SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Section 240.14a-12
MedPlus, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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[ ] Fee computed on a table below per Exchange Act Rules
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MEDPLUS, INC.
8805 Governor's Hill Drive
Cincinnati, Ohio 45249
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1997
TO THE SHAREHOLDERS OF MEDPLUS, INC.:
You are cordially invited to attend the Annual
Meeting of the Shareholders of MedPlus, Inc. to be
held on May 15, 1997 at 1:30 P.M. at the Blue Ash
Hotel Conference Center, 5901 Pfeiffer Road,
Cincinnati, Ohio 45242, for the purpose of
considering and acting on the following:
1. Election of five directors to serve until the
1998 Annual Meeting.
2. Transaction of such other business as may
properly come before the meeting or any adjournment
thereof.
Shareholders of record at the close of business
on March 31, 1997 will be entitled to vote at the
meeting.
By Order of the Board
of Directors
Robert E. Kenny III
Secretary
April 17, 1997
__________________________________________________________________
A Proxy Statement and proxy are submitted herewith.
As a shareholder, you are urged to complete and mail
the proxy promptly whether or not you plan to attend
this Annual Meeting in person. The enclosed envelope
for return of proxy requires no postage if mailed in
the U.S.A. Shareholders attending the meeting may
personally vote on all matters which are considered in
which event their signed proxies are revoked. It is
important that your shares be voted. In order to
avoid the additional expense to the Company of further
solicitation, we ask your cooperation in mailing your
proxy promptly.
__________________________________________________________________
PROXY STATEMENT
MEDPLUS, INC.
8805 Governor's Hill Drive
Cincinnati, Ohio 45249
April 17, 1997
ANNUAL MEETING OF SHAREHOLDERS
May 15, 1997
INTRODUCTION
The enclosed form of proxy is being solicited on
behalf of the Board of Directors of MedPlus, Inc.
(also referred to as "MedPlus" or the "Company") for
the Annual Meeting of Shareholders to be held on May
15, 1997. Each of the 5,924,206 shares of Common
Stock, without par value, outstanding on March 31,
1997, the record date of the meeting, is entitled to
one vote on all matters coming before the meeting.
Only shareholders of record of the Company at the
close of business on March 31, 1997 will be entitled
to vote at the meeting either in person or by proxy.
This Proxy Statement is being mailed to shareholders
on or about April 17, 1997.
The shares represented by all properly executed
proxies which are sent to the Company will be voted as
designated and each not designated will be voted
affirmatively. Each person granting a proxy may
revoke it by giving notice to the Company's Secretary
in writing or in open meeting at any time before it is
voted. Proxies will be solicited principally by mail,
but may also be solicited by directors, officers and
other regular employees of the Company who will
receive no compensation therefor in addition to their
regular salaries. Brokers and others who hold stock
in trust will be asked to send proxy materials to the
beneficial owners of the stock, and the Company will
reimburse them for their expenses. The expense of
soliciting proxies will be borne by the Company.
The Annual Report of the Company for the fiscal
year ended December 31, 1996 is enclosed with this
Proxy Statement.
ELECTION OF DIRECTORS
Five directors are to be elected to hold office
until the 1998 Annual Meeting of Shareholders. It is
the intention of the individuals named in the proxy to
vote for the election of only the five nominees named.
Only the maximum of five directors may be elected.
The Company is not currently aware of any potential
candidates who may be nominated at or prior to the
meeting, and in no event will the proxies solicited
hereby be voted for other than the five nominees
named.
The nominees, Richard A. Mahoney, Robert E. Kenny
III, Paul J. Stein, Jay Hilnbrand and Paul A. Martin,
are currently serving as members of the Board of
Directors. While management has no reason to believe
that any of the nominees will, prior to the date of
the meeting, refuse or be unable to accept the
nominations, should any nominee so refuse or become
unable to accept, the proxies will be voted for the
election of such substitute nominee, if any, as may be
recommended by the Board of Directors. Nominees
receiving the five highest totals of votes cast in the
election will be elected as directors. Proxies in the
form solicited hereby which are returned to the
Company will be voted in favor of the five nominees
specified above unless otherwise instructed by the
shareholders. Abstentions and shares not voted by
brokers and other entities holding shares on behalf of
beneficial owners will not be counted and will have no
effect on the outcome of the election.
