U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to
Commission file number: Z-24196
MEDPLUS, INC.
(Name of small business issuer in its charter)
OHIO 48-1094982
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8805 Governor's Hill Drive, Suite 100, Cincinnati OH 45249
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 513-583-0500
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
(Cover Page continued on Page 2)
The Company's revenues from continuing operations for its fiscal
year ended January 31, 2000 were $12,537,895.
The aggregate market value of the voting stock held by non-
affiliates of the Company as of April 20, 2000 was $17,701,892,
based on the average bid and ask price of such stock on that date
as reported on the Nasdaq National Market.
As of April 26, 2000, 6,215,232 shares of the Company's no par
value common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company's Proxy Statement for the Annual Meeting
of Shareholders to be held on June 27, 2000 are incorporated by
reference into Part III of this Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
Yes ________ No X
INTEGRATED REPORTS TO SECURITY HOLDERS
Pursuant to General Instruction F of Form 10-KSB and Regulation
240.14a(d) of the Securities Exchange Act of 1934, the Company's
Annual Report to Security Holders for its fiscal year ended
January 31, 2000 has been combined with the required information
of Form 10-KSB and is being filed with the U.S. Securities and
Exchange Commission and submitted to the registrant's shareholders
on an integrated basis.
A list of the exhibits to this Form 10-KSB is included in Part III
hereof under the caption "Exhibits and Reports on Form 8-K."
MedPlus, Inc. will provide a copy of any such exhibit to any of
its shareholders upon written request and payment of a copying
charge of $.10 per page. Requests for copies should be directed
to: Investor Relations, MedPlus, Inc., 8805 Governor's Hill
Drive, Suite, 100, Cincinnati, Ohio 45249.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
NOTE REGARDING FORWARD LOOKING STATEMENTS: This Report contains
forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements involve
risks and uncertainties, including, among other things, statements
regarding the Company's anticipated business strategies and
partnerships, plans for funding of operations, financial costs and
expenses and HIPAA compliance issues. Actual Company results may
differ significantly from those described herein. Factors within
and without the Company's control that might affect such results
include, but are not limited to, those discussed in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Forward Looking Statements." Statements made in this
document are made only as of the date hereof and shareholders and
others are strongly advised to review updated information
regarding the status of the Company's business contained in the
Company's press releases and periodic reports, such as Reports on
Forms 10-QSB and 8-K, filed from time to time with the SEC.
General
MedPlus[R], Inc. (the "Company") is a provider of web-based
information technology and workflow solutions that enable health
care providers and others the ability to access and manage
information efficiently and cost effectively. The Company
classifies its business in two operating segments: (1) Health Care
Solutions and (2) Workflow and Content Management.
Health Care Solutions: The Company's health care related products
consist of web-based and stand-alone enterprise-wide electronic
private health record systems, optical document archival and
retrieval systems and process improvement and automation services,
primarily in the area of patient care and laboratory services. The
Company's products and services provide its customers with timely
access to the most valuable asset in health care: vital patient
clinical and demographic information, available at the critical
instant a diagnostic or treatment decision is made. The Company's
products and consulting services are designed to allow health care
providers to achieve quality and productivity enhancements quickly
and easily while containing costs.
Workflow and Content Management: The Company's Universal Document
Management Systems, Inc. subsidiary (Universal Document) develops
and sells Step2000[R], a workflow content management and
application development software product that coordinates the
utilization of information on an enterprise-wide basis. Universal
Document serves customers in a variety of industries through value
added resellers and OEMs.
In March 2000, the Company completed the sale of its majority
interest in DiaLogos Incorporated, its education subsidiary, for
$300,000, a two-year $450,000 note and a warrant to purchase 10%
of the outstanding shares of the entity.
In January 1998, the Company completed the sale of all the assets
of its IntelliCode division to Becton, Dickinson and Company for
approximately $17.3 million plus royalty payments over five years.
The Company was incorporated in 1991. The Company's principal
executive offices are located at 8805 Governor's Hill Drive, Suite
100, Cincinnati, Ohio, 45249 and its Web site address is
www.medplus.com. The Company's telephone number is (513) 583-
0500.
Industry Background
Over 90% of the Company's fiscal 2000 revenues were related to the
health care industry. The Company's remaining revenues were
derived from manufacturing, engineering, pharmaceutical and
technology markets. Fortune 500 companies represented the
predominance of customers in these other markets and the Company
did not rely on any one customer or market for these remaining
revenues.
The health care industry continues to be subject to the pressures
of various regulatory, operational, technological and economic
factors creating the need for better information systems and
processes. Over the past few years, many institutions within the
industry were focused on ensuring that their existing systems were
Year 2000 compliant and, as a result, did not focus on creating a
stronger technological infrastructure. Because Year 2000
compliance has by now been addressed by most institutions and is
no longer the primary focus of their information technology
resources, the Company believes that many health care institutions
will begin investing in technology and systems to address their
information and efficiency needs.
Regulatory. A major issue facing health care institutions is
compliance with the proposed Health Insurance Portability and
Accountability Act of 1996 (HIPAA). These rules dictate security
standards that must be adopted by all health care organizations
that capture and transmit specific types of data. As a result of
HIPAA, a significant number of health care providers across the
United States must adopt a new approach to guaranteeing the
confidentiality and privacy of the patient record. As a result,
the proposed HIPAA regulations will have a very significant impact
on capital spending in health care over the next few years.
In addition, various regulations from the Department of Justice
and the Federal Trade Commission dictate how physician groups can
negotiate with managed care companies and will require the
integration of clinical data at physician practices. The health
care industry is also regulated by the Joint Commission for
Accreditation of Healthcare Organizations (JCAHO), which is
responsible for accrediting all hospitals. JCAHO has imposed
specific information management requirements for accreditation.
Most of these requirements mandate performance levels difficult to
achieve without integration of disparate systems. The Company's
products and services are specifically designed to help providers
comply with these requirements.
Operational. Hospitals and other health care organizations
comprise numerous departments, such as accounting, laboratory,
radiology, pharmacy, medical records, business office and
clinical. The information management requirements of these
departments are very distinct. To the extent that computerized
systems have been purchased, most hospitals have historically
acquired a collection of separate, stand-alone information systems
for their various departments. Moreover, even within a particular
systems category, such as the laboratory, there are no system
standards. Numerous vendors sell proprietary systems that often
are not directly compatible with either competitive systems or the
systems of other departments.
Physicians lack timely access to critical clinical data at the
point of care when diagnosis and treatment decisions are made.
This issue can create unnecessary testing, misdiagnoses, improper
treatments, increased length of stay at acute care facilities,
administration of ineffective medications and adverse drug
reactions.
Technological. One of the most critical issues facing health care
today is the existence of multiple vendor legacy systems that are
not integrated within a hospital, much less within an integrated
delivery network. In addition to significant HIPAA compliance
challenges presented by this lack of integration, accessing
clinical and demographic information on a patient-centric versus
organization-centric basis is almost impossible. Hospitals need
to be able to integrate patient-centric data with their current
legacy systems - regardless of their legacy system vendors - so
they can benefit from an "open system" and capture data in a
format that can be easily accessed by physicians and
administrators.
In the past year, the introduction of application service
providers (ASP) in health care has created the opportunity for
remote Internet access to third party software. This "ASP model"
of information management will lower the cost of information
technology and provide access to applications previously
unaffordable. The availability of portals will provide
connectivity among payors, physicians, providers and consumers and
offer entities the opportunity to increase market share and
provide customer satisfaction through effective branding and
product/service differentiation via the Internet.
Economic. Rising health care costs in the United States have
caused significant changes in the health care industry. Managed
care organizations such as health maintenance organizations,
preferred providers and independent physician associations, as
well as other payers, have developed alternative payment models to
control costs, including procedure-based cost limitations,
contractually approved providers and capitation (a fixed monthly
fee for members as payment for all required services). The result
has been a continuing shift of financial risk from the payers to
both the physician/provider and the institutional provider
(hospitals, clinics, long-term care facilities, acute providers
and rehabilitative care centers). In response, health care
organizations are aligning themselves with one another in order to
form integrated delivery systems in an effort to lower costs and
compete more effectively in the changing health care environment.
The economic viability of many providers will depend upon their
ability to continue to provide quality health care services while
dramatically cutting costs and increasing productivity. The
delivery of health care services is both labor and information
intensive because the functions of tracking, organizing,
retrieving, evaluating and generally managing the high volume of
health care data that providers generate are essential to any
provider. Compared to other industries, however, the health care
industry has been slow to automate its information management
needs.
Products and Services
Health Care Solutions
The products and services in the Company's Health Care Solutions
segment consist of (1) the E-Maxx[TM] Enterprise-Wide Private
Health Record System, a web-enabled operational data store; (2)
the ChartMaxx[TM] Enterprise-Wide Private Health Record System, a
computerized enterprise-wide electronic private health record
system; (3) the OptiMaxx[R] Archival System, an automated data
storage and retrieval system; and (4) FutureCORE[R], Inc., a
consulting services division. The Company designed its products
with open architecture and modular functionality, allowing them to
be compatible with most existing systems to which they will
interface without requiring any support or cooperation from the
systems vendors. By designing products to be entirely independent
of, but compatible with, other system vendors, potential customer
acceptance of the Company's products is not limited in any way by
a customer's existing information system configurations. As a
result, the Company's ability to market its products generally is
not subject to the cooperation of third party systems vendors.
E-Maxx Enterprise-Wide Private Health Record System
E-Maxx is the web-enabled version of the Company's ChartMaxx
system. E-Maxx allows clinicians with Internet access to perform
chart functions, such as chart completion, and have access to
historical charts from any location using a Netscape Navigator or
Internet Explorer Web browser. E-Maxx allows participating
physicians to gain real time Web access to critical patient
information located at hospitals, clinics or their offices. It
also provides the highest levels of security currently offered in
the marketplace and allows for the secure exchange of information
among parties.
In December 1999, the Company and Quest Diagnostics Incorporated
executed a five year license agreement, using a transaction-based
pricing model, allowing Quest Diagnostics to use the E-Maxx system
to transmit and receive laboratory data. Quest Diagnostics is the
nation's leading provider of diagnostic testing, information and
services to over 180,000 physician customers. In January 2000,
the Company executed a $2.5 million licensing agreement with
Cybear, Inc., a leading E-Health care connectivity, applications
and portal provider, to provide user access to the E-Maxx system
over the Internet.
ChartMaxx Enterprise-Wide Private Health Record System
The ChartMaxx system is an enterprise-wide electronic private
health system that combines multiple technical and functional
approaches to computer-based patient record development. The
Company has installed, or is currently installing, the ChartMaxx
system at over 20 customer sites nationwide.
Specifically, ChartMaxx is an integrated software and hardware
platform which:
- - creates complete, digital medical records that meet
administrative and legal requirements;
- - manages multimedia digital data (structured and unstructured)
in both report-oriented and discreet data element formats;
- - manages scanned documents (imaging);
- - manages workflow and the work processes associated with health
information management;
- - builds a data repository based on an SQL (an industry standard)
database and mass storage;
- - forms a system that has both enterprise-wide and remote
connections;
- - provides application software to further automate the medical
records and patient accounts departments;
- - may be used by providers of care and other health care staff
members; and
- - facilitates communication of clinical information within the
health care organization and to external sources.
