Merge Healthcare secures $20 million in financing, settles class-action lawsuits

Milwaukee, Wis. - Merge Healthcare has entered into a securities purchase agreement with Merrick RIS for $20 million in financing through a private placement, a move that should net the financially troubled Merge approximately $16.6 million after transaction costs and closing fees.

Merge, a medical imaging software and services provider, also announced that it has entered into an agreement in principle to settle consolidated securities class-action suits for $16 million.

In the private placement, Merge intends to sell 14.2 million shares of its common stock at a per share price of $.35. The company also will sell a $15 million senior secured term note due in 2010 and 6.8 million shares of its common stock as partial consideration for the term note. The term note also requires Merge to have positive adjusted EBITDA for the last fiscal quarter of 2008 and throughout the term of the note.

The private placement is scheduled to close on or about June 3, 2008.

As part of the agreement, Merrick will name five people to replace five of the eleven directors on the Merge board. Kenneth Rardin, president and CEO of Merge, said the financing, combined with cost reduction plans and a focus on PACS and teleradiolgy markets, should allow the company to concentrate on its core business.

In a related matter, the agreement to settle the class action suits calls on Merge and its insurance carrier to make a one-time cash payment of $16 million. Merge would contribute more than $3 million to that payment, while insurance would pay the rest.

Earlier this year, the company announced an agreement in principle to settle a derivative action.

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