Directors are elected annually and serve for one
year terms. Information with respect to each of the
five nominees is as follows:
Richard A. Mahoney, age 49, has been the
Company's President and a director of the Company
since January 1991. While Mr. Mahoney has been the
President of the Company since its inception, Mr.
Mahoney has held the titles of Chairman of the Board
and Chief Executive Officer of the Company since
November 1995.
Robert E. Kenny III, age 41, an attorney engaged
in the private practice of law since 1985, has served
as Secretary of the Company since its inception and as
a director of the Company since 1991.
Paul J. Stein, age 50, has been a director of the
Company since 1991. Mr. Stein has been since October
1990 a self-employed marketing consultant and
manufacturer's representative.
Jay Hilnbrand, age 63, a director of the Company
since April 1994, is the General Manager and a
director of Universal Document Management Systems,
Inc. ("UDMS"), a document management software
development company which became a wholly-owned
subsidiary of the Company in 1995.
Paul A. Martin, age 42, a director of the Company
since August 29, 1996, has been the Corporate Accounts
Receivable Manager for CommuniCare Health Services, a
home healthcare agency which also owns and operates a
nursing home, since 1995. Prior to his position with
CommuniCare he was the Director of the business office
for Dimensions Health Corp., a hospital and
out-patient center management company.
BOARD OF DIRECTORS MEETINGS AND
COMMITTEES
In the fiscal year ended December 31, 1996, the Board
of Directors met on four occasions. Each incumbent
director during the last fiscal year attended 75% or
more of the aggregate of (i) the total number of
meetings of the Board of Directors (held during the
period for which he has been a director) and (ii) the
total number of meetings held by all committees of the
Board on which he served (during the periods that he
served).
The Company has an Audit Committee of the Board of
Directors, the members of which are not officers or
employees of the Company except for the President.
The Audit Committee, which held two meetings during
1996, recommends to the entire Board of Directors the
independent auditors to be employed by the Company,
consults with the independent auditors with respect to
their audit plans, reviews the independent auditors'
report and any management letters issued by the
auditors, and consults with the independent auditors
with regard to financial reporting and the adequacy of
internal controls. The members of the Audit Committee
during 1996 were Messrs. Mahoney, Kenny, Stein and
Martin.
The Company has a Compensation Committee of the Board
of Directors, which held three meetings during 1996.
The Compensation Committee recommends to the entire
Board of Directors the compensation arrangements,
including grants of stock options and other incentives
under the Company's 1994 Long-Term Stock Incentive
Plan, for the corporate officers of the Company and
reviews proposed changes in management organization.
The present members of the Compensation Committee are
Messrs. Stein, Martin and Kenny.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners
Under Section 13(d) of the Securities Exchange Act of
1934 and the rules promulgated thereunder, a
beneficial owner of a security is any person who
directly or indirectly has or shares voting power or
investment power over such security. Such beneficial
owner under this definition need not enjoy the
economic benefit of such securities. The following
shareholders are known by the Company to have been the
beneficial owners of 5% or more of the Company's
Common Stock as of December 31, 1996:
Title of Class Name and Address of Amount and Nature
Percent of
Beneficial Owner (1) of Ownership
Class (2)
Common Stock Richard A. Mahoney 2,953,109
48.62%
Chairman of the Board, shares owned
President and Chief beneficially
(3)
Executive Officer
8598 Twilight Tear Drive
Cincinnati, OH 45249
Common Stock The Keys Plus 690,938
shares 11.67%
Irrevocable Trust owned
8598 Twilight Tear Drive beneficially
(4)
Cincinnati, OH 45249
Common Stock The Keys 690,937
shares 11.67%
Irrevocable Trust owned
8598 Twilight Tear Drive beneficially
(4)
Cincinnati, OH 45249
Common Stock Paul J. Stein 306,500
shares 5.18%
4041 Harding Drive owned
Westlake, OH 44148 beneficially
(5)
__________________
(1) The persons and entities named in the above table
have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned
by them, subject to community property laws where
applicable and the information contained in other
footnotes to this table.