OptiMaxx Archival System
The Company offers an optical disk storage and retrieval system
under the name "OptiMaxx" specially customized for hospitals,
medical practices and other health care providers. It consists of
hardware (optical drives, disk "jukeboxes" and personal computers)
and software, purchased from third party vendors, which are
combined with the Company's proprietary software in a manner that
provides specific benefits to health care industry users. The
OptiMaxx system permits the automatic storage of information to an
optical disk. Previously, this information would have been
printed out and stored as paper or on microfilm/microfiche.
OptiMaxx can also scan and manage existing paper documents.
OptiMaxx has been installed and is operational at over 120
customer sites to date.
Specifically, OptiMaxx provides in a single system:
- - information collected from a variety of information systems
without the need for a complex interface or programming expertise;
- - scanned documents or images;
- - instant access to information for ad hoc query and analysis;
- - a simple, common user interface for searching and retrieving
information regardless of origin; and
- - ability to fax, print or e-mail search results.
A key feature of OptiMaxx is its ability to capture data directly
from existing computer information systems without special
software, other interfaces or any data manipulation. Most optical
storage systems must have the "host" information system computer
configure files in a specific manner or convert the electronic
format of the outgoing data into a particular format, often
proprietary, which the optical system can then recognize and use
when the data is received. OptiMaxx, which was designed to act as
a system peripheral (such as a printer), can work with most host
systems without the need for data configuration by the host
system. Every host system must have the capacity to output data
to a printer, and OptiMaxx can accept any such output "as is"
without any special treatment by the host system. Moreover,
OptiMaxx itself does not convert or change the incoming data.
OptiMaxx stores the data and can retrieve it in its native format,
without conversion.
During fiscal 1999, the Company entered into an agreement to
license a customized version of OptiMaxx to be used in certain
Quest Diagnostics laboratory facilities. This agreement is unique
because it combines the functionality of the OptiMaxx system with
the workflow documentation system created by Universal Document.
FutureCORE
FutureCORE provides the Company's customers with access to
consultants who can analyze customers' information systems and
provide process improvement methodologies in laboratories,
physician offices, hospitals, major health care instrumentation
firms and integrated delivery networks. Thus, the Company has the
unique advantage of being able to assist health care providers re-
engineer their existing processes while implementing the Company's
product line so as to maximize a customer's return on its
investment (ROI) in technology. Specifically, FutureCORE's
"Check-Up" service includes an on-site operational analysis to
assist clients in implementing process improvements and an ROI
analysis that documents available cost savings by implementing
FutureCORE's recommended process improvements and ChartMaxx and
OptiMaxx products and services.
Workflow and Content Management
Universal Document offers workflow and content management products
(including "Step2000[R] ") and consulting services related to
those products. Step2000 is the only development solution that
provides totally integrated workflow, content management and
application development power with a "one click" Web deployment
capability that facilitates electronic business to business
applications. It enables developers to create and deploy
workflow-enabled application solutions easily and quickly
throughout the enterprise. Universal Document boasts a solid base
of Fortune 500 clients including Mercedes-Benz, Marathon Oil,
Boeing North American, Inc. (formerly Rockwell International Space
Systems Division), PPG Industries, Sears and many others.
Customer Support
The Company focuses on providing its customers with the highest
level of customer support, which is necessary to attract and
retain its valued customer base. The Company prides itself on a
highly qualified support staff, each of whom has the level of
technical expertise required to handle a diverse range of support-
related challenges. Customers with questions regarding the
Company's products and services may contact our call desk 24 hours
a day, 7 days a week, to receive a prompt response to their
support needs.
Strategy
The Company's strategies vary by segment, based upon each
segment's goals and initiatives:
Health Care Solutions: The Company has focused much of its
strategy on becoming a leading provider of E-Health, business to
business services within the next 2-3 years. As a result of its
recently announced five-year contract with Quest Diagnostics,
participating physicians will be able to enter laboratory orders
and receive results via the Web. In addition, physicians will
have the opportunity to access medical records from their homes or
offices, including clinical results and patient information
received from hospitals and clinics.
Management of the Company believes it is uniquely well positioned
to succeed in this sector of the health care industry because:
1. With its current product offering and business partnerships,
the Company can rapidly deploy this solution to physician offices,
hospitals, laboratories and clinics. The E-Maxx solution has the
ability to reduce sales cycles, expedite the completion of
interfaces to disparate systems and provide significant cost
savings to hospitals and laboratories for the distribution of
clinical information to physicians.
2. Many health care organizations can save millions of dollars by
implementing the ChartMaxx product. The ChartMaxx system provides
an extremely unique and cost effective approach to complying with
proposed HIPAA regulations. In addition, this solution can be used
to assist physicians comply with Federal statutes relating to
managed care contracts by providing the clinical integration
required by these agencies.
3. The patient-centric, data repository capabilities of E-Maxx and
ChartMaxx provide the foundation for capturing essential clinical
data on an enterprise-wide basis. Aggregating this information on
a patient-centric versus organization centric basis with a
longitudinal view of this data solves critical issues for
physicians, providers, payors, pharmaceutical companies and
patients (consumers).
4. The Company's ASP business model also provides an Internet
branding capability for health care organizations to use in their
E-commerce strategies. Creating virtual private networks using the
ChartMaxx product as the repository of enterprise-wide clinical
information provides exceptional opportunities for organizational
branding and market differentiation.
5. The ability to integrate clinical information from disparate
systems is a significant advantage the Company enjoys over its
competitors, as are the quality of its imaging systems and its
ability to assist providers with HIPAA compliance issues.
With the evolution of technology, specifically the Internet and
ISP/ASP models, information technology solutions in health care
will change dramatically. Health care organizations will have a
variety of options to choose from in selecting solutions, and the
monolithic vendors attempting to provide all applications will be
severely challenged by "best of breed" solutions. Accordingly, the
Company believes that its ability to provide physicians and
administrators with access to critical clinical data on a patient-
centric and HIPAA compliant basis is a solution that will provide
strategic and financial benefits to prospective customers.
In addition to its E-Health focus, the Company plans to continue
to develop information management systems that address specific
market needs, are affordable and can be easily integrated with the
major systems currently in place. The Company intends to continue
to explore new market opportunities through product development,
strategic partnering, acquisitions, the creation of new companies
or divisions and the use of partnership/distributor relationships
that will provide increased market penetration in international
markets to which the Company has had limited exposure in the past.
The Company also plans to work with current and future strategic
partners to promote the implementation of the ChartMaxx system in
reference laboratories, hospitals, physician offices and clinics.
Current strategic partners include Quest Diagnostics, Quorum
Health Resources, Inc., Cybear, Inc., Sunquest Information
Systems, Inc., Medical Systems Management, Inc., Software
Technology Corporation and Lason, Inc.
Workflow and Content Management: This segment, through Universal
Document, licenses a workflow development product that facilitates
the coordination of information for its customers in various
markets. The goals of Universal Document are to continue to
maintain a superior, versatile product and to obtain the market
penetration necessary for continual growth. The Company has
integrated, and will continue to integrate, Step2000 into the
Company's Health Care Solutions products to create a comprehensive
product package for its customers. Although the Company believes
Step2000 is a superior product in the marketplace, the workflow
market is very competitive. Universal Document's biggest
challenge is to ensure that it has a proper distribution channel
to market its products. A key initiative for fiscal 2000 and
beyond is partnering Universal Document with resellers of its
product to provide a cost-effective means of product distribution
to a broader market. In fiscal 2000, the Company announced the
execution of an OEM agreement with an international provider of
mid-range, enterprise resource planning (ERP) business solutions
to privately brand and sell Step2000.
Sales and Marketing
The Company markets its products and services through selected
strategic resellers and reference selling arrangements and a
direct sales force. The Company's sales philosophy is to provide
consultative selling services to end users conducted by both
direct and indirect sales forces knowledgeable about information
management technologies.
Due to the ability of the Company's products to interface with
major information system vendors, the Company is able to market
its products directly to end users, and is not required to enter
into costly technical support, joint selling or other
collaborative selling arrangements with vendors of information
systems merely to obtain access to the market. However, the
Company has found it to be advantageous to enter into reseller and
reference seller agreements for strategic reasons, including
increased acceptance by customers due to the association with
familiar vendors and exposure to the existing customer bases of
the resellers and reference sellers. Presently, the Company has
strategic reseller, reference selling and preferred vendor
arrangements with suppliers including Quorum, Sunquest Information
Systems, Inc., Magnet, Inc., AmeriNet, Inc., Medical Systems
Management, Inc., Lason, Inc. and Summit Document Management Ltd.
Competition
The market for information technology products and services is
intensely competitive. The Company believes that the principal
competitive factors in this market include the breadth and quality
of system and product offerings, product pricing, the reputation
and stability of the information systems provider, the features
and capabilities of the information systems, management of the
system implementation cycle, ongoing support for such systems, the
potential for enhancements thereto and technical and financial
resources. Certain of the Company's competitors have
significantly greater resources than the Company. In addition,
the Company's products compete with other technologies as well as
similar products developed by other companies, and other major
information management companies may enter the markets in which
the Company competes. Competitive pressures and other factors,
such as new product introductions by the Company or its
competitors, or the entry into new geographic markets, may result
in significant pricing pressures that could have a material
adverse effect on the Company's business. There can be no
assurance that the Company will be able to continue to compete
successfully with its existing or any future competitors.
Product Manufacturing and Sources
The Company does not possess internal manufacturing capacity and
instead relies upon third-party manufacturers to fulfill its
hardware requirements. This reliance on outside suppliers
involves several risks, including limited control over pricing,
availability, quality and delivery schedules. Hardware
incorporated into the Company's products, such as optical disk
drives and computers, is non-proprietary and potentially
available from multiple sources, although the Company currently
limits its purchases to certain vendors based on delivery, service
and cost factors. To the extent the Company relies on single
sources of components, it is vulnerable to potential disruptions
in supply should such a manufacturer become insolvent or otherwise
experience production problems. The Company believes, however,
that any such disruption would be temporary since there are
numerous alternative sources of supply available.
The Company relies to a large extent on licensed third-party
software that is integrated into its products through the use of
proprietary software. The Company's internal software development
capacity is limited, and the Company therefore concentrates its
efforts on developing and enhancing proprietary software that
enables various third-party software products to work together.
The Company must rely on the third-party suppliers for
enhancements and ongoing support for the acquired products. The
failure of one or more of such vendors to provide services for any
reason could, at least temporarily, adversely affect the Company's
business.
Customers
The Company's contracts for certain systems and related services
it sells may approach or exceed $1,000,000 per individual
customer. As a result, the Company may have certain customers in
any one year which represent a significant portion of the
Company's total revenues for that year. For the year ended
January 31, 2000, the Company's consolidated revenues included two
customers who accounted for a total of 31% of consolidated
revenues. For the years ended January 31, 1999 and 1998, a single
customer accounted for 36% and 12% of the Company's total
revenues, respectively.
Product Development and Engineering
The Company's product development strategy focuses on addressing
specific information management solutions and expanding its
existing product lines by adapting them to additional but related
applications. Historically, the Company has relied upon both
internal development and acquisitions for its product development
efforts. The Company believes that it can often respond more
quickly to market requirements by acquiring complementary products
or technology, and intends to continue to evaluate opportunities
to acquire new technologies in the future.
