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As filed with the Securities and Exchange Commission on December 30, 1999
Registration No. 333-_____
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MERGE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1600938
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
1126 South 70th Street, Suite 107B, Milwaukee, Wisconsin 53214-3151
(414) 977-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
William C. Mortimore, President
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)
Copies to:
Mitchell D. Goldsmith
Dennis B. O'Boyle
Shefsky & Froelich Ltd.
444 N. Michigan Avenue
Chicago, Illinois 60611
(312) 527-4000
(312) 527-5921 (Facsimile)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: as soon as practicable after
this Registration Statement has become effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: 9
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box:
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: 9 ____________
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: 9 ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: 9
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per share aggregate offering price registration fee
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<S> <C> <C> <C> <C>
Common Stock $.01 par value 420,000 $ 2.00 (1) $ 840,000 (1) $ 221.76
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</TABLE>
(1) Estimated on the basis of the average of the bid and asked prices on
_________________, 1999, on the Nasdaq SmallCap Market for the Common Stock
pursuant to Rule 457(c).
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in the prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 30, 1999
PRELIMINARY PROSPECTUS
420,000 SHARES
OF
MERGE TECHNOLOGIES INCORPORATED
COMMON STOCK
($0.01 PAR VALUE)
This Prospectus relates to our public offering of up to 420,000 shares
of Common Stock, $.01 par value (the "Shares" or the "Common Stock").
We, 3032854 Nova Scotia Company ("NS Company") and Interpra Medical
Imaging Network, Ltd. ("Interpra") entered into a Purchase Agreement which
resulted in us owning 100% of NS Company, and NS Company owning 100% of the
voting equity securities of Interpra. At the same time as it entered into the
Purchase Agreement, Interpra issued certain non-voting exchangeable Interpra
shares (the "Exchangeable Shares") to the old Interpra shareholders. The
Exchangeable Shares allow Interpra shareholders to exchange each Exchangeable
Share for one share of our Common Stock. (For a description of the conversion
provisions of the Exchangeable Shares, see "Plan of Distribution").
Our Shares trade on the Nasdaq SmallCap Market under the symbol "MRGE".
On December 23, 1999, the last reported bid price was $2.00 for the Shares.
SEE "RISK FACTORS" FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS
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 ___________________, 1999
DOCUMENTS INCORPORATED BY REFERENCE
We are incorporating in this Prospectus by reference the following
documents filed by the Company with the Commission:
1. Our Annual Report on Form 10-KSB, for fiscal year ended
December 31, 1998.
2. Our Quarterly Reports on Form 10-QSB, for the quarters ended
March 31, June 30, 1999 and September 30, 1999.
3. Our Current Reports on Form 8-K dated September 21, 1999, as
amended on September 21, 1999 and November 18, 1999.
4. All documents we subsequently filed pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the
termination of the offering made by this Prospectus are
incorporated by reference in this Prospectus.
5. The Company's Form 8-K dated January 9, 1998.
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 107B,
MILWAUKEE, WISCONSIN 53214-3151 (TELEPHONE: (414) 977-4000).
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RISK FACTORS
This offering involves a high degree of risk. Prospective investors in
the Shares should consider carefully, among other things, the following risk
factors with respect to us and this offering.
LACK OF CONSISTENT PROFITABILITY; HISTORY OF OPERATING LOSSES
Although we experienced significant revenue growth from fiscal 1994
through fiscal 1996, we incurred net losses of approximately $1,920,000 in
fiscal 1998 and approximately $210,000 in fiscal 1997, respectively. We incurred
net losses of approximately $2,300,000 for the nine months ended September 30,
1999 and approximately $903,000 for the nine months ended September 30, 1998.
There can be no assurance that we will achieve profitability in the future. As
of September 30, 1999 we had working capital of approximately $ 5,115,000.
OPERATING RESULTS MAY FLUCTUATE
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 OEMs, and the timing of such orders could cause material
fluctuations in our business and operating results. 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 and volume
discounts. We expect to continue to increase our operating expenses for
personnel 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 Common Stock.
INCREASED CREDIT AND PAYMENT RISKS ASSOCIATED WITH END-USER SALES
We currently market and sell a significant portion of our products to
OEMs. 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 MUST RESPOND TO TECHNOLOGICAL CHANGE; RISKS OF OUR INVOLVEMENT WITH RAPIDLY
DEVELOPING TECHNOLOGY
The markets for our Company's products are characterized by rapid
technological advances, product obsolescence, 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. Any failure by
us to anticipate or to respond adequately to technological developments in its
industry, changes in customer requirements, or 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 its 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 the taking, storing and
interpretation of 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
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technologies may slow as capital investment budgets are reduced, thereby
significantly reducing the demand for our products.
WE DEPEND ON MAJOR CUSTOMERS
We sell a majority of our products to a relatively limited number of
OEMs, VARs and dealers. Aggregate sales to our ten largest customers represented
approximately 74% and 70% of our net sales in 1997 and 1998, respectively, and
approximately 73% of our net sales for the nine months ended September 30, 1999.
During 1998, Picker and Konica accounted for approximately 18%, each, of our net
sales. For the nine months ended September 30, 1999, Picker, Konica and Philips
accounted for approximately 21%, 14% and 11%, respectively, 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 is 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, including Picker, 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.
EXPANSION OF INTERNATIONAL SALES EFFORTS; CURRENCY RISK
An important component of our business plan includes increasing our
sales to customers outside the United States, which represented 45% of our net
sales for the nine months ended September 30, 1999. Sales in foreign currency
represented approximately 10.4% of our net sales for the nine months ended
September 30, 1999; however, we anticipate that this percentage may increase in
the future. In order to increase overseas sales, it may be necessary or
desirable for us to expand our sales force, or establish additional offices
outside the United States. The increased costs of hiring new personnel or
establishing offices could have a material adverse effect on our results of
operations and financial condition.
We do not hedge against risks associated with receipt of foreign
currency. We do, however, anticipate that if sales denominated in foreign
currency increase in the future, we may deem it advisable to hedge against risks
associated with receipt of foreign currency. No assurance can be given that such
hedging, if undertaken, will prevent us from incurring losses due to currency
fluctuation.
In order to increase foreign sales, it may be necessary or desirable
for us to expand our sales force, or establish additional offices outside the
United States. The increased costs of hiring new personnel or establishing
offices could have a material adverse effect on our results of operations and
financial condition.
DEPENDENCE UPON KEY PERSONNEL
Our continued success will depend to a significant degree upon the
efforts and abilities of our senior management, in particular, William C.
Mortimore, our President and Chief Executive Officer, William L. Stafford, Vice
President, Sales-OEM/VAR, David M. Noshay, Vice President, Strategic Marketing,
Michael J. Franco, Vice President, Engineering and Chief Technology Officer,
Anton van Kimmenade, Vice President, Woldwide Service and Colleen M. Doan, Chief
Financial Officer. Of these key personnel, only Mr. Mortimore and Mr. van
Kimmenade have employment agreements with us. The loss of the services of any of
these officers could have a material adverse effect on us. We presently maintain
a term life insurance policy covering the life of Mr. Mortimore, the proceeds of
which would be payable to us.
POTENTIAL DIFFICULTY IN HIRING ADDITIONAL SALES AND ENGINEERING PERSONNEL
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, an 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.
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PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
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
our CaseWorks product. A U.S. patent has been applied for Distributed
Architecture for Health Care Environment, Patent Application No. 09/151902. 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. 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.
GOVERNMENT REGULATION
The manufacturing and marketing of our products are subject to
government regulation as medical devices in the United States 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 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 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 could have a
material adverse effect on our business, financial condition and results of
operations.
PRODUCT LIABILITY; RISK OF PRODUCT DEFECTS
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
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increased service and warranty and other costs, any of which could have a
material adverse effect upon our business, operating results and financial
condition.
MARKETS FOR OUR COMPANY'S PRODUCTS ARE HIGHLY COMPETITIVE
The markets for our products are highly competitive. Many of our
customers purchase products from both us and our competitors. We have two
primary competitors in the imaging acquisition network business, which includes
our MergeMVP product. In the DICOM software package business, we primarily
compete directly and indirectly with a number of other entities, including 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.
In the application of MergeWorks Connectivity Products specifically for
hardcopy film networks, which include the MergeAPS print server and the MergeXPI
printer interface, we compete with multiple film vendors. However, since the
MergeAPS print server works with any of the laser film printers available from
these vendors, these companies also have purchased products from us when they
have needed to interface with other competing manufacturers' products. We expect
competition to increase in the future from existing competitors and from other
companies that may enter our existing or future markets. We could also face
competition from networking equipment and telecommunications manufacturers if
such companies were either to develop DICOM capability for their products, or
purchase from one of our competitors products that provide DICOM capability.
We have one primary competitor with a similarly broad product line in
the market for integrating the management of clinical and administrative medical
information in the manner of the Integrated Healthcare Enterprise ("IHE")
framework that was formulated by a joint activity of RSNA and the Hospital
Information Management System Society ("HIMSS"). Competition could also arise
from medical imaging companies or healthcare IT companies which choose to offer
a wider product suite embracing the IHE framework.
Many of our current and potential 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: applications
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.
ADDITIONAL FUNDING MAY BE NECESSARY
Internally generated cash flows are expected to be sufficient to
support operations during the next 12 months. Thereafter, if cash generated from
operations is insufficient to satisfy our projected requirements, or if we elect
to use funds for additional acquisitions or other matters, we may be required to
sell additional equity or debt securities or obtain bank financing or other
credit facilities.
NO INTENTION TO DECLARE OR PAY DIVIDENDS
We do not currently intend to declare or pay any cash dividends on the
Common Stock in the foreseeable future and we anticipate that earnings, if any,
will be used to finance the development and expansion of our business. We also
anticipate that we may in the future seek to obtain a loan, revolving credit
agreement or other financing arrangement, the terms of which, although not known
to us at this time, may prohibit the declaration and payment of dividends
without prior lender approval. 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.
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POTENTIAL ADVERSE IMPACT OF PREFERRED STOCK ON RIGHTS OF COMMON STOCK
Our Articles of Incorporation 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. The
rights of the holders of Common Stock will be subject to, and may be materially
adversely affected by, the rights of the holders of any 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. We have
issued one share of preferred stock in connection with a voting trust
established for the benefit of holders of Exchangeable Shares. Although we have
no present plans to issue additional shares of Preferred Stock, there can be no
assurance that we will not do so in the future.
ANTITAKEOVER MEASURES
Our Articles of Incorporation and By-Laws, 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 the shareholders receiving less for their Common Stock than otherwise
might be available in the event of a takeover attempt.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains certain forward-looking statements including:
(i) anticipated trends in the Company's financial condition and results of
operations, including expected changes in the Company's gross profit, sales and
marketing expense, product research and development expense, general and
administrative expense and professional expenses; (ii) the Company's business
strategy for future growth in the market, including the Company's plans
regarding anticipated hiring; and (iii) the Company's ability to distinguish
itself from its current and future competitors. When used in the Prospectus,
the words "believes," "intends," "anticipates," "expects," and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties. In addition
to the other risks described elsewhere in this "Risk Factors" Section,
important factors to consider in evaluating such forward-looking statements
include: (i) changes in external competitive market factors which might impact
trends in the Company's results of operations; (ii) unanticipated working
capital and other cash requirements; (iii) general changes in the industries in
which the Company competes; and (iv) various other competitive factors that may
prevent the Company from competing successfully in the marketplace. In light of
these risks and uncertainties, many of which are described in greater detail
elsewhere in this "Risk Factors" Section, actual results could differ
materially from the forward-looking statements contained in this Prospectus.
THE COMPANY
Merge Technologies Incorporated is an international provider of
clinical information systems integration solutions for healthcare organizations.
Current offerings include software, hardware, and integration component products
that facilitate networking and information management of image-producing and
image-using devices in diagnostic radiology. A hospital or an imaging center can
use our components to create a communications bridge between incompatible
devices, permit radiologists to use video images on electronic workstations or
film as a diagnostic medium and create a diagnostic-quality electronic archive
of imaging results. In addition, our products can convert the data generated by
medical imaging devices into concise electronic reports with relevant images
that may be distributed in a health care organization's information network or
included in an electronic patient record ("EPR"). We also have products for
integrating the management of clinical and administrative medical information in
the manner of the IHE framework that was formulated by a joint activity of RSNA
and HIMSS.
The incompatibility of the various "legacy" imaging devices in a
typical radiology department or diagnostic imaging center has made the sharing
of diagnostic information difficult. Our MergeBOX(TM) products convert the
output of medical image-producing devices such as Computed Tomography ("CT")
scanners and Magnetic Resonance ("MR") scanners into an industry-standard
network communications protocol known as DICOM (Digital Imaging Communications
for Medicine or the "DICOM standard"). Our component products also connect
various legacy diagnostic image printers and workstations and other image-using
devices to a DICOM network. Our MergeCOM(TM) communications software is used
worldwide by most medical imaging device manufacturers to build DICOM into new
scanners and image-using devices. Our MergePort component product connects
healthcare information systems to medical image management systems via DICOM and
the HL-7 Healthcare Information Communication Standard.
Other Merge products store medical images into a permanent electronic
archive, facilitate the creation of electronic reports containing relevant
diagnostic images, and manage the secure distribution of reports via fax or an
intra/extranet. Still other products support the web-based access of healthcare
professionals to the medical and administrative information that can improve the
timeliness and accuracy of their work. In addition, we also provide consulting
services to assist customers in the planning and implementation of electronic
imaging information systems.