(2) Percentages indicated for each person are
calculated with respect to a total number of shares
equal to the number of shares actually outstanding as
of December 31, 1996 plus that number of shares which
such person had the option to purchase as of that
date.
(3) Total consists of (i) 931,725 shares, owned
outright by Mr. Mahoney, (ii) 1,381,875 shares owned
by Mr. Mahoney as trustee for the benefit of certain
minor children and with respect to which Mr. Mahoney
had sole voting and investment power (but no pecuniary
interest therein), (iii) 489,509 shares, 5,000 of
which were shares subject to options exercisable at
December 31, 1996, as to which Mr. Mahoney had sole
voting power as proxy, and 150,000 shares which Mr.
Mahoney had, and continues to have, the option to
purchase pursuant to (iv) an options granted to him in
1995 and 1996 in accordance with his employment
agreement with the Company and options granted to him
in lieu of a cash bonus for 1996.
(4) These shares are also included in the shares shown
as beneficially owned by Mr. Mahoney.
(5) Total consists of (i) 276,000 shares owned
outright by Mr. Stein, (ii) 28,000 shares which are
owned by members of Mr. Stein's immediate family and
(iii) 2,500 shares which Mr. Stein then had, and
continues to have, the option to purchase. Mr. Stein
has shared voting and investment power with respect to
the shares owned by members of his immediate family.
Mr. Mahoney has sole voting power as a proxy with
respect to the 278,500 shares owned outright by Mr.
Stein and, accordingly, these shares are also included
in the shares shown as beneficially owned by Mr.
Mahoney.
Management
The following table sets forth the beneficial
ownership of the Company's Common Stock by its
directors, the named executives, and all directors and
executive officers as a group, as of March 31, 1997:
Name and Amount and
Title of Position of Nature of
Percent
Class of Beneficial Beneficial
Of
Owner(1) Ownership
Class
Common Stock Richard A. Mahoney 2,938,674 shares
48.29%
Chairman of the Board, owned
President, Chief beneficially(2)
Executive Officer
and Director
Common Stock Paul J. Stein 310,250 shares
Director owned
beneficially(3) 5.23%
Common Stock Gary L. Price 129,000 shares
2.18%
Senior Vice President, owned
beneficially
Business Development
Common Stock Jay Hilnbrand 105,734 shares
1.78%
Director and General owned
beneficially(4)
Manager of Subsidiary
Common Stock E. Andrew Mayo 78,916 shares
1.33%
Executive Vice owned
beneficially(5)
President
Common Stock Philip S. Present II 59,205 shares
.99%
Chief Operating Officer beneficially(6)
Common Stock Paul A. Martin --
--
Director
Common Stock Robert E. Kenny III 11,750 shares
.20%
Director and Secretary owned
beneficially(7)
Common Stock All directors and 3,268,375
shares 53.23%
executive officers as a owned
beneficially
group(10 persons)
(1) The persons and entities named in the above table
have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned
by them, subject to community property laws where
applicable and the information contained in other
footnotes to this table. For purposes of this table,
stock options are considered to be currently
exercisable if by their terms they may be exercised as
of the date of mailing of this Proxy Statement or if
they become exercisable within 60 days thereafter.
(2) Total consists of (i) 927,225 shares which are
owned outright by Mr. Mahoney, (ii) 4,500 shares which
are owned by members of Mr. Mahoney's immediate
family, (iii) 1,381,875 shares which are owned by Mr.
Mahoney as trustee for the benefit of certain minor
children and with respect to which Mr. Mahoney has
sole voting and investment power, (iv) 475,074 shares,
11,250 shares of which are shares subject to options
exercisable on or before June 17, 1997, as to which
Mr. Mahoney has sole voting power as proxy and (v)
150,000 shares which Mr. Mahoney currently has the
option to purchase pursuant to options granted to him
in 1995 and 1996, in accordance with his employment
agreement with the Company, and options granted to him
in lieu of a cash bonus for 1996.
(3) Total consists of (i) 276,000 shares owned
outright by Mr. Stein, (ii) 28,000 shares which are
owned by members of Mr. Stein's immediate family and
(iii) 6,250 shares which Mr. Stein will have the
option to purchase as of May 15, 1997. Mr. Stein has
shared voting and investment power with respect to the
shares owned by members of his immediate family. Mr.
