As filed with the Securities and Exchange Commission on May 7, 2003
Registration No. 333-100103
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United States Securities and Exchange Commission
Washington, D. C. 20549
AMENDMENT NO. 2
TO
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, Suite S107B, 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 & CEO
1126 South 70th Street, Suite 107B, Milwaukee, Wisconsin 53214-3151
(414) 977-4000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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Copies to:
Mitchell D. Goldsmith, Esquire
Dennis B. O'Boyle, Esquire
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Chicago, Illinois 60611
(312) 527-4000
(312) 527-3194 (Telefacsimile)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement has been declared 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 (hereinafter referred to as the "Securities Act"), 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: _________.
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Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities registered offering price aggregate offering Registration fee
to be registered per share price
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Common Stock $0.01 par value 1,106,476 (1)(2) $4.36 (3) $4,824,017.30 (3) $417.51 (3)
Common Stock $0.01 par value 413 (1)(2) $8.22 (3) $3,394.86 (3) $0.27 (3)
(1) All shares of Common Stock are being registered for sale by certain Selling Shareholders (defined herein).
(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) 1,106,476 Shares were registered in connection with the original registration statement filed for this
offering. We have paid a registration fee of $417.51 for those Shares. We are registering an additional 413
Shares for which we are paying an additional fee of $0.27. The proposed maximum offering price per share for
the 413 additional Shares is estimated on the basis of the average of the bid and asked prices on May 2, 2003
on the Nasdaq SmallCap 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 or until the registration statement shall become effective on
such date as the Commission (as hereinafter defined), acting pursuant to said
Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED MAY 7, 2003
PRELIMINARY PROSPECTUS
1,106,889 Shares
of
Merge Technologies Incorporated
Common Stock
($0.01 par value)
-- This paragraph is along left margin of this page iii - -
The information in this 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 soliciting 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 1,106,889
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 May 2002, we purchased the assets of Aurora Technology Inc., a
private Minnesota corporation (hereinafter referred to as "Aurora") through one
of our wholly-owned subsidiaries, Signal Stream, Inc., a Wisconsin Corporation
now known as Merge Aurora Solutions Inc. ("Signal Stream"). In connection with
this transaction, we issued 93,901 unregistered Shares to Aurora's
shareholders. We are obligated to register such shares on behalf of those
holders.
In addition, in June 2002, we, Merge Technologies Holdings Co, a Nova
Scotia, Canada company and one of our wholly-owned subsidiaries (hereinafter
referred to as "Merge Holdings") and eFilm Medical Inc., a Canadian corporation
(hereinafter referred to as "eFilm"), completed transactions pursuant to a
Reorganization Agreement which resulted in us owning, through Merge
Technologies Holding Co., 100% of the voting equity securities of eFilm. At
the same time as it entered into the Reorganization Agreement, eFilm issued
certain non-voting equity exchangeable eFilm shares to its prior eFilm
shareholders. The exchangeable shares allow eFilm shareholders to exchange
their exchangeable shares for 1,000,000 of our Shares. We are obligated to
register such shares on behalf of those holders. For a description of the
conversion provisions of the exchangeable shares, see "Issuance of Common
Stock Upon Exchange of Exchangeable Shares."
Also, during 2002 and 2003, we also issued 4,974 Shares to holders of
our Series A Preferred Stock in the form of dividends on the Series A Preferred
Stock and 8,014 Shares to certain of our directors for services. We are
registering such shares on behalf of those holders.
The Shares trade on the Nasdaq SmallCap Market under the symbol
"MRGE." On May 2, 2003, the last reported bid price was $8.25 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 SmallCap 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
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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 _______________, 2003
DOCUMENTS INCORPORATED BY REFERENCE
-------------------------------------
We are incorporating in this Prospectus by reference the following
documents which we filed with the 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 Form 8-A dated January 9, 1998.
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, SUITE
S107B, 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 1,106,889 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
(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 Medicine, open medical standards like HL-7 and the Integrated
Healthcare Enterprise ("IHE").
RECENT ACQUISITION OF AURORA TECHNOLOGY, INC.
Through one of our wholly owned subsidiaries, Signal Stream, we
recently acquired 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. We are
utilizing Aurora's assets in a similar manner as Aurora.