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 eliminates
redundancy, resulting in reduced capital equipment expenditures; (ii) permanent
electronic archives of diagnostic-quality imaging results can be created,
enabling the retrieval of these images and reports at any time in the future;
(iii) the modular architecture of our products allows radiology departments and
other diagnostic imaging centers to
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build their electronic image management systems in an incremental, flexible and
cost-effective manner; (iv) with the continued development of health care
information technology, diagnostic images and reports collected and managed with
our technology can readily be incorporated into a patient's EPR; and (v) the
combining of medical and administrative information management with an
integrated product suite that promotes the timeliness and accuracy of results,
which can translate into improved financial performance.
We are a Wisconsin corporation and were incorporated on November 25,
1987. Our executive offices are located at 1126 South 70th Street, Suite 107B
Milwaukee, Wisconsin 53214-3151, our telephone number is (414) 977-4000 and our
Internet address is www.merge.com.
USE OF PROCEEDS
Since we will issue all Shares in exchange for the Exchangeable Shares,
we will not receive any cash proceeds.
PLAN OF DISTRIBUTION
ISSUANCE OF COMMON STOCK UPON EXCHANGE OF EXCHANGEABLE SHARES
We, NS Company and Interpra entered into a Purchase Agreement which
resulted in our owning 100% of NS Company, and NS Company owning 100% of the
voting equity securities of Interpra. At the same time as it entered into the
Purchase Agreement, Interpra issued the Exchangeable Shares to the old Interpra
shareholders. The Exchangeable Shares allow Interpra shareholders to exchange
each Exchangeable Share for one share of our Common Stock.
Under the terms of the Share Exchange Agreement, each holder of
Exchangeable Shares is entitled (i) at any time through and including August 31,
2004 to require us to exchange any or all of the Exchangeable Shares for shares
of our Common Stock, 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;
and (ii) at any time between August 31, 2004 and September 30, 2004, to require
us to redeem any or all of the Exchangeable Shares for $4.50 per Exchangeable
Share. In the event that we are liquidated, each Exchangeable Share shall be
exchanged automatically for Shares.
On September 30, 2004, we shall purchase all of the then outstanding
Exchangeable Shares for an amount per share equal to the current market price of
the Shares plus declared and unpaid dividends.
To request an exchange of any Exchangeable Shares represented by one or
more certificates, a signed Retraction Request (one blank form is enclosed)
needs to be sent to the registered office of Interpra located at 100 Sheppard
Avenue, Suite 440, Toronto, Ontario M2N 6N5, fax no.: 416-250-5374, to the
attention of the President, along with a copy sent to the registered office of
Merge located at 1126 South 70th Street, Suite S107B, Milwaukee, Wisconsin
53214-3151, U.S.A., fax no.: 414-977-4200, to the attention of the President and
of the Chief Financial Officer. In each case, the Retraction Request may be sent
by mail (postage prepaid), telecopy or by delivery to the respective address and
fax number set out above. In addition, the holder shall deliver to us a signed
Notice of Retraction in the form attached as Exhibit A to this Prospectus. Upon
receipt of all necessary documents, we shall issue to the holder certificates
representing Shares and pay any declared but unpaid dividends, whether in cash
or in the form of shares.
DESCRIPTION OF SECURITIES
The total number of shares of stock which we have authority to issue is
10,000,000 shares of Common Stock, $0.01 par value and 5,000,000 shares of
Preferred Stock ("Preferred Stock"), $0.01 par value.
The following description of our capital stock is a summary and is
qualified in its entirety by the provisions of our Articles of Incorporation and
By-Laws, copies of which are on file with the Securities and Exchange
Commission.
8
<PAGE> 9
COMMON STOCK
Holders of Common Stock are entitled to one vote per share of Common
Stock beneficially owned on each matter submitted to a vote at a meeting of
shareholders, subject to Section 180.1150 of the Wisconsin Business Corporation
Law ("WBCL") (described below under "Certain Statutory and Other Provisions").
The Common Stock does 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 Common Stock has no
preemptive rights and no redemption or conversion privileges. Subject to any
preferences of any outstanding Preferred Stock, the holders of Common Stock 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 shareholders. Our Articles state that a majority vote of
shares represented at a meeting at which a quorum is present is sufficient for
all actions that require the vote of shareholders. However, under the WBCL,
certain actions require enhanced approval by either a supermajority of
two-thirds of all outstanding shares entitled to vote and certain actions
require a majority of all outstanding shares entitled to vote. All of the
outstanding shares of the Common Stock are, and the shares to be sold by us as
part of the Offering when legally issued and paid for will be, fully paid and
nonassessable, except for certain statutory liabilities which may be imposed by
Section 180.0622(2)(b) of the WBCL for unpaid employee wages.
PREFERRED STOCK
Pursuant to the Articles, our Board of Directors may, without further
action by our shareholders, from time to time, issue shares of the 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 Common Stock. Also, holders of the Preferred
Stock would normally be entitled to receive a preference payment in the event of
our liquidation, dissolution, or winding-up before any payment is made to the
holders of Common Stock. The issuance of preferred stock will be approved by a
majority of our independent directors who do not have an interest in the
transaction and who have access, at our expense, to us or independent legal
counsel. Under certain circumstances, the issuance of such Preferred Stock may
discourage bids for the Common Stock at a premium or otherwise adversely affect
the market price of the Common Stock or 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 of our shares of
the Preferred Stock, our Board of Directors, without shareholder approval, may
issue the Preferred Stock with voting and conversion rights which could
adversely affect the holders of Common Stock.
LIMITATION OF DIRECTOR LIABILITY
Section 180.0828 of the 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 By-Laws provide for indemnification of directors
and officers to the fullest extent permitted by Wisconsin law.
9
<PAGE> 10
CERTAIN STATUTORY AND OTHER PROVISIONS
The provisions of our By-Laws 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 our long-term growth without disruption caused by the threat
of a takeover not deemed by our 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 By-Laws currently provide
that the number of Directors shall be five. The authorized number of Directors
may be changed by amendment of the By-Laws. We expect that the By-Laws will be
amended before the nominees are elected to the Board of Directors to provide
that the number of Directors shall be not less than three nor greater than
eleven. The By-Laws 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 By-Laws 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 By-Laws 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 our 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, 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 the
Company) 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
10
<PAGE> 11
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 the Company) 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 its initial
public offering of Common Stock in 1998, the Company is 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 common stock 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 of our Common Stock 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
By-Laws 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 the Common Stock
with the goal of seeking to have us repurchase the Common Stock at a premium.
The WBCL statutory provisions and our Articles and By-Law 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
11
<PAGE> 12
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 of
Common Stock 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 our Common Stock,
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 our shareholders.
The Board of Directors and the Shareholders have approved resolutions
for us to "opt-out" of Section 180.1141, Section 180.1131 and Section 180.1150
of the WBCL.
TRANSFER AGENT
The transfer agent for the Common Stock is Firstar Trust Company.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby has been
passed on for us by Michael, Best & Friedrich LLP, Milwaukee, Wisconsin.
EXPERTS
The consolidated balance sheets of Merge Technologies Incorporated as
of and for the years ended December 31, 1998 and December 31, 1997 and the
related consolidated statements of operations, stockholders' equity, cash flows,
and comprehensive income for the years ended December 31, 1998, December 31,
1997 and December 31, 1996, incorporated by reference in this Prospectus, have
been audited by KPMG LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
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 files 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; New
York Regional Office, Public Reference Room, Seven World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. 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 Common Stock is
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 SmallCap Market, 1735 K Street, N.W., Washington, D.C. 20006.
12
<PAGE> 13
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
TABLE OF CONTENTS
PAGE
----
DOCUMENTS INCORPORATED BY REFERENCE 2
RISK FACTORS 3
THE COMPANY 7
USE OF PROCEEDS 8
PLAN OF DISTRIBUTION 8
DESCRIPTION OF SECURITIES 8
LEGAL MATTERS 12
EXPERTS 12
AVAILABLE INFORMATION 12
420,000 SHARES
MERGE TECHNOLOGIES INCORPORATED
COMMON STOCK
($0.01 PAR VALUE)
PROSPECTUS
13
<PAGE> 14
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a schedule of the estimated expenses to be incurred by
the Company in connection with the issuance and sale of the securities being
registered hereby.
<TABLE>
<S> <C>
Registration Fee..................................................................... 221.76
Blue Sky Fees and Expenses........................................................... 0
Accounting Fees and Expenses......................................................... 2700.00
Legal Fees and Expenses.............................................................. 4,000.00
Printing Expenses.................................................................... 1700.00
Transfer Agent and Registrar Fees.................................................... 0
Miscellaneous........................................................................ 1000.00
Total*...............................................................................$
</TABLE>
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the WBCL, directors and officers of the Company are entitled to
mandatory indemnification from the Company 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 the Company and such breach or failure constituted: (i) a willful
failure to deal fairly with the Company or its 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. The
Company's By-Laws provide for indemnification of directors and officers to the
fullest extent permitted by Wisconsin law.
ITEM 16. EXHIBITS
EXHIBIT NO.
5 Opinion of Michael, Best & Friedrich LLP regarding legality of issuance
of Shares.
10 Provisions Attaching to Exchangeable Shares with exhibit, Share
Exchange Agreement dated as of September 3, 1999 by and between Merge
Technologies Corporation and Interpra Medical Imaging Network Ltd.
23.1 Consent of KPMG LLP.
23.2 Consent of Michael, Best & Friedrich LLP (see Exhibit 5).
ITEM 17. UNDERTAKINGS
A. The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts of
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
16
<PAGE> 15
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 Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the 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.
C. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 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.
B. Indemnification
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange 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.
17
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukee, State of Wisconsin, on December 30, 1999.
Merge Technologies Incorporated
By: /s/ William C. Mortimore
-------------------------------------
William C. Mortimore
President and Chief Executive Officer
18
<PAGE> 17
GRANT OF POWER OF ATTORNEY
Each person whose signature appears below as a Director and/or officer
of Merge Technologies Incorporated hereby constitutes and appoints William C.
Mortimore and Colleen M. Doan his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all subsequent amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ William C. Mortimore December 28, 1999
- -----------------------------
William C. Mortimore President and Chief Executive Officer,
Director
- -----------------------------
Robert T. Geras Director
/s/ Robert A. Barish December 28, 1999
- -----------------------------
Robert A. Barish, M.D. Director
/s/ Michael D. Dunham December 28, 1999
- -----------------------------
Michael D. Dunham Director
/s/ Dennis Brown December 28, 1999
- -----------------------------
Dennis Brown Director
- -----------------------------
Douglas S. Harrington, M.D. Director
/s/ Kevin C. Moley December 28, 1999
- -----------------------------
Kevin E. Moley Director
- -----------------------------
Hymie S. Negin Director
/s/ Colleen M. Doan December 28, 1999
- -----------------------------
Colleen M. Doan Chief Financial Officer, Secretary and
Treasurer (Principal Accounting Officer and
Principal Financial Officer)
</TABLE>
19
<PAGE> 1
EXHIBIT 5
December 29, 1999
Merge Technologies Incorporated
1126 South 70th Street
Milwaukee, Wisconsin 43214
Re: MERGE TECHNOLOGIES INCORPORATED
Ladies and Gentlemen:
We have acted as special counsel to you ("Merge"), for the limited
purpose of advising you regarding certain issues of Wisconsin law as they affect
the transactions contemplated by the Purchase Agreement by and among Interpra
Medical Imaging Network Ltd. ("Company"), Merge and 3032854 Nova Scotia Company,
dated September 1, 1999 (the "Purchase Agreement"), with respect to, among other
things, the issuance by Merge of its common stock, $0.01 par value per share
(the "Merge Common Shares") in exchange for the Company's non-voting
exchangeable shares (the "Exchangeable Shares").
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord and this Opinion
Letter should be read in conjunction therewith. Except as otherwise indicated
herein, capitalized terms used in this Opinion Letter are defined in the
Purchase Agreement or the Accord.
The law covered by the opinions expressed in this Opinion Letter is
limited to the law of the State of Wisconsin, and specifically excludes federal
and Illinois law.
We have relied without independent investigation upon factual
representations made by Merge in the Transaction Documents (defined below),
resolutions of the Board of Directors of Merge referenced below (the "Merge
Resolutions"), and in the Officer's Certificate dated December 29, 1999 attached
to this Opinion Letter. We do not regularly represent Merge and so have no
knowledge beyond that obtained in connection with the preparation of this
Opinion Letter. The Transaction Documents consist exclusively of the Purchase
Agreement, the Share Exchange Agreement by and between Company and Merge dated
September 1, 1999 (the "Share Exchange Agreement"), and the Provisions Attaching
to Exchangeable Shares (the "Provisions"). The Merge Resolutions consist
exclusively of the resolutions of the Board of Directors of Merge dated August
24, 1999, August 31, 1999, September 1, 1999, and December 28, 1999.
<PAGE> 2
INTERPRA MEDICAL IMAGING NETWORK LTD.
December 29, 1999
Page 2
Based upon and subject to the foregoing, we are of the opinion that
upon the issuance by Merge of the Merge Common Shares as contemplated by the
Transaction Documents, the Merge Common Shares will have been duly authorized
and validly issued and, assuming the facts set forth in the attached Officer's
Certificate, will be fully paid and nonassessable, except to the extent provided
in Wisconsin Statutes Section 180.0622(2)(b), as judicially interpreted.
The General Qualifications apply to this opinion.
We confirm that we are unaware of, nor have we been asked to represent
Merge in connection with, any actions or proceedings against Merge, pending or
overtly threatened in writing, before any court, governmental agency or
arbitrator that seek to affect the enforceability of the Transaction Documents.
This Opinion Letter may be relied upon by you only in connection with
the transactions contemplated by the Purchase Agreement, and may not be used or
relied upon by you or any other person for any other purpose whatsoever, except
to the extent authorized in the Accord, without in each instance our prior
written consent.
