SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
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MedPlus, Inc.
(Name of Registrant as Specified In Its Charter)
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Registrant)
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MEDPLUS, INC.
8805 Governor's Hill Drive, Suite 100
Cincinnati, Ohio 45249
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 25, 1998
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 June 25, 1998 at 1:30
P.M. at the Marriott Hotel Northeast, 9644 Mason-Montgomery Road,
Mason, Ohio 45040, for the purpose of considering and acting on
the following:
1. Election of six directors to serve until the 1999 Annual
Meeting.
2. Approval of an amendment to the 1994 Long-Term Stock Incentive
Plan increasing the total number of shares of the Company's Common
Stock subject to grants thereunder from 1 million shares to 2
million shares.
3. Approval of the 1998 MedPlus, Inc. Employee Stock Purchase
Plan.
4. 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 May 11, 1998
will be entitled to vote at the meeting.
By Order of the Board of Directors
Robert E. Kenny III
Secretary
May 22, 1998
__________________________________________________________________
IMPORTANT
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, Suite 100
Cincinnati, Ohio 45249
May 22, 1998
ANNUAL MEETING OF SHAREHOLDERS
June 25, 1998
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 June 25, 1998. Each of the 6,175,717 shares of Common
Stock, without par value, outstanding on May 11, 1998, 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 May 11, 1998 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 May 22, 1998.
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 January
31, 1998 is enclosed with this Proxy Statement.
ELECTION OF DIRECTORS
Six directors are to be elected to hold office until the 1999
Annual Meeting of Shareholders. It is the intention of the
individuals named in the proxy to vote for the election of only
the six nominees named. Only the maximum of six 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 six nominees named.
The nominees, Richard A. Mahoney, Robert E. Kenny III, Paul J.
Stein, Jay Hilnbrand, Paul A. Martin and Philip S. Present II,
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 six 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 six 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 six nominees is as
follows:
Richard A. Mahoney, age 50, 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 42, 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 51, has been a director of the Company since
1991. Mr. Stein has been a self-employed marketing consultant and
manufacturer's representative since October 1990.
Jay Hilnbrand, age 64, a director of the Company since April 1994,
is the General Manager 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 43, a director of the Company since August 29,
1996, has been an Implementation Consultant for the Company since
August 18, 1997. Prior to joining the Company, he had 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.
Philip S. Present II, age 47, joined the Company in April 1995 as
Vice President of Corporate Development. Mr. Present was named
the Chief Operating Officer of the Company in June 1996. He
became a director of the Company on December 13, 1997 to fill a
vacancy created on the Board by an increase in the number of
directors of the Company from five to six. From September 1973 to
March 1995, Mr. Present was employed by the certified public
accounting firm of KPMG Peat Marwick LLP.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
In the fiscal year ended January 31, 1998, the Board of Directors
met on two occasions. Each of Messrs. Mahoney, Kenny, Stein,
Martin and Present attended 100% 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). Mr. Hilnbrand did not attend
either meeting of the Board of Directors, but did execute the
three Actions By Unanimous Written Consent of the Directors which
were executed during the fiscal year ended January 31, 1998.
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 Messrs. Mahoney and Martin. The Audit Committee, which
held two meetings during the fiscal year ended January 31, 1998,
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 the fiscal
year ended January 31, 1998 were Messrs. Mahoney, Kenny, Stein and
Martin.
The Company has a Compensation Committee of the Board of
Directors, which held two meetings and executed four Actions by
Unanimous Written Consent during the fiscal year ended January 31,
1998. 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
and Kenny. Mr. Martin resigned from the Compensation Committee on
August 15, 1997 upon becoming an employee of the Company.
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 January 31, 1998:
Title of Name and Address of Amount and Nature Percent
Class Beneficial Owner(1) of Ownership of Class(2)
____________ ____________________ _________________ ___________
Common Stock Richard A. Mahoney 3,051,974 shares 47.52%
Chairman of the Board, owned
President and Chief beneficially (3)
Executive Officer
8598 Twilight Tear Drive
Cincinnati, OH 45249
Common Stock The Keys Plus 690,938 shares 11.22%
Irrevocable Trust owned
8598 Twilight Tear Drive beneficially (4)
Cincinnati, OH 45249
Common Stock The Keys 690,937 shares 11.22%
Irrevocable Trust owned
8598 Twilight Tear Drive beneficially (4)
Cincinnati, OH 45249
Common Stock Paul J. Stein 310,250 shares 5.03%
4041 Harding Drive owned
Westlake, OH 44148 beneficially (5)
_____________________
(1) The persons and entities named in the above table had, at
January 31, 1998, 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 were considered to be
exercisable if by their terms they could have been exercised as of
January 31, 1998 or if they became exercisable within 60 days
thereafter.
(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 January 31, 1998 plus that number of
shares which such person had the right to acquire as of the date
60 days thereafter.
(3) Total consists of 927,725 owned outright by Mr. Mahoney,
4,500 shares owned by members of Mr. Mahoney's immediate family
and 250,000 shares subject to options exercisable by Mr. Mahoney
as of January 31, 1998 or within 60 days thereafter. In addition,
Mr. Mahoney is the sole trustee of two trusts for the benefit of
certain minor children which at January 31, 1998 held a total of
1,381,875 shares of Common Stock; Mr. Mahoney had, and continues
to have, sole voting and dispository power with respect to the
shares held by the trusts but no pecuniary interest in such
shares. Finally, Mr. Mahoney had sole voting power as proxy with
respect to an additional 487,874 shares, 11,250 of which were
shares subject to options exercisable at January 31, 1998 or
within 60 days thereafter.
(4) These shares are also included in the shares shown as
beneficially owned by Mr. Mahoney.
(5) Total consists of (i) 274,000 shares owned outright by Mr.
Stein, (ii) 30,000 shares owned by members of Mr. Stein's
immediate family and (iii) 6,250 shares which Mr. Stein then had,
and continues to have, the option to purchase. Mr. Stein had, and
continues to have, shared voting and investment power with respect
to the shares owned by members of his immediate family. Mr.
Mahoney had, and continues to have, sole voting power as a proxy
with respect to the 274,000 shares owned outright by Mr. Stein and
the 6,250 shares which Mr. Stein had the option to purchase;
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 May 11,
1998:
Title of Name and Position of Amount and Nature Percent
Class Beneficial Owner(1) of Ownership of Class
____________ ______________________ __________________ ________
Common Stock Richard A. Mahoney 3,044,474 shares 47.28%
Chairman of the Board, owned
President, Chief beneficially
Executive Officer and
Director
Common Stock Paul J. Stein 312,750 shares 5.06%
Director owned
beneficially(3)
Common Stock Gary L. Price 102,800 shares 1.66%
Senior Vice President, owned
Business Development beneficially
Common Stock Jay Hilnbrand 95,724 shares 1.55%
Director and owned
General Manager beneficially(4)
of Subsidiary
Common Stock Philip S. Present II 88,829 shares 1.43%
Chief Operating Officer owned
and Director beneficially(5)
Common Stock Timothy P. McMullen 30,001 shares 0.48%
Vice President of Sales owned
and Marketing beneficially(6)
Common Stock Paul F. Albrecht 23,384 shares 0.38%
Vice President and owned
Chief Technology Officer beneficially(7)
Common Stock Robert E. Kenny III 14,250 shares 0.23%
Director and Secretary owned
beneficially(8)
Common Stock Paul A. Martin 3,388 shares 0.05%
Director and owned
Implementation beneficially(9)
Common Stock All directors and 3,363,229 shares 51.12%
executive officers owned
as a group(10 persons) beneficially(10)
_________________________
(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 May 11, 1998 or if they become
exercisable within 60 days thereafter.