Mahoney has sole voting power as a proxy with respect
to the 276,000 shares owned outright by Mr. Stein and,
should Mr. Stein choose to exercise his option to
purchase 6,250 shares as of May 15, 1997, Mr. Mahoney
will also have sole voting power as a proxy with
respect to those shares. Accordingly, the 276,000
shares owned outright by Mr. Stein and the 6,250
shares which Mr. Stein will have the option to
purchase as of May 15, 1997 are also included in the
shares shown as beneficially owned by Mr. Mahoney.
(4) Total consists of (i) 100,724 shares owned
outright by Mr. Hilnbrand and (ii) 5,000 shares which
Mr. Hilnbrand will have the option to purchase as of
May 15, 1997. Mr. Mahoney has sole voting power as a
proxy with respect to the 100,724 shares owned
outright by Mr. Hilnbrand and, should Mr. Hilnbrand
choose to exercise his option to purchase 5,000 shares
as of May 15, 1997, Mr. Mahoney will also have sole
voting power as a proxy with respect to those shares.
Accordingly, all shares shown as beneficially owned by
Mr. Hilnbrand are also included in the shares shown as
beneficially owned by Mr. Mahoney.
(5) Total consists of (i) 77,250 shares owned outright
by Mr. Mayo and (ii) 1,666 shares which Mr. Mayo had,
and continues to have, the option to purchase as of
February 1, 1997.
(6) Total consists of (i) 30,000 shares owned outright
by Mr. Present, (ii) 26,665 shares which Mr. Present
will have the option to purchase as of June 1, 1997
and (iii) approximately 2,540 shares held by Mr.
Present through the MedPlus, Inc. 401(k) Plan (the
"401(k) Plan").
(7) Total consists of (i) 5,000 shares owned outright
by Mr. Kenny, (ii) 500 shares which Mr. Kenny owns
through an IRA and (iii) 6,250 shares which Mr. Kenny
will have the option to purchase as of May 15, 1997.
(8) Includes the shares owned by Mr. Mahoney as a
trustee, shares over which Mr. Mahoney has voting
power and shares owned by Mr. Stein's immediate family
and the total number of shares owned directly by all
directors and executive officers.
EXECUTIVE COMPENSATION
Summary
The following table summarizes, for the fiscal years
indicated, all annual compensation earned by or
granted to the Company's Chief Executive Officer and
the only other executive officers whose compensation
exceeded $100,000 for all services rendered to the
Company in all capacities (the "named executives")
during the last fiscal year:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Awards
____________________
______________________
Restric- All
Name and Securities tive
Other
Principal Underlying Stock
Compen-
Position Year Salary($) Bonus($) Options
Grants sation($)
_________ ____ _________ ________ __________
______ _________
Richard A. 1996 200,750 -- 100,000 --
--
Mahoney,
Chairman 1995 137,000 63,000 50,000 --
--
of the
Board, 1994 133,007 98,220 -- --
51,255(1)
President
and Chief
Executive
Officer
Gary L. 1996 112,500 95,461 -- --
--
Price,
Senior 1995 98,000 126,486 -- --
--
Vice
President, 1994 48,000 -- -- --
--
Business
Development
E. Andrew 1996 125,000 -- 5,000 --
--
Mayo,
Executive 1995 114,000 -- -- --
--
Vice
President 1994 77,000 13,310 -- --
--
Philip S. 1996 128,000 -- 30,000 --
--
Present II,
Chief 1995 69,000 -- 25,000 --
--
Operating
Officer 1994 -- -- -- --
--
_________________
(1)Consists of loan guaranty fees of $3,750 paid to
Mr. Mahoney in exchange for his guaranty of certain
bank loans to the Company and $47,505 of reimbursed
moving expenses incurred in Mr. Mahoney's move to
Cincinnati.
Stock Options
The following table sets forth information regarding
stock options granted to the named executives during
1996:
OPTION GRANTS IN LAST FISCAL
YEAR
Individual Grants
__________________________________________________________________
Number of % Total Options Exercise
Securities Granted to Em- of Base
Underlying ployees in Price
Expiration
Name Options Granted Fiscal year ($/Sh.)