The Company's total product development expenditures were $2.6
million and $2.3 million for the years ended January 31, 2000 and
1999, respectively. The Company believes that continued
investment in research and development for both internally
developed and acquired products is critical to its long-term
growth and success and its ability to remain competitive. The
Company intends to continue to make investments in product
development and engineering and to recruit and hire experienced
development personnel. However, there is no guarantee that the
Company will be successful in developing and deploying new
applications and services that respond to competitive and
technological developments and changing customer needs.
Government Regulations
The Company's business is subject to a significant degree of
government regulation including, but not limited to:
Internet: Laws and regulations may be adopted with respect to the
Internet or other online services covering issues such as user
privacy, patient confidentiality, pricing and content. The
Company cannot predict whether any laws or regulations will be
adopted, or the effect thereof, if any, on the Company.
Food and Drug Administration: The United States Food and Drug
Administration (the "FDA") has issued a guidance document
addressing the regulation of certain computer products as medical
devices under the Federal Food, Drug, and Cosmetic Act (the "FDC
Act"). To the extent that a particular computer software product
is considered a "medical device" under the FDC Act, the
manufacturer of such a product is required (depending on the
product) to: (i) register and list such product with the FDA; (ii)
notify the FDA of and demonstrate substantial equivalence to other
products on the market before marketing such a product; or (iii)
obtain FDA approval by filing a pre-market application that
establishes the safety and effectiveness of the product. The
Company expects that the FDA is likely to become increasingly
active in regulating computer software that is intended for use in
health care settings. None of the Company's products currently is
regulated by the FDA. The FDA indicated its intention to consider
more extensive regulation of additional types of computer
software, which could include existing or future products offered
by the Company, and has solicited industry input as to the
regulation of computer products as medical devices. The FDA has
reached no decision to date on this issue. The FDA, if it chooses
to regulate such software, can impose extensive requirements
governing pre- and post-market conditions relating to clinical
investigations, approvals and manufacturing. In addition, such
products would be subject to the FDC Act's general controls,
including those relating to good manufacturing practices and
adverse experience reporting.
Federal and State Regulations of Heath Care Relationships: There
are numerous state and federal statutes and regulations governing
patient referrals, physician financial relationships, inducements
to beneficiaries of federal health care programs and the
transmission of claims that may affect the Company at some time in
the future. The Company believes that it has structured its
operations to be in compliance with these regulations; however,
these regulations are complex and changing and the government may
take positions that are inconsistent with the Company's practices.
Licenses and Proprietary Rights
To a significant degree, the Company's products consist of third
party hardware and software integrated with proprietary software
of the Company. The Company does not hold any patents with
respect to any of its current products, nor does it expect to
apply for any patents in the foreseeable future. The Company
attempts to protect its use of third-party hardware and software
with contractual exclusivity and nondisclosure provisions, but
because the Company does not own the rights to these third-party
products, there can be no assurance that competitors or others
will not attempt to integrate the same or similar products into
systems competitive with those sold by the Company. To protect
its proprietary product components, the Company relies upon the
law of copyrights, trade secrets, nondisclosure agreements with
employees and others, and restrictions incorporated into
agreements with customers. Notwithstanding these safeguards, it
could be possible for competitors to obtain and/or imitate the
Company's software and/or hardware. Further, there can be no
assurance that others will not independently develop products
similar or superior to those of the Company. The Company also
explores technology developed by other entities that may be
licensed or acquired in an effort to reduce the product
development cycle or to complement existing product lines.
MedPlus[R], FutureCORE[R] and OptiMaxx[R] are registered trademarks of
the Company. E-Maxx[TM] and ChartMaxx[TM] trademarks of the Company
(the Company has entered into an agreement to use the name
"ChartMaxx" with the owner of the trademark). Step2000[R] is a
registered trademark, and Universal Document Management Systems[TM]
is a trademark, of Universal Document.
Employees
As of January 31, 2000, the Company had 89 full-time employees.
The Company's future success will depend, in part, on its ability
to continue to attract, retain and motivate highly qualified
technical, marketing and management personnel who are in great
demand.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently leases approximately 28,900 square feet of
high quality office space in Cincinnati, Ohio with a term
extending through May 2004.
ITEM 3. LEGAL PROCEEDINGS.
As of the date hereof, the Company is not a party to any material
legal proceeding and, to the Company's knowledge, there are no
material legal proceedings pending against the Company, as
described in SEC Reg. No. 228.103.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is traded on the Nasdaq National Market
System ("NMS") under the symbol "MEDP." There were approximately
3,000 record holders of the Company's common stock as of April 20,
2000. The following table sets forth, for the periods indicated,
as reported by Nasdaq, the range of high and low sales price (not
closing bids) of the Company's common stock on the NMS. All
prices are rounded to the nearest one-eighth, and bid prices
reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
Fiscal Year/Quarter High Low
Fiscal Year Ended January 31, 2000
First Quarter $ 3.375 $ 1.500
Second Quarter 3.000 .750
Third Quarter 3.563 .875
Fourth Quarter 8.000 3.094
Fiscal Year Ended January 31, 1999
First Quarter $ 8.875 $ 6.250
Second Quarter 8.000 5.500
Third Quarter 7.250 1.625
Fourth Quarter 3.375 1.375
The Company has not paid any cash dividends on its common stock
since its inception. No dividends on its common stock are
expected to be declared in the foreseeable future.
On June 25, 1999, the Company issued 2,371,815 shares of
convertible Preferred Shares. The Preferred Shares pay dividends
at a rate of 4% per share for the first four years, increasing to
10% thereafter and accruing, if not paid, on a cumulative basis.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
General
MedPlus is a provider of web-based information technology
solutions that enable health care providers to access and manage
information efficiently and cost effectively. The Company's
solutions focus on various elements of process analysis and
redesign, document imaging and management and workflow systems
integration.
The Company's health care related products, included in its Health
Care Solutions segment, consist of the ChartMaxx Enterprise-wide
Private Health Record System ("ChartMaxx"), the E-Maxx Enterprise-
wide Private Health Record System, and the OptiMaxx Archival
System ("OptiMaxx"). ChartMaxx is an enterprise-wide electronic
private health record system that provides users with a web-
enabled, patient-centric data repository of clinical and
administrative information provided from sources such as
hospitals, reference laboratories, clinics and physician offices.
In addition, this system assists health care organizations in
complying with the proposed Health Insurance Portability and
Accountability Act of 1996 (HIPAA) regulations. E-Maxx is the web-
enabled version of the Company's ChartMaxx system. OptiMaxx is an
optical disk-based archival and retrieval system designed to meet
the needs of health care providers that require electronic storage
and quick retrieval of information. The Company's FutureCORE
subsidiary ("FutureCORE") provides process improvement and
automation services, primarily in the areas of medical records and
patient accounts departments, hospital and reference laboratories
and physician offices.
The Company's Universal Document Management Systems, Inc.
subsidiary ("Universal Document"), included in its Workflow and
Content Management Segment, develops and sells Step2000, a
workflow content management and application development software
product that enhances the utilization of information on an
enterprise-wide basis, regardless of hardware platform or
operating environment.
Substantially all of the Company's operations are located in
Cincinnati, Ohio.
Revenue Recognition Cycle
The Company's revenues are derived from systems sales, including
software licenses and hardware, support contracts and
installation, implementation, training and education and
consulting services. Systems sales consist of software licenses
for proprietary software, third party software and hardware, and
related installation services. The gross profit percentage on
systems sales may vary among customers based upon the relative
proportion of proprietary software and third party software and
hardware included in a sale. Revenues from support contracts
include software and hardware maintenance and support. Consulting
service revenues are derived from implementation, integration,
training, custom software development and process improvement
services. Revenues from support contracts and consulting services
are expected to increase as the number of installed systems
increases. The gross profit percentage on support contracts and
consulting services may fluctuate based upon the negotiated terms
of each contract and the Company's ability fully to utilize its
customer support, implementation and consulting personnel.
The decision by a health care provider to replace, substantially
modify or upgrade its information systems is a strategic decision
and often involves a large capital commitment requiring an
extended approval process. The sales cycle for the Company's
ChartMaxx systems' sales is typically six to eighteen months from
initial contact to the execution of a sales agreement. As a
result, the sales cycle causes variations in quarter to quarter
results. These agreements cover the entire implementation of the
system and specify the implementation schedule, which typically
takes place in one or more phases. The agreements generally
provide for the licensing of the Company's software and third
party software with a one-time perpetual license fee that is
adjusted depending on the number of concurrent users using the
software. Third party hardware is usually sold outright, with
fees charged for installation and training. Site specific
customization, interfaces with existing customer systems and other
consulting services are sold on a fixed fee or a time and material
basis.
Fluctuations in Results of Operations
The Company has historically experienced significant quarterly and
annual fluctuations in revenues and operating results which may
continue in the future. The Company's revenues have fluctuated
due to the length of the sales cycle, the number and timing of
systems sales, and the timing of installation, implementation and
consulting services. As a significant percentage of the Company's
operating expenses are fixed, quarterly operating results will
vary with the fluctuation in revenues. As a result, period to
period comparisons of the Company's past operating results may not
be necessarily indicative of future operating results of the
Company.
History of Operating Losses
The Company has historically incurred operating losses from
continuing operations and as of January 31, 2000 had an
accumulated deficit of $16.3 million. The Company's software
development efforts, the development of new products and the
expansion of its marketing, sales and customer support staff,
among other aspects of the Company's strategy, will require
significant expenditures over the next several years that may not
be offset by revenues. The Company's ability to achieve and
maintain significant revenues or profitability will be dependent
upon its ability to obtain and maintain demand from customers for
its current and future products. As a result, there can be no
assurance that the Company will ever achieve significant revenues
or profitable operations.
Discontinued Operations
DiaLogos: In December 1999, the Company's board of directors
authorized management to enter into negotiations to dispose of its
majority interest in DiaLogos Incorporated, its education
subsidiary. Subsequent to year-end, the Company completed the
sale of its investment in the stock of DiaLogos to a private
investment group for cash consideration of $300,000, a two-year
$450,000 note and a warrant to purchase 10% of the outstanding
shares of DiaLogos common stock.
IntelliCode: In January 1998, the Company completed the sale of
all the assets of its IntelliCode division to Becton Dickinson and
Company ("Becton Dickinson") for total proceeds of $17,334,588
plus royalty payments over five years. In connection with the
sale, Becton Dickinson also assumed certain liabilities of the
IntelliCode division, primarily deferred revenues and obligations
related to service contracts and an office lease.
Universal Document: In January 1998, the Company decided to sell
the net assets of the Universal Document segment and presented the
segment as a discontinued operation for the fiscal year ended
January 31, 1998. During fiscal 1999, due to a change in the
Company's customer base that enhanced the compatibility of the
segment with the OptiMaxx product, the Company made the decision
to retain it and presented the results of operations and financial
position of the segment in continuing operations in for the fiscal
year ended January 31, 1999. Prior years' financial statements
were presented on a comparable basis.
Results of Operations
Years Ended January 31, 2000 and 1999
Revenues: Revenues for the year ended January 31, 2000 were
$12,537,895, an increase of $2,578,957, or 26% over the $9,958,938
reported for fiscal 1999. Systems sales increased $2,221,675, or
36%, from the year ended January 31, 1999 primarily as a result of
the recognition of a significant ChartMaxx license sold in the
fourth quarter of fiscal 2000. Support and consulting revenues
increased $357,282, or 9%, from the year ended January 31, 1999 due
to increased support and consulting revenues from the Company's
ChartMaxx and OptiMaxx product lines as the number of installed
sites of these products continued to increase.