(2) Total consists of (i) 927,725 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
dispository power, (iv) 480,374 shares, 13,750 shares of which are
shares subject to options exercisable on or before July 10, 1998,
as to which Mr. Mahoney has sole voting power as proxy and (v)
250,000 shares which Mr. Mahoney currently has the option to
purchase pursuant to options granted to him in 1995, 1996 and 1997
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) 274,000 shares owned outright by Mr.
Stein, (ii) 30,000 shares which are owned by members of Mr.
Stein's immediate family and (iii) 8,750 shares which Mr. Stein
currently has the option to purchase or will have the option to
purchase on or before July 10, 1998. 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 274,000 shares owned outright by Mr.
Stein and, should Mr. Stein choose to exercise his option to
purchase 8,750 shares, Mr. Mahoney will also have sole voting
power as a proxy with respect to those shares. Accordingly, the
274,000 shares owned outright by Mr. Stein and the 8,750 shares
which Mr. Stein has the option to purchase as of are also included
in the shares shown as beneficially owned by Mr. Mahoney.
(4) Total consists of (i) 90,724 shares owned outright by Mr.
Hilnbrand and (ii) 5,000 shares which Mr. Hilnbrand has the option
to purchase or will have the option to purchase on or before July
10, 1998. Mr. Mahoney has sole voting power as a proxy with
respect to the 90,724 shares owned outright by Mr. Hilnbrand and,
should Mr. Hilnbrand choose to exercise his option to purchase
5,000 shares, 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) 30,000 shares owned by Mr. Present
through a retirement plan account, (ii) 53,334 shares which Mr.
Present has the option to purchase and (iii) approximately 5,495
shares held by Mr. Present through the MedPlus, Inc. 401(k) Plan.
(6) Total consists of 30,001 shares which Mr. McMullen has the
option to purchase.
(7) Total consists of 23,834 shares which Mr. Albrecht has the
option to purchase.
(8) Total consists of (i) 5,000 shares owned outright by Mr.
Kenny, (ii) 500 shares which Mr. Kenny owns through an IRA and
(iii) 8,750 shares which Mr. Kenny has the option to purchase or
will have the option to purchase on or before July 10, 1998.
(9) Total consists of 3,388 shares which Mr. Martin has the
option to purchase.
(10) 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, including those
officers who are not named executives.
The Company's executive officers not previously discussed under
"Election of Directors" are as follows:
Gary L. Price, 43, joined the Company as Vice President, Sales in
January 1992 and in June 1996 was named Senior Vice President,
Business Development.
Timothy P. McMullen, 43, has been the Vice President of Sales and
Marketing since December 13, 1997. He joined the Company as Vice
President, Corporate Accounts and Managed Care in June 1996 after
sixteen years with the Hill-Rom Co. Inc. At Hill-Rom, the world's
largest manufacturer and distributor of patient beds and patient
environments, he held several senior positions including Vice
President of Corporate Accounts, Merchandising, International, and
Domestic Sales.
Daniel A. Silber, 49, joined the Company as Vice President of
Finance and Chief Financial Officer in May 1995. From 1993 until
he joined the Company, he was Chief Financial Officer for Saturday
Knight LTD, a manufacturer and distributor of bathroom
accessories.
Paul F. Albrecht, 43, was elected Vice President and Chief
Technology Officer on December 13, 1997 following his tenure as
General Manager of the ChartMaxx(tm) Division of MedPlus since May
16, 1994. Prior to joining the Company, Mr. Albrecht had been the
Director of the Systems Development Area for Cincinnati Bell
Information Systems since December 1991.
AMENDMENT TO 1994 MEDPLUS, INC. LONG-TERM STOCK
INCENTIVE PLAN
A key factor in the Company's continuing advancement and
growth is its ability to attract, motivate and retain highly
qualified employees. The market for such employees, especially in
the Company's high technology industry, continues to be extremely
competitive. The Company has historically utilized stock-based
incentives to attract, motivate and retain employees and hopes to
continue to do so. Because a number of the companies with which
the Company and its subsidiaries compete for employees make
extensive use of stock-based incentives to maintain a highly
qualified employee base, the Company believes that stock-based
incentives enable the Company to cost-effectively compete for the
talents of key employees. In addition, the Company believes that
by providing its employees with the opportunity to purchase the
Company's Common Stock at attractive prices, it is giving
employees a chance at a long-term ownership stake in the Company;
as a result, the economic interests of the Company's employees and
those of its shareholders are aligned.
For the above reasons, the Company has in place the 1994 MedPlus,
Inc. Long-Term Stock Incentive Plan (the "Long-Term Plan").
Subject to the provisions of the Long-Term Plan, a Committee of
the Board of Directors designated to administer the Long-Term Plan
(the "Committee") may at any time, or from time to time, grant
stock incentives under the Long-Term Plan to, and only to, those
employees who in the opinion of the Committee can contribute
significantly to the growth and successful operations of the
Company or a Subsidiary ("Eligible Employees"). Stock incentives
may be granted in the form of a stock option ("Option"), a stock
appreciation right ("SAR"), a stock award ("Stock Award"), or a
combination of an Option, a SAR, and/or a Stock Award.
The Board of Directors believes that additional shares of Common
Stock should be available for issuance by the Board from time to
time to Eligible Employees pursuant to the Long-Term Plan. As of
May 11, 1998, all of the currently authorized 1,000,000 shares of
Common Stock subject to stock incentives which may be granted
under the Long-Term Plan had been granted. Thus, the Board has
approved, and recommends the shareholders adopt, an amendment to
the Long-Term Plan which increases the number of shares of Common
Stock which the Board is authorized to issue thereunder from
1,000,000 to 2,000,000 shares.
The maximum amount of Common Stock with respect to which stock
incentives may be granted to any person during any calendar year
(the "Maximum Annual Grant") is 50,000 shares; provided, however,
that in the case of a grant made to a recipient upon the
recipient's initial hiring by the Company or in lieu of a cash
bonus, the Maximum Annual Grant is increased to 100,000 shares.