Very truly yours,
Michael Best & Friedrich, LLP
/s/ Michael Best & Friedrich, LLP
---------------------------------
<PAGE> 1
Exhibit 10
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
The Exchangeable Non Voting Shares in the capital of the Corporation
shall have the following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"Act" means the Business Corporations Act of Ontario.
"Affiliate" of any person means any other person directly or indirectly
controlled by, or under common control of, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to any person, means
the possession by another person, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that first mentioned
person, whether through the ownership of voting securities, by contract or
otherwise.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means a day other than a Saturday, a Sunday or any other
day when banks are not open for business in Toronto, Ontario.
"Canadian Dollar Equivalent" means in respect of an amount expressed in
a foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purposes.
"Cash Retraction Price" is defined in Section 6.1 of these share
provisions.
"Cash Retraction Right" is defined in Section 6.1 of these share
provisions
"Common Share Reorganization" is defined in Section 12.1 of these share
provisions.
"Common Shares" mean the common shares of the Corporation.
"Corporation" means Interpra Medical Imaging Network Ltd., a
corporation incorporated under the laws of the Province of Ontario.
"Current Market Price" means, in respect of a Merge Common Share, on
any date as of which the Current Market Price is to be determined, the average
of the closing prices of a Merge Common Share on the National Association of
Securities Dealers Automated Quotation System,
<PAGE> 2
Small-Cap Issues (the "NASDAQ Small-Cap") (as published in The Wall Street
Journal (Midwest Edition), or, if not published therein, in any other
authoritative source determined by the Board of Directors) on the 20 trading
days immediately preceding such date, or, if the Merge Common Shares are not
then listed on the NASDAQ Small-Cap, on such other stock exchange or automated
quotation system on which Merge Common Shares are then listed or quoted, as the
case may be, and, if Merge Common Shares are listed or quoted on more than one
such exchange or automated quotation system, on such exchange or automated
quotation system as may be selected by the Board of Directors for such purpose.
"Designee" is defined in the Share Exchange Agreement.
"Exchange Right" is defined in the Share Exchange Agreement.
"Exchangeable Shares" means the Exchangeable Non Voting Shares of the
Corporation having the rights, privileges, restrictions and conditions set forth
herein.
"Exchangeable Share Consideration" means the Specified Number of Merge
Common Shares exchangeable for Exchangeable Shares, which Merge Common Shares
shall be duly issued as fully paid and non assessable, and shall be free and
clear of any lien, claim or incumbrance, plus a cheque payable at any branch of
the bankers of Merge for cash dividends declared or previously paid on Merge
Common Shares but not yet paid on Exchangeable Shares, plus delivery of non-cash
dividends declared or previously delivered on Merge Common Shares, but not yet
delivered on Exchangeable Shares.
"Exchangeable Share Price" means, on a particular date, the Current
Market Price of a Specified Number of Merge Common Shares plus an additional
amount equivalent to the amount by which the declared and unpaid cash and
non-cash dividends on one Exchangeable Share exceed, if at all, the declared and
unpaid dividends on a Specified Number of Merge Common Shares, calculated in
accordance with the provisions of Article III of the Provisions Attaching to
Exchangeable Shares.
"Liquidation Amount" is defined in Section 5.1 of these share
provisions.
"Liquidation Call Right" is defined in the Share Exchange Agreement.
"Liquidation Date" is defined in Section 5.1 of these share provisions.
"Liquidation Right" is defined in Section 5.1 of these share
provisions.
"Merge" means Merge Technologies Incorporated, a corporation organized
and existing under the laws of the State of Wisconsin, and any successor
corporation.
"Merge Common Shares" means the common shares of Merge, $0.01 par value
per share.
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<PAGE> 3
"Merge Dividend Declaration Date" means the date on which the Board of
Directors of Merge declares any dividend on the Merge Common Shares.
"Purchase Price" is defined in Section 6.3 of these share provisions.
"Purchase Right" means the Merge Purchase Right pursuant to Article 2
of the Share Exchange Agreement.
"Reclassification" is defined in Section 12.2 of these share
provisions.
"Redemption Date" means September 30, 2004.
"Redemption Price" is defined in Section 7.1 of these share provisions.
"Redemption Right" is defined in Section 7.2 of these share provisions.
"Retracted Shares" is defined in Section 6.1 of these share provisions.
"Retraction Call Notice" is defined in Section 6.3 of these share
provisions.
"Retraction Right" is defined in Section 6.1 of these share provisions.
"Retraction Date" is defined in Section 6.1 of these share provisions.
"Retraction Price" is defined in Section 6.1 of these share provisions.
"Retraction Request" is defined in Section 6.1 of these share
provisions.
"Retraction Call Right" is defined in Section 6.1 of these share
provisions.
"Share Exchange Agreement" means the Share Exchange Agreement between
Merge and the Corporation attached as Exhibit A hereto and made a part hereof.
"Specified Number" means one share, subject to adjustment in accordance
with Article 12 of these share provisions.
"Support Agreement" means the Support Agreement, dated as of August 31,
1999 among Merge, the Corporation and the stockholders of the Corporation.
"Trust" means the trust which is the subscriber for Merge Common Shares
having voting rights equal to the number of Exchangeable Shares outstanding from
time to time (other than Exchangeable Shares held by Merge and its Affiliates)
multiplied by the Specified Number with such voting rights to be exercised by
the Trustee pursuant to the Trust Agreement.
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<PAGE> 4
"Trust Agreement" means the Trust Agreement made as of dated as of
August 31, 1999 among Merge, as the settlor, and the Trustee, establishing the
Trust.
"Trustee" means Firstar Bank Milwaukee NA and any successor trustee
appointed under the Trust Agreement.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 With respect to the payment of dividends and the distribution of
assets in the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among its shareholders for the purpose of winding up
its affairs as herein provided, the Exchangeable Shares shall be entitled to the
a preference over: (i) the Common Shares, solely to the extent of any cash or
non-cash dividends declared or previously paid or delivered on Merge Common
Shares but not yet paid or delivered on Exchangeable Shares; and (ii) any other
shares ranking junior to the Exchangeable Shares.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled, subject to
applicable law, to receive on each dividend payment date specified by the board
of directors of Merge, a dividend on each Exchangeable Share:
(a) in the case of a cash dividend declared on Merge Common
Shares, in an amount in cash for each Exchangeable Share equal to the
Canadian Dollar Equivalent on the Merge Dividend Declaration Date of
the cash dividend declared on the Specified Number of Merge Common
Shares;
(b) in the case of a stock dividend declared on the Merge
Common Shares to be paid in Merge Common Shares, in such number of
Exchangeable Shares for each Exchangeable Share as is equal to the
number of Merge Common Shares to be paid on the Specified Number of
Merge Common Shares; or
(c) in the case of a dividend declared on the Merge Common
Shares in property other than cash or Merge Common Shares, in such type
and amount of property for each Exchangeable Share as is the same as or
economically equivalent to (to be determined by the Board of Directors,
in good faith and its sole discretion, with the assistance of such
reputable and independent financial advisors and/or other experts as
the Board of Directors may require) the type and amount of property
declared on the Specified Number of Merge Common Shares. Such dividends
shall be paid out of money, assets or property of the
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<PAGE> 5
Corporation properly applicable to the payment of dividends, or out of
authorized, but unissued shares of the Corporation.
3.2 Cash dividends shall be paid by cheque of the Corporation payable
at par at any branch of the bankers of the Corporation or by electronic fund
transfer to the bank accounts specified by the holders from time to time and the
sending of such a cheque to each holder of an Exchangeable Share shall satisfy
the cash dividend represented thereby unless the cheque is not paid on
presentation. Certificates registered in the name of the registered holder of
Exchangeable Shares shall be issued or transferred in respect of any stock
dividends contemplated by Section 3.1(b) hereof and the sending of such a
certificate to each holder of an Exchangeable Share shall satisfy the stock
dividend represented thereby. Such other type and amount of property in respect
of any dividends contemplated by Section 3.1(c) hereof shall be issued,
distributed or transferred by the Corporation in such manner as it shall
determine and the issuance, distribution or transfer thereof by the Corporation
to each holder of an Exchangeable Share shall satisfy the dividend represented
thereby. Any cheque required to be mailed or sent to a holder of Exchangeable
Shares shall be validly sent or mailed if mailed to the address of the holder
recorded in the securities register of the Corporation, or in the event of such
address not being so recorded, then at the last known address of such holder.
The Corporation may deduct and withhold from any payments of dividends in cash,
shares or other property any amounts required by law to be deducted and
withheld, including, without limitation, United States dividend withholding
taxes to the extent the Corporation or Merge believes that such withholding may
be required. Subject to applicable law, no holder of an Exchangeable Share shall
be entitled to recover by action or other legal process against the Corporation
any dividend that is represented by a cheque that has not been duly presented to
the Corporation's bankers for payment or that otherwise remains unclaimed for a
period of six years from the date on which such dividend was payable.
3.3 The record date for the determination of the holders of
Exchangeable Shares entitled to receive payment of, and the payment date for,
any dividend declared on the Exchangeable Shares under Section 3.1 hereof shall
be the same dates as the record date and payment date, respectively, for the
corresponding dividend declared on the Merge Common Shares.
3.4 If on any payment date for any dividend declared on the
Exchangeable Shares under Section 3.1 hereof the dividends are not paid in full
on all of the Exchangeable Shares then outstanding, any such dividends that
remain unpaid shall be paid on a subsequent date or dates determined by the
Board of Directors on which the Corporation shall have sufficient moneys, assets
or property properly applicable to the payment of such dividends.
3.5 In paying any stock dividend in the form of Exchangeable Shares,
the Corporation shall not be required to deliver fractional shares of
Exchangeable Shares but in lieu thereof may pay to the holders of Exchangeable
Shares an amount in cash equal to the same fraction of the Canadian Dollar
Equivalent of the Current Market Price of one Merge Common Share on the last
Business Day prior to dividend payment date.
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<PAGE> 6
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Section
11.2 of these share provisions:
(a) pay any dividends on the Common Shares or on any other
shares ranking junior to the Exchangeable Shares, other than stock
dividends payable in Common Shares, or any such other shares ranking
junior to the Exchangeable Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in
respect of Common Shares or any other shares ranking junior to the
Exchangeable Shares;
(c) redeem or purchase any other shares of the Corporation
ranking equally with, or superior to, the Exchangeable Shares with
respect to the payment of dividends or on any liquidation distribution;
or
(d) issue any Exchangeable Shares or any other shares of the
Corporation ranking equally with, or superior to, the Exchangeable
Shares other than by way of stock dividends to the holders of
Exchangeable Shares.
4.2 The restrictions in Sections 4.1 shall not apply if all dividends
on the outstanding Exchangeable Shares required by Section 3.1 to have been
declared and paid on the Exchangeable Shares through the date of the action
restricted by Section 4.1 have been declared and paid in full.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, each holder of
Exchangeable Shares shall be entitled to exercise a right (the "Liquidation
Right"), subject to applicable law and the exercise by Merge or its Designee of
the Liquidation Call Right, to receive from the assets of the Corporation in
respect of each Exchangeable Share held by the holder on the date on which the
assets of the Corporation are distributed to its shareholders (the "Liquidation
Date") in connection with such liquidation, dissolution or winding up, in
priority to any distribution of any part of the assets of the Corporation among
the holders of the Common Shares, or any other shares ranking junior to the
Exchangeable Shares, the Exchangeable Share Price to be paid in the form of the
Exchangeable Share Consideration (the "Liquidation Amount").
5.2 Upon the exercise of the Liquidation Right, on or promptly after
the Liquidation Date, and subject to the exercise by Merge or its Designee of
the Liquidation Call Right, the
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<PAGE> 7
Corporation shall cause to be delivered to the holders of the Exchangeable
Shares, the Liquidation Amount for each Exchangeable Share upon presentation and
surrender of the certificates representing such Exchangeable Shares, together
with such other documents and instruments as may be required to effect a
transfer of Exchangeable Shares under the Act and the bylaws of the Corporation
and such additional documents and instruments as the Corporation may reasonably
require, at the registered office of the Corporation. Payment of the total
Liquidation Amount for such Exchangeable Shares shall be made by delivery to
each holder at the address of the holder recorded in the securities register of
the Corporation for the Exchangeable Shares or by holding (as specified in
writing by such holder) for pick up by the holders at the registered office of
the Corporation the Liquidation Amount (less any Merge Common Shares withheld in
respect of any tax required to be deducted or withheld therefrom by the
Corporation, and less any tax required to be deducted and withheld therefrom by
the Corporation, including, without limitation, United States dividend
withholding taxes to the extent the Corporation or Merge believes that such
withholding may be required).
On and after the Liquidation Date, the holders of such Exchangeable
Shares shall cease to be holders of such Exchangeable Shares and shall not be
entitled to exercise any of the rights of holders in respect thereof, other than
the right to receive their proportionate part of the total Liquidation Amount,
unless payment of the proportionate share of the total Liquidation Amount for
such Exchangeable Shares shall not be made upon presentation and surrender of
share certificates in accordance with the foregoing provisions, in which case
the rights of the holders shall remain unaffected to the extent their
proportionate share of the total Liquidation Amount has not been paid, until
their proportionate share of the total Liquidation Amount has been fully paid in
the manner hereinbefore provided.
