Transactions with Related Party

12 Months Ended

Dec. 31, 2012

Transactions with Related Party [Abstract]

Transactions with Related Party

(11) Transactions with Related Party

Merrick RIS, LLC (Merrick) and its affiliates, including Merrick Ventures, LLC (Merrick Ventures), beneficially own, as of December 31, 2012, approximately 31% of our outstanding common stock.  Michael W. Ferro, Jr., our 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.  Mr. Ferro also serves as the chairman and chief executive officer of Merrick and the chairman and chief executive officer of Merrick Ventures.  Accordingly, Mr. Ferro indirectly owns or controls all of the shares of our common stock owned by Merrick and Merrick Ventures.  Due to its stock ownership, Merrick has significant influence over our business, including the election of our directors.  

Effective January 1, 2009, we entered into a consulting agreement with Merrick.  Services provided by Merrick under the consulting agreement include financial analysis and strategic planning.  Effective January 1, 2010, we entered into an amendment to extend the term of the consulting agreement with Merrick through December 31, 2011, and modified the payment terms from a flat fee arrangement per quarter to a per transaction or success based arrangement.  On February 24, 2012, we entered into a second amendment, effective January 3, 2012, to extend the term of the consulting agreement with Merrick through December 31, 2013, and modified the fee structure to include a quarterly retainer in the amount of $150. This is in addition to the per transaction or success based arrangement that exists. Further, the second amendment includes a modification of the success payment in the event of a sale, by including a payment of 2% of the total consideration received if the total consideration is greater than $1 billion (the agreement still allows for a 1% success fee if under $1 billion).  We paid $1,069, $1,348 and $2,039 to Merrick for such services and recognized $976, $1,176 and $2,338 in acquisition related and general and administrative expenses in 2012, 2011 and 2010, respectively.  As of December 31, 2012 and December 31, 2011, we had $38 and $132, respectively, recorded in accounts payable covering obligations under this agreement.  

On July 30, 2010, we acquired substantially all of the Olivia Greets assets from Merrick Healthcare Solutions, LLC (Merrick Healthcare), an affiliate of Merrick Ventures, for 500,000 shares of our common stock. Merrick Healthcare transferred these shares of common stock to Merrick Ventures after the expiration of the one-year trading restriction. As a result of the Olivia Greets acquisition, the value-added reseller agreements that we entered into with Merrick Healthcare in March 2009 and March 2010 were terminated.

On June 20, 2011, Merrick purchased $5,000 of the $52,000 of additional Notes that we issued on June 20, 2011.  Merrick purchased the Notes at the same purchase price per Note as the other investors in the transaction. We used the proceeds from this private placement of additional Notes to redeem and retire all outstanding shares of our Series A Preferred Stock, including $11,755 to redeem and retire the 10,000 shares of our Series A Preferred Stock held by Merrick.

Merrick Ventures owns over 75% of the outstanding equity interest of an entity called higi llc (higi).  Mr. Ferro is higi's Chairperson and Founder.  In December 2011, we entered into a master services agreement with higi, pursuant to which we agreed to provide higi with certain professional services, including software engineering design, application and web portal development for a fixed payment of $675.  We recognized $155 and $506 in revenue in 2012 and 2011 and were paid $490 in 2011 under this Agreement.  In addition, the master services agreement granted higi certain branding rights related to our health station business and requires higi to pay a fixed annual fee of one hundred dollars per station to us for each station that is branded with higi's trademarks and that includes higi's software, images and/or other intellectual property.  The agreement has an initial term of one year, with continuing renewal rights, and is subject to termination on 120 days notice from us.  On March 28, 2012, we entered into an agreement to sell 500 health stations and related equipment to higi for $2,750.  We recognized revenue of $2,750 in 2012.

On February 24, 2012, we entered into an Assignment Agreement with Merrick Ventures under which Merge will sublease from Merrick approximately 4,700 square feet located at 200 E. Randolph Street, 22nd floor, Chicago, IL at an annual rental rate of $78, terminating on December 13, 2013.  The rent will be paid to Merrick monthly and is exactly the same rate as Merrick currently pays under its lease.  Under the Assignment, Merge will also pay approximately $70 (which represents the book value) for all fixtures, leasehold improvements and furniture located in the space.