Shares of Common Stock subject to stock incentives granted under
the Long-Term Plan may be either authorized but unissued shares or
shares held in the Company's treasury, or any combination thereof,
in the discretion of the Committee. The number of shares of Common
Stock which may be granted under the Long-Term Plan as Stock
Awards in any calendar year may not exceed 25,000.
The Long-Term Plan is administered by the Committee which consists
of not less than three directors of the Company designated by the
Board of Directors in accordance with the Code of Regulations of
the Company; provided, however, that no director may be designated
as or continue to be a member of the Committee unless such
director is at the time of designation and service a
"disinterested person" within the meaning of Rule 16b-3 of the
Securities and Exchange Commission (or any successor provision at
the time in effect). Grants of stock incentives may be
recommended by the Committee either with or without consultation
with employees, but the Committee has full authority to act in the
matter of selection of all Eligible Employees and in recommending
stock incentives to be granted to them.
The Long-Term Plan may be amended by the Board of Directors upon
the recommendation of the Committee, provided that, without the
approval of the shareholders of the Company, no amendment shall be
made which (i) increases the maximum aggregate number of shares of
Common Stock that may be issued or transferred pursuant to stock
incentives, (ii) withdraws the administration of the Long-Term
Plan from the Committee or amends the provisions of the Long-Term
Plan with respect to eligibility and disinterest of members of
the Committee, (iii) permits any person who is not at the time an
Eligible Employee of the Company or of a subsidiary to be granted
a stock incentive, (iv) permits any Option to be exercised more
than ten years after the date it is granted, (v) amends the Long-
Term Plan to extend the date set forth therein for shareholder
approval or (vi) amends the provisions governing the amendment
process. However, the Board of Directors may by resolution,
adopted by a majority of the entire Board of Directors,
discontinue the Long-Term Plan. No amendment or discontinuance of
the Long-Term Plan by the Board of Directors or the shareholders
of the Company will, without the consent of the employee,
adversely affect any stock incentive previously granted to such
employee.
On May 11, 1998, the closing price of the Company's Common
Stock on the Nasdaq National Market was $7.13.
PROPOSAL TO ADOPT THE 1998 MEDPLUS, INC. EMPLOYEE STOCK
PURCHASE PLAN
As noted above, the Company's success in attracting,
motivating and retaining highly qualified employees is partially
due to its use of stock-based incentives. To date, the Company
has been using the Long-Term Plan to provide stock incentives to
key employees. However, in an effort to further motivate and
retain its current employees and to attract talented individuals,
the Company now believes that it is appropriate to adopt the 1998
MedPlus, Inc. Employee Stock Purchase Plan (the "1998 Plan").
On April 23, 1998, the Board of Directors approved, subject
to shareholder approval, the adoption of the 1998 Plan. The 1998
Plan will be submitted for shareholder approval at the Annual
Meeting. The full text of the 1998 Plan is attached as Exhibit A
to this Proxy Statement, and the following discussion is qualified
in its entirety by reference to Exhibit A.
In approving the 1998 Plan for submission to the Company's
shareholders, the Board of Directors recognized the changing
environment for the compensation of eligible employees. To
provide a flexible vehicle under which appropriate benefits can be
obtained by employees, the 1998 Plan permits employees to acquire
a proprietary interest in the Company through the purchase of
shares of the Company's Common Stock at a price which is the lower
of 85% of the closing price of the stock on the Offering
Commencement Date (as defined in the 1998 Plan) or the Offering
Termination Date (as defined in the 1998 Plan), subject to
additional restrictions described below and in Exhibit A.
The 1998 Plan will become effective on August 1, 1998 if
approved and adopted by the shareholders and shares subject to the
1998 Plan will be registered by the Company on a Registration
Statement on Form S-8. If the 1998 Plan is not approved by the
shareholders, the 1998 Plan will be of no force and effect. If
approved, the 1998 Plan will continue in existence until July 31,
2002, unless earlier terminated by the Board of Directors. The
Board of Directors may terminate the 1998 Plan at any time. In
addition, subject to the provisions of the 1998 Plan, a Committee
of the Board of Directors designated to administer the 1998 Plan
(the "1998 Plan Committee") shall have plenary authority in its
discretion to interpret and construe the provisions of the 1998
Plan and adopt rules and regulations for administering the 1998
Plan.
Subject to certain restrictions as to the number of shares
each employee may purchase under the 1998 Plan, any employee who
(1) is regularly scheduled to work more than 20 hours per week,
(2) has completed 90 days' employment and (3) is employed by the
Company on the date the employee's participation in the 1998 Plan
is to become effective will be eligible to participate in
offerings under the 1998 Plan which commence on or after such 90
day period has concluded. The Company currently has approximately
114 such employees. An eligible employee may become a participant
by authorizing a payroll deduction for such participation in
accordance with the 1998 Plan.
The 1998 Plan will be implemented by four annual offerings of
the Company's Common Stock beginning on the 1st day of August in
each of the years 1998, 1999, 2000 and 2001, each Offering (as
defined in the 1998 Plan) terminating on July 31 of the following
year, provided, however, that each annual Offering may, in the
discretion of the 1998 Plan Committee exercised prior to the
commencement thereof, be divided into two six-month Offerings
commencing, respectively, on August 1 of such year and February 1
of the following year and terminating on January 31 and July 31 of
the following year, respectively. The maximum number of shares
which may be issued under the 1998 Plan is 350,000. The number of
shares which may be issued in each Offering is indicated in detail
in Exhibit A hereto.
The Board of Directors shall have complete power and
authority to terminate or amend the 1998 Plan; provided, however,
that the Board of Directors shall not, without the approval of the
shareholders of the Corporation (i) increase the maximum number of
shares which may be issued under any Offering (except pursuant to
Section 12.04 of the 1998 Plan); (ii) amend the requirements as to
the class of employees eligible to purchase stock under the 1998
Plan or (iii) permit the members of the Committee to purchase
stock under the 1998 Plan. No termination, modification, or
amendment of the 1998 Plan may, without the consent of an employee
then having an option under the 1998 Plan to purchase stock,
adversely affect the rights of such employee under such option.
Federal Income Tax Consequences
It is the intention of the Company to have the 1998 Plan qualify
as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The 1998
Plan has been structured in order to meet the criteria of Section
423 of the Code. No taxable income for federal income tax
purposes results to an employee from the exercise of the option to
purchase shares of stock under the 1998 Plan. Any gain realized
on the sale of stock acquired through the 1998 Plan is considered
as capital gain for federal income tax purposes to an employee if
the stock has been held at least one year after it was acquired
and if at least two years have expired from the grant of the
option. Any appreciation is considered a long-term capital gain
to the employee if the stock was held longer than eighteen months
from the date of acquisition. The Company is not entitled to any
deduction for federal income tax purposes with respect to the
grant or exercise of any option under the 1998 Plan.