Date
_______ ________________ ______________ __________
____________
Richard A. 50,000 15% $11.32
April 15, 2000
Mahoney 50,000 15% 11.38 May
22, 2001
E. Andrew 5,000 1% 8.38
February 1, 2001
Mayo
Philip S. 25,000 7% 8.56
January 1, 2001
Present II 5,000 1% 8.38
February 1, 2001
Gary L. -- -- --
--
Price
The following table sets forth information regarding
stock options exercised by the named executives during
1996 and the value of unexercised in-the-money options
held by the named parties as of December 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR
AND FY-END OPTION VALUES
Number of Securities Value of
Unexercised
Underlying Unexercised
In-the-Money
Options at FY-End (#) Options
at FY-End ($)
_____________________
______________________
Shares
Acq'd Value
on Real-
Exer- ized Exercis- Unexercis- Exercis-
Unexercis-
Name cise ($) able able able
able
______ ______ ______ __________ ___________ __________
___________ Richard -- -- 150,000 --
$0 --
A.
Mahoney
E.
Andrew -- -- -- 5,000 --
$0
Mayo
Philip -- -- 8,333 46,667 $0
$0
S.
Present II
Gary L. -- -- -- -- --
--
Price
Compliance with Section 16(a) of the Exchange Act
During fiscal year 1996, E. Andrew Mayo, Executive
Vice President of the Company, failed to file in a
timely manner two reports on Form 4 with respect to
two sales of shares of the Company's common stock made
in September and November. In addition, for fiscal
year 1996, Mr. Mayo failed to file in a timely manner
a report on Form 5 with respect to the
above-referenced sales and a charitable gift of shares
of the Company's common stock (the amount of the gift
had been incorrectly reported on a previously filed
Form 4). A Form 5 has now been filed correctly
reflecting all three transactions.
Compensation of Directors
During the year ended December 31, 1996, the Company's
outside directors (those directors who are not
employees of the Company) were compensated for their
services as directors as follows: (i) director Paul
A. Martin was compensated at the rate of $500 per
meeting and (ii) directors Paul J. Stein and Robert E.
Kenny III were compensated at the rate of $3,000 per
meeting (outside directors are not compensated for
committee meetings that occur on the same date as full
Board meetings). The $2,500 increase in the per
meeting payments made to Messrs. Stein and Kenny were
payments made in lieu of options to purchase the
Company's common stock which Messrs. Stein and Kenny
were entitled to have received, but did not receive,
on March 16, 1994 and May 24, 1995 (the "1994-1995
Options") pursuant to Section 5(b) of the MedPlus,
Inc. Director's Non-Discretionary Stock Option Plan
(the "Director's Plan"). Specifically, because the
Company failed to issue the 1994-1995 Options to
Messrs. Stein and Kenny as required, the Board
resolved to (i) lend those directors $30,000 each to
purchase that number of shares of the Company's common
stock which would have been subject to the 1994-1995
Options (the "Loans") and (ii) increase the per
meeting payments to be made to Messrs. Stein and Kenny
to allow them to pay off the Loans as soon as
possible. The Company does not additionally compensate
employee directors. All directors are reimbursed for
all expenses incurred in connection with attendance at
meetings of the Board and the performance of Board
duties.
In addition, outside directors are entitled to receive
stock options under the Directors' Plan. The
Directors' Plan provides that, commencing in 1995,
nonemployee directors were entitled to an option to
purchase 5,000 shares after their first year in office
and to an annual, automatic grant of an option to
purchase 2,500 shares of the Company's Common Stock at
every annual shareholders' meeting commencing in 1995.
A total of 100,000 shares is available under the
Directors' Plan. All options granted under the
Directors' Plan have a five year term and an exercise
price equal to 100% of fair market value of the Common
Stock on the date of issuance. Options are not
exercisable at all for six months after their
issuance, at which time they become exercisable as to
50% of the shares covered. After 12 months, they
become exercisable in full until expiration.
Employment Agreements
Richard A. Mahoney, the Company's Chairman of the
Board, President and Chief Executive Officer, is
employed pursuant to an employment agreement dated
October 31, 1995. The term of the agreement expires
on June 30, 2001 and commenced on November 1, 1995.
