Transactions with Related Party

12 Months Ended

Dec. 31, 2013

Transactions with Related Party [Abstract]

Transactions with Related Party

(10)Transactions with Related Party

Merrick Ventures, LLC (Merrick Ventures) and Merrick Venture Management Holdings, LLC (Merrick Holdings), beneficially own, as of December 31, 2013, approximately 27.5% of our outstanding common stock.  Michael W. Ferro, Jr., the former Chairman of the Board of Merge Healthcare, and trusts for the benefit of Mr. Ferro’s family members beneficially own a majority of the equity interests in Merrick Ventures and Merrick Holdings. On August 26, 2013, Mr. Ferro resigned as Chairman of the Board and as a director of Merge Healthcare.   Mr. Ferro serves as the chairman and chief executive officer of each of Merrick Holdings and of Merrick Ventures. Accordingly, Mr. Ferro indirectly controls all of the shares of Common Stock owned by Merrick Holdings and Merrick Ventures.

Beginning in 2009 we were a party to a consulting agreement with Merrick RIS, LLC, an affiliate of Merrick Holdings and Merrick Ventures, under which Merrick provided services including financial analysis and strategic planning.   In 2012 we entered into a second amendment to extend the term of the consulting agreement with Merrick RIS, LLC through December 31, 2013, and modified the fee structure to include a quarterly retainer in the amount of $150 in addition to a per transaction fee of $250 for acquisitions by Merge Healthcare.  We paid $627, $1,069 and $1,348 to Merrick for such services and recognized $600, $850 and $919 in acquisition related expenses and $27, $126 and $257 in general and administrative expenses in 2013, 2012 and 2011, respectively.  As of December 31, 2013 and 2012, we had $0 and $38, respectively, recorded in accounts payable covering obligations under this agreement. The consulting agreement expired on December 31, 2013.

In April 2010 and June 2011, Merrick RIS, LLC purchased an aggregate of $10,000 in principal amount of our Notes at the same purchase price as the other investors in the transactions. In April 2013, we commenced a cash tender offer for any and all of the Notes, and Merrick RIS, LLC, or an affiliate thereof, tendered $10,000 of its Notes. We purchased the Notes from Merrick RIS, LLC, or an affiliate thereof, for a total price of $10,670, which is based on the same consideration calculation as provided to other investors that tendered Notes.

Merrick Ventures owns 33% of the outstanding equity interest of an entity called higi llc (higi).  Mr. Ferro is higi’s 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.  Revenue of $14, $155 and $506 was recognized under this agreement in 2013, 2012 and 2011, respectively.  In addition, the agreement granted higi certain branding rights related to our health station business and requires higi to pay to us a fixed annual fee of one hundred dollars per station for each station that is branded with higi’s trademark and that includes higi’s user interface.  The agreement terminated in accordance with its terms on December 31, 2013.  On March 28, 2012, we entered into an agreement to sell higi health stations and related equipment for $2,750.  Revenue of $2,750 was recognized related to this agreement in 2012. 

On September 8, 2010, we entered into an assignment agreement with Merrick Ventures under which Merrick Ventures assigned to us its sublease with Aon Corporation for approximately 11,934 square feet located on the 20th floor of 200 East Randolph Street, in Chicago Illinois, at an annual base rental rate of approximately $19.5 per month from August 1, 2011 to July 31, 2012, $20.0 per month from August 1, 2012 to July 31, 2013 and $20.5 per month from August 1, 2013 to December 9, 2013, when the sublease expired. The rent was paid to the sub–landlord monthly and was the same rate as Merrick Ventures paid under the sublease.

On February 24, 2012, we entered into an agreement with Merrick Ventures under which Merge agreed to sublease from Merrick approximately 4,700 square feet located at 200 E. Randolph Street, 22nd floor, Chicago, IL at an annual rental of $80.  This agreement expired on December 13, 2013.  The rent was paid to Merrick monthly and was the same rate as Merrick paid under its lease.  Under the Assignment, Merge paid approximately $74 (which represents the book value) for all fixtures, leasehold improvements and furniture located in the space.  We vacated the space we subleased from Merrick Ventures in September 2013.