NEW PLAN BENEFITS
Except as reflected in the following table, no specific
determinations have been made or can be made in advance as to the
future recipients of stock incentives under the Long-Term Plan or
of benefits under the 1998 Plan. The table sets forth known
future grants under the Long-Term Plan and the 1998 Plan, if any.
The information in this table is subject to change in light of
facts and circumstances that may occur in the future but are not
presently known to the Company.
1994 Long Term 1998 Employee Stock
Stock Incentive Plan Purchase Plan
____________________ ___________________
Name and Position Dollar Value ($) Number of Units (1) Number of Units (1)
__________________ _________________ ____________________ ___________________
Richard A. Mahoney,
Chairman of the Board,
President and Chief
Executive Officer --(2) 200,000(3) --(4)
Gary L. Price,
Vice President, Sales -- -- --
Philip S. Present II,
Chief Operating Officer
and Director --(2) 50,000(5) --
Timothy P. McMullen,
Vice President, Sales
and Marketing -- -- --
Paul F. Albrecht,
Chief Technology Officer -- -- --
Executive Officer Group --(2) 250,000 --
Non-Executive Director Group -- -- --
Non-Executive Officer
Employee Group --(2) 65,000(6) --
__________________________
(1) Units referenced are of options.
(2) Due to the nature of options, the options listed cannot be
valued at this time.
(3) Mr. Mahoney is entitled to annual 50,000 share option grants
pursuant to his employment agreement. The term of the employment
agreement expires June 30, 2001. Such grants are subject to Mr.
Mahoney's continued employment with the Company. See "Executive
Compensation -- Employment Agreements." Of the 200,000 options to
be granted to Mr. Mahoney, the receipt of 50,000 options which
have been granted to Mr. Mahoney is contingent upon the approval
by the shareholders of the proposed amendment to the 1994 MedPlus,
Inc. Long-Term Stock Incentive Plan.
(4) Because Mr. Mahoney is the beneficial owner of greater than 5%
of the Company's outstanding common stock, he will be unable to
participate in the 1998 Plan in accordance with its terms.
(5) Mr. Present is entitled to a 50,000 share option grant if he
is elected President of the Company during his employment with the
Company. See "Executive Compensation - Employment Agreements."
(6) Of the 65,000 options to be granted to non-executive officer
employees, 60,000 are options which have been granted to such
employees contingent upon the approval by the shareholders of the
proposed amendment to the 1994 MedPlus, Inc. Long-Term Stock
Incentive Plan.
Approval by Shareholders
The resolution which will be introduced at the Annual Meeting
seeking approval of an amendment to the Long-Term Plan is as
follows:
RESOLVED, that Section 4(a) of the 1994 Long-Term Stock Incentive
Plan be amended to read in its entirety as follows:
"(a) The maximum aggregate number of shares of Common Stock
subject to Stock Incentives that may be granted to participants in
the Plan shall be 2,000,000. Shares of Common Stock subject to
Stock Incentives granted under this Plan may be either authorized
but unissued shares or shares held in the Company's treasury, or
any combination thereof, in the discretion of the Committee."
Adoption of the above resolution requires the affirmative vote of
the holders of a majority of the Company's Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote.
Proxies in the form solicited hereby which are returned to the
Company will be voted in favor of the resolutions unless otherwise
instructed by the shareholders. Abstentions and shares not voted
by brokers and other entities holding shares on behalf of
beneficial owners will have the same effect as votes cast against
the resolutions, provided such shares are properly present at the
meeting in person or by proxy.
The resolution which will be introduced at the Annual Meeting
seeking approval of the adoption of the 1998 Plan is as follows:
RESOLVED, that the MedPlus, Inc. 1998 Employee Stock Purchase Plan
be, and it hereby is, adopted in the form attached as Exhibit A to
the Proxy Statement relating to this Annual Meeting of
Shareholders.
Adoption of the above resolution requires the affirmative vote of
the holders of a majority of the Company's Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote.
Proxies in the form solicited hereby which are returned to the
Company will be voted in favor of the resolutions unless otherwise
instructed by the shareholders. Abstentions and shares not voted
by brokers and other entities holding shares on behalf of
beneficial owners will have the same effect as votes cast against
the resolutions, provided such shares are properly present at the
meeting in person or by proxy.
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 four most highly-compensated
executive officers, other than the Chief Executive Officer, whose
compensation exceeded $100,000 for all services rendered to the
Company in all capacities (the "named executives") during the last
fiscal year and who were serving in such capacity as of January
31, 1998:
SUMMARY COMPENSATION TABLE
Long Term Compensation
_______________________________________
Annual Compensation Awards
__________________________________ __________________________
Name and Other Annual Restricted Securities All Other
Principal Fiscal Compensa- Stock Underlying Compensa-
Position Year(1) Salary($) Bonus($) tion($) Awards($) Options(#) tion($)
_____________ _______ _________ ________ _____________ __________ __________ __________
Richard A. Mahoney, 1998 205,004 200,000 -- 4,015 50,000(1) --
Chairman of the
Board, President 1996 200,750 -- -- -- 100,000 --
and Chief Executive
Officer 1995 137,000 63,000 -- -- 50,000
Gary L. Price, 1998 132,541 68,088(2) -- 4,015 -- 21,420(3)
Senior Vice
President, 1996 112,500 95,461 -- -- -- --
Business
Development 1995 98,000 126,486 -- -- -- --
Timothy P. McMullen, 1998 149,583 28,262(2) -- -- 25,000(1) --
Vice President of
Sales and 1996 78,750 -- -- -- 50,000 --
Marketing
1995 -- -- -- -- -- --
Philip S. Present, 1998 151,649 100,000 -- -- --(1) --
II, Chief Operating
Officer and 1996 128,000 -- -- -- 30,000 --
Director
1995 69,000 -- -- -- 25,000 --
Paul F. Albrecht, 1998 96,667 -- -- -- 20,000(1) --
Vice President and
Chief Technology 1996 75,000 -- -- -- 15,000 --
Officer
1995 72,000 -- -- -- 10,000 --
_______________
(1) In December 1997, the Company changed its fiscal year end from
December 31 to January 31. Accordingly, the Company's 1998 fiscal
year commenced on February 1, 1997 and ended on January 31, 1998.
Information for the year ended January 31, 1998 is compared with
information for the years ended December 31, 1995 and December 31,
1996. During the period from January 1 through January 31, 1997,
Mr. Mahoney earned a salary of $24,750 and was granted 50,000
options, Mr. Price earned a salary of $16,500, Mr. McMullen earned
a salary of $11,250 and was granted 5,000 options, Mr. Present
earned a salary of $18,000 and was granted 25,000 options and Mr.
Albrecht earned a salary of $10,500 and was granted 1,500 options.
This information is not included in the table and no additional
compensation of any type was earned by the named executive
officers during that period.
(2) Amounts indicated represent commission payments.
(3) Amount indicated represents the forgiveness of a loan made to
Mr. Price in the amount of $21,420.