It provides for a base salary of $186,000 per annum
initially, increasing incrementally to a base salary
of $245,000 per annum in the final year of the
agreement. Under the agreement, Mr. Mahoney will also
be entitled to annual bonuses of up to 100% of his
salary, the actual amount to be determined based on
the Company's performance and Mr. Mahoney's personal
performance as determined by the Board of Directors or
the Compensation Committee of the Board of Directors.
He also is entitled to annual stock option grants of
50,000 shares
during the term of the agreement under the Long-Term
Plan and may be granted stock options in lieu of a
cash bonus in a particular year.
Under the employment agreement, if the Company
terminates Mr. Mahoney's employment without cause or
Mr. Mahoney terminates his employment with the Company
under a limited set of circumstances defined in the
employment agreement, including a change of control,
Mr. Mahoney will receive an amount derived by
multiplying the factor 2.99 by the sum of his salary
and bonus paid in the year prior to the year of
termination. In addition, in the event of a change in
control of the Company, all outstanding stock options
held by Mr. Mahoney at the time of the change in
control and which were granted six months or more
prior to such time will become exercisable in full and
will become subject to repurchase, at fair market
value, for cash by the Company at Mr. Mahoney's
election. This agreement also provides that in the
event it expires and Mr. Mahoney is not rehired in the
same position under the terms and conditions of a new
employment agreement acceptable to both Mr. Mahoney
and the Company, Mr. Mahoney will receive lump sum
severance compensation equal to the sum of the salary
and bonus paid to him in the year ending June 30,
2001, the final year of the agreement. In the event
the agreement is terminated by the Company for cause,
Mr. Mahoney would forfeit any severance payment and
all of his outstanding stock options. The agreement
also provides that upon termination or expiration, Mr.
Mahoney's participation in Company-sponsored employee
and health benefit plans will be continued at the
Company's expense for a maximum of 18 months so long
as he is alive and is not elsewhere employed or
self-employed.
Philip S. Present II, the Company's Chief Operating
Officer, is employed pursuant to an employment
agreement dated January 1, 1997. The term of this
agreement is 12 months. The agreement provides for a
base salary of $12,000 per month, beginning in
January, 1997, plus bonuses payable based upon the
attainment of certain profitability criteria. The
agreement contains customary noncompetition and
confidentiality provisions and may be terminated by
the Company for nonperformance. In the event Mr.
Present is elected President of the Company during the
term of the agreement, whether or not such election
follows a change in control of the Company, the
agreement provides that he shall be awarded stock
options to purchase 50,000 shares of the Company's
Common Stock under the Company's Long-Term Stock
Incentive Plan. In addition, if the Company
terminates Mr. Present's employment without cause, he
shall receive severance pay in the amount of three
months' salary. Finally, should Mr. Present's
employment be terminated, with or without cause, as a
result of the liquidation, dissolution, consolidation,
merger or other business combination of the Company,
including the transfer of all or substantially all of
the Company's assets, the agreement provides that (i)
the Company shall pay to Mr. Present an amount equal
to twice the aggregate of salary and bonus payments
made to him from January 1, 1997 until the date of
such termination and (ii) all stock options granted to
Mr. Present prior to such event shall immediately
become fully vested (but in no event shall any stock
options become vested earlier than the minimum vesting
period provided by the Company's 1994 Long-Term Stock
Incentive Plan).
Gary L. Price, the Company's Senior Vice President,
Business Development, is employed pursuant to an
employment agreement dated December 23, 1994. The
term of this agreement is 36 months. The agreement
provides for a base salary of $108,000 per year,
beginning in March, 1995, plus commissions payable
based upon the attainment of certain sales and
profitability criteria. On January 1, 1997, Mr.
Price's base salary was increased to $132,000 per
year. The agreement contains customary noncompetition
and confidentiality provisions and may be terminated
by the Company for nonperformance. The agreement does
not contain any special severance provisions which
would be triggered by a change in control of the
Company.
