requested our opinion with respect to
the matters set forth below.
For purposes of this opinion, we have reviewed the Registration
Statement. In addition, we have examined the originals or copies certified or
otherwise identified to our satisfaction of: (i) the Company's Articles of
Incorporation, as amended to date; (ii) the By-laws of the Company, as amended
to date; (iii) records of the corporate proceedings of the Company as we deemed
necessary or appropriate as a basis for the opinions set forth herein; and
(iv) those matters of law as we have deemed necessary or appropriate as a basis
for the opinions set forth herein. We have not made any independent review or
investigation of the organization, existence, good standing, assets, business
or affairs of the Company, or of any other matters. In rendering our opinion,
we have assumed without inquiry the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of these documents submitted to us as copies.
We have not undertaken any independent investigation to determine facts
bearing on this opinion, and no inference as to the best of our knowledge of
facts based on an independent investigation should be drawn from this
representation. Further, our opinions, as hereinafter expressed, are subject
to the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; and (ii) the effect of general
principles of equity whether enforcement is considered in a proceeding in
equity or at law and the discretion of the court before which any proceeding
therefore may be brought.
We are admitted to the practice of law only in the State of Wisconsin
and, accordingly, we do not purport to be experts on the laws of any other
jurisdiction nor do we express an opinion as to the laws of jurisdictions
other than the laws of the State of Wisconsin, as currently in effect.
On the basis of, and in reliance upon, the foregoing, and subject to
the qualifications contained herein, we are of the opinion that the Shares
held by the selling shareholders are validly issued, fully-paid and
nonassessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement.
This opinion is rendered only to you and is solely for your benefit
in connection with the transactions covered hereby. This opinion may not
be relied upon by you for any other purpose or furnished, or quoted to, or
relied upon by any other person, firm or corporation for any purpose
without our prior express written consent.
Very truly yours,
HERRLING, CLARK, HARTZHEIM
& SIDDALL, LTD.
/s/ Greg P. Curtis
-------------------------------
Greg P. Curtis
GPC/csd
-------------
EXHIBIT 23.1
-------------
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Merge Technologies Incorporated:
We consent to the use of our report dated March 28, 2003, with respect
to the consolidated balance sheets of Merge Technologies Incorporated and
subsidiaries as of December 31, 2002 and 2001, and the related consolidated
statements of operations, shareholders' equity, cash flows, and comprehensive
income (loss) for each of the years in the three-year period ended December
31, 2002, incorporated herein by reference and to the reference to our firm
under the heading "Experts" in the prospectus. Our report on the consolidated
financial statements refers to the adoption of the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets," on January 1, 2002.
/s/ KPMG LLP
----------------------------
Chicago, Illinois
August 29, 2003
------------
EXHIBIT 23.2
------------
Please refer to EXHIBIT 5 of this Registration Statement.
-------------
EXHIBIT 23.3
-------------
CONSENT OF SHEFSKY & FROELICH LTD.
We consent to the use of our firm name under the heading "Legal Matters" in
the Registration Statement of Merge Technologies Incorporated on Form S-3.
/s/ Shefsky & Froelich Ltd.
----------------------------------
Shefsky & Froelich Ltd.