Gross Profit: Gross profit for the year ended January 31, 2000 was
$5,237,676, or 42% of revenues, compared to $2,858,701, or 28% of
revenues, for the year ended January 31, 1999. The gross profit
percentage on systems sales increased from 45% for the year ended
January 31, 1999 to 52% for the year ended January 31, 2000 due to
a higher proportion of proprietary software relative to lower
margin third party hardware and software included in sales. The
gross profit percentage for support and consulting revenues
increased from 3% for the year ended January 31, 1999 to 21% for
the year ended January 31, 2000. The increase in this percentage
was primarily a result of an increase in support and consulting
revenues resulting from additional sites installed. In addition,
the prior year's costs were higher due to an increase in customer
support, installation, and consulting personnel in advance of
related revenues and lower than expected utilization rates of those
personnel. Future gross profit margins for support and consulting
services may continue to be depressed in the near term as a result
of the timing of systems sales, unforeseen delays in
implementation schedules, the number and timing of additions to
the implementation and consulting staff relative to when
associated costs become billable to customers or the need to use
independent consultants while the Company is further developing
its implementation and consulting staff.
Operating Expenses: Operating expenses for the year ended January
31, 2000 were $8,112,113 compared to $9,554,497 for the comparable
period of 1999, a decrease of 15%. This decrease relates primarily
to a drastic reduction in its sales and marketing expenses as the
Company has restructured these departments in an effort to
streamline costs while providing better market penetration. This
decrease was partially offset by an increase in product development
and other research and development activities for E-Maxx, ChartMaxx
and OptiMaxx. As product development related activities are the
cornerstone to maintaining a competitive position in the market,
the Company has increased its investing in these types of
activities during fiscal 2000. General and administrative expenses
have remained stable as the Company has been focused on controlling
these types of costs.
Other Income (Expense): In comparing fiscal 2000 to fiscal 1999,
interest expense increased primarily as the result of the Company's
new $2 million subordinated debt financing agreement entered into
in April 1999 and increases in the average balance on the Company's
line of credit. Other income relates primarily to interest income
that decreased due to lower average cash balances in fiscal 2000.
Fiscal 1999 had higher average cash and cash equivalents balances
due to cash received from the sale of the Company's IntelliCode
division to Becton, Dickinson and Company in January 1998. Expenses
related to the employment of Synergis management, acquisition, and
offering costs are not anticipated to recur in the future.
Income Tax Benefit: The Company's income tax benefit was $11,176 in
the year ended January 31, 2000, compared to $1,616,370 for fiscal
1999. The Company did not recognize for accounting purposes the
full tax benefit of its net operating losses for fiscal 2000 or
1999 as the realization of these benefits did not meet the
recognition criteria at the end of either period due to the
Company's history of operating losses. However, the Company
recognized a portion of the benefit of its net operating loss for
income tax purposes for fiscal 1999 through the carryback of this
loss against taxable income in fiscal 1998 generated by the sale of
the IntelliCode division. The Company's ability to recognize the
full benefit of its net operating loss in future periods will be
dependent upon the generation of future taxable income, limitations
imposed by the Internal Revenue Service, and other matters
potentially affecting the realizability of these carryforwards.
Discontinued Operations: Discontinued operations for the fiscal
2000 and 1999 years represents the effect of the disposal of
DiaLogos. Fiscal 1999 also includes the reversal of a loss that
was accrued in fiscal 1998 relating to the Universal Document
segment that the Company decided to retain in August 1998.
Net Loss: The Company's net loss has significantly decreased
between the years largely as the result of increased revenues,
decreased operating and other expenses described above. This
improvement was partially offset by the Company's inability to
recognize an income tax benefit, as described above.
Conversion Discount on Preferred Stock: During the second quarter
of fiscal 2000, the Company issued 2,371,815 shares of its
preferred stock to certain investors at a purchase price of $1.729
per share for gross proceeds of $4,100,000 (see Financing in
Liquidity and Capital Resources). As a result of this issuance,
the Company recorded a conversion discount on the preferred stock
of $346,285. This amount represents the effect of the differential
between the conversion price of $1.729 and the closing market price
of $1.88 on the date of commitment of the Preferred Shares.
Although the beneficial conversion feature has no impact on the
financial condition or cash flows of the Company, it does
negatively impact the Company's loss per common share-basic and
diluted.
Preferred Stock Dividend Requirements: The Company began recording
quarterly dividends on its preferred stock in the second quarter of
fiscal 2000. Although the Company is only required to pay dividends
at an annual rate of 4% for the first three years, the preferred
stock dividend requirement disclosed in the consolidated statement
of operations has been calculated using the Company's estimated
market rate of 8%. A market rate of 8% was utilized as the
dividends are considered increasing rate dividends for accounting
purposes. The incremental 4% has no impact on the financial
condition or cash flows of the Company, but negatively impacts the
Company's earnings (loss) per common share-basic and diluted.
Loss Attributable to Common Shareholders and Loss Per Common Share:
Net Loss has been adjusted for the dividend requirements related to
the preferred shares issued in the second quarter of fiscal 2000 to
derive the "Loss Attributable to Common Shareholders." This amount
has been utilized in the calculation of net loss per common share.
Years Ended January 31, 1999 and 1998
Revenues: Revenues for the year ended January 31, 1999 were
$9,958.938, a decrease of $242,214, or 2% over the $10,201,152
reported for the comparable period in 1998. Systems sales
decreased $1,756,777, or 22%, from the year ended January 31, 1999
primarily as a result of a decrease in the number and relative size
of ChartMaxx and OptiMaxx systems sold during the year. Support
and consulting revenues increased $1,514,563, or 66%, from the year
ended January 31, 1998 due to the Company's ChartMaxx and OptiMaxx
product lines as the number of installed sites of these products
continued to increase.
Gross Profit: Gross profit for the year ended January 31, 1999 was
$2,858,701, or 29% of revenues, compared to $2,974,961, or 29% of
revenues, for the year ended January 31, 1998. The gross profit
percentage on systems sales increased from 35% for the year ended
January 31, 1998 to 45% for the year ended January 31, 1999 due to
a higher proportion of proprietary software relative to lower
margin third party hardware and software included in sales. The
gross profit percentage for support and consulting revenues
decreased from 10% for the year ended January 31, 1998 to 3% for
the year ended January 31, 1999. The decrease in this percentage
was primarily a result of an increase in customer support,
installation, and consulting personnel in advance of related
revenues and lower than expected utilization rates of those
personnel.
Operating Expenses: Operating expenses for the year ended January
31, 1999 were $9,554,497 compared to $9,811,952 for the comparable
period of 1998, a decrease of 3%. This decrease relates primarily
to a controlling of costs related to the Company's sales and
marketing departments and its general and administrative expense.
These decreases were partially offset by increases in research and
development activities as the Company continues to focus on
enhancing its core products.
Other Income (Expense): Excluding Synergis related expenses, other
income (expenses) increased to $244,394 of income for the year
ended January 31, 1999 from expense of $231,922 for the year ended
January 31, 1998. The decrease in expense is primarily due to an
increase in interest income as a result of an increase in the
Company's average cash and cash equivalents balances from fiscal
1998 due to cash received from the sale of the Company's
IntelliCode division to Becton, Dickinson and Company in January
1998. Expenses related to the employment of Synergis management,
acquisition, and offering costs are discussed in the footnotes to
the financial statements. These expenses are not expected to recur
in the future.
Income Tax Benefit: The Company's income tax benefit was $1,616,370
in the year ended January 31, 1999, compared to $3,475,777 for
fiscal 1998. The Company recognized a portion of the benefit of its
net operating loss for income tax purposes for fiscal 1999 through
the carryback of this loss against taxable income in fiscal 1998
generated by the sale of the IntelliCode division. However, the
Company did not recognize for accounting purposes the full tax
benefit of its net operating losses for fiscal 1999 or 1998 as the
realization of these benefits did not meet the recognition criteria
at the end of either period due to the Company's history of
operating losses. The Company's ability to recognize the full
benefit of its net operating loss in future periods will be
dependent upon the generation of future taxable income, limitations
imposed by the Internal Revenue Service, and other matters
potentially affecting the realizability of these carryforwards.
Discontinued Operations: Discontinued operations for fiscal 1999
represent the operations of DiaLogos and the reversal of the
accrued loss related to the Universal Document segment which the
Company decided to retain in August 1998. Discontinued operations
for the year ended January 31, 1998 represent the operations of
DiaLogos offset by a gain on the sale and the results of operations
of the Company's IntelliCode division, as well as the accrued
losses related to the Universal Document segment.
Liquidity and Capital Resources
The Company's business requires significant amounts of working
capital to finance new product research and development, its
strategic focus on the E-Health market, the expansion of its sales
and marketing organization, anticipated revenue growth, capital
expenditures and strategic investments. The Company's principal
uses of cash since inception have been for funding operations,
capital expenditures, research and development activities and
investments in and advances to companies that are deemed to have
strategic value to the Company. The Company has financed its
operations, working capital needs, and investments through the
sale of common stock, the issuance of preferred shares and
subordinated debt, bank borrowings, capital lease financing
agreements and the sale of the assets of its IntelliCode division.
Financing
The Company has a $2,000,000 revolving line of credit agreement
with a bank that had an outstanding balance of $1,112,509 as of
January 31, 2000 and that is due on May 15, 2000. The Company's
assets secure the line of credit. Although the Company has
adequate cash and cash equivalents on hand to satisfy the
commitment, the Company will need to obtain alternative financing
in order to continue its growth strategy. This financing may
include obtaining additional debt, an equity offering or other
capital infusion, or the sale of certain of the Company's assets.
Although management has been evaluating these opportunities, the
Company's ability to obtain this funding will be dependent upon a
number of factors including the volatility of the market and its
effect on the Company's stock price and the Company's ability to
obtain additional debt financing. There is no guarantee that any
of the necessary alternative financing transactions will occur in
the near-term.
In the first quarter of fiscal 2000, the Company entered into an
Agreement (the "Agreement") with three investment firms to obtain
$6,100,000 in debt and equity financing. The terms of the
Agreement provide for financing of $2,000,000 in subordinated
debentures (the "Notes") and $4,100,000 in Series A Convertible
Preferred Shares (the "Preferred Shares"). The proceeds of the
financing has been utilized to fund working capital requirements
and continue product development and market penetration of certain
of the Company's core products. On April 30, 1999, the Company
issued the Notes, due 2004, with an annual coupon rate, payable
quarterly, of 10% in the first year, 12% from May 1, 2000 through
October 31, 2000 and 14% thereafter. The principal portion of the
Notes is payable as follows: $666,666 in April 2002, $666,667 in
April 2003 and $666,667 in April 2004; however, the Company may
redeem the Notes at any time during their term without penalty.
The Notes also contain certain restrictions including the
Company's ability to use cash proceeds received from non-operating
sources. The holders of the Notes also received warrants to
purchase 281,137 Preferred Shares at an exercise price of $1.66.