RECENT ACQUISITION OF eFILM MEDICAL INC.
We also recently purchased 100% of the issued and outstanding shares
of common stock of 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.
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 profitability
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, 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% and 52% of our net sales
in 1998, 1999, 2000, 2001 and 2002, 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. 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
36% of our net sales in fiscal 2001 and 38% of our net sales for fiscal 2002.
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, 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 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.
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 Digital Imaging Communications in Medicine ("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
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, including the acquisitions of
eFilm and Aurora, 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.
INCLUDED AS SELLING SHAREHOLDERS ARE SOME OF OUR PRESENT DIRECTORS AND A
FORMER DIRECTOR
Included as Selling Shareholders are some of our present directors,
namely, Robert T. Geras, Patrice M. Bret, M. D., Robert A. Barish, M. D.,
Michael D. Dunham, Anna M. Hajek, John D. Halamka, M. D. and Richard A. Reck,
and one former director, Hymie S. Negin. We are registering some, but not
all, of the Shares which they own for resale through this Prospectus. No
Selling Shareholder is obligated to deliver to us any of the proceeds from
the sale of his, her or its Shares.
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, 131,594 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, 940,000 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 131,594 votes with regard to the Special
Voting Preferred Stock and the eFilm Trustee has 940,000 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, Suite
S107B, Milwaukee, Wisconsin 53214-3151. Our telephone number is
(414) 977-4000, and our internet address is www.merge.com.
RECENT 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 will be held in escrow for twelve months
to secure obligations of Aurora. We agreed to file a registration statement,
of which this Prospectus is a part, with the Commission with respect to the
93,901 Shares issued in this transaction.
The consideration for the purchase of the Aurora assets 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.
RECENT ACQUISITION OF E-FILM MEDICAL INC.
On June 28, 2002, we, 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 Exchangeable Share is exchangeable and convertible
into one Share. We agreed to file a registration statement, of which this
Prospectus is a part, 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 ImageChannel(Trademark) label.
The consideration was negotiated at arms-length between the 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.
USE OF PROCEEDS
-----------------
Since we will issue up to 1,000,000 Shares in exchange for the eFilm
Exchangeable Shares to certain of the Selling Shareholders, 60,000 of which
Shares have already been issued, and we have already issued 93,901 Shares to
the former shareholders of Aurora Technology, Inc., 4,974 Shares to holders of
our Series A Preferred Stock and 8,014 Shares to certain of our directors for
services, we will not receive any cash proceeds from the sale of any of the
Shares by the Selling Shareholders.
ISSUANCE OF COMMON STOCK UPON EXCHANGE OF EXCHANGEABLE SHARES
---------------------------------------------------------------
We, Merge Holdings and eFilm entered into a Reorganization Agreement
and, among other documents, a Share Exchange Agreement, which resulted in the
owning 100% of Merge Holdings, and Merge Holdings owning 100% of the voting
equity securities of eFilm. At the same time as it entered into the
Reorganization Agreement, eFilm issued the eFilm Exchangeable Shares to the
former eFilm shareholders. The eFilm Exchangeable Shares allow former eFilm
shareholders to exchange each eFilm Exchangeable Share for one share of our
Shares.
Under the terms of the Share Exchange Agreement, each holder of eFilm
Exchangeable Shares is entitled at any time through and including June 28,
2007, to require us to exchange any or all of the Exchangeable Shares for
Shares of the Company, plus (a) cash in the amount of any cash dividends
declared but not paid, and (b) delivery of any non-cash dividends declared
but not paid. In the event that the Company is liquidated, each eFilm
Exchangeable Share shall be exchanged automatically for Shares.
On June 28, 2007, each eFilm Exchangeable Share shall automatically
be exchanged for Shares. We have the right, but not the obligation, to
purchase all of the then outstanding eFilm Exchangeable Shares for an amount
per share equal to the current market price of the Shares, plus declared and
unpaid dividends.