Stock Options
The following table sets forth information regarding stock options
granted to the named executives during fiscal year 1998:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
__________________________________________________________________
Number of % of Total
Securities Options Exercise
Underlying Granted to of Base Expira-
Options Employees in Price tion
Name Granted Fiscal year ($/Sh.) Date
_____________ ___________ ______________ _________ _____________
Richard A.
Mahoney 50,000(1) 19% 5.63 April 15, 2002
Gary L. Price -- -- -- --
Timothy P.
McMullen 25,000(2) 9% 6.31 May 15, 2002
Philip S.
Present II --(3) -- -- --
Paul F.
Albrecht 20,000(4) 7% 6.31 May 15, 2002
(1) During the period from January 1 through January 31, 1997, Mr.
Mahoney was granted 50,000 options at an exercise price of $5.13
per share which represents 29% of the total options granted to all
employees of the Company during such period. These options expire
January 7, 2002.
(2) During the period from January 1 through January 31, 1997, Mr.
McMullen was granted 5,000 options at an exercise price of $5.13
per share which represents 3% of the total options granted to all
employees of the Company during such period. These options expire
January 7, 2002.
(3) During the period from January 1 through January 31, 1997, Mr.
Present was granted 25,000 options at an exercise price of $5.13
per share which represents 15% of the total options granted to all
employees of the Company during such period. These options expire
January 7, 2002.
(4) During the period from January 1 through January 31, 1997, Mr.
Albrecht was granted 1,500 options at an exercise price of $5.13
per share which represents 1% of the total options granted to all
employees of the Company during such period. These options expire
January 7, 2002.
The following table sets forth information regarding stock options exercised by the named executives during
fiscal year 1998 and the value of unexercised in-the-money options held by the named parties as of January
31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at FY-End(#) Money Options at FY-End($)(1)
__________________________ _______________________________
Shares
Acquired on Value
Name Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
__________________ _________ ___________ ___________ ______________ ____________ _____________
Richard A. Mahoney -- -- 25,000 -- 521,500 --
Gary L. Price -- -- -- -- -- --
Timothy P. McMullen -- -- 11,667 68,333 6,768 85,532
Philip S. Present II -- -- 43,335 36,665 77,020 91,280
Paul F. Albrecht -- -- 12,167 34,333 2,030 57,600
___________________
(1) Based on the average high and low prices of the Company's
common stock on January 30, 1998.
Compliance with Section 16(a) of the Exchange Act
To the Company's knowledge, during fiscal year 1998, all
reports required to be filed under Section 16(a) of the Exchange
Act were filed in a timely manner.
Compensation of Directors
During the year ended January 31, 1998, 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 prior to his employment with the Company and (ii)
directors Paul J. Stein and Robert E. Kenny III were compensated
at the rate of $3,000 per meeting; $2,500 of each $3,000 payment
made to Messrs. Stein and Kenny represented forgiveness of amounts
due under promissory notes issued to the Company by Messrs. Stein
and Kenny for loans made to them by the Company to purchase shares
of the Company's Common Stock (outside directors are not
compensated for committee meetings that occur on the same date as
full Board meetings). 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 up to 50,000 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 and
Director, is employed pursuant to an employment agreement dated
January 1, 1998. The term of this agreement is 13 months. The
agreement provides for a base salary of $15,000 per month,
beginning in January 1998, 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, 1998 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
March 16, 1998. The term of this agreement is 6 months and it
provides for a base salary of $12,000 per month. 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.
Timothy P. McMullen, the Company's Vice President of Sales and
Marketing, is employed pursuant to an employment agreement dated
January 1, 1998. The term of this agreement is 13 months. The
agreement provides for a base salary of $13,333 per month,
beginning in January 1998, 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 the Company terminates Mr. McMullen's employment without
cause, he shall receive severance pay in the amount of three
months' salary.
Paul F. Albrecht, the Company's Chief Technology Officer, is
employed pursuant to an employment agreement dated January 1,
1998. The term of this agreement is 13 months. The agreement
provides for a base salary of $9,167 per month, beginning in
January 1998, plus bonuses payable based upon the attainment of
certain revenue and profitability criteria. 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.
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND OTHER
INFORMATION
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 and Director 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. Stein has
executed a promissory note payable to DiaLogos in the amount of
$44,000 for a 2% interest in DiaLogos, Mr. Mahoney and his spouse
have invested a total amount of $297,000 for an interest of 13.5%
of DiaLogos, Mr. Present has invested $44,000 for a 2% interest 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 and Director, 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.
The terms of the Agreement of Merger and Plan of
Reorganization pursuant to which the Company acquired UDMS in
December 1995 provided that the Company would not sell or merge
UDMS to or into an unaffiliated third party or sell its stock to
an unaffiliated third party without the prior consent of Jay
Hilnbrand, one of the prior shareholders of UDMS, General Manager
of UDMS and a director of the Company. When the Board of
Directors of the Company determined it would be in the best
interests of the Company to conduct an initial public offering of
UDMS' common stock (the "IPO"), the Company needed to obtain Mr.
Hilnbrand's consent. In accordance with that obligation, the
Company and Mr. Hilnbrand entered into an Agreement on May 15,
1997, subsequently amended December 10, 1997, pursuant to which
Mr. Hilnbrand agreed to consent to the IPO and the Company agreed
to pay to Mr. Hilnbrand $10,100 on the effective date of the IPO.
(A copy of this Agreement, as amended, was included as an Exhibit
to the Company's 1998 Annual Report on Form 10-KSB.)
When the Company acquired UDMS in December 1995, it also
acquired all the common stock of HWB, Inc., a company which was
affiliated with UDMS and of which Mr. Hilnbrand was a shareholder
("HWB"). A portion of the consideration paid by the Company for
the common stock of HWB was to be based on the revenues of UDMS
over a period of time (the "Earn-Out Consideration"). As a result
of the potential IPO, the Company and Mr. Hilnbrand have also
amended the Stock Purchase Agreement dated December 29, 1995
pursuant to which Mr. Hilnbrand sold to the Company all of the
common stock of HWB, Inc. owned by him. (A copy of this
Agreement, as amended, was included as an Exhibit to the Company's
1998 Annual Report on Form 10-KSB). The amendment provides that
if the IPO occurs, certain Earn-Out Consideration due Hilnbrand
could be earned by him over an extended period of time and a
portion of such consideration could be paid in the form of UDMS'
common stock instead of the Company's common stock.
In January 1998, the Company decided to sell the net assets of the
Step2000 segment of UDMS and is currently negotiating with
prospective buyers. The Company expects to complete the sale by
the end of December 1998. Jay Hilnbrand, General Manager of UDMS
and a director of the Company, has been acting on the Company's
behalf in identifying and negotiating with prospective buyers. It
is the intention of the Company to compensate Mr. Hilnbrand for
these efforts in the event the Company sells the Step2000 product
as a result of such efforts. At this time, the specific terms of
such compensation have not been finalized.