On June 25, 1999, the Company also issued to the investors
2,371,815 Preferred Shares, with a $ .01 stated par value, at a
purchase price of $1.729 per share for gross proceeds of
$4,100,000 (net proceeds of $3,773,047). The Preferred Shares are
convertible into the Company's common stock on a one-for-one
basis. The Company is required to pay a cumulative dividend
quarterly at a rate of 4% per share for the first three years,
increasing to 10% thereafter. The Preferred Shares (a) include
voting rights, (b) receive preferential treatment upon liquidation
of the Company and (c) convert into common shares upon certain
events. In addition, upon meeting certain requirements specified
in the Agreement, the Company can elect at its option to convert
the Preferred Shares into common shares of the Company. Also,
ten-year warrants for the purchase of 721,702 Preferred Shares
were issued to the Investors at a purchase price of $1.66. These
warrants cannot be exercised unless the value of the Company's
stock price as traded on the NASDAQ over a twenty-day period
exceeds $7.17.
Common Stock Repurchase Program
The Company's Board of Directors authorized a common stock
repurchase program in November 1996. Under the program the
Company may repurchase up to 500,000 shares of the Company's
common stock. No shares were repurchased during fiscal 2000. On
a cumulative basis, the Company has repurchased 200,000 shares.
Cash Flows from Operations and Liquidity
Cash flows provided by operating activities for continuing
operations for fiscal 2000 were $555,416, compared to a use of
cash of $7,730,136 for fiscal 1999. This significant improvement
in operating cash flows were largely the result of the
significantly better operating performance of the Company and the
improvement of working capital for the Company including
accelerated collection of accounts receivable. In addition, the
Company had income tax expense of $1,896,869 in fiscal 1999,
compared to the receipt of over $550,000 for a tax refund in
fiscal 2000.
Although operating cash flows have improved, management continues
to review the Company's current operations to identify areas to
reduce or maintain current levels of expenses until revenues
increase sufficiently to justify increased investments in certain
areas. Over the past two years, the Company has made significant
strides in curtailing expenses, primarily in the area of sales of
marketing, and continues to review its current structure to
properly manage expenses. In addition to expense reductions,
increased revenues will also be needed to improve operating cash
flow. The Company believes that it has historically experienced
lower-than-anticipated revenues because many of its potential
customers have been focusing on resolving internal Year 2000
issues rather than purchasing enterprise-wide solutions, such as
ChartMaxx or OptiMaxx. As resolution of this matter occurs, the
Company anticipates sales of ChartMaxx and OptiMaxx will increase,
although there is no assurance that this trend will occur in the
near term. The Company is also focusing on its E-Health strategy,
which will require significant cash outlays in order to realize
its full potential. There can be no assurance as to the extent or
timing of the Company's success in achieving these goals.
Other Risk Factors
The Company manufactures and sells software technology in the
health care industry. As a result, there are certain risks
inherent with operating in these markets including the
competitiveness of the software technology industry, the Company's
dependence on market acceptance of existing and future products,
technological changes in the industry and the Company's reliance
on the health care industry. The Company has also been
historically dependent on certain key customers. Internally, the
Company must also focus on managing its growth, including
retaining and attracting key employees and obtaining the funding
necessary to finance its growth strategy. Although management of
the Company has been focused on achieving its business plan, there
is no guarantee that the Company will be able to achieve
profitability under these market conditions.
Year 2000 Compliance
The Company's business is dependent on the operation of numerous
systems that could have been impacted by Year 2000 related
problems. Those systems include, among others, hardware and
software systems used by the Company to deliver services to the
Company's customers, including proprietary software systems and
hardware and software supplied by third parties, communications
networks, the internal systems of the Company's customers and
suppliers, and the hardware and software systems used internally.
During the transition into the Year 2000, the Company and its
customers did not experience any significant problems related to
Year 2000, and the Company does not expect any to arise in the
future.
Forward Looking Statements
The Company notes that many of the statements made herein are
forward-looking statements. As such, in addition to the risk
factors addressed herein, factors may occur which could cause
actual events to differ materially from those anticipated in these
statements.
For example, although the Company hopes its relationship with
Quest Diagnostics Incorporated will assist it in becoming a
leading provider of E-health, business to business services within
the next 2-3 years, if Quest Diagnostics determines that its
physician customers are not accessing laboratory results via the
Internet and the ChartMaxx system as predicted, it may research
alternative means of transmitting such results to physicians. In
addition, MedPlus' ability to provide E-Health services and
perform its obligations pursuant to its agreement with Quest
Diagnostics will depend on the abilities of certain subcontractors
to MedPlus, including but not limited to an Internet Service
Provider.
Furthermore, the Company's ability to assist its customers with
HIPAA compliance and other regulatory compliance matters will
depend in large part on the version of HIPAA regulations
eventually adopted and updates to those and other regulations from
time to time. In addition, the Company's involvement in the
online health care industry will necessarily require its
partnership with third party vendors, the specific terms and
conditions of which will not be finalized until the requirements
of that industry are better understood.
ITEM 7. FINANCIAL STATEMENTS
Information called for by this item is set forth in the Company's
Consolidated Financial Statements contained in this report.
Specific financial statements and supplemental data can be found
at the pages listed in the following index:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number
Description In This Report
Independent Auditors' Report of KPMG LLP 22
Consolidated Balance Sheets as of
January 31, 2000 and 1999 23
Consolidated Statements of Operations for the
years ended January 31, 2000, 1999 and 1998 24
Consolidated Statements of Shareholders' Equity
for the years ended January 31, 2000, 1999 and 1998 25
Consolidated Statements of Cash Flows for
the years ended January 31, 2000, 1999 and 1998 26
Notes to Consolidated Financial Statements 27 to 44
Independent Auditors' Report
The Board of Directors
MedPlus, Inc.:
We have audited the accompanying consolidated balance sheets of
MedPlus, Inc. and subsidiaries as of January 31, 2000 and 1999,
and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the
three year period ended January 31, 2000. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of MedPlus, Inc. and subsidiaries as of January 31, 2000
and 1999, and the results of their operations and their cash flows
for each of the years in the three year period then ended January
31, 2000, in conformity with generally accepted accounting
principles.
/s/ KPMG, LLP
Cincinnati, Ohio
April 14, 200
<TABLE>
<CAPTION>
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 2000 and 1999
January 31, January 31,
2000 1999
___________ __________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,471,031 1,024,485
Accounts receivable, less allowance for doubtful
accounts of $196,000 in 2000 and $155,000 in 1999 2,790,780 5,014,022
Other receivables 20,101 21,671
Costs in excess of billings 387,430 31,693
Inventories 415,650 442,312
Prepaid expenses 614,978 624,939
Income tax refundable - 550,000
___________ __________
Total current assets 7,699,970 7,709,122
Capitalized software development costs, net 2,833,763 2,559,823
Fixed assets, net 1,184,826 1,323,980
Other assets 238,682 280,925
Net assets from discontinued operations 204,198 1,238,408
___________ __________
Total assets $ 12,161,439 13,112,258
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under capital lea $ 18,186 31,645
Borrowings on line of credit 1,112,509 507,017
Accounts payable 929,340 1,582,409
Accrued expenses 1,549,888 1,988,228
Deferred revenue 2,120,506 1,158,128
___________ __________
Total current liabilities 5,730,429 5,267,427
Long-term notes payable 2,017,112 -
Long-term borrowings on line of credit - 2,250,000
Obligations under capital leases, excluding current installments - 15,989
___________ __________
Total liabilities 7,747,541 7,533,416
___________ __________
Commitments and contingencies
Shareholders' equity:
Preferred stock with liquidation preferences, $.01 par value,
authorized 5,000,000 shares; issued 2,371,815 shares 23,718 -
Common stock, no par value, authorized 15,000,000 shares; issued
6,364,533 shares in 2000 and 6,225,371 shares in 1999 - -
Additional paid-in capital 21,653,390 17,639,105
Treasury stock, at cost, 200,000 shares in 2000 and 1999 (863,497) (863,497)
Accumulated deficit (16,346,101) (11,167,502)
Unearned stock compensation (53,612) (29,264)
___________ __________
Total shareholders' equity 4,413,898 5,578,842
___________ __________
Total liabilities and
shareholders' equity $ 12,161,439 13,112,258
=========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended January 31, 2000, 1999 and 1998
Year Ended Year Ended Year Ended
January 31, January 31, January 31,
2000 1999 1998
_____________ _____________ ____________
<S> <C> <C> <C>
Revenues:
Systems sales $ 8,377,056 6,155,381 7,912,158
Support and consulting revenues 4,160,839 3,803,557 2,288,994
_____________ _____________ ____________
Total revenues 12,537,895 9,958,938 10,201,152
Cost of revenues:
Systems sales 4,014,751 3,411,387 5,171,635
Support and consulting revenues 3,285,468 3,688,850 2,054,556
_____________ _____________ ____________
Total cost of revenues 7,300,219 7,100,237 7,226,191
_____________ _____________ ____________
Gross profit 5,237,676 2,858,701 2,974,961
Operating expenses:
Sales and marketing 3,181,806 4,968,590 5,309,109
Research and development 1,606,554 1,217,733 713,124
General and administrative 3,323,753 3,368,174 3,789,719
_____________ _____________ ____________
Total operating expenses 8,112,113 9,554,497 9,811,952
_____________ _____________ ____________
Operating loss (2,874,437) (6,695,796) (6,836,991)
Other income (expense):
Synergis management expenses, acquisition
and offering costs (179,663) (2,070,731) (3,707,945)
Interest expense (518,838) (131,470) (346,315)
Other income (expense), net 140,866 375,864 114,393
_____________ _____________ ____________
Total other income (expense), net (557,635) (1,826,337) (3,939,867)
_____________ _____________ ____________
Loss before income tax benefit (3,432,072) (8,522,133) (10,776,858)
Income tax benefit (11,176) (1,616,370) (3,475,777)
_____________ _____________ ____________
Loss from continuing operations (3,420,896) (6,905,763) (7,301,081)
Income (loss) from discontinued operations (1,757,703) (1,641,990) 10,406,170
_____________ _____________ ____________
Net income (loss) (5,178,599) (8,547,753) 3,105,089
Conversion discount on preferred stock (346,285) - -
Preferred stock dividend requirements (246,000) - -
_____________ _____________ ____________
Income (loss) attributable to common
shareholders $ (5,770,884) (8,547,753) 3,105,089
============= ============= ============
Earnings (loss) per share - basic and diluted:
Continuing operations $ (0.66) (1.13) (1.23)
Discontinued operations (0.29) (0.27) 1.76
_____________ _____________ ____________
Net income (loss) $ (0.95) (1.40) 0.52
============= ============= ============
Weighted average number of shares of common stock 6,086,970 6,109,439
5,922,781
============= ============= ============
See accompanying notes to consolidated financial statements.</TABLE>
<TABLE>
<CAPTION> MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years Ended January 31, 2000, 1999 and 1998
Accu-
mulated
Addi- Unearned other Total
Common Preferred tional Accu- stock compre-
share-
stock- stock- Preferred Paid-in Treasury mulated compen- hensive
holders'
shares shares stock capital stock deficit sation income (loss)
equity
_________ _________ _________ __________ _________ ___________
_________ ___________ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Balances at January 31, 1997 5,921,706 - $ - 14,938,186 - (5,471,341) (204,154)
1,824 9,264,515
Comprehensive income:
Unrealized gains on investment
securities, net of tax - - - - - - - (1,824) (1,824)