To effect an exchange of any eFilm Exchangeable Shares, a holder shall
present and surrender certificates representing the eFilm Exchangeable Shares
to eFilm at its offices located at 500 University Avenue, Suite 300, Toronto,
Ontario L6J 1M5. In addition, the holder shall deliver to eFilm a signed
Notice of Retraction, together with a signed and witnessed Power of Attorney
to Transfer Securities and Representations and Warranties. Upon receipt of
all necessary documents, eFilm shall immediately notify the Company at its
offices located at 1126 South 70th Street, Suite 107B, Milwaukee, Wisconsin
53214-3151. The Company shall issue to the holder certificates representing
Shares and pay any declared but unpaid dividends, whether in cash or non-cash.
SELLING SHAREHOLDERS
----------------------
The Selling Shareholders or their assignees and transferees may offer
up to 1,106,889 Shares pursuant to this Prospectus. The Company 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 either presently own or
will own after conversion of the Exercisable Shares.
Shares Beneficially Shares Shares to be
Owned Prior to Being Beneficially Owned
Selling Shareholders Offering Offered After Offering(1)
------------------------------ -------------------- --------- -------------------
Number Percent Number Percent
--------- -------- --------- --------
Harvey L. Poppel............... 1,065,648 11% 4,562 1,061,086 11%
Robert T. Geras................ 753,180 8% 305 752,875 8%
Patrice M. Bret, M. D. (2)..... 317,796 3% 314,015 3,781 *
Gregory G. Couch (2)........... 313,630 3% 313,630 ----- *
Catherine McCallum (2)......... 150,000 2% 150,000 ----- *
Aurora Technology Inc. (3)..... 93,901 1% 93,901 ----- *
Robert A. Barish, M. D......... 84,181 1% 1,441 82,740 1%
The Toronto Hospital, Mount
Sinai Hospital, Princess Margaret
Hospital Imaging Consultants
Partnership (2)(4)............. 62,740 1% 62,740 ----- *
University Health
Network (2)(5)............... 60,000 1% 60,000 ----- *
NBCN Clearing Inc. ITF Mount
Sinai Hospital (2)(6)........ 40,000 * 40,000 ----- *
Michael D. Dunham.............. 34,912 * 3,177 31,735 *
Mitchell D. Goldsmith.......... 34,176 * 79 34,097 *
Peter Rossos, M D. (2)......... 30,000 * 30,000 ----- *
Joe Cafazzo (2)................ 30,000 * 30,000 ----- *
Anna M. Hajek.................. 17,201 * 2,101 15,100 *
John D. Halamka, M. D.......... 12,934 * 791 12,143 *
Richard A. Reck................ 439 * 28 411 *
Hymie S. Negin................. 119 * 119 ----- *
--------- -------- ---------
3,100,857 1,106,889 1,993,968
*Less than one percent
(1) Assumes the sale of all Shares offered by this Prospectus.
(2) All Shares will be issued upon conversion of the eFilm Exchangeable
Shares.
(3) Kate Sackman, President, exercises voting and investment powers over
these Shares on behalf of this Selling Shareholder.
(4) The members of the Management Committee, Patrice M. Bret, Robert
Willinsky, Mathew Lax, Eran Hayeems, Dheeraj Rajan, exercise voting and
investment powers over these Shares on behalf of this Selling
Shareholder.
(5) Tom Closson, President and Chief Executive Officer, exercises voting and
investment powers over these Shares on behalf of this Selling Shareholder.
(6) Joan Sproul, Vice President Finance, exercise 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.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
----------------------------------------
Aurora is a Selling Shareholder who received Shares in connection with
our May 2002 transaction in which we purchased the assets of Aurora. The
following Selling Shareholders are directors: Robert T. Geras; Patrice M.
Bret, M. D.; Robert A. Barish, M. D.; Michael D. Dunham; Anna M. Hajek; Dr.
John D. Halamka, M. D. and Richard A. Reck. From December 1999 to May 2002,
Hymie Negin was one of our directors. Mitchell D. Goldsmith is a member of the
firm of Shefsky & Froelich Ltd. which has provided legal services to us for over
five years. Dr. Bret, Mr. Couch, Ms. McCallum, The Toronto Hospital, Mount
Sinai Hospital, Princess Margaret Hospital Imaging Consultants Partnership,
University Health Network, NBCN Clearing Inc. ITF Mount Sinai Hospital, Dr.