1999 SHAREHOLDER PROPOSALS
In order for any shareholder proposals for the 1999 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, Suite 100, Cincinnati, Ohio 45249, prior to
December 28, 1998.
SELECTION OF ACCOUNTANTS FOR FISCAL YEAR 1999
The Company will continue to retain the services of KPMG Peat
Marwick LLP, its outside accounting firm since 1994, for fiscal
year 1999. Representatives of KPMG Peat Marwick LLP are expected
to be present at the Annual Meeting, will have the opportunity to
make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
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
EXHIBIT A
_____________________
MEDPLUS, INC. EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I -- PURPOSE
1.01. Purpose
The MedPlus, Inc. Employee Stock Purchase Plan (the "Plan") is
intended to provide a method whereby Employees of MedPlus, Inc.
and its Subsidiary Corporations (hereinafter referred to, unless
the context otherwise requires, as the "Company") will have an
opportunity to acquire a proprietary interest in the Company
through the purchase of shares of the Common Stock of the
Company. It is the intention of the Company to have the Plan
qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The
provisions of the Plan shall be construed so as to extend and
limit participation in a manner consistent with the requirements
of that Section of the Code.
ARTICLE II -- DEFINITIONS
2.01. Base Pay
"Base Pay" means regular straight-time earnings excluding payments
for overtime, shift premium, bonuses and other special payments,
commissions and other marketing incentive payments.
2.02. Committee
"Committee" means the individuals described in Article XI.
2.03. Employee
"Employee" means any person who is customarily employed on a full-
time or part-time basis by the Company and is regularly scheduled
to work more than 20 hours per week.
2.04. Offering
"Offering" means each of the annual or six-month offerings of the
Company's Common Stock under the Plan.
2.05. Offering Commencement Date
"Offering Commencement Date" means the August 1 or February 1, as
the case may be, on which the particular Offering begins.
2.06. Offering Termination Date
"Offering Termination Date" means the January 31 or July 31, as
the case may be, on which the particular Offering terminates.
2.07. Subsidiary Corporation
"Subsidiary Corporation" means any present or future corporation
which (i) is a "subsidiary corporation", as that term is defined
in Section 424 of the Code, of the Company and (ii) is designated
by the Committee as an entity the employees of which shall be
entitled to participate in the Plan.
ARTICLE III -- ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility.
Any Employee who shall have completed 90 days' employment and
shall be employed by the Company on the date his participation in
the Plan is to become effective shall be eligible to participate
in Offerings under the Plan which commence on or after such 90
day period has concluded.
3.02. Leave of Absence.
For purposes of participation in the Plan, a person on leave of
absence shall be deemed to be an Employee for the first 90 days
of such leave of absence and such Employee's employment shall be
deemed to have terminated at the close of business on the 90th
day of such leave of absence unless such Employee shall have
returned to regular full-time or part-time employment (as the case
may be) prior to the close of business on such 90th day.
Termination by the Company of any Employee's leave of absence,
other than termination of such leave of absence on return to
full-time or part-time employment, shall terminate an Employee's
employment for all purposes of the Plan and shall terminate such
Employee's participation in the Plan and right to exercise any
option. 3.03. Restrictions on Participation. Notwithstanding any
provisions of the Plan to the contrary, no Employee shall be
granted an option to participate in the Plan:
(a) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock,
possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company (for purposes of this
paragraph, the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any Employee); or
(b) which permits his rights to purchase stock under all Code Sec.
423 employee stock purchase plans of the Company to accrue at a
rate which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar
year in which such option is outstanding.
3.04. Commencement of Participation.
An eligible Employee may become a participant by completing an
authorization for a payroll deduction on the form provided by the
Company and filing it with the Committee on or before the date set
therefor by the Committee, which date shall be prior to the
Offering Commencement Date for the Offering. Payroll deductions
for a participant shall commence on the applicable Offering
Commencement Date when his authorization for a payroll deduction
becomes effective and shall end on the Offering Termination Date
of the Offering to which such authorization is applicable unless
sooner terminated by the participant as provided in Article VIII.
ARTICLE IV -- OFFERINGS
4.01. Annual Offerings.
The Plan will be implemented by four annual Offerings of the
Company's Common Stock beginning on the 1st day of August in each
of the years 1998, 1999, 2000 and 2001, each Offering terminating
on July 31 of the following year, provided, however, that each
annual Offering may, in the discretion of the Committee exercised
prior to the commencement thereof, be divided into two six-month
Offerings commencing, respectively, on August 1 of such year and
February 1 of the following year and terminating on January 31 and
July 31 of the following year, respectively. The maximum number of
shares issued in the respective years shall be:
- - From August 1, 1998 to July 31, 1999: 50,000 shares.
- - From August 1, 1999 to July 31, 2000: 75,000 shares plus
unissued shares from the prior Offerings, whether offered or not.
- - From August 1, 2000 to July 31, 2001: 100,000 shares plus
unissued shares from the prior Offerings, whether offered or not.
- - From August 1, 2001 to July 31, 2002: 125,000 shares plus
unissued shares from the prior Offerings, whether offered or not.
If a six-month Offering is made, the maximum number of shares to
be issued shall be one-half of the number of shares set forth for
the annual period in which the six-month Offering falls, plus, if
the Offering is a February 1 to July 31 Offering, unissued
shares, whether offered or not, from the immediately preceding
six-month Offering.
ARTICLE V -- PAYMENTS FOR STOCK
5.01. Method of Payment.
Unless otherwise determined by the Committee, the method of
contribution to the Plan shall be by regular payroll deduction as
provided below. The Committee shall have the authority to
establish such other methods of contribution to the Plan as it
deems reasonable and appropriate under the circumstances.
5.02. Amount of Deduction.
At the time a participant files his authorization for payroll
deduction, he shall elect to have deductions made from his pay on
each payday during the time he is a participant in an Offering at
the rate of 1% to 10%, in increments of 1%, of his Base Pay in
effect at the Offering Commencement Date of such Offering. In the
case of a part-time hourly Employee, such Employee's Base Pay
during an Offering shall be determined by multiplying such
Employee's hourly rate of pay in effect on the Offering
Commencement Date by the number of regularly scheduled hours of
work for such Employee during such Offering.
5.03. Participant's Account.
All payroll deductions made for a participant shall be credited to
his account under the Plan. A participant may not make any
separate cash payment into such account except when on leave of
absence and then only as provided in Section 5.04.
5.04. Changes in Payroll Deductions.
A participant may discontinue his participation in the Plan as
provided in Article VIII, but no other change can be made during
an Offering and, specifically, a participant may not alter the
amount of his payroll deductions for that Offering.