During the first nine months of 1996, E. Andrew Mayo,
the Company's Executive Vice President, was employed
pursuant to an employment agreement dated October 2,
1991, as amended on June 1, 1993. The term of this
agreement was for five years. The agreement provided
for a base salary of $72,000 during the first year,
plus commissions payable based upon the attainment of
certain sales and profitability criteria. Thereafter,
compensation to Mr. Mayo was determined based on
periodic evaluations of Mr. Mayo by the Company. The
agreement contained customary noncompetition and
confidentiality provisions and was subject to
termination by the Company for nonperformance. The
agreement did not contain any special severance
provisions which would be triggered by a change in
control of the Company. On October 2, 1996, Mr.
Mayo's employment agreement terminated. Mr. Mayo has
been employed by the Company pursuant to the terms
thereof on an at-will basis since then and he will
continue to be so employed until May 1, 1997, at which
time Mr. Mayo's recent resignation shall become
effective.
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND OTHER
INFORMATION
In December, 1995, a wholly-owned subsidiary of the
Company, MedPlus Acquisition Corp. ("MAC"), purchased
all the outstanding shares of UDMS, a document
management software development company. Jay
Hilnbrand, a director of the Company, has been the
President, a director and the majority shareholder of
UDMS since 1990. In December, 1995, UDMS was merged
into MAC and is now a wholly-owned subsidiary of the
Company. As consideration for his ownership interest
in UDMS, Mr. Hilnbrand received a total of $1,406,506
in a combination of cash and the Company's Common
Stock. Mr. Hilnbrand's consideration was received as
follows: (1) initial consideration totaling
$1,198,400, in the form of $504,183.75 in cash and
79,339 shares of the Company's Common Stock and (2)
consideration which was contingent upon the
performance of UDMS between December 14, 1995 and
December 29, 1995, as determined by the Company's
review of UDMS' audited financial statements, totaling
approximately $208,106, in the form of $87,718 in
cash and 11,385 shares of the Company's Common Stock.
The consideration paid for UDMS was based upon an
evaluation of UDMS which was performed by an
independent investment banking firm.
The Company signed a letter of agreement with
DiaLogos, Inc. ("DiaLogos"), dated July 12, 1996,
amended January 31, 1997, in which the Company, on or
before March 31, 1998, agreed to either pay DiaLogos
for 75% of the common shares of DiaLogos or secure a
funding commitment for DiaLogos' operations from
investors and/or lenders, or a combination thereof.
(A copy of such letter of agreement was included as an
Exhibit to the Company's 1996 Annual Report on Form
10-KSB). Certain investors identified by the Company
would receive a 1% interest in DiaLogos in exchange
for each $22,000 invested in DiaLogos. In addition,
the letter provides that in the event the Company
secures a funding commitment from investors and/or
lenders, then DiaLogos will grant the Company the
option (immediately exercisable through December 31,
1999) to purchase 75% of the common shares of DiaLogos
less any shares already purchased by the Company
and/or investors identified by the Company. Richard
Mahoney, the President, Chief Executive Officer and
Chairman of the Board of the Company, Paul J. Stein, a
director of the Company, Philip S. Present II, the
Chief Operating Officer of the Company and Daniel A.
Silber, the Chief Financial Officer of the Company
have each either invested or agreed to invest funds in
DiaLogos in exchange for ownership interests therein.
Specifically, Mr. Mahoney and his spouse have executed
promissory notes payable to DiaLogos in a total amount
of $297,000 for an interest of 13.5% of DiaLogos, Mr.
Stein and Mr. Present have each executed a promissory
note payable to DiaLogos in the amount of $44,000 for
2% interests in DiaLogos and Mr. Silber has invested
$22,000 for a 1% interest in DiaLogos.
On September 1, 1996, the Company, UDMS and Madison
Financial Group Ltd. /f/k/a/ DMG Equity Partners LLC
("Madison"), an Ohio limited liability company,
entered into a Consulting Agreement pursuant to which
Madison agreed to provide consulting services to UDMS
in connection with potential acquisitions, corporate
reorganizations and restructurings, and private or
public offerings, including preparing reports,
memoranda, analyses, and other documents for
management relating thereto. In consideration of the
services to be provided by Madison to UDMS thereunder,
UDMS has paid Madison a one time consulting fee of
$50,000 and the Company granted Madison a warrant to
purchase 15 shares of UDMS stock owned by the Company
at a price of $415,100, subject to adjustment upward
in certain circumstances (the "Warrant"). The $50,000
fee is to be reimbursed to UDMS in the event Madison
exercises the Warrant. The Warrant is exercisable for
a period of three (3) years beginning on the date, if
ever, UDMS completes a public or private offering of
its stock and only if (i) Madison does not terminate
the Consulting Agreement prior to the completion of a
public or private offering of UDMS stock and (ii) UDMS
does not terminate the Consulting Agreement more than
ninety (90) days prior to completion of a public or
private offering of UDMS stock. Richard A. Mahoney,
the President, Chief Executive Officer and Chairman of
the Board of the Company, holds a 36% interest in
Madison.