Rossos and Mr. Cafazzo are Selling Shareholders who received eFilm Exchangeable
Shares in connection with our June 2002 transaction with eFilm; each of these
persons will receive Shares upon conversion of the eFilm Exchangeable 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 Shareholders
will be effected from time to time on the open market in ordinary brokerage
transactions in the Nasdaq SmallCap 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 SmallCap 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 SmallCap 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, 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 May 1, 2003, there were 9,694,986 Shares, 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. 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 SmallCap 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 a financial institution (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
(the "eFilm Exchangeable Shares"). 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 a financial institution (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.
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
---------
Our and our subsidiaries' consolidated financial statements 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 in this Prospectus
and the Registration Statement (of which this Prospectus is a part) 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.
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
SmallCap 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 1,106,889 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 MERGE TECHNOLOGIES INCORPORATED
by the Company. This 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. Common Stock
Neither the delivery of this Prospectus ($0.01 par value)
nor any offer or sale made hereunder shall,
under any circumstances, create any
implication that there has been no change
in the affairs of the Company or that
information contained herein is correct PROSPECTUS
as of any time subsequent to the date ------------
hereof.
TABLE OF CONTENTS PAGE
-------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE...................... 1
RISK FACTORS............................................. 2
THE COMPANY.............................................. 8
USE OF PROCEEDS FROM WARRANT EXERCISES................... 10
ISSUANCE OF COMMON STOCK UPON EXCHANGE OF EXCHANGEABLE
SHARES................................................. 10
SELLING SHAREHOLDERS..................................... 11
CERTAIN TRANSACTIONS AND RELATIONSHIPS................... 12
PLAN OF DISTRIBUTION..................................... 12
DESCRIPTION OF SECURITIES................................ 13
LEGAL MATTERS............................................ 18
EXPERTS.................................................. 18
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 the Company in connection with the issuance and sale of the securities
being registered hereby.
Registration Fee...................... $ 417.78
Blue Sky Fees and Expenses............ $ 2,750.00
Accounting Fees and Expenses.......... $ 5,500.00*
Legal Fees and Expenses............... $ 7,500.00*
Printing Expenses..................... $ 100.00*
Transfer Agent and Registrar Fees..... $ 100.00*
Miscellaneous......................... $ 500.00*
------------
Total................................. $ 16,867.78
============
*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 Number
---------------
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.
(Please refer to Exhibit 5 of this Registration Statement.)*
23.3 Consent of Shefsky & Froelich Ltd.*
*Previously submitted.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
A. (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 Securities Act; and
(ii) To reflect in the prospectus any facts of events
arising after the effective date of the registration
statement which, individually or together, represent a
fundamental change in the information in the
registration statement; and
(iii) To include any additional or changed material
information with respect to the plan of distribution;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if 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. 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, other than the payment by the registrant of expenses
incurred or paid by a 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 this Amendment No. 2 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 May 7, 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
and Secretary
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 May 7, 2003
----------------------------------- of Directors and Chief
William C. Mortimore Strategy Officer
/s/ Richard A. Linden Director, President, May 7, 2003
----------------------------------- President and Chief
Richard A. Linden Executive Officer
/s/ Robert T. Geras * Director May 7, 2003
-----------------------------------
Robert T. Geras
/s/ Robert A. Barish, M. D. * Director May 7, 2003
-----------------------------------
Robert A. Barish, M. D.
/s/ Michael D. Dunham * Director May 7, 2003
-----------------------------------
Michael D. Dunham
/s/ John D. Halamka, M. D., M. S. * Director May 7, 2003
-----------------------------------
John D. Halamka, M. D., M. S.
/s/ Patrice M. Bret, M. D. * Director May 7, 2003
-----------------------------------
Patrice M. Bret, M. D.
/s/ Anna M. Hajek * Director May 7, 2003
-----------------------------------
Anna M. Hajek
----------------------------------- Director
Richard A. Reck
/s/ Scott T. Veech Chief Financial Officer and May 7, 2003
----------------------------------- Treasurer (Principal Accounting
Scott T. Veech Officer and Principal Financial
Officer
*Signed on May 7, 2003, pursuant to Power of Attorney granted to Scott T. Veech
by instrument dated September 26, 2002.
*By: /s/ Scott T. Veech
---------------------------
Scott T. Veech, Chief Financial
Officer, Secretary & Treasurer
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 registration statement.
Our report 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
May 6, 2003