Net income - - - - - 3,105,089 - - 3,105,089
Total comprehensive income 3,103,265
__________
Issuance of common stock,
net of issuance costs 225,056 - - 2,010,549 - - - -
2,010,549
Purchase of treasury shares (10,500) - - - (53,554) - - -
(53,554)
Options exercised 16,666 - - 109,719 - - - - 109,719
Tax benefit associated with
exercise of options - - - 93,500 - - - - 93,500
Minority shareholders'
interest in accumulated
deficit of DiaLogos - - - - - (253,497) - - (253,497)
Unearned compensation under
employee stock
award plan,
net of amortization 7,784 - - 63,610 - - (4,449) -
59,161
Fair value of options
issued to nonemployees - - - 122,547 - - 20,780 -
143,327
_________ _________ _________ __________ _________ ___________
_________ ___________ __________
Balances at January 31, 1998 6,160,712 - - 17,338,111 (53,554) (2,619,749)
(187,823) - 14,476,985
Issuances of common stock 32,232 - - 217,574 - - - -
217,574
Purchase of treasury shares (189,500) - - - (809,943) - - -
(809,943)
Options exercised 7,673 - - 58,085 - - - - 58,085
Net loss - - - - - (8,547,753) - - (8,547,753)
Stock compensation under
employee stock award plan,
net of amortization 14,254 - - 25,335 - - 2,832 -
28,167
Net amortization of
options issued to nonemployees - - - - - - 155,727 -
155,727
_________ _________ _________ __________ _________ ___________
_________ ___________ __________
Balances at January 31, 1999 6,025,371 - - 17,639,105 (863,497) (11,167,502)
(29,264) - 5,578,842
Issuances of preferred stock,
net of issuance costs - 2,371,815 23,718 3,706,416 - - - -
3,730,134
Issuances of warrants related
to preferred stock and debt - - - 42,913 - - - - 42,913
Issuances of common stock 62,199 - - 92,738 - - - -
92,738
Options exercised 22,833 - - 120,968 - - - - 120,968
Dividends on preferred stock 45,630 - - (43,000) - - - -
(43,000)
Net loss - - - - - (5,178,599) - - (5,178,599)
Stock compensation under
employee stock award plan,
net of amortization 8,500 - - 45,390 - - 80 - 45,470
Warrants issued to
nonemployees, net of
amortization - - - 48,860 - - (24,428) - 24,432
_________ _________ _________ __________ _________ ___________
_________ ___________ __________
Balances at January 31, 2000 6,164,533 2,371,815 $23,718 21,653,390 (863,497) (16,346,101)
(53,612) - 4,413,898
========= ========= ========= ========== =========
=========== ========= =========== ==========
See accompanying notes to consolidated financial statements. </TABLE>
<TABLE>
<CAPTION>
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended January 31, 2000, 1999 and 1998
Year Ended Year Ended Year Ended
January 31, January 31, January 31,
2000 1999 1998
_________________ ________________ _______________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,178,599) (8,547,753) 3,105,089
Loss (income) from discontinued operations 1,757,703 1,641,990 (10,406,170)
_________________ ________________ _______________
Loss from continuing operations (3,420,896) (6,905,763) (7,301,081)
Adjustments to reconcile loss from continuing
operations to net cash used in operating
activities:
Synergis acquisition and offering costs - 573,724 2,979,555
Impairment losses related to UDMS - - 1,241,513
Amortization of capitalized software
development costs 751,840 520,960 531,024
Amortization of unearned stock
compensation costs 69,898 158,559 222,487
Depreciation and amortization of fixed assets 420,122 355,102 226,200
Amortization of deferred costs
related to long-term debt 121,827 - -
Amortization of excess of cost over
fair value of net assets acquired - - 130,705
Provision for loss on doubtful accounts 41,000 123,405 112,348
Deferred income taxes - (206,147) (359,224)
(Gain) loss on sale of fixed assets 1,804 16,612 (3,691)
Changes in assets and liabilities,
net of business acquisitions:
Accounts receivable 2,182,242 (601,208) (3,017,908)
Other receivables 1,570 (17,133) (35,581)
Costs in excess of billings (355,737) (31,693) -
Inventories 26,662 315,159 (471,902)
Prepaid expenses and other assets 99,670 (54,903) 1,165
Accounts payable and accrued expenses (896,964) (602,605) 2,835,279
Income taxes 550,000 (1,896,869) -
Deferred revenue 962,378 522,664 182,463
_________________ ________________ _______________
Net cash provided by (used in)
continuing operations 555,416 (7,730,136) (2,726,648)
Net cash used in discontinued operations (723,493) (2,245,361) (2,046,877)
_________________ ________________ _______________
Net cash provided by (used in)
operating activities (168,077) (9,975,497) (4,773,525)
Cash flows from investing activities:
Capitalization of software development costs (1,025,780) (1,060,170) (884,337)
Purchases of fixed assets (282,772) (434,061) (351,229)
Proceeds from sales of investment
securities and fixed assets - - 318,248
Cash acquired in (payments made for) business
acquisitions - - 16,375
Synergis acquisition and offering costs (236,445) (1,725,452) (1,478,838)
Proceeds from the sale of discontinued operations - - 17,334,588
Other advances and investments - - (927,695)
_________________ ________________ _______________
Net cash provided by (used in)
investing activities (1,544,997) (3,219,683) 14,027,112
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of issuance costs 213,706 83,420 2,105,269
Proceeds from the issuance of preferred
stock and warrants, net of issuance costs 3,740,242 - -
Purchase of treasury stock - (809,943) (53,554)
Proceeds from borrowings on line of credit 9,485,993 7,143,759 11,721,152
Repayments on line of credit (11,130,501) (5,883,094) (10,224,799)
Proceeds from issuance of long-term debt
and warrants 2,000,000 - -
Payment of debt issue costs (119,372) (60,000) -
Payment of preferred dividends (1,000) - -
Principal payments on capital lease obligations (29,448) (29,807) (39,345)
_________________ ________________ _______________
Net cash provided by financing activities 4,159,620 444,335 3,508,723
_________________ ________________ _______________
Net increase (decrease) in cash and
cash equivalents 2,446,546 (12,750,845) 12,762,310
Cash and cash equivalents, beginning of period 1,024,485 13,775,330 1,013,020
_________________ ________________ _______________
Cash and cash equivalents, end of period $ 3,471,031 1,024,485 13,775,330
================= ================
===============
Interest paid $ 448,077 113,920 282,963
================= ================
===============
Income taxes paid (refunds received) $ (561,176) 600,000 -
================= ================
===============
See accompanying notes to consolidated financial statements. </TABLE>
MEDPLUS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2000, 1999 and 1998
(1) Description of the Business
MedPlus is an E-Health business to business provider of web-based
information technology solutions that enable health care providers
to access and manage information efficiently and cost effectively.
The Company's solutions focus on various elements of process
analysis and redesign, document imaging and management and
workflow systems integration.
The Company's health care related products, included in its Health
Care Solutions segment, consist of the ChartMaxx Enterprise-wide
Private Health Record System ("ChartMaxx") and the OptiMaxx[R]
Archival System ("OptiMaxx"). ChartMaxx is an enterprise-wide
electronic private health record system that provides users with a
web-enabled, patient-centric data repository of clinical and
administrative information provided from sources such as
hospitals, reference laboratories, clinics and the physician
office. In addition, this system enables health care
organizations to comply with the proposed Health Insurance
Portability and Accountability Act of 1996 (HIPAA) regulations.
OptiMaxx is an optical disk-based archival and retrieval system
designed to meet the needs of health care providers that require
electronic storage and quick retrieval of information. The
Company's FutureCORE[R], Inc. subsidiary ("FutureCORE") provides
process improvement and automation services, primarily in the
areas of medical records and patient accounts departments within
hospital and reference laboratories and physician offices. The
Company's Universal Document Management Systems, Inc. subsidiary,
included in its Workflow and Content Management Segment, develops
and sells Step2000[R], a workflow Content management and
application development software product that enhances the
utilization of information on an enterprise-wide basis, regardless
of hardware platform or operating environment.
Substantially all of the Company's operations are located in
Cincinnati, Ohio.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Universal Document and
FutureCORE. All intercompany accounts and transactions have been
eliminated in consolidation.
In December 1999, the Company made the decision to dispose of its
interest in DiaLogos Incorporated, which was sold effective March
1, 2000. The Company also sold its IntelliCode division in
January 1998. As a result, both entities have been accounted for
as discontinued operations. The consolidated financial statements
of the Company have been reclassified to present these entities as
discontinued operations. The accompanying notes present amounts
related only to continuing operations, unless otherwise indicated.
(b) Fiscal Year
The Company has a fiscal year commencing on February 1 and ending
on January 31 of the respective year.
(c) Revenue Recognition
The Company's revenues are derived from systems sales, including
software licenses and hardware, support contracts, installation,
implementation, training, and consulting services.
Revenue related to system sales is recognized in compliance with
American Institute of Certified Public Accountants Statements of
Position ("SOP") 97-2, 98-4 and 98-9, which pertain to Software
Revenue Recognition. For OptiMaxx systems, revenue is generally
recognized upon shipment. Revenue recognition for ChartMaxx
systems generally commences when a contract is signed and the
system is configured and shipped. If a contract requires the
Company to perform services or provide modifications that are
deemed significant to system acceptance, the Company recognizes
revenue for the entire contract under the percentage of completion
method of accounting.
Revenues from installation, implementation, training, and
consulting services are recognized in the period in which the
services are performed. Revenue from support contracts is
recognized ratably over the term of the contract. Deferred
revenues primarily represent support contracts that have been
billed in advance of the support to be provided.
(d) Cash and Cash Equivalents
At January 31, 2000 and 1999, cash and cash equivalents consisted
of $3,232,200 and $1,010,351, respectively, in money market fund
investments. Due to the short-term nature of these investments,
the carrying value of cash and cash equivalents approximates fair
value.
Interest income from cash equivalents and investment securities,
included in other income (expense) in the consolidated statements
of operations, was $148,327, $260,481 and $94,703, for the years
ended January 31, 2000, 1999, and 1998.
(e) Concentrations of Credit Risk
Financial instruments potentially exposing the Company to
concentrations of credit risk, as defined by SFAS No. 105,
Disclosure of Information about Financial Instruments with Off-
Balance-Sheet Risk and Financial Instruments with Concentrations
of Credit Risk, consist primarily of cash equivalents and trade
accounts receivable. The Company's cash equivalents consist of
highly liquid money market funds. The Company's trade accounts
receivables are largely concentrated in the health care industry.
However, the Company's credit risk is limited due to the
geographic dispersion and diversity of customers making up the
Company's receivable portfolio.
(f) Inventories
Inventories generally relate to computer equipment purchased for
resale and are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
(g) Capitalized Software Development Costs
The Company accounts for software development costs in accordance
with the provisions of SFAS No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed. Costs
incurred in designing and developing computer software products
are expensed as research and development until technological
feasibility has been established. Technological feasibility is
established upon completion of a detail program design or, in its
absence, completion of a working model. Upon the achievement of
technological feasibility, software production costs are
capitalized and subsequently reported at the lower of unamortized
cost or net realizable value.
Annual amortization expense, included in cost of revenues in the
consolidated statements of operations, is the greater of the
amount computed, using the ratio of the current year's revenues to
the total of current and anticipated future revenues, or the
straight-line method over the remaining economic life which does
not exceed five years. Amortization amounted to $751,840,
$520,960, and $531,024 for the years ended January 31, 2000, 1999,
and 1998, respectively. Accumulated amortization for capitalized
software development costs was $2,108,577 and $1,356,737, at
January 31, 2000 and 1999, respectively.