The Corporation shall have the right at any time after the Liquidation
Date to deposit or cause to be deposited in a custodial account with any
chartered bank or trust company in Canada the total Liquidation Amount in
respect of the Exchangeable Shares represented by certificates that have not, at
the Liquidation Date, been surrendered by the holders thereof, and immediately
upon making such deposit the Corporation shall give notice thereof to the
applicable holders of the Exchangeable Shares. Upon such deposit being made, the
rights of such holders of Exchangeable Shares after such deposit shall be
limited to the right to receive their proportionate part of the total
Liquidation Amount (less any tax required to be deducted or withheld therefrom,
including, without limitation, United States dividend withholding taxes to the
extent the Corporation or Merge believes that such withholding may be required)
for the Exchangeable Shares with respect to which the Liquidation Amount has
been so deposited, against presentation and surrender of the certificates
representing such Exchangeable Shares to such bank or trust company. Upon such
payment or deposit of the total Liquidation Amount, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be the holders of the Merge Common Shares either: (i) delivered to such
holder; or (ii) deposited with such chartered bank or trust company.
5.3 After the total Liquidation Amount has been paid or deposited,
whether by the Corporation pursuant to the Liquidation Right or by Merge or its
Designee following the exercise
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<PAGE> 8
of the Liquidation Call Right, holders of Exchangeable Shares shall not be
entitled to share in any further distribution of the assets of the Corporation.
5.4 In paying the total Liquidation Amount the Corporation shall not
be required to deliver fractional shares of Merge Common Shares but in lieu
thereof may pay to the holders of Exchangeable Shares in accordance with Section
5.2 an amount in cash equal to the same fraction of the Canadian Dollar
Equivalent of the Current Market Price of one Merge Common Share on the last
Business Day prior to the Liquidation Date.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 Subject to the provisions of the Act and applicable securities
laws, the exercise by Merge or its Designee of the Retraction Call Right and
otherwise upon compliance with the provisions of this Article 6, a holder of
Exchangeable Shares shall be entitled:
(a) at any time through and including August 31, 2004, to
require the Corporation to redeem any or all of the Exchangeable Shares
registered in the name of such holder (the "Retraction Right") for the
Exchangeable Share Price per Exchangeable Share to be paid in the form
of the Exchangeable Share Consideration (the "Retraction Price"); and
(b) at any time between September 1, 2004 and October 1, 2004,
to require the Corporation to redeem any or all of the Exchangeable
Shares registered in the name of such holder (the "Cash Retraction
Right") for the price of U.S. $4.50 per Exchangeable Share, to be paid
in cash (the "Cash Retraction Price").
Merge shall use its best efforts to provide each holder of Exchangeable Shares
with written notice by June 30, 2004 advising such holder of the impending
expiration of the period during which the holder could exercise the Retraction
Right or the Cash Retraction Right. However, the failure to provide such notice
shall have no effect on the rights of Merge or its Designee under these share
provisions or any other agreement. To effect such redemption pursuant to the
Retraction Right or the Cash Retraction Right, the holder shall present and
surrender at the registered office of the Corporation the certificate or
certificates representing the Exchangeable Shares which the holder desires to
have the Corporation redeem, together with such other documents and instruments
as may be required to effect a transfer of Exchangeable Shares under the Act and
the bylaws of the Corporation, and such additional documents and instruments as
the Corporation may reasonably require, together with a duly executed statement
(the "Retraction Request") in the form of Appendix 1 hereto or in such other
form as may be acceptable to the Corporation:
(a) specifying that the holder desires to have all or any
number specified therein of the Exchangeable Shares represented by such
certificate or certificates (the "Retracted Shares") redeemed by the
Corporation;
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(b) stating the Business Day on which the holder desires to
have the Corporation redeem the Retracted Shares (the "Retraction
Date"), provided that the Retraction Date shall be not less than 10
Business Days nor more than 15 Business Days after the date on which
the Retraction Request is received by the Corporation and further
provided that, in the event that no such Business Day is specified by
the holder in the Retraction Request, the Retraction Date shall be
deemed to be the tenth Business Day after the date on which the
Retraction Request is received by the Corporation; and
(c) acknowledging the overriding right (the "Retraction Call
Right") of Merge or its Designee to purchase all but not less than all
the Retracted Shares directly from the holder and that the Retraction
Request shall be deemed to be a revocable offer by the holder to sell
the Retracted Shares to Merge and its Designee in accordance with the
Retraction Call Right on the terms and conditions set out in Section
6.3 below.
6.2 Subject to the exercise by Merge or its Designee of the
Retraction Call Right and compliance with all applicable securities laws, upon
receipt by the Corporation in the manner specified in Section 6.1 hereof of a
certificate or certificates representing the number of Exchangeable Shares which
the holder desires to have the Corporation redeem pursuant to the Retraction
Right or Cash Retraction Right, as applicable, together with a Retraction
Request, and provided that the Retraction Request is not revoked by the holder
in the manner specified in Section 6.7, the Corporation shall redeem the
Retracted Shares effective at the close of business on the Retraction Date and
shall cause to be delivered to such holder the Retraction Price or the Cash
Retraction Price, as applicable, with respect to such shares in the manner
provided in Section 6.4 hereof. If only a part of the Exchangeable Shares
represented by any certificate are redeemed (or purchased by Merge or its
Designee pursuant to the Retraction Call Right), a new certificate for the
balance of such Exchangeable Shares shall be issued to the holder at the expense
of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify Merge thereof. In order to exercise the
Retraction Call Right, Merge must notify the Corporation and the holder in
writing of its determination to do so (the "Retraction Call Notice") within 5
Business Days of notification to Merge by the Corporation of the receipt by the
Corporation of the Retraction Request. If Merge does not so notify the
Corporation within such 5 Business Day period, the Corporation will notify the
holder as soon as possible thereafter that Merge will not exercise the
Retraction Call Right. If Merge delivers the Retraction Call Notice within such
5 Business Day time period, and provided that the Retraction Request is not
revoked by the holder in the manner specified in Section 6.7, the Retraction
Request shall thereupon be considered only to be an offer by the holder to sell
the Retracted Shares to Merge or its Designee in accordance with the Retraction
Call Right. In such event, the Corporation shall not redeem the Retracted Shares
pursuant to the Retraction Right, and Merge or its Designee shall purchase from
such holder and such holder shall sell to Merge or its Designee on the
Retraction Date the Retracted Shares for a purchase price (the "Purchase Price")
per share equal to the Retraction Price or the Cash Retraction Price, as
applicable, in the manner set forth in the Share Exchange Agreement. If Merge
does not deliver the Retraction Call Notice within such 5 Business Day period,
and provided that the
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Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the Corporation shall redeem the Retracted Shares on the Retraction
Date and in the manner otherwise contemplated in this Article 6.
6.4 On the Retraction Date, subject to the exercise by Merge or its
Designee of the Retraction Call Right and compliance with all applicable
securities laws, the Corporation shall deliver to the holder at the address of
the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick up by the holder at the registered office of the
Corporation, as specified in writing by such holder, the Retraction Price or
Cash Retraction Price, as applicable (less any Merge Common Shares withheld in
respect of any tax required to be deducted or withheld therefrom by the
Corporation, and, less any tax required to be deducted or withheld therefrom by
the Corporation, including, without limitation, United States dividend
withholding taxes to the extent the Corporation or Merge believes that such
withholding may be required), and such delivery shall be deemed to be payment of
and shall satisfy and discharge all liability for the total Retraction Price or
total Cash Retraction Price, as applicable (plus any tax required and in fact
deducted and withheld therefrom and remitted to the proper tax authority) unless
the cheque is not paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the
holder of the Retracted Shares shall cease to be a holder of such Retracted
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive, subject to these share
provisions, his proportionate part of the total Retraction Price, total Cash
Retraction Price or total Purchase Price, as applicable, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of his proportionate part of the total Retraction Price,
total Cash Retraction Price or total Purchase Price, as applicable, shall not be
made, in which case the rights of such holder shall remain unaffected to the
extent payment of his proportionate part of the total Retraction Price, total
Cash Retraction Price or total Purchase Price, as applicable, has not been made
until his proportionate part of the total Retraction Price, total Cash
Retraction Price or total Purchase Price, as applicable, has been fully paid in
the manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of his proportionate part of the total Retraction Price, total Cash
Retraction Price or total Purchase Price, as applicable, has been made in
accordance with the foregoing provisions, the holder of the Retracted Shares so
redeemed by the Corporation or purchased by Merge or its Designee shall
thereafter be considered and deemed for all purposes to be a holder of the Merge
Common Shares delivered to it.
6.6 Notwithstanding any other provision of this Article 6, the
Corporation shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of Retracted
Shares would be contrary to solvency requirements or other provisions of
applicable law, including securities laws. If the Corporation believes that on
any Retraction Date it would not be permitted by any of such provisions to
redeem the Retracted Shares tendered for redemption on such date, and provided
that Merge shall not have exercised the Retraction Call Right with respect to
the Retracted Shares, the Corporation shall only be obligated to redeem
Retracted
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Shares specified by a holder in a Retraction Request to the extent of the
maximum number that may be redeemed (rounded down to a whole number of shares)
as would not be contrary to such provisions and shall notify the holder at least
2 Business Days prior to the Retraction Date as to the number of Retracted
Shares which will not be redeemed by the Corporation. In any case in which the
redemption by the Corporation of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law, including securities laws,
the Corporation shall redeem Retracted Shares in accordance with Section 6.4 of
these share provisions on a pro rata basis and shall issue to each holder of
Retracted Shares a new certificate, at the expense of the Corporation,
representing the Retracted Shares not redeemed by the Corporation pursuant to
Section 6.4 hereof. Provided that the Retraction Request is not revoked by the
holder in the manner specified in Section 6.7, the holder of any such Retracted
Shares not redeemed by the Corporation pursuant to Section 6.4 of these share
provisions as a result of solvency requirements of applicable law shall be
deemed by giving the Retraction Request to require Merge or its Designee to
purchase such Retracted Shares from such holder on the Retraction Date or as
soon as practicable thereafter on payment by Merge or its Designee to such
holder of the Purchase Price for each such Retracted Share pursuant to the
Exchange Right, all as more specifically provided in the Article 1 of the Share
Exchange Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given by
the holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Merge or its Designee shall be deemed to have been revoked.
As soon as practicable after having received such withdrawal notice the
Corporation shall return, or cause to be returned, to the holder, the
Exchangeable Shares delivered to the Corporation pursuant to section 6.1. If the
Retraction Request has not been revoked as provided for in this Section 6 by the
close of business on the Business Day immediately preceding the Retraction Date,
the holder of such Retraction Shares shall be deemed to have agreed to sell the
Retraction Shares to Merge or its Designee in accordance with the Retraction
Call Right.
6.8 In paying the Retraction Price, the Corporation shall not be
required to deliver fractional shares of Merge Common Shares but in lieu thereof
may pay to the holders of Exchangeable Shares in accordance with Section 6.4 an
amount in cash equal to the same fraction of the Canadian Dollar Equivalent of
the current Market Price of one Merge Common Share on the last Business Day
prior to the Retraction Date.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law, if directed by Merge pursuant to the
Share Exchange Agreement, the Corporation shall on the Redemption Date redeem
the whole of the then outstanding Exchangeable Shares for an amount per share
equal to the Exchangeable Share Price to be paid in the form of the Exchangeable
Share Consideration (the "Redemption Price").
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7.2 In the case of a redemption of Exchangeable Shares under this
Article 7, the Corporation shall, at least 20 days before the Redemption Date,
send or cause to be sent to each holder of Exchangeable Shares a notice in
writing of the redemption by the Corporation of the Exchangeable Shares held by
such holder (the "Redemption Right"). Such notice shall set out the Redemption
Price and the Redemption Date. On or after the Redemption Date, the Corporation
shall cause to be delivered to the holders of the Exchangeable Shares to be
redeemed, the Redemption Price for each such Exchangeable Share upon
presentation and surrender at the registered office of the Corporation,
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the bylaws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require.
Payment of the total Redemption Price for such Exchangeable Shares shall be made
by delivery to each holder at the address of the holder recorded in the
securities register of the Corporation or by holding for pick up by the holder
at the registered office of the Corporation the Share Redemption Consideration
(less any Merge Common Shares withheld in respect of any tax required to be
deducted or withheld therefrom by the Corporation, and less any tax required to
be deducted or withheld therefrom by the Corporation, including without
limitation, United States dividend withholding taxes to the extent the
Corporation or Merge believes that such withholding may be required).
On and after the Redemption Date, the holders of the Exchangeable
Shares called for redemption pursuant to the Redemption Right shall cease to be
holders of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate part of the total Redemption Price, unless payment of their
proportionate part of the total Redemption Price for such Exchangeable Shares
shall not be made upon presentation and surrender of certificates in accordance
with the foregoing provisions, in which case the rights of such holders shall
remain unaffected until their proportionate part of the total Redemption Price
has been paid in full in the manner hereinbefore provided.
The Corporation shall have the right at any time after the sending of
notice of its intention to redeem the Exchangeable Shares pursuant to the
Redemption Right, to deposit or cause to be deposited the total Redemption Price
of the Exchangeable Shares so called for redemption, or of such Exchangeable
Shares represented by certificates that have not at the date of such deposit
been surrendered by the holders thereof in connection with such redemption, in a
custodial account with any chartered bank or trust company in Canada named in
such notice and giving notice thereof to the holders of the Exchangeable Shares.
Upon the later of such deposit being made and the Redemption Date, the
Exchangeable Shares in respect whereof such deposit shall have been made, shall
be redeemed and the rights of the holders thereof after deposit or the
Redemption Date, as the case may be, shall be limited to receiving their
proportionate part of the total Redemption Price (less any tax required to be
deducted or withheld therefrom, including, without limitation, United States
dividend withholding taxes to the extent the Corporation or Merge believes that
such withholding may be required) for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Upon
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such payment or deposit of the total Redemption Price, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be holders of the Merge Common Shares delivered to them.