5.05. Leave of Absence.
If a participant goes on a leave of absence, such participant
shall have the right to elect: (a) to withdraw the balance in his
or her account pursuant to Section 7.02, (b) to discontinue
contributions to the Plan but remain a participant in the Plan,
or remain a participant in the Plan during such leave of absence,
authorizing deductions to be made from payments by the Company to
the participant during such leave of absence and undertaking to
make cash payments to the Plan at the end of each payroll period
to the extent that amounts payable by the Company to such
participant are insufficient to meet such participant's
authorized Plan deductions.
ARTICLE VI -- GRANTING OF OPTION
6.01. Number of Option Shares.
On the Commencement Date of each Offering, a participating
Employee shall be deemed to have been granted an option to
purchase a maximum number of shares of the stock of the Company
equal to an amount determined as follows: an amount equal to (i)
that percentage of the Employee's Base Pay which he has elected
to have withheld (but not in any case in excess of 10%) multiplied
by (ii) the Employee's Base Pay during the period of the Offering
and divided by (iii) 85% of the market value of the stock of the
Company on the applicable Offering Commencement Date. The market
value of the Company's stock shall be determined as provided in
paragraphs (a) and (b) of Section 6.02 below. An Employee's Base
Pay during the period of an Offering shall be determined by
multiplying, in the case of a one-year Offering, his normal weekly
rate of pay (as in effect on the last day prior to the
Commencement Date of the particular Offering) by 52 or the hourly
rate by 2,080 or, in the case of a six-month Offering, by 26 or
1040, as the case may be, provided that, in the case of a part-
time hourly Employee, the Employee's Base Pay during the period of
an Offering shall be determined by multiplying such Employee's
hourly rate by the number of regularly scheduled hours of work
for such Employee during such Offering.
6.02. Option Price.
The option price of stock purchased with payroll deductions made
during such Offerings for a participant therein shall be the lower
of:
(a) 85% of the closing price of the stock on the Offering
Commencement Date or the nearest prior business day on which
trading occurred on the Nasdaq National Market; or
(b) 85% of the closing price of the stock on the Offering
Termination Date or the nearest prior business day on which
trading occurred on the Nasdaq National Market.
ARTICLE VII -- EXERCISE OF OPTION
7.01. Automatic Exercise.
Unless a participant gives written notice to the Company as
hereinafter provided, his option for the purchase of stock with
payroll deductions made during any Offering will be deemed to have
been exercised automatically on the Offering Termination Date
applicable to such Offering, for the purchase of the number of
full shares of stock which the accumulated payroll deductions in
his account at that time will purchase at the applicable option
price (but not in excess of the number of shares for which options
have been granted to the Employee pursuant to Section 6.01), and
any excess in his account at that time will be returned to him.
7.02. Withdrawal of Account.
By written notice to the Committee, at any time prior to the
Offering Termination Date applicable to any Offering, a
participant may elect to withdraw all the accumulated payroll
deductions in his account at such time.
7.03. Fractional Shares.
Fractional shares will not be issued under the Plan and any
accumulated payroll deductions which would have been used to
purchase fractional shares will be returned to any Employee
promptly following the termination of an Offering, without
interest.
7.04. Transferability of Option.
During a participant's lifetime, options held by such participant
shall be exercisable only by that participant.
7.05. Delivery of Stock.
As promptly as practicable after the Offering Termination Date of
each Offering, the Company will deliver to each participant, as
appropriate, the stock purchased upon exercise of his option.
ARTICLE VIII -- WITHDRAWAL
8.01. In General.
As indicated in Section 7.02, a participant may withdraw payroll
deductions credited to his account under the Plan at any time by
giving written notice to the Committee. All of the participant's
payroll deductions credited to his account will be paid to him
promptly after receipt of his notice of withdrawal, and no
further payroll deductions will be made from his pay during such
Offering. The Company may, at its option, treat any attempt to
borrow by an Employee on the security of his accumulated payroll
deductions as an election, under Section 3.02, to withdraw such
deductions.
8.02. Effect on Subsequent Participation.
A participant's withdrawal from any Offering will not have any
effect upon his eligibility to participate in any succeeding
Offering or in any similar plan which may hereafter be adopted by
the Company.
8.03. Termination of Employment.
Upon termination of the participant's employment for any reason,
including retirement (but excluding death while in the employ of
the Company or continuation of a leave of absence for a period
beyond 90 days), the payroll deductions credited to his account
will be returned to him, or, in the case of his death subsequent
to the termination of his employment, to the person or persons
entitled thereto under Section 12.01.
8.04. Termination of Employment Due to Death.
Upon termination of the participant's employment because of his
death, his beneficiary (as defined in Section 12.01) shall have
the right to elect, by written notice given to the Committee
prior to the earlier of the Offering Termination Date or the
expiration of a period of 60 days commencing with the date of the
death of the participant, either: (a) to withdraw all of the
payroll deductions credited to the participant's account under
the Plan, or (b) to exercise the participant's option for the
purchase of stock on the Offering Termination Date next following
the date of the participant's death for the purchase of the
number of full shares of stock which the accumulated payroll
deductions in the participant's account at the date of the
participant's death will purchase at the applicable option price,
and any excess in such account will be returned to said
beneficiary, without interest. In the event that no such written
notice of election shall be duly received by the Committee, the
beneficiary shall automatically be deemed to have elected,
pursuant to paragraph (b), to exercise the participant's option.
8.05. Leave of Absence.
A participant on leave of absence shall, subject to the election
made by such participant pursuant to Section 5.04, continue to be
a participant in the Plan so long as such participant is on
continuous leave of absence. A participant who has been on leave
of absence for more than 90 days and who therefore is not an
Employee for the purpose of the Plan shall not be entitled to
participate in any Offering commencing after the 90th day of such
leave of absence. Notwithstanding any other provisions of the
Plan, unless a participant on leave of absence returns to regular
full-time or part-time employment with the Company at the earlier
of: (a) the termination of such leave of absence or (b) three
months from the 90th day of such leave of absence, such
participant's participation in the Plan shall terminate on
whichever of such dates first occurs.
ARTICLE IX -- INTEREST
9.01. Payment of Interest.
No interest will be paid or allowed on any money paid into the
Plan or credited to the account of any participant Employee.
ARTICLE X -- STOCK
10.01. Maximum Shares.
The maximum number of shares which shall be issued under the Plan,
subject to adjustment upon changes in capitalization of the
Company as provided in Section 12.04 shall be 125,000 shares in
each annual Offering (62,500 shares in each six-month Offering)
plus in each Offering all unissued shares from prior Offerings,
whether offered or not, not to exceed 350,000 shares for all
Offerings. If the total number of shares for which options are
exercised on any Offering Termination Date in accordance with
Article VI exceeds the maximum number of shares for the
applicable Offering, the Company shall make a pro rata allocation
of the shares available for delivery and distribution, and the
balance of payroll deductions credited to the account of each
participant under the Plan shall be returned to him as promptly
as possible.
