Issuer
Free Writing Prospectus dated November 12, 2009 relating to
the
Prospectus
dated November 5, 2009
Registration
No. 333-161691
November
12, 2009
The
information contained in this free writing prospectus supplements Merge
Healthcare Incorporated's (“Merge” or the “Company”) base prospectus dated
November 5, 2009 as set forth herein. The Company has offered up to
9,074,033 shares of common stock in a registered direct offering with select
institutional investors (the “Offering”).
The
Company estimates that the net proceeds from the sale of the common stock will
be approximately $25.2 million, assuming that the Company sells all of the
common stock offered. “Net proceeds” is what the Company expects to receive
after paying the placement agency fees and other expenses of the Offering
payable by the Company. The Company intends to use $18.1 million of
the net proceeds from the Offering to prepay in full its senior secured note due
June 2010 (the “Note”), which includes all amounts owed under the Note of $15.0
million and an additional amount $3.1 million payable as a result of the
prepayment of the Note. Per the terms of the Note, the Company
expects to record an additional $0.6 million non-cash charge related to
acceleration of costs previously being amortized over the life of the loan
resulting in a $3.7 million expense in the fourth quarter of 2009.
The Note
is held by Merrick RIS, LLC (“Merrick”) and bears interest at 13.0% per annum,
payable quarterly, and becomes payable in a single installment in June
2010. As a result of the prepayment, we are required to pay 118% of
the outstanding principal of the Note, together with accrued and unpaid
interest. The Company agreed to prepay the Note in exchange for
Merrick’s agreement to waive its piggyback registration rights with respect to
this offering and for Merrick’s and Michael W. Ferro, Jr.’s agreement not to
offer, sell, offer or agree to sell, grant any option to purchase or otherwise
dispose (or announce any offer, sale, grant of an option to purchase or other
disposition) of, directly or indirectly, any of the Company’s common stock (or
any securities convertible into, exercisable for or exchangeable or exercisable
for shares of Common Stock) prior to 90 days following the date of this
prospectus supplement, except for transfers (i) to Mr. Ferro’s spouse, relatives
or lineal descendants or ancestors, natural or adopted (collectively,
“Relatives”), provided that the transferee agrees in writing to be bound by the
terms of these restrictions, (ii) any trust, partnership or other entity for the
direct or indirect benefit of Mr. Ferro or the Relatives, (iii) transfers upon
the death of Mr. Ferro pursuant to the laws of descent and distribution or
pursuant to wills, (iv) gifts, provided that the transferee agrees in writing to
be bound by the terms of these restrictions, or (v) to the Company.
Merrick
RIS, LLC beneficially owns, as of September 30, 2009, 42.7% of the Company’s
outstanding common stock. Michael W. Ferro, Jr., the Company’s
Chairman of the Board, and trusts for the benefit of Mr. Ferro’s family members
beneficially own a majority of the equity interest in Merrick RIS,
LLC. Mr. Ferro also serves as the chairman and chief executive
officer of Merrick RIS, LLC. Accordingly, Mr. Ferro indirectly owns
or controls the Note and all of the shares of common stock owned by Merrick RIS,
LLC. In addition, Justin C. Dearborn, the Company’s Chief Executive
Officer and a Director, served as Managing Director and General Counsel of
Merrick Ventures, LLC, an affiliate of Merrick RIS, LLC, from January
2007 until his appointment as Chief Executive Officer of the Company on June 4,
2008.
The
Company intends to use the remaining net proceeds from the Offering for general
corporate purposes, including working capital.
This free
writing prospectus should be read together with the prospectus dated
November 5, 2009 (the “Prospectus”) included in the Company’s Registration
Statement on Form S-3 (Registration No. 333-161691) relating to
the common stock of the Company. The information set forth above supplements the
information contained in the Prospectus.
The
issuer has filed a registration statement (including the Prospectus)
(Registration No. 333-161691) with the SEC for the Offering to which this
communication relates. A prospectus supplement related to the
Offering will also be filed with the Securities and Exchange
Commission. Before you invest, you should read the Prospectus in that
registration statement and the prospectus supplement and other documents the
issuer has filed or will file with the SEC for more complete information about
the issuer and the Offering. You may get these documents for free by visiting
EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer
will arrange to send you these documents if you request them by calling (414)
977-4067.
Any
disclaimers or other notices that may appear below are not applicable to this
communication and should be disregarded. Such disclaimers were automatically
generated as a result of this communication being sent via email or another
communication system.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This free
writing prospectus contains “forward-looking statements.” These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as “may,” “will,” “intends,”
“plans,” “believes,” “anticipates,” “expects,” “estimates,” “predicts,”
“potential,” “continue,” “likely,” “unlikely” or “opportunity,” the negative of
these words or words of similar import. Similarly, statements that describe the
Company’s future plans, strategies, intentions, expectations, objectives, goals
or prospects are also forward-looking statements. Discussions containing these
forward-looking statements may be found, among other places, in the “Business”
and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” sections incorporated by reference from the Company’s most recent
Annual Report on Form 10-K, as well as any amendments thereto reflected in
subsequent filings with the SEC. These forward-looking statements are based
largely on the Company’s expectations and projections about future events and
future trends affecting its business, and are subject to risks and uncertainties
that could cause actual results to differ materially from those anticipated in
the forward-looking statements. The risks and uncertainties include, among
others, those noted in “Risk Factors” above and those included in the documents
that we incorporate by reference herein. In addition, past financial
and/or operating performance is not necessarily a reliable indicator of future
performance and you should not use the Company’s historical performance to
anticipate results or future period trends. The Company can give no assurances
that any of the events anticipated by the forward-looking statements will occur
or, if any of them do, what impact they will have on the Company’s results of
operations and financial condition. Except as required by law, the Company
undertakes no obligation to publicly revise its forward-looking statements to
reflect events or circumstances that arise after the filing of this free writing
prospectus.