7.3 In paying the Redemption Price the Corporation shall not be
required to deliver fractional shares of Merge Common Shares but in lieu thereof
may pay to the holders of Exchangeable Shares in accordance with Section 7.2 an
amount in cash equal to the same fraction of the Canadian Dollar Equivalent of
the Current Market Price of one Merge Common Share on the last Business Day
prior to the Retraction Date.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and the prior written consent of Merge,
the Corporation may at any time and from time to time purchase for cancellation
all or any part of the outstanding Exchangeable Shares at any price by agreement
with a holder of record of Exchangeable Shares then outstanding or through the
facilities of any stock exchange on which the Exchangeable Shares are listed or
quoted at any price per share together with an amount equal to all declared and
unpaid dividends thereon (less any tax required to be deducted or withheld
therefrom by the Corporation, including, without limitation, United States
dividend withholding taxes to the extent the Corporation or Merge believes that
such withholding may be required).
ARTICLE 9
DISSENT RIGHTS
9.1 A holder of Exchangeable Shares shall not be entitled to exercise
any rights of dissent provided for in the Act on a proposal to amend the
Articles of the Corporation to: (i) effect an exchange, reclassification or
cancellation of the Exchangeable Shares; or (ii) create a new class or series of
shares equal or superior to the Exchangeable Shares.
ARTICLE 10
VOTING RIGHTS
10.1 Except as required by applicable law, the holders of the
Exchangeable Shares shall not be entitled as such to receive notice of or to
attend any meeting of the shareholders of the Corporation or to vote at any such
meeting.
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ARTICLE 11
AMENDMENT AND APPROVAL
11.1 The rights, privileges, restrictions and conditions attaching to
the Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares, voting separately as a
class, given as hereinafter specified.
11.2 Any approval given by the holders of the Exchangeable Shares to
add to, change or remove any right, privilege, restriction or condition
attaching to the Exchangeable Shares or any other matter requiring the approval
or consent of the holders of Exchangeable Shares shall be deemed to have been
sufficiently given if it shall have been given in accordance with applicable law
subject to a minimum requirement that such approval be evidenced by resolution
passed by not less than 50.1% of the votes cast on such resolution at a meeting
of holders of Exchangeable Shares duly called and held at which the holders of
at least 50% of the outstanding Exchangeable Shares at that time are present and
represented by proxy; provided that if at any such meeting the holders of at
least 50% of the outstanding Exchangeable Shares at that time are not present or
represented by proxy within one half hour after the time appointed for such
meeting then the meeting shall be adjourned to such date not less than 10 days
thereafter and to such time and place as may be designated by the Chairman of
such meeting. At such adjourned meeting the holders of Exchangeable Shares
present and represented by proxy thereat may transact the business for which the
meeting was originally called and a resolution passed thereat by the affirmative
vote of not less than two thirds of the votes cast on such resolution at such
meeting shall constitute the approval or consent of the holders of the Exchanged
Shares. On every poll taken at any meeting of holders of Exchangeable Shares,
each holder shall be entitled to one vote in respect of each Exchangeable Share
held. Subject to the foregoing, the formalities to be observed in respect of the
giving or waiving of notice of any such meeting and the conduct thereof shall be
those from time to time prescribed in the by laws of the Corporation with
respect to meetings of shareholders. Any approval or consent required to be
given by the holders of Exchangeable Shares shall also be validly given if
expressed by an instrument or instruments in writing signed by all the holders
of Exchangeable Shares.
ARTICLE 12
ADJUSTMENT TO THE SPECIFIED NUMBER
12.1 If and whenever at any time up to and including the Liquidation
Date, the outstanding Merge Common Shares are subdivided or redivided into a
greater number of Merge Common Shares or are reduced, combined or consolidated
into a smaller number of Merge Common Shares (any of such events being
hereinafter called a "Common Share Reorganization"), the Specified Number shall
be adjusted effective immediately upon the occurrence of the Common Share
Reorganization by multiplying the Specified Number at that time by the quotient
or fraction, as the case may be, obtained when: (i) the number of Merge Common
Shares outstanding after the completion of such
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<PAGE> 15
Common Share Reorganization is divided by (ii) the number of Merge Common Shares
outstanding before giving effect to the Common Share Reorganization.
12.2 If and whenever at any time up to and including the Liquidation
Date, the outstanding Merge Common Shares shall be reclassified, exchanged or
converted into other shares, securities or property, otherwise than as a result
of a Common Share Reorganization, or if the designation of or rights,
privileges, restrictions and conditions attached to the Merge Common Shares are
changed, or if there shall be an amalgamation, merger, reorganization,
liquidation, dissolution, winding up or other similar transaction affecting
Merge (other than a transaction which does not result in any reclassification of
the outstanding Merge Common Shares or a change of the Merge Common Shares into
other assets, securities or property), or a transfer of all or substantially all
of the assets of Merge to another corporation or entity (any such event being
referred to in this Section 12.2 as a "Reclassification"), then each such holder
of Exchangeable Shares shall be entitled to receive and shall accept, and the
Corporation shall deliver to each such holder at the time such holder would
otherwise have received Merge Common Shares, in lieu of the number of Merge
Common Shares such holder would have received at such time if there had been no
Reclassification, the aggregate number and kind of shares or other securities or
amount of other property which such holder would have been entitled to receive
as a result of the Reclassification if, on the effective date thereof, he had
been the registered holder of the number of Merge Common Shares to which he was
theretofore entitled at such time.
12.3 If Merge shall fix a record date for the making of a distribution
to all or substantially all the holders of outstanding Merge Common Shares of:
(i) shares of any class other than Merge Common Shares; (ii) rights, options or
warrants; or (iii) evidences of its indebtedness, then in each such case the
Specified Number shall be adjusted immediately after such record date so that it
shall equal the rate determined by multiplying the Specified Number in effect on
such record date by a fraction, of which the denominator shall be the total
number of Merge Common Shares outstanding on such record date multiplied by the
Current Market Price per share of Merge Common Shares on such record date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of such shares or rights, options or warrants
or evidences of indebtedness or assets so to be distributed, and of which the
numerator shall be the total number of Merge Common Shares outstanding on such
record date multiplied by such Current Market Price per share of Merge Common
Shares; provided, however, Merge Common Shares owned by or held for the account
of Merge shall be deemed not to be outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed. To the extent that such distribution is not so made, the
Specified Number shall be readjusted to the Specified Number which would then be
in effect based upon such shares or rights, options or warrants or evidences of
indebtedness or assets actually distributed.
12.4 If and whenever at any time up to and including the Liquidation
Date, Merge shall take any action affecting or relating to Merge Common Shares,
other than an event described in Section 12.1, 12.2 or 12.3, which in the
opinion of the Board of Directors would prejudicially affect the rights of the
holders of Exchangeable Shares, then the Specified Number shall be adjusted in
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<PAGE> 16
such manner, if any, and at such time, as the Board of Directors may determine
in their sole discretion to be equitable in the circumstances to the holders of
Exchangeable Shares. Any such determination shall be binding upon the
Corporation, Merge and each holder of Exchangeable Shares. The failure by the
Board of Directors to take any action to provide for an adjustment on or prior
to the effective date of any action by Merge affecting the Merge Common Shares
shall be conclusive evidence that the Board of Directors has determined that it
is equitable to make no adjustment in the circumstances.
12.5 If a dispute shall at any time arise with respect to the
adjustments provided for herein, such dispute shall be conclusively determined
by the Board of Directors acting in good faith and any such determination shall
be binding upon the Corporation, Merge and all holders of Exchangeable Shares.
12.6 No adjustment in the Specified Number shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
rate; provided, however, that any adjustments which by reason of this Section
12.7 are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. The adjustments provided for in this Article shall
be cumulative.
12.7 No adjustments in the Specified Number shall be made pursuant to
Section 12.1 above if the Corporation shall correspondingly: (i) subdivide or
redivide its outstanding Exchangeable Shares into a greater number of shares; or
(ii) reduce, combine or consolidate the outstanding Exchangeable Shares into a
smaller number of shares.
12.8 No adjustments in the Specified Number shall be made pursuant to
Section 12.1, Section 12.2 or Section 12.3 above if the holders of the
Exchangeable Shares were permitted to participate in a Common Share
Reorganization, Reclassification, the issuance of such rights, options or
warrants or such distribution, as the case may be, as though and to the same
effect as if they had exchanged their Exchangeable Shares for Merge Common
Shares prior to the Common Share Reorganization, Reclassification, issuance of
such rights, options or warrants or such distribution, as the case may be, or if
such holders were permitted to participate in the issuance of substantially
equivalent rights, options or warrants of the Corporation or any equivalent
distribution by the Corporation, as the case may be.
12.9 In any case where the application of the foregoing provisions
results in an increase in the Specified Number taking effect immediately after
the record date for a specific event, then, if the Corporation is required to
deliver any Merge Common Shares prior to completion of the event, the
Corporation may postpone the distribution to a holder of Exchangeable Shares of
the additional Merge Common Shares to which he is entitled by reason of the
increase of the Specified Number, but such additional Merge Common Shares shall
be issued and delivered to that holder upon completion of the event and the
Corporation shall deliver to the holder an appropriate instrument evidencing his
right to receive such additional Merge Common Shares.
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ARTICLE 13
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
13.1 The Corporation will take all such actions and do all such things
as shall be necessary or advisable to perform and comply with all provisions of
the Support Agreement applicable to the Corporation and to ensure performance
and compliance by Merge with all provisions of the Support Agreement applicable
to Merge in accordance with the terms thereof including, without limitation,
taking all such actions and doing all such things as shall be necessary or
advisable to enforce to the fullest extent possible for the direct benefit of
the Corporation all rights and benefits in favor of the Corporation under or
pursuant to such agreement.
13.2 The Corporation shall not propose, agree to or otherwise give
effect to any amendment to, or waiver or forgiveness of its rights or
obligations under, the Support Agreement without the approval of the holders of
the Exchangeable Shares given in accordance with Section 11.2 of these share
provisions other than such amendments, waivers and/or forgiveness as may be
necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Exchangeable Shares thereunder;
(b) making such provisions or modifications not inconsistent with
such agreement as may be necessary or desirable with respect to matters
or questions arising thereunder which, in the opinion of the Board of
Directors, may be expedient to make, provided that the Board of
Directors shall be of the opinion, after consultation with such
advisors as they consider appropriate, that such provisions and
modifications will not be prejudicial to the interests of the holders
of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement
which, on the advice of counsel to the Corporation, are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or manifest
error contained therein, provided that the Board of Directors shall be
of the opinion, after consultation with counsel, that such changes or
corrections will not be prejudicial to the interests of the holders of
the Exchangeable Shares.
ARTICLE 14
LEGEND
14.1 The certificates evidencing the Exchangeable Shares shall contain
or have affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to these provisions and those contained in the Support
Agreement and the Share Exchange Agreement including, but not limited to the
provisions relating to the Liquidation Call Right, the Retraction Call Right and
the Purchase Right, and any transfer restrictions under applicable securities
laws. Neither the Exchangeable Shares nor the Merge Common Shares issuable in
exchange for the Exchangeable
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Shares have been registered under the Securities Act of 1933, as amended (the
"U.S. Securities Act") or the Ontario Securities Act, and may not be offered or
sold: (i) in the United States or to a U.S. Person unless such shares are
registered under the U.S. Securities Act, or an exemption from the registration
requirements of the U.S. Securities Act is available; or (ii) in Canada unless
such shares are qualified by prospectus filed in accordance with the applicable
provincial Securities Acts or an exemption from the registration requirements of
such provincial Securities Acts is available.
ARTICLE 15
NOTICES
15.1 Any notice, request or other communication to be given to the
Corporation or to Merge by a holder of Exchangeable Shares shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
telecopy or by delivery to the registered office of the Corporation or, in the
case of a notice, request or communication to Merge, to Merge's principal office
and addressed to the attention of the President. Any such notice, request or
other communication, if given by mail, telecopy or delivery, shall only be
deemed to have been given and received upon actual receipt thereof by the
Corporation or Merge as the case may be.
15.2 Any presentation and surrender by a holder of Exchangeable Shares
to the Corporation of certificates representing Exchangeable Shares in
connection with the liquidation, dissolution or winding up of the Corporation,
or the retraction, redemption or purchase for cancellation of Exchangeable
Shares, shall be made by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation addressed to the attention of the President
of the Corporation. Any such presentation and surrender of certificates shall
only be deemed to have been made and to be effective upon actual receipt thereof
by the Corporation. Any such presentation and surrender of certificates made by
registered mail shall be at the sole risk of the holder mailing the same.
15.3 Any notice, request or other communication to be given or sent to
a holder of Exchangeable Shares by or on behalf of the Corporation shall be in
writing and shall be valid and effective if given by mail (postage prepaid), or
by delivery, to the address of the holder recorded in the securities register of
the Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the third Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
the Corporation pursuant thereto.
ARTICLE 16
AGREEMENT TO SHARE EXCHANGE AGREEMENT
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16.1 By accepting and holding the certificate or certificates
representing the Exchangeable Shares, such holder of Exchangeable Shares shall
be deemed to have agreed to be bound by the Share Exchange Agreement as if such
holder were a party thereto.
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APPENDIX 1
NOTICE OF RETRACTION
To the Corporation and Merge Technologies Incorporated:
This notice is given pursuant to Article 6 of the Exchangeable Share
Provisions (the "Share Provisions") attaching to the share(s) represented by
this certificate and all capitalized words and expressions used in this notice
which are defined in the Share Provisions have the meanings ascribed to such
words and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 6 of the Share Provisions:
/ / all share(s) represented by this certificate; or
/ / share(s) only.