(h) Fixed Assets
Fixed assets are stated at cost for purchased assets, fair value
for assets obtained through acquisitions, and the present value of
minimum lease payments for equipment held under capital leases.
Depreciation, including amortization of capital leases, is
computed using the straight-line method over the estimated useful
lives of the assets, which range from three to ten years.
Leasehold improvements and equipment held under capital leases are
amortized using the straight-line method over the shorter of the
lease term or estimated useful life of the asset.
(i) Income Taxes
The provisions for income taxes are accounted for in accordance
with SFAS No. 109, Accounting for Income Taxes. Under the asset
and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled.
(j) Stock Option Plan
The Company accounts for its stock option plan in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and related
interpretations. As a result, the Company recognizes no
compensation cost in its consolidated statements of operations
because the exercise price of its stock options is equal to the
market price of the underlying stock on the date of grant. In
addition, the Company provides pro forma disclosure of the
provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, which is an alternative method of accounting for
stock options.
(k) Earnings (Loss) Per Share
The Company calculates earnings (loss) per share in accordance
with the provisions of SFAS No. 128, Earnings per Share, which
requires the calculation of "basic" and "diluted" earnings per
share. Basic earnings per share excludes any dilutive effects of
options, warrants or convertible securities. Diluted earnings per
share reflects the assumed conversion of all dilutive securities.
Basic and diluted earnings per share are based on the weighted
average number of shares of common stock outstanding for each
period excluding any shares related to nonvested employee stock
awards. Dilutive securities have not been included in the
weighted average shares used for the calculation of diluted
earnings per share in periods of losses from continuing operations
because the effect of such securities would be antidilutive. At
January 31, 2000, potential dilutive securities consisted of
2,371,815 shares of convertible preferred stock, 1,102,839
warrants issued to non-employees, and 1,763,553 options to
purchase common stock of the Company under the Company's stock
incentive plans.
(l) Comprehensive Income (Loss)
Consistent with SFAS No. 130, Reporting Comprehensive Income, the
Company includes comprehensive income (loss) in its consolidated
statement of shareholders' equity. Comprehensive income represents
the net change in shareholders' equity during a period from
sources other than transactions with shareholders. Amounts
included in this statement represent net income (loss) and
unrealized gains on investment securities.
(m) Supplemental Cash Flow Information
During fiscal 2000, the Company issued 45,630 shares of its common
stock valued at $80,000 to satisfy dividend requirements on its
convertible preferred stock.
The Company's discretionary contribution to its Retirement Savings
and Investment Plan for the fiscal years ended 2000 and 1999,
respectively, was funded through the issuance of 12,197 and 32,232
shares of common stock, valued at approximately $23,600 and
$217,600 at the dates of issuance. During fiscal 2000, the
Company also issued 50,002 shares of its common stock valued at
$69,100 to fund its Employee Stock Purchase Plan for the fiscal
1999 plan year. During the years ended January 31, 2000, 1999 and
1998, the Company granted employees 8,500, 14,254, and 7,784
shares of common stock, respectively, under a stock award plan.
The market value of the stock at the dates of grant was
approximately $45,000, $23,000, and $64,000, respectively, and is
being amortized over one year in accordance with the terms of the
awards.
In fiscal 2000, the Company granted a warrant to purchase 100,000
shares of the Company's common stock to a consultant of the
Company. This warrant has an estimated fair value of $48,860
which is being amortized into expense over the related service
period of two years.
In fiscal 1998, the Company realized a tax benefit of $93,500
associated with the exercise of stock options. The tax benefit
reduced the income tax liability and was credited to paid-in
capital.
(n) Use of Estimates
Preparing financial statements in conformity with generally
accepted accounting principles requires the Company's management
to make a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of
contingent assets and liabilities. Actual results could differ
from those estimates.
(o) Reclassifications
Certain reclassifications have been made to the consolidated
financial statements previously reported to conform to the current
period presentation.
(3) Discontinued Operations
DiaLogos
In December 1999, the Company's board of directors authorized
management to enter into negotiations to formally dispose of its
majority interest in DiaLogos Incorporated, its education
subsidiary. As a result, DiaLogos has been reported as a
discontinued operation in the consolidated financial statements.
In March 2000, the Company completed the sale of its investment in
the stock of DiaLogos to a private investment group for cash
consideration of $300,000. The terms of the arrangement also
include additional consideration including a two-year $450,000
note with interest payable at a 2% premium over the current prime
rate and a warrant to purchase 10% of the outstanding shares of
DiaLogos common stock. The warrant is exercisable based upon
certain future actions taken by the management of DiaLogos. The
note is collateralized by the stock of DiaLogos. Due to DiaLogos'
history of operating losses and negative cash flows, the Company
has assessed no value to the note and warrant. As a result, the
Company recognized a loss on the sale of DiaLogos of $885,527. No
income tax benefit has been provided for this loss because of the
Company's net operating loss position.
IntelliCode
In January 1998, the Company completed the sale of all the assets
of its IntelliCode division to Becton Dickinson and Company
("Becton Dickinson") for total proceeds of $17,334,588 plus
royalty payments over five years. In connection with the sale,
Becton Dickinson also assumed certain liabilities of the
IntelliCode division, primarily deferred revenues and obligations
related to service contracts and an office lease.
The Company recognized a pre-tax gain of $14,724,720 and an after-
tax gain of $10,268,710 related to this transaction for the year
ended January 31, 1998. The royalty payments are based on future
defined revenues and are recorded as income when earned. No
royalty payments were earned for the years ended January 31, 2000
and 1999.
Universal Document
In January 1998, the Company decided to sell the net assets of the
Universal Document segment and presented it as a discontinued
operation for the fiscal year ended January 31, 1998. During
fiscal 1999, due to a change in the Company's customer base which
enhanced the compatibility of the segment with the Company's
OptiMaxx product, the Company made the decision to retain the
Universal Document segment and presented the results of
operations and financial position of the segment in continuing
operations in for the fiscal year ended January 31, 1999. Prior
years' financial statements were presented on a comparable basis.
Included in the fiscal 1998 operating loss were impairment losses
related to the excess of cost over fair value of net assets
acquired and capitalized software development costs of $774,677
and $466,836, respectively. The Company had also accrued a loss
of $180,000 for the disposal of the net assets of the segment and
for its estimated net operating losses through its expected date
of disposal. The Company reversed this accrual during fiscal year
1999 as a result of its decision to retain Universal Document.
These reversals are included in discontinued operations for the
year ended January 31, 1999.
Losses related to the sale of DiaLogos, income from the
IntelliCode discontinued operations and the reversal of accrued
losses related to the disposal of the net assets of the Universal
Document segment, as shown on the accompanying Consolidated
Statements of Operations, includes the following
<TABLE><CAPTION> Year Ended Year Ended Year Ended
January 31, January 31, January 31,
2000 1999 1998
_____________ _____________ _____________
<S> <C> <C> <C>
Revenues:
DiaLogos $ 1,848,942 1,471,046 -
Intellicode - - 7,274,279
_____________ _____________ _____________
Total revenues $ 1,848,942 1,471,046 7,274,279
============= ============= =============
Operating income (loss):
DiaLogos $ (827,176) (1,819,289) (710,318)
Intellicode - - 1,805,741
Universal Document - 290,654 (290,654)
_____________ _____________ _____________
Total operating income (loss) (827,176) (1,528,635) 804,769
Gain (loss) on sale:
Loss on sale of DiaLogos (885,527) - -
Gain on sale of Intellicode - - 14,724,720
_____________ _____________ _____________
Total gain (loss) on sale (885,527) - 14,724,720
Income tax expense:
Discontinued operations (45,000) (113,355) (667,309)
Disposal of Intellicode - - (4,456,010)
_____________ _____________ _____________
Total income tax expense (45,000) (113,355) (5,123,319)
_____________ _____________ _____________
Income(loss) from discontinued operations $(1,757,703) (1,641,990) 10,406,170
============= ============= =============
</TABLE>
As of January 31, 2000 and 1999, $67,743 and $14,544 of interest
expense has been allocated to the operating loss from discontinued
operations related to DiaLogos. This allocation of interest
expense related to the overall debt of the Company has been based
upon the net assets of DiaLogos, relative to the net assets of the
Company on a consolidated basis.
As of January 31, 2000, the Company had net assets of $204,198
generally consisting of the following assets and liabilities of
DiaLogos: cash, accounts receivable, and fixed assets-net of
depreciation, trade accounts payable and accrued expenses, and
obligations under capital leases.
(4) Synergis Management Expenses, Acquisition and
Offering Costs
In 1997, the Company began negotiations to combine certain design
automation software resellers and integrators for the expected
merger of these entities with a subsidiary of the Company, which
eventually would become the Company's Synergis subsidiary. This
newly merged entity was expected to spin-off from the Company
through an initial public offering or, later, through private
financing.
For the years ended January 31, 2000, 1999 and 1998, the Company
incurred and expensed $179,663, $1,497,007 and $728,390,
respectively, for operating costs associated with the senior
management team hired to manage the expected merger of the
entities and the public offering or private financing of the
Synergis subsidiary. In addition, for the years ended January 31,
1999 and 1998, the Company had expensed $573,724 and $2,979,555,
respectively, for acquisition and offering costs related to
accountants', attorneys', and consultants' fees incurred on behalf
of postponed initial public offerings. During the first quarter
of fiscal 2000, the Company terminated all negotiations and has
not incurred any expenses subsequent to that date. The Company
does not anticipate any additional expenses related to the
Synergis transaction on a prospective basis.
(5) Fixed Assets
Fixed assets consisted of the following at January 31, 2000 and
1999:
January 31, January 31,
2000 1999
___________ ___________
Equipment $1,632,211 1,391,091
Furniture and fixtures 536,858 526,662
Leasehold improvements 197,181 197,181
Purchased software 162,590 148,710
___________ ___________
2,528,840 2,263,644
Accumulated depreciation and
amortization (1,344,014) (939,664)
___________ ___________
$1,184,826 1,323,980
(6) Bank Agreements
As of January 31, 2000, the Company had a $2,000,000 revolving
line of credit agreement with a bank that had an outstanding
balance of $1,112,509. The interest rate on the line of credit
agreement is payable at the bank's prime rate plus 1 1/2%. During
fiscal 2000, the Company also paid a closing fee of $60,000 and
quarterly commitment fees of 1% on the line of credit. The
Company's assets secure the line of credit. Due to the variable
rate and short-term nature of the agreement, its carrying value
approximates fair value.
On February 15, 2000, the Company entered into a new $2,000,000
revolving credit facility with the same bank that is due on May
15, 2000. The interest rate on the new financing agreement is
payable at the bank's prime rate plus 1 1/2% and the credit facility
is secured by all assets of the Company.
(7) Debt and Equity Financing
In April 1999, the Company entered into an Agreement (the
"Agreement") with three investment firms to obtain $6,100,000 in
debt and equity financing. The terms of the Agreement provide for
financing of $2,000,000 in subordinated debentures (the "Notes")
and $4,100,000 in Series A Convertible Preferred Stock (the
"Preferred Stock"). Certain terms of the Agreement were amended
in June 1999. The proceeds of the financing will be utilized to
fund working capital requirements and continue product development
and market penetration of certain of the Company's core products.
On April 30, 1999, the Company issued the Notes, due 2004, with an
annual coupon rate, payable quarterly, of 10% in the first year,
12% from May 1, 2000 through October 31, 2000 and 14% thereafter.