10.02. Participant's Interest in Option Stock.
The participant will have no interest in stock covered by his
option until such option has been exercised.
10.03. Registration of Stock.
Stock to be delivered to a participant under the Plan will be
registered in the name of the participant, or, if the participant
so directs by written notice to the Committee prior to the
Offering Termination Date applicable thereto, in the names of the
participant and one such other person as may be designated by the
participant, as joint tenants with rights of survivorship or as
tenants by the entireties, to the extent permitted by applicable
law.
10.04. Restrictions on Exercise.
The Board of Directors may, in its discretion, require as
conditions to the exercise of any option that the shares of
Common Stock reserved for issuance upon the exercise of the
option shall have been duly listed, upon official notice of
issuance, upon a stock exchange, and that either: (a) a
Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective, or (b)
the participant shall have represented at the time of purchase, in
form and substance satisfactory to the Company, that it is his
intention to purchase the shares for investment and not for
resale or distribution.
ARTICLE XI -- ADMINISTRATION
11.01. Appointment of Committee.
The Board of Directors shall appoint a committee (the "Committee")
to administer the Plan, which shall consist of no fewer than
three members of the Board of Directors. No member of the
Committee shall be eligible to purchase stock under the Plan.
11.02. Authority of Committee.
Subject to the express provisions of the Plan, the Committee shall
have plenary authority in its discretion to interpret and
construe any and all provisions of the Plan, to adopt rules and
regulations for administering the Plan, and to make all other
determinations deemed necessary or advisable for administering
the Plan. The Committee's determination on the foregoing matters
shall be conclusive.
11.03. Rules Governing the Administration of the Committee.
The Board of Directors may from time to time appoint members of
the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in
the Committee. The Committee may select one of its members as its
Chairman and shall hold its meetings at such times and places as
it shall deem advisable. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be
made by a majority of its members. The Committee may correct any
defect or omission or reconcile any inconsistency in the Plan in
the manner and to the extent it shall deem desirable. Any
decision or determination reduced to writing and signed by a
majority of the members of the Committee shall be as fully
effective as if it had been made by a majority vote at a meeting
duly called and held. The Committee may appoint a secretary and
shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
ARTICLE XII -- MISCELLANEOUS
12.01. Designation of Beneficiary.
A participant may file a written designation of a beneficiary who
is to receive any stock and/or cash. Such designation of
beneficiary may be changed by the participant at any time by
written notice to the Committee. Upon the death of a participant
and upon receipt by the Company of proof of identity and
existence at the participant's death of a beneficiary validly
designated by him under the Plan, the Company shall deliver such
stock and/or cash to such beneficiary. In the event of the death
of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such stock and/or
cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such stock and/or cash to the spouse or
to any one or more dependents of the participant as the Company
may designate. No beneficiary shall, prior to the death of the
participant by whom he has been designated, acquire any interest
in the stock or cash credited to the participant under the Plan.
12.02. Transferability.
Neither payroll deductions credited to a participant's account nor
any rights with regard to the exercise of an option or to receive
stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by
will or the laws of descent and distribution. Any such attempted
assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an
election to withdraw funds in accordance with Section 7.02.
12.03. Use of Funds.
All payroll deductions received or held by the Company under this
Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll
deductions.
12.04. Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding shares
of Common Stock of the Company have increased, decreased, changed
into, or been exchanged for a different number or kind of shares
or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock
split or similar transaction, appropriate and proportionate
adjustments may be made by the Committee in the number and/or
kind of shares which are subject to purchase under outstanding
options and on the option exercise price or prices applicable to
such outstanding options. In addition, in any such event, the
number and/or kind of shares which may be offered in the
Offerings described in Article IV hereof shall also be
proportionately adjusted. No adjustments shall be made for stock
dividends. For the purposes of this Paragraph, any distribution
of shares to shareholders in an amount aggregating 20% or more of
the outstanding shares shall be deemed a stock split and any
distributions of shares aggregating less than 20% of the
outstanding shares shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or
more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all of the
property or stock of the Company to another corporation, the
holder of each option then outstanding under the Plan will
thereafter be entitled to receive at the next Offering
Termination Date upon the exercise of such option for each share
as to which such option shall be exercised, as nearly as
reasonably may be determined, the cash, securities and/or
property which a holder of one share of the Common Stock was
entitled to receive upon and at the time of such transaction. The
Board of Directors shall take such steps in connection with such
transactions as the Board shall deem necessary to assure that the
provisions of this Section 12.04 shall thereafter be applicable,
as nearly as reasonably may be determined, in relation to the
said cash, securities and/or property as to which such holder of
such option might thereafter be entitled to receive.
12.05. Amendment and Termination.
The Board of Directors shall have complete power and authority to
terminate or amend the Plan; provided, however, that the Board of
Directors shall not, without the approval of the stockholders of
the Corporation (i) increase the maximum number of shares which
may be issued under any Offering (except pursuant to Section
12.04); (ii) amend the requirements as to the class of employees
eligible to purchase stock under the Plan or (iii) permit the
members of the Committee to purchase stock under the Plan. No
termination, modification, or amendment of the Plan may, without
the consent of an Employee then having an option under the Plan
to purchase stock, adversely affect the rights of such Employee
under such option.
12.06. Effective Date.
The Plan shall become effective as of August 1, 1998 if approved
by the holders of a majority of the Common Stock present in
person or by proxy at a special or annual meeting of the
shareholders held on or before June 30, 1998. If the Plan is not
so approved, the Plan shall not become effective.
12.07. No Employment Rights.
The Plan does not, directly or indirectly, create any right for
the benefit of any Employee or class of employees to purchase any
shares under the Plan, or create in any Employee or class of
employees any right with respect to continuation of employment by
the Company, and it shall not be deemed to interfere in any way
with the Company's right to terminate, or otherwise modify, an
Employee's employment at any time.
12.08. Effect of Plan.
The provisions of the Plan shall, in accordance with its terms, be
binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without
limitation, such Employee's estate and the executors,
administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of
such Employee. 12.09. Governing Law. The law of the State of
Ohio will govern all matters relating to this Plan except to the
extent it is superseded by the laws of the United States.
MEDPLUS, INC.
FORM OF PROXY
______________________
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 June 25, 1998
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, PHILIP S. PRESENT II
2. APPROVAL OF AN AMENDMENT TO THE 1994 LONG-TERM STOCK INCENTIVE
PLAN INCREASING THE TOTAL NUMBER OF SHARES OF THE COMPANY'S COMMON
STOCK SUBJECT TO GRANTS THEREUNDER FROM 1 MILLION SHARES TO 2
MILLION SHARES.
FOR approval of the amendment. ________ WITHHOLD AUTHORITY
3. APPROVAL OF THE MEDPLUS, INC. EMPLOYEE STOCK PURCHASE PLAN
FOR approval of the Plan. ________ WITHHOLD AUTHORITY
4. 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: _________________, 1998