The undersigned hereby notifies the Corporation that the Retraction
Date shall be_____________.
NOTE: The Retraction Date must be a Business Day and must not be less
than 10 Business Days nor more than 15 Business Days after the date
upon which this notice is received by the Corporation. In the event
that no such Business Day is specified above, the Retraction Date shall
be deemed to be the tenth Business Day after the date on which this
notice is received by the Corporation.
The undersigned acknowledges the Retraction Call Right of Merge or its
Designee to purchase all but not less than all the Retracted Shares from the
undersigned and that the giving of this notice to Merge shall be deemed to be a
revocable offer by the undersigned to sell the Retracted Shares to Merge or its
Designee in accordance with the Retraction Call Right on the Retraction Date for
the Retraction Price or Cash Retraction Price, as applicable, and on the other
terms and conditions set out in Section 6.3 of the Share Provisions. If Merge
determines not to exercise the Retraction Call Right, the Corporation will
notify the undersigned of such fact as soon as possible. This notice of
retraction and offer to sell the Retracted Shares to Merge or its Designee may
be revoked and withdrawn by the undersigned by notice in writing given to the
Corporation at any time before the close of business on the Business Day
immediately preceding the Retraction Date. If this Notice of Retraction has not
been revoked and withdrawn by the undersigned by such time, the undersigned
shall be deemed to have agreed to sell the Retracted Shares to Merge or its
Designee in accordance with the Retraction Call Right.
The undersigned acknowledges that if, as a result of solvency
provisions of applicable law, the Corporation is not permitted to redeem all
Retracted Shares, the undersigned will be deemed to have exercised the Exchange
Right (as defined in the Share Exchange Agreement) so as to require
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Merge or its Designee to purchase the unredeemed Retracted Shares in accordance
with the provisions of the Share Exchange Agreement.
The undersigned hereby represents and warrants to the Corporation,
Merge and its Designee that the undersigned has good title to, and owns, the
share(s) represented by this certificate to be acquired by the Corporation,
Merge or its Designee, as the case may be, free and clear of all liens, claims
and encumbrances.
- --------------------------------
(Date)
- --------------------------------
(Signature of Shareholder)
Address of Shareholder:
- -----------------------
- -----------------------
- -----------------------
- -----------------------
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining shares
of the Corporation will be issued and registered in the name of the shareholder
as it appears on the register of the Corporation.
613075
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EXHIBIT A
SHARE EXCHANGE AGREEMENT
ATTACHED
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SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT (the "Agreement") dated as of September
3, 1999, by and between Merge Technologies Incorporated, a Wisconsin
corporation ("Merge") and Interpra Medical Imaging Network Ltd., an Ontario
corporation (the "Corporation").
RECITALS
A. Merge, 3032854 Nova Scotia Company ("Holdings") and the
Corporation have entered into a Purchase Agreement dated as of September 1, 1999
(the "Purchase Agreement"), pursuant to which, among other transactions, each
shareholder of the Corporation (each, a "Holder," collectively, the "Holders")
shall be issued Exchangeable Non Voting Shares of the Corporation's capital
stock (the "Exchangeable Shares").
B. The Exchangeable Shares are exchangeable into shares of common
stock of Merge, $0.01 par value per share (the "Merge Common Shares"), and shall
otherwise have the rights set forth in the Provisions Attaching to Exchangeable
Shares.
C. As a material inducement to the Corporation to consummate the
transactions contemplated by the Purchase Agreement, Merge and the Corporation
desire to provide for the terms of the exchange of the Exchangeable Shares for
the Merge Common Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties agree as follows:
ARTICLE 1
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE ON LIQUIDATION OF MERGE
1.1 Exchange Right
1.1.1. Merge agrees that subject to compliance with the provisions
of the Act and applicable securities laws and the exercise by Merge or its
Designee of the Retraction Call Right (as defined in the Provisions Attaching to
Exchangeable Shares) and otherwise in compliance with the provisions of Article
6 of the Provisions Attaching to Exchangeable Shares, each Holder of
Exchangeable Shares shall be entitled:
(a) at any time through and including August 31, 2004 during
which, as described in Section 1.3 of this Agreement, the Corporation
is not permitted to redeem all Retracted Shares as described in Section
1.3 of this Agreement, to require Merge or its Designee to
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exchange any or all of the Exchangeable Shares registered in the name
of the Holder (the "Exchange Right") for the Exchangeable Share Price
per Exchangeable Share to be paid in the form of the Exchangeable
Share Consideration (the "Exchange Price"); and
(b) at any time between September 1, 2004 and October 1, 2004
during which, as described in Section 1.3 of this Agreement, the
Corporation is not permitted to redeem all Retracted Shares, to require
Merge or its Designee to exchange any or all of the Exchangeable Shares
registered in the name of the Holder (the "Cash Exchange Right") for
the price of U.S. $4.50 per Exchangeable Share, to be paid in cash (the
"Cash Exchange Price").
1.1.2 If any Holder wishes to exercise his Exchange Right or Cash
Exchange Right, as applicable, in respect of all or any of the Exchangeable
Shares registered in his name, he shall deliver to Merge, in person or by
certified or registered mail, at its principal office (attention: Chief
Financial Officer), or at such other place as may be specified by Merge from
time to time, the Holder Deliveries, and the Retraction Request will constitute
and will be deemed to constitute notice from such Holder to Merge that such
Holder is exercising the Exchange Right with respect to those Retracted Shares
which the Corporation is not permitted to redeem, except that the Retraction
Date shall be deemed to be the "Exchange Date."
1.1.3 Subject to compliance with the provisions of Section 5.9,
on the Exchange Date, Merge or its Designee shall pay or cause to be paid to the
applicable Holder, the Exchange Price or Cash Exchange Price, as applicable, for
each Exchangeable Share surrendered on this Exchange Date for exchange pursuant
to Section 1.1.2. Payment of the total Exchange Price or Cash Exchange Price, as
applicable, for such Exchangeable Shares shall be made by delivery to such
Holder at the registered office of Merge or at such other location as may be
specified by Merge by notice to such Holder of the Exchangeable Share
Consideration (less any Merge Common Shares withheld by Merge or its Designee in
respect of Taxes). As of and with effect from the Exchange Date, such Holder
shall cease to be the holder of such Exchangeable Shares and, subject to Section
5.1 hereof, shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the Exchange Price or Cash
Exchange Price, as applicable, unless payment of the total Exchange Price or
Cash Exchange Price, as applicable, for such Exchangeable Shares shall not be
made in accordance with this provision, in which case the rights of such Holder
shall remain unaffected to the extent payment of the Exchange Price or Cash
Exchange Price, as applicable, has not been made, until the Exchange Price or
Cash Exchange Price, as applicable, has been fully paid in the manner
hereinbefore provided. Upon such payment or deposit of the Exchange Price or
Cash Exchange Price, as applicable, such Holder shall thereafter be considered
and deemed for all purposes to be the holder of the Merge Common Shares
delivered to him.
1.2 Automatic Exchange on Liquidation of Merge.
1.2.1 Merge shall give each Holder notice of each of the
following events at the time set forth below:
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(a) in the event of any determination by the Board of Directors
of Merge to institute voluntary liquidation, dissolution or winding up
proceedings with respect to Merge or to effect any other distribution
of assets of Merge among its shareholders for the purpose of winding up
its affairs, at least 15 days prior to the proposed effective date of
such liquidation, dissolution or winding up or other distribution; and
(b) immediately, upon the earlier of (i) receipt by Merge of
notice of, or (ii) Merge otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or distribution of assets of
Merge among its shareholders for the purpose of winding up its affairs.
1.2.2 In order to enable each Holder to participate in the
distribution of assets of Merge in connection with any of the events set forth
in Section 1.2.1(a) or 1.2.1(b) above (a "Liquidation Event"), on the fifth
Business Day (the "Automatic Exchange Date") prior to the date on which Merge
shall be liquidated all of the then outstanding Exchangeable Shares shall be
automatically exchanged for Merge Common Shares (the "Automatic Exchange"). To
effect the Automatic Exchange, Merge or its Designee shall purchase each
Exchangeable Share outstanding on the Automatic Exchange Date held by each
Holder, and each Holder shall sell all Exchangeable Shares at such time, for a
purchase price per share (the "Liquidation Amount") equal to the Exchangeable
Share Price on the last Business Day prior to the Automatic Exchange Date (less
any Taxes or U.S. Taxes).
1.2.3 On the Automatic Exchange Date, Merge or its Designee shall
pay or cause to be paid to each Holder, the Liquidation Amount for each
Exchangeable Share upon presentation and surrender at the registered office of
Merge (attention: Chief Financial Officer), or at such other place as may be
specified by Merge from time to time, of the Holder Deliveries. Payment of the
total Liquidation Amount for such Exchangeable Shares shall be made by delivery
to the applicable Holder of the Exchangeable Share Consideration (less any Merge
Common Shares withheld by Merge or its Designee in respect of Taxes). As of and
with effect from the Automatic Exchange Date, each Holder shall cease to be the
holder of the Exchangeable Shares exchanged on such date and, shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive his total Liquidation Amount, unless payment of his
total Liquidation Amount shall not be made upon presentation and surrender of
the share certificates representing such Exchangeable Shares in accordance with
the foregoing provisions, in which case the rights of such Holder shall remain
unaffected to the extent payment of his total Liquidation Amount has not been
made, until his total Liquidation Amount has been fully paid in the manner
hereinbefore provided. Merge or its Designee shall have the right to deposit or
cause to be deposited in a custodial account with any chartered bank or trust
company in Canada (the "Liquidation Amount Depositary"), the Liquidation Amount
in respect of the Exchangeable Shares represented by certificates that have not
been surrendered on the Automatic Exchange Date. Immediately upon making such
deposit, Merge shall give notice thereof to such Holder. The Exchangeable Shares
in respect of which such deposit shall have been made shall be deemed to be
exchanged as of the date of such deposit and, subject to Section 5.1 hereof, the
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rights of such Holder with respect to such Exchangeable Shares shall thereafter
be limited to the right to receive the Liquidation Amount deposited against
presentation and surrender of the certificates representing such Exchangeable
Shares to the Liquidation Amount Depositary. Upon such payment or deposit of the
Liquidation Amount, such Holder shall thereafter be considered and deemed for
all purposes to be the holder of the Merge Common Shares either (i) delivered to
him, or (ii) deposited with the Liquidation Amount Depositary.
1.3 Exercise of Exchange Right Subsequent to Retraction. If a
Holder has exercised his right under Article 6 of the Provisions Attaching to
Exchangeable Shares of the Corporation to require the Corporation to redeem any
or all of the Exchangeable Shares held by such Holder (the "Retracted Shares"),
provided that Merge or its Designee shall not have exercised the Retraction Call
Right (as hereinafter defined) with respect to the Retracted Shares, and such
Holder is notified by the Corporation pursuant to Section 6.6 of the Provisions
Attaching to Exchangeable Shares that the Corporation will not be permitted as a
result of solvency requirements or other provisions of applicable law, including
securities laws, to redeem all such Retracted Shares, the Corporation hereby
agrees to immediately notify Merge of such prohibition against the Corporation
redeeming all of the Retracted Shares and to immediately forward or cause to be
forwarded to Merge all relevant materials delivered by such Holder to the
Corporation (including, without limitation, a copy of the Retraction Request
delivered pursuant to Section 6.1 of the Provisions Attaching to Exchangeable
Shares) in connection with such requested retraction of the Retracted Shares. In
any such event, the Retraction Request will constitute and will be deemed to
constitute notice from such Holder to Merge that such Holder is exercising the
Exchange Right with respect to those Retracted Shares which the Corporation is
not permitted to redeem, and subject to compliance with applicable securities
laws, Merge or its Designee agrees to purchase such Retracted Shares in
accordance with the provisions of Section 1.1.3.
ARTICLE 2
PURCHASE BY MERGE OR ITS DESIGNEE
2.1 Purchase of Shares. Subject to Section 2.2.1 hereof, on the
Purchase Date Merge or its Designee shall purchase all of the then outstanding
Exchangeable Shares (the "Purchase Right") for an amount per share (the
"Purchase Price") equal to the Exchangeable Share Price on the last Business Day
prior to the Purchase Date, which amount shall be paid in the form of the
Exchangeable Share Consideration (less any Taxes or U.S. Taxes).
2.2 Purchase Procedure.
2.2.1 Thirty days prior to September 30, 2004, Merge or its
Designee shall send or cause to be sent to each Holder and the Corporation a
notice in writing setting forth whether Merge or its Designee has elected, in
its sole discretion, to (i) purchase the then outstanding Exchangeable Shares on
the Purchase Date pursuant to this Article 2, or (ii) cause the Corporation to
redeem such Exchangeable Shares on the Purchase Date pursuant to Article 7 of
the Provisions Attaching to
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Exchangeable Shares. In the event Merge or its Designee shall have elected to
purchase such Exchangeable Shares pursuant to this Article 2, such notice shall
set out the Purchase Price. In the event Merge or its Designee shall have
elected to cause the Corporation to redeem such Exchangeable Shares, such notice
shall contain instructions for the Corporation to take all steps necessary to
redeem the Exchangeable Shares on the Purchase Date and the Corporation shall,
unless prohibited by law, redeem such Exchangeable Shares in accordance with
such instructions and the provisions of Article 7 of the Provisions Attaching to
Exchangeable Shares. If the Corporation is prohibited by law from so redeeming
such Exchangeable Shares, it shall forthwith notify Merge in writing thereof and
Merge or its Designee shall purchase the then outstanding Exchangeable Shares on
the Purchase Date pursuant to this Article 2.