The Company's Chief Operating Officer, Philip S.
Present II, was an audit partner with the accounting
firm KPMG Peat Marwick LLP ("KPMG") prior to joining
the Company in 1995. In such capacity he served as
the engagement partner for a client of KPMG,
Structural Dynamics Research Corporation ("SDRC"),
during 1993. In 1995 SDRC restated its financial
statements for the years 1992 and 1993 as a result of
its allegedly having reported premature and fictitious
revenue for such years. In April 1997, the Securities
and Exchange Commission ("SEC") settled a civil
proceeding in the United States District Court for the
Southern District of Ohio against SDRC and five of its
former senior officers. SDRC consented to a permanent
injunction and the former officers consented to both
permanent injunctions and a total of approximately
$1.5 million in monetary penalties. One of the former
officers also pleaded guilty to related criminal
charges. In a separate administrative proceeding also
concluded in April 1997, Mr. Present and another
former KPMG partner voluntarily consented to a cease
and desist order arising out of the conduct of the
audits of SDRC'S financial statements without
admitting or denying any of the SEC's allegations. As
a result of the order, Mr. Present may not practice as
an accountant before the SEC for a period of 30
months. The order will not affect his current duties
with the Company or his ability to serve as a director
of a publicly-held company. Mr. Present voluntarily
consented to the order in order to avoid the expense
and time burden of prolonged contested proceedings.
1997 SHAREHOLDER PROPOSALS
In order for any shareholder proposals for the 1997
Annual Meeting of Shareholders to be eligible for
inclusion at the meeting, they must be received by the
Secretary of the Company at 8805 Governor's Hill
Drive, Cincinnati, Ohio 45249, prior to December 28,
1997.
OTHER MATTERS
The Board of Directors does not know of any other
business to be presented to the meeting and does not
intend to bring other matters before the meeting.
However, if other matters properly come before the
meeting, it is intended that the persons named in the
accompanying proxy will vote thereon according to
their best judgment in the interests of the Company.
By Order
of the
Board of
Directors
Robert
E. Kenny III
Secretary
MedPlus, Inc.
8805 Governor's Hill Drive
Cincinnati, OH 45249
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.
The undersigned hereby appoints Richard A.
Mahoney and Robert E. Kenny III and each of them with
full power of substitution as proxies to vote, as
designated below, for and in the name of the
undersigned all shares of stock of MedPlus, Inc. which
the undersigned is entitled to vote at the Annual
Meeting of the Shareholders of said Company scheduled
to be held on May 15, 1997 at 1:30 p.m. at the Blue
Ash Hotel and Conference Center, 5901 Pfeiffer Road,
Cincinnati, Ohio, 45242 or at any adjournment or
recess thereof.
Please mark X in the appropriate box. The Board
of Directors recommends a FOR vote on each proposal.
1. ELECTION OF DIRECTORS.
________FOR all nominees listed below.
________WITHHOLD AUTHORITY
(except as marked to the contrary below)
RICHARD A. MAHONEY, ROBERT E. KENNY III, PAUL J.
STEIN, JAY HILNBRAND, PAUL A. MARTIN
2. In their discretion, the proxies are authorized
to vote upon such other business as may properly come
before the meeting or any adjournment thereof.
ALL FORMER PROXIES ARE HEREBY REVOKED.
NUMBER OF SHARES _____________
_____________________________
(Signature of Shareholder)
_____________________________
(Signature of Shareholder)
Please sign exactly as your
name appears
to the left. All joint owners
should
sign. (When signing in a
fiduciary
capacity or as a corporate
officer, please
give your full title as such.)
Dated:
_______________________, 1997