2.2.2 Subject to Section 2.2.1 hereof, on the Purchase Date Merge
or its Designee shall pay or cause to be paid to each Holder the Purchase Price
for each Exchangeable Share upon presentation and surrender at the registered
office of Merge (attention: Chief Financial Officer), or at such other place as
may be specified by Merge from time to time, of the Holder Deliveries. Payment
of the total Purchase Price for such Exchangeable Shares shall be made by
delivery to the applicable Holder at the registered office of Merge or at such
other location as may be specified by Merge by notice to each Holder of the
Exchangeable Share Consideration (less any Merge Common Shares withheld by Merge
or its Designee in respect of Taxes, and, less any Taxes or U.S. Taxes). As of
and with effect from the Purchase Date, each Holder shall cease to be the holder
of such Exchangeable Shares and, subject to Section 5.1 hereof, shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive the Purchase Price, unless payment of the total
Purchase Price for such Exchangeable Shares shall not be made upon presentation
and surrender of share certificates representing such Exchangeable Shares in
accordance with the foregoing provisions, in which case the rights of such
Holder shall remain unaffected to the extent payment of the Purchase Price has
not been made until the Purchase Price has been fully paid in the manner
hereinbefore provided. Merge or its Designee shall have the right, on or after
the Purchase Date, to deposit or cause to be deposited in a custodial account
with any chartered bank or trust company in Canada (the "Purchase Price
Depositary") the Purchase Price in respect of the Exchangeable Shares
represented by certificates that have not at the date of such deposit been
surrendered by such Holder in connection with the Purchase; provided that, in
the event of an acceleration of the Purchase Date pursuant to clause (i) of the
last sentence of the definition of "Purchase Date", Merge or its Designee shall
be required to make such deposit, if any, on the Purchase Date. Immediately upon
making such deposit, Merge or its Designee shall give notice thereof to such
Holder. The Exchangeable Shares in respect of which such deposit shall have been
made shall be deemed to be exchanged as of the date of such deposit and, subject
to Section 5.1 hereof, such Holder's rights with respect to such Exchangeable
Shares shall thereafter be limited to the right to receive the Purchase Price so
deposited against presentation and surrender of the certificates representing
such Exchangeable Shares to the Purchase Price Depositary. Upon such payment or
deposit of the Purchase Price, such Holder shall thereafter be considered and
deemed for all purposes to be the holder of the Merge Common Shares either (i)
delivered to him, or (ii) deposited with the Purchase Price Depositary.
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ARTICLE 3
DISTRIBUTION ON LIQUIDATION OF THE CORPORATION
3.1 Liquidation Call Right. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, Merge or its Designee
shall have the overriding right (the "Liquidation Call Right") to purchase all,
but not less than all, of the Exchangeable Shares from each Holder for an amount
per share (the "Liquidation Call Price") equal to the Exchangeable Share Price
on the last Business Day prior to the date on which the Corporation's assets
shall be distributed to its shareholders in connection with such liquidation,
dissolution or winding up (the "Liquidation Date"), which amount shall be
satisfied in full by Merge or its Designee causing to be delivered to each
Holder the Exchangeable Share Consideration (less any Taxes or U.S. Taxes).
3.2 Exercise of Liquidation Call Right. To exercise the Liquidation
Call Right, Merge shall notify each Holder and the Corporation of Merge or its
Designee's intention to exercise the Liquidation Call Right (a) in the case of a
voluntary liquidation, dissolution or winding up of the Corporation, at least 15
days before the Liquidation Date, and (b) in the case of an involuntary
liquidation, dissolution or winding up of the Corporation at least five Business
Days before the Liquidation Date . If Merge or its Designee exercises the
Liquidation Call Right, on the Liquidation Date Merge or its Designee will
purchase, and each Holder will sell, all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation Call Price.
3.3 Procedure For Payment of Liquidation Call Price. In the event
Merge or its Designee has exercised the Liquidation Call Right as provided
herein, then on or after the Liquidation Date, Merge or its Designee shall pay
or cause to be paid to each Holder the Liquidation Call Price for each
Exchangeable Share upon presentation and surrender at the registered office of
Merge (attention: Chief Financial Officer), or at such other place as may be
specified by Merge from time to time, of the Holder Deliveries. Payment of the
total Liquidation Call Price for such Exchangeable Shares shall be made by
delivery to the applicable Holder at the address of the such Holder at the
registered office of Merge or at such other location as may be specified by
Merge by notice to such Holder of the Exchangeable Share Consideration (less any
Merge Common Shares withheld by Merge or its Designee in respect of Taxes). In
the event Merge or its Designee has exercised the Liquidation Call Right as
provided herein, then as of and with effect from the Liquidation Date, each
Holder shall cease to be a holder of such Exchangeable Shares and shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive the Liquidation Call Price with respect to each
Exchangeable Share held by him on the Liquidation Date, unless payment of the
total Liquidation Call Price for such Exchangeable Shares shall not be made upon
presentation and, subject to Section 5.1 hereof, surrender of the share
certificates representing such Exchangeable Shares in accordance with the
foregoing provisions, in which case the rights of each Holder shall remain
unaffected to the extent payment of the Liquidation Call Price has not been made
until the Liquidation Call Price has been fully paid in the manner hereinbefore
provided. Merge or its Designee shall have
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the right to deposit or cause to be deposited in a custodial account with any
chartered bank or trust company in Canada (the "Liquidation Call Price
Depositary") the Liquidation Call Price in respect of the Exchangeable Shares
represented by certificates that have not at the date of such deposit been
surrendered by a Holder in connection with the exercise by Merge or its Designee
of the Liquidation Call Right. Immediately upon making such deposit, Merge or
its Designee shall give notice thereof to such Holder. The Exchangeable Shares
in respect of which such deposit shall have been made shall be deemed to be
exchanged on the date of such deposit and, subject to Section 5.1 hereof, such
Holder's rights with respect to such Exchangeable Shares shall thereafter be
limited to the right to receive the Liquidation Call Price so deposited against
presentation and surrender of the certificates representing such Exchangeable
Shares to the Liquidation Call Price Depositary. Upon such payment or deposit of
the Liquidation Call Price, such Holder shall thereafter be considered and
deemed for all purposes to be the holder of the Merge Common Shares either (i)
delivered to him, or (ii) deposited with the Liquidation Call Price Depositary.
ARTICLE 4
EXERCISE OF THE RETRACTION CALL RIGHT
4.1 Retraction. In the event that a Holder has exercised such Holder's
right under Article 6 of the Provisions Attaching to Exchangeable Shares to
require the Corporation to redeem any or all of the Exchangeable Shares held by
him (the "Retraction Right"), Merge or its Designee shall have the overriding
right (the "Retraction Call Right") to purchase all, but not less than all, of
such Exchangeable Shares from such Holder for the Exchange Price or Cash
Exchange Price, as applicable (the "Retraction Call Price").
4.2 Exercise of Retraction Call Right. To exercise the Retraction Call
Right, Merge or its Designee shall notify the applicable Holder and the
Corporation in writing of Merge's or its Designee's intention to exercise such
right within five Business Days after Merge has been notified by the Corporation
that such Holder has exercised the Retraction Right. If Merge or its Designee
exercises the Retraction Call Right, on the Retraction Date Merge or its
Designee will purchase, and such Holder will sell, such Exchangeable Shares for
a price per share equal to the Retraction Call Price.
4.3 Procedure For Payment of Retraction Call Price. In the event that
Merge or its Designee has exercised the Retraction Call Right with respect to
any Exchangeable Shares as provided herein, then, on or after the Retraction
Date, Merge or its Designee shall pay or cause to be paid to the applicable
Holder the Retraction Call Price for each such Exchangeable Share upon
presentation and surrender at the registered office of Merge (attention: Chief
Financial Officer), or at such other place as may be specified by Merge from
time to time, the Holder Deliveries. Payment of the total Retraction Call Price
for such Exchangeable Shares shall be made by delivery to such Holder at the
registered office of Merge or at such other location as may be specified by
Merge by notice to such Holder of the Exchange Price or Cash Exchange Price, as
applicable. In the event
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Merge or its Designee has exercised the Retraction Call Right as provided
herein, then as of and with effect from the Retraction Date such Holder shall
cease to be a holder of such Exchangeable Shares with respect to which Merge or
its Designee has exercised the Retraction Call Right and, subject to Section 5.1
hereof, shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the Retraction Call Price with
respect to each such Exchangeable Share, unless payment of the total Retraction
Call Price for such Exchangeable Shares shall not have been made upon
presentation and surrender of the share certificates representing such
Exchangeable Shares in accordance with the foregoing provisions, in which case
such Holder's rights shall remain unaffected to the extent the Retraction Call
Price has not been paid until the Retraction Call Price has been fully paid in
the manner hereinbefore provided. Merge or its Designee shall have the right to
deposit or cause to be deposited in a custodial account with any chartered bank
or trust company in Canada (the "Retraction Call Price Depositary") the
Retraction Call Price in respect of the Exchangeable Shares represented by
certificates that have not at the date of such deposit been surrendered by such
Holder in connection with the exercise by Merge or its Designee of the
Retraction Call Right. Immediately upon making such deposit, Merge or its
Designee shall give notice thereof to such Holder. The Exchangeable Shares in
respect of which such deposit has been made shall be deemed to be exchanged as
of the date of such deposit and, subject to Section 5.1 hereof, such Holder's
rights with respect to such Exchangeable Shares shall thereafter be limited to
the right to receive the Retraction Call Price so deposited against presentation
and surrender of the certificates representing such Exchangeable Shares to the
Retraction Call Right Depositary. Upon such payment or deposit of the Retraction
Call Price, such Holder shall thereafter be considered and deemed for all
purposes to be the holder of the Merge Common Shares either (i) delivered to
him, or (ii) deposited with the Retraction Call Price Depositary.
ARTICLE 5
COVENANTS OF MERGE, CORPORATION AND HOLDER
5.1 Right to Dividends. There shall be no payment or adjustment by
Merge, its Designee, if applicable, the Corporation or any Holder on account of
any dividends on any Exchangeable Shares on a Share Exchange in respect of the
Exchangeable Shares exchanged on such occasion. Dividends payable on any such
Exchangeable Shares for which the record date has occurred prior to the date of
exchange or deemed exchange with respect to such Exchangeable Shares shall be
paid by the Corporation, even if the distribution date with respect to such
dividends occurs after such date of exchange or deemed exchange; provided,
however, that, if Merge or its Designee shall have exercised the Liquidation
Call Right and the Liquidation Date occurs after the record date with respect to
such dividends, but prior to the distribution date with respect thereto, each
Holder shall be treated with respect to each Exchangeable Share to be purchased
by Merge or its Designee on the Liquidation Date pursuant to Article 3 hereof,
as if he had been a holder of the Specified Number of Merge Common Shares on
such record date and shall be deemed to have assigned to Merge or its Designee
all rights against the Corporation with respect to such dividends.
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5.2 Stamp or Other Transfer Taxes. Each Holder shall be solely
responsible for the payment of any stamp, documentary, transfer or other like
taxes or charges that may be payable to any governmental body or agency in
respect of the disposition by such Holder to Merge or its Designee of
Exchangeable Shares or the issuance of Merge Common Shares to such Holder
pursuant to a Share Exchange and for any Taxes which must be deducted or
withheld by Merge or its Designee by reason of such Holder being a non resident
of Canada within the meaning of the Income Tax Act (Canada) or otherwise. Except
as aforesaid and as otherwise provided in this Agreement, exchanges of
Exchangeable Shares shall be effected at no cost to the applicable Holder.
5.3 Fractional Shares. Merge or its Designee shall not be required to
deliver fractional Merge Common Shares upon any Share Exchange, but in lieu
thereof shall pay an amount in cash equal to the same fraction of the Current
Market Price of one Merge Common Share at the effective date of the Share
Exchange.
5.4 Issuance of New Certificates. Subject to compliance with the
provisions of Section 5.9, Merge or its Designee shall deliver or cause to be
delivered to the applicable Holder, one or more certificates representing the
Exchangeable Shares in respect of which the Exchange Right, Cash Exchange Right
or the Retraction Right, as the case may be, was not exercised by such Holder
but which were evidenced by the certificate or certificates delivered to Merge
or its Designee pursuant to Section 1.1.2 or 4.3 hereof.
5.5 Merge Shares.
(a) Merge hereby represents, warrants and covenants that it shall
keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock, a number of Merge Common Shares
equal to the maximum number of Merge Common Shares which may be
issuable from time to time to the Holders upon a Share Exchange.
(b) Whenever Merge or its Designee is required to deliver Merge
Common Shares pursuant to this Agreement, such shares shall be duly
delivered as fully paid and nonassessable and free and clear of any
lien, claim and encumbrance, other than any restriction on transfer
imposed by Section 5.6 hereof and applicable securities laws.
5.6 Restrictions on Transfers of Merge Shares.
(a) As long as a Holder is a director, officer or employee of
Merge or the Corporation or any of their respective subsidiaries, such
Holder shall comply with all Merge policies in force from time to time
concerning the purchase and sale of securities of Merge by directors,
officers or employees of Merge and its subsidiaries to the extent such
policies are applicable to such Holder pursuant to its terms.
(b) The Merge Common Shares (whether acquired pursuant to this
Agreement or otherwise) have not been registered under the U.S.
Securities Act or the Ontario Securities
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Act, and may not be sold, transferred or otherwise disposed: (i) in the
United States or to a U.S. Person unless such shares are registered
under the Securities Act, or an exemption from the registration
requirements of the Securities Act is available; (ii) unless made in
conformity with Rule 144 promulgated by the SEC under the Securities
Act; or (iii) in Canada unless such shares are qualified by prospectus
filed in accordance with the applicable provincial Securities Acts or
an exemption from the prospectus requirements of such provincial
Securities Acts is available. In no event shall any sale, transfer or
other disposition of the Merge Common Shares be permitted in violation
of (i) the rules and regulations of the SEC promulgated under the
Securities Act, or (ii) the Ontario Securities Act and any provincial
securities laws and regulations. In addition, any such Holder who
intends to transfer Merge Common Shares shall use his best efforts not
to sell any such Merge Common Shares to a person (other than a person
who would be entitled to file a Schedule 13G under the U.S. Securities
Exchange Act of 1934, as amended (the "1934 Act"), with respect to such
sale) who would "beneficially own" (as such term is used in the
regulations promulgated pursuant to Section 13(d) of the 1934 Act),
after giving effect to the purchase of such Merge Common Shares, more
than 5% of the Merge Common Shares outstanding at such time.
5.7 Transfer Agent. Merge covenants that it will supply its transfer
agent with duly executed share certificates for the purpose of completing a
Share Exchange.
5.8 Corporation Liquidation. Merge covenants that prior to the
Purchase Date it will use its commercially reasonable best efforts to prevent
the liquidation, dissolution or winding up of the Corporation.
5.9 Non Resident of Canada at Time of Exchange. Notwithstanding the
provisions of any section of this Agreement, in the event that a Holder does not
represent and warrant that he is not a non resident of Canada within the meaning
of the Income Tax Act (Canada) when such Holder or Merge or its Designee is
entitled to exercise any exchange right hereunder or any such exchange occurs
automatically, such Holder shall provide to Merge or its Designee a certificate
pursuant to Section 116 of the Income Tax Act (Canada) or any successor
provision thereto (such certificate being hereinafter referred to as a
"Certificate") having a certificate limit that is not less than fair market
value of the Merge Common Shares which such Holder is entitled to receive upon
such exchange and otherwise conforming in all respects with the provisions of
section 116 of the Income Tax Act (Canada) or any successor provisions thereto.
If such Holder does not provide such Certificate to Merge or its Designee on or
before the date on which the exchange is to occur, Merge or its Designee shall
be entitled to hold back Merge Common Shares having a fair market value equal to
the amount of any Taxes that Merge or its Designee would be required to pay on
behalf of such Holder pursuant to Section 116 of the Income Tax Act (Canada) or
any successor thereto. Merge or its Designee shall be entitled to sell such
Merge Common Shares and to remit the sale price to Revenue Canada on account of
any such Taxes within such time (determined by Merge or its Designee acting
reasonably) as will enable it to comply with the requirements of subsection
116(5) of the Income Tax Act (Canada) or any successor thereto in the event that
such Holder fails to provide such Certificate before such time and such Holder
hereby appoints Merge or its Designee as
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his lawful attorney with full and irrevocable power and authority to execute all
agreements, documents and instruments and to take such other action as may be
required to effect such sale. If such Holder provides such Certificate before
such time, Merge or its Designee shall release to such Holder any Merge Common
Shares so held back or the proceeds from a sale thereof if not remitted to
Revenue Canada.
5.10 Reincorporation of Merge. The parties hereto agree that, in the
event Merge ceases to be a Wisconsin corporation and is reincorporated in
another jurisdiction, the parties hereto shall amend or modify, or cause, or
consent to, the amendment or modification of, such Transaction Documents, and
enter into such additional agreements and execute, or cause the execution of,
such additional documents, as may be required to provide the parties hereto with
substantially the same rights and obligations and economic benefits under the
laws of such jurisdiction of reincorporation.
ARTICLE 6
SUCCESSORS AND ASSIGNS
6.1 Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the respective transferees and
assigns (if the transfer or assignment of this Agreement is permitted
hereunder), or the successors, executors, administrators and legal
representatives of the parties hereto, provided, however, that this Agreement
may not be assigned by the parties hereto in whole or in part except as
otherwise expressly provided herein.
6.2 Merge Successors. Merge shall not enter into any transaction
(whether by way of restructuring, reorganization, consolidation, merger,
transfer, sale, lease or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any other person
or, in the case of a merger, of the continuing corporation resulting therefrom
unless:
(a) (i) such other person or continuing corporation (the "Merge
Successor"), by operation of law, becomes automatically bound by the
terms and provisions of this Agreement, or (ii) if the Merge Successor
does not become so bound, the Merge Successor executes, prior to or
contemporaneously with the consummation of such transaction, an
agreement supplemental hereto and such other instruments (if any) as
are satisfactory to the Majority Holders and, in the opinion of legal
counsel to the Majority Holders, are necessary or advisable to evidence
the assumption by the Merge Successor of the liability for all moneys
payable and property deliverable hereunder and the covenant of such
Merge Successor to pay and deliver or cause to be delivered the same
and its agreement to observe and perform all the covenants and
obligations under this Agreement; and
(b) such transaction shall, to the satisfaction of the Majority
Holders and in the opinion of such legal counsel, be upon such terms as
are required to substantially preserve and
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not to impair in any material respect any of the rights, duties, powers
and authorities of the Majority Holders hereunder.
ARTICLE 7
TERMINATION
7.1 Term. This Agreement shall continue until the earliest to occur of
the following events:
(a) no outstanding Exchangeable Shares are held by any Holder,
and
(b) the execution of an instrument in writing terminating this
Agreement, signed by duly authorized officers or representatives of
Merge and the Corporation and by each Holder.
ARTICLE 8
DEFINITION AND MISCELLANEOUS
8.1 Definitions of Certain Terms. As used herein, the following terms
shall have the following meanings (and any capitalized terms not otherwise
defined herein shall have the meanings given them in the Provisions Attaching to
Exchangeable Shares).
"1934 Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Agreement" is defined in the first paragraph hereof.
"Automatic Exchange" is defined in Section 1.2.2.
"Automatic Exchange Date" is defined in Section 1.2.2.
"Cash Exchange Price" is defined in Section 1.1.1.
"Cash Exchange Right" is defined in Section 1.1.1.
"Certificate" is defined in Section 5.9.
"Corporation" is defined in the first paragraph hereof.
"Designee" means a Subsidiary or Affiliate of Merge.
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"Exchange Date" is defined in Section 1.1.2.
"Exchange Price" is defined in Section 1.1.1.
"Exchange Right" is defined in Section 1.1.1.
"Exchangeable Shares" is defined in the Recitals to this Agreement.
"Holder" is defined in the Recitals to this Agreement.
"Holder Deliveries" means, with respect to any exercise of the Exchange
Right, the Cash Exchange Right, the Automatic Exchange, a Purchase, the
Liquidation Call Right or the Retraction Call Right, the certificates
representing the Exchangeable Shares subject to such exercise, together with one
or more stock transfer powers endorsed in blank by the applicable Holder and
containing a representation and warranty by such Holder that such Holder is not
a non resident of Canada within the meaning of the Income Tax Act (Canada). If
such Holder does not so represent and warrant, the provisions of Section 5.9
shall apply.
"Liquidation Amount" is defined in Section 1.2.2.
"Liquidation Amount Depositary" is defined in Sect ion 1.2.3.
"Liquidation Call Price" is defined in Section 3.1.
"Liquidation Call Price Depositary" is defined in Section3.3.
"Liquidation Call Right" is defined in Section 3.1.
"Liquidation Date " is defined in Section 3.1.
"Liquidation Event" is defined in Section 1.2.2.
"Majority Holders" means at any time the Holders of more than 50% of
the Exchangeable Shares issued and outstanding at such time.
"Merge" is defined in the first paragraph hereof.
"Merge Common Shares" is defined in the Recitals to this Agreement.
"Merge Successor" is defined in Section 6.2.
"Person" means an individual, a corporation, partnership, trust, any
other entity and any group (which term includes a "group" as defined in
Section13(d)(3) of the 1934 Act).
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"Provisions Attaching to Exchangeable Shares" is defined in the
Purchase Agreement.
"Purchase Agreement" has the meaning ascribed thereto in the second
paragraph hereof.
"Purchase Date" means September 30, 2004.
"Purchase Price" is defined in Section 2.1.
"Purchase Price Depositary" is defined in Section 2.2.2.
"Purchase Right" is defined in Section 2.1.
"Retracted Shares" is defined in Section 1.3.
"Retraction Call Price" is defined in Section 4.1.
"Retraction Call Price Depositary" is defined in Section 4.3.
"Retraction Call Right" is defined in Section 4.1.
"Retraction Right" is defined in section 4.1.
"Share Exchange" means, with respect to any Exchangeable Share, the
acquisition by Merge or its Designee of such Exchangeable Share, whether
pursuant to exercise (i) by a Holder of the Exchange Right, the Automatic
Exchange, the Purchase Right, or (ii) by Merge or its Designee of the
Liquidation Call Right or the Retraction Call Right.
"Subsidiary" means any corporation, association, or other business
entity a majority (by number of votes on the election of directors) of the
shares of capital stock (or other voting interests) of which is owned, directly
or indirectly, by Merge.
"Taxes" means any taxes that Merge or its Designee may be required to
pay on behalf of, or withhold from, any person pursuant to the Income Tax Act
(Canada) or any successor thereto or pursuant to any applicable provincial tax
legislation.
"U.S. Taxes" means any U.S. dividend withholding taxes that are
required to be withheld.
"Transaction Documents" means this Agreement, the Provisions Attaching
to Exchangeable Shares, the Trust Agreement and the Support Agreement.
8.2 Amendments, Modifications, Etc. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed by duly authorized officers or representatives of
Merge and the Corporation and by the Majority Holders.
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8.3 Changes in Capital of Merge and the Corporation . At all times
after the occurrence of any event effected pursuant to Section 2.5 of the
Support Agreement or Article 11 of the Provisions Attaching to Exchangeable
Shares, as a result of which either the Merge Common Shares or the Exchangeable
Shares or both are in any way changed, this Agreement shall forthwith be amended
and modified as necessary in order that it shall apply with full force and
effect, mutatis mutandis, to all new securities into which the Merge Common
Shares or the Exchangeable Shares or both are so changed and the parties hereto
shall execute, in accordance with Section 8.2, such amendments, modifications
and supplement to this Agreement as are necessary to effect such changes.
8.4 No Waiver. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any party hereof or the right of such party thereafter to enforce
each and every such provision. No waiver of any breach of or non compliance with
this Agreement shall be held to be a waiver of any other or subsequent breach or
non compliance.
8.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Wisconsin (and the federal laws of
the United States applicable therein), without regard to their respective
conflict of law rules.
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8.6 Notices. All notices and other communications hereunder, and any
delivery by a Holder of certificate representing Exchangeable Share, shall be
made in accordance with Article 15 of the Provisions Attaching to Exchangeable
Shares.
8.7 Construction of Agreement. A reference to an Article or Section
shall mean an Article of or a Section in this Agreement unless otherwise
expressly stated. The titles and headings herein are for reference purposes only
and shall not in any manner limit the construction of this Agreement which shall
be considered as a whole. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words,"without
limitation."
8.8 Entire Agreement. This Agreement and the Transaction Documents (i)
constitute the entire agreement, and supersede all other prior agreements and
understandings, both written and oral between the parties with respect to the
subject matter hereof, and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder, except as otherwise
expressly provided herein or therein.
8.9 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity of any other provision of this
Agreement, each of which shall remain in full force and effect.
8.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same Agreement.
8.11 Proportionate Share of Amounts Paid. Notwithstanding any provision
in Sections 1.1.3, 1.2.3, 2.2.2, 3.3 or 4.3, pursuant to the exercise of the
Exchange Right, the Cash Exchange Right, the Automatic Exchange, a Purchase, the
Liquidation Call Right or the Retraction Call Right, each Holder shall be
entitled to receive only the Exchange Price, Cash Exchange Price, Liquidation
Amount, Purchase Price, Liquidation Call Price or the Retraction Call Price with
respect to such Holder's Exchangeable Shares, and not the total amount or price
with respect to all Exchangeable Shares subject to such exercise.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
MERGE TECHNOLOGIES INCORPORATED
By: /s/ William C. Mortimore
---------------------------
Name: William C. Mortimore
Title: President and Chief Executive Officer
INTERPRA MEDICAL IMAGING NETWORK LTD.
By: /s/ Stephen Herman
---------------------------
Title: President
613444
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our report dated February 3, 1999, relating to the consolidated
balance sheets of Merge Technologies Incorporated and subsidiary as of December
31, 1998 and 1997, and the related consolidated statements of operations,
shareholders' equity, cash flows, and comprehensive income for each of the years
in the three-year period ended December 31, 1998, and the related schedule,
which report appears in the December 31, 1998 annual report on Form 10-KSB of
Merge Technologies Incorporated and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG LLP
Chicago, Illinois
December 28, 1999
<PAGE> 1
Exhibit 23.2
December 30, 1999
Merge Technologies Incorporated
1126 South 70th Street, Suite 107B
Milwaukee, Wisconsin 53214-3151
Dear Sir or Madam:
We have acted as special counsel to Merge Technologies Incorporated
("Merge"), in connection with its registration statement on Form S-3 (the
"Registration Statement") being filed on or about the date of this letter with
the Securities and Exchange Commission relating to the proposed issuance of
shares of common stock, $0.01 par value (the "Shares"), of Merge pursuant to the
terms of the Purchase Agreement between Merge and 3032854 Nova Scotia Company,
dated September 1, 1999.
We hereby consent to the filing of our opinion attached as an exhibit
to the Registration Statement and to the use of our name under the heading
"Legal Opinions" in the Registration Statement and related prospectus.
Sincerely,
MICHAEL, BEST & FRIEDRICH LLP
/s/ Michael, Best & Friedrich LLP