The Company also is required to pay a 2% fee on the amount of
principal outstanding on each annual anniversary of October 31,
1999. The principal portion of the Notes is payable as follows:
$666,666 in April 2002, $666,667 in April 2003 and $666,667 in
April 2004; however, the Company may redeem the Notes at any time
during their term without penalty. In circumstances specified in
the Agreement, if the Company receives cash from certain
transactions, as defined, the Company may be required to pay any
outstanding principal balance and accumulated interest thereon.
Due to the recent issuance of the Notes, their carrying amounts
approximate their fair values. The holders of the Notes also
received warrants to purchase 281,137 Preferred Stock at an
exercise price of $1.66. This warrant price is subject to
adjustment if the Company does not meet specified requirements
relating to the appreciation of its stock price at the end of a
defined two-year period. Holders of the warrants can also elect a
non-cash conversion of the warrants to Preferred Stock, but would
receive a reduced number of shares of Preferred Stock.
On June 25, 1999, the Company issued to the investors 2,371,815 of
Preferred Stock, with a $ .01 stated par value, at a purchase
price of $1.729 per share for gross proceeds of $4,100,000 (net
proceeds of $3,773,047). The Preferred Stock are convertible into
the Company's common stock on a one-for-one basis. However, the
conversion ratio could be subject to certain price and dilution
adjustments which essentially place restrictions on the Company's
ability to issue warrants, options or other rights (except to
employees), issue convertible securities or stock dividends, or
make changes in option prices or conversion rates. The Company is
required to pay a cumulative dividend quarterly at a rate of 4%
per share for the first three years, increasing to 10% thereafter.
The market rate related to the dividends is estimated at an annual
rate of 8%. The Preferred Stock (a) include voting rights, (b)
receive preferential treatment upon liquidation of the Company and
(c) convert into common shares upon certain events. In addition,
upon meeting certain requirements specified in the Agreement, the
Company can elect at its option to convert the Preferred Stock
into common shares of the Company. Also, ten-year warrants for
the purchase of 721,702 Preferred Stock were issued to the
Investors at a purchase price of $1.66. These warrants cannot be
exercised unless the value of the Company's stock price as traded
on the NASDAQ over a twenty-day period exceeds $7.17.
As of January 31, 2000, the $2,000,000 Notes issued by the Company
on April 30, 1999 have been recorded, net of debt issuance costs
and discounts, in the Consolidated Balance Sheet as long-term
debt. Debt issuance costs and discounts on the Notes will be
amortized to interest expense over the remaining term of the
Notes. The effective interest yield on the Notes is estimated at
an annual rate of 14.5%. The estimated fair value of the Note
warrants have been recorded as additional paid-in-capital in the
Consolidated Balance Sheet. The Preferred Stock and related
warrants have also been recorded in shareholders' equity in the
Consolidated Balance Sheet based upon their relative estimated
fair value. The estimated fair value of all financial instruments
were based upon an external appraisal by an investment banking
firm unrelated to the Company.
The Company recognized in the second quarter of fiscal 2000 a
beneficial conversion feature on the Preferred Stock of $346,285
that was included in the Consolidated Statement of Operations as
an adjustment to net loss. This amount represents the effect of
the differential between the conversion price and the closing
market price on the date of commitment of the Preferred Stock.
Although the beneficial conversion feature has no impact on the
financial condition or cash flows of the Company, it has a
negative impact on the Company's earnings (loss) per common share-
basic and diluted in the second quarter of fiscal 2000. The
Company also records dividends on the preferred stock on a
quarterly basis beginning in the second quarter of fiscal 2000.
Although the Company is only required to pay dividends at an
annual rate of 4% for the first three years, the preferred stock
dividend requirement disclosed in the consolidated statement of
operations has been based upon the Company's estimated market rate
of 8%. The incremental 4% had no impact on the financial
condition or cash flows of the Company, but negatively impacts the
Company's earnings (loss) per share-basic and diluted.
(8) Common Stock and Related Transactions
In connection with the sale of the IntelliCode assets to Becton
Dickinson, the Company sold 222,556 shares of its common stock to
Becton Dickinson in exchange for $2,000,000 in cash on January 28,
1998. The sale price was based on the average closing price of
the Company's common stock for the thirty days prior to the
announcement on November 21, 1997 of the signing of a letter of
intent relating to the sale of the IntelliCode assets.
During fiscal 2000, the Company entered into an agreement with an
investment firm to obtain $6,100,000 of debt and equity financing.
The terms of the agreement are described more fully in Note 7,
Debt and Equity Financing, to the consolidated financial
statements.
(9) Income Taxes
Total income tax expense (benefit) for the years ended January 31,
2000, 1999 and 1998 were as follows:
January 31, January 31, January 31,
2000 1999 1998
____________ ____________ ____________
Loss from operations $ (11,176) (1,616,370) (3,475,777)
Discontinued operations 45,000 113,355 5,123,319
Shareholders' equity, for
Compensation expense for
tax purposes in excess
of amounts recognized
for Financial reporting
purposes - - (93,500)
Shareholders' equity,
unrealized Gains (losses)
on marketable Securities
recorded for Financial
reporting purposes - - (1,026)
____________ ____________ ____________
$ 33,824 (1,503,015) 1,553,016
============ ============ ============
Total income tax benefit attributable to loss from continuing
operations for the years ended January 31, 2000, 1999 and 1999
were as follows:
January 31, January 31, January 31,
2000 1999 1998
____________ ____________ ____________
Federal:
Current $ (11,176) (1,229,425) (2,574,749)
Deferred - (179,718) (231,146)
____________ ____________ ____________
(11,176) (1,409,143) (2,805,895)
____________ ____________ ____________
State:
Current - (180,798) (541,804)
Deferred - (26,429) (128,078)
____________ ____________ ____________
- (207,227) (669,882)
____________ ____________ ____________
$ (11,176) (1,616,370) (3,475,777)
============ ============ ============
Income tax benefit differs from the amounts computed by applying
the Federal statutory rate to pre-tax loss from continuing
operations as a result of the following:
January 31, January 31, January 31,
2000 1999 1998
____________ ____________ ____________
Computed "expected"
benefit $(1,166,904) (2,897,525) (3,664,132)
Change in valuation
allowance 1,368,250 1,429,220 468,754
State income taxes,
net of Federal benefit (168,393) (413,118) (574,634)
Other (44,129) 265,053 294,235
____________ ____________ ____________
$ (11,176) (1,616,370) (3,475,777)
============ ============ ============
The tax effects of temporary differences that give rise to
deferred tax assets and deferred tax liabilities at January 31,
2000 and 1999 are as follows:
January 31, January 31,
2000 1999
____________ ____________
Deferred tax assets:
Net operating loss carryforward $4,215,595 2,817,759
Accrued Expenses 330,113 223,009
Capital loss carryforward 84,922 84,922
Alternative minimum tax 38,824 50,000
____________ ____________
Total gross deferred tax assets 4,669,454 3,175,690
Less valuation allowance (3,349,446) (1,981,196)
____________ ____________
Net deferred tax assets 1,320,008 1,194,494
____________ ____________
Deferred tax liabilities:
Software costs (1,136,900) (998,331)
Fixed assets (175,293) (163,660)
Other (7,815) (32,503)
____________ ____________
Total gross deferred tax
liabilities (1,320,008) (1,194,494)
____________ ____________
Net deferred tax liabilities $ - -
============ ============
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Due to the
Company's recent history of operating losses, management has
established valuation allowances against its net deferred tax
assets as of January 31, 2000.
At January 31, 2000, the Company had net operating loss
carryforwards for Federal income tax purposes of approximately
$10,800,000, which are subject to realization based upon the
Company's ability to generate future taxable income, limitations
imposed by the Internal Revenue Service, and other matters
potentially affecting the realizability of these carryforwards.
The net operating loss carryforwards expire at various periods
through 2019. The Company also has a capital loss carryforward of
approximately $218,000 which is available to offset future capital
gains, if any, through 2001.
(10) Stock Incentive Plans
In 1994, the Company adopted the 1994 Long-Term Stock Incentive
Plan ("Long-Term Plan") and the Directors' Nondiscretionary Stock
Option Plan ("Directors' Plan"), collectively the "Option Plans."
The Long-Term Plan provides for the grant of up to 2,000,000
stock-based incentives to employees in the form of stock options,
stock appreciation rights, stock awards, or any combination
thereof. A total of 100,000 shares is reserved for issuance under
the Directors' Plan. Options granted under the Long-Term Plan may
be either nonqualified or incentive options. Under the terms of
both the Long-Term Plan and the Directors' Plan, options may not
be granted at less than fair market value on the date of the
grant. Options granted under both plans are exercisable in
installments; however, no options are exercisable earlier than six
months or later than ten years from the date of the grant.
At January 31, 2000, there were 270,502 shares available for grant
under the Long-Term Plan and 38,975 additional shares available
for grant under the Directors' Plan.
The per share weighted average fair values at the date of grant
for options granted during the years ended January 31, 2000, 1999,
and 1998 were $1.22, $3.10, and $3.25, respectively. These fair
values were estimated using the Black Scholes option-pricing model
with the following weighted average assumptions: 2000 - expected
dividend yield 0%, risk-free interest rate of 6.5%, expected
volatility of 70%, and an expected life of 4.1 years; 1999 -
expected dividend yield 0%, risk-free interest rate of 5.07%,
expected volatility of 53%, and an expected life of 4.8 years;
1998 - expected dividend yield 0%, risk-free interest rate of
6.16%, expected volatility of 41%, and an expected life of 4.8
years.
The Company applies APB Opinion No. 25 in accounting for the
Option Plans; accordingly, no compensation cost has been
recognized for its options granted to employees in the
consolidated financial statements. The Company recognized
$31,930, $190,483, and $59,160 of compensation cost during the
years ended January 31, 2000, 1999 and 1998, respectively, related
to stock awards granted under the Long-Term Plan.
For its employee stock options, had the Company determined
compensation cost based on the fair value at the grant date for
its stock options under SFAS No. 123, the Company's net income
(loss) would have been reduced (increased) to the pro forma
amounts indicated below:
January 31, January 31, January 31,
2000 1999 1998
____________ ____________ ____________
Net income (loss)
As reported $ (5,770,884) (8,547,753) 3,105,089
Pro forma (6,604,787) (9,500,571) 2,239,941
============ ============ ============
Net income (loss)
per share -
basic and diluted
As reported $ (0.95) (1.40) 0.52
Pro forma (1.09) (1.56) 0.38
============ ============ ============
In February 1999, the Company also granted an option to purchase
100,000 shares of common stock with an estimated fair value of
$48,860 as compensation to a consultant. The estimated fair value
was determined using the Black Scholes option-pricing model with
the following weighted average assumptions: expected dividend
yield 0%, risk-free interest rate of 5.1%, expected volatility of
53%, and an expected life of 3 years. The fair value of these
options is being amortized over the related service periods of two
years. The Company recognized $24,432 in amortization expense
related to the option grant in the year ended January 31, 2000.
Transactions with respect to options, including options granted to
consultants, for the years ended January 31, 2000, 1999 and 1998
were as follows:
Weighted
Number Average
of Exercise
Shares Price
__________ ___________
Shares under option, January 31, 1997 766,650 $ 8.63
Options exercised (16,666) 5.97
Options forfeited or canceled (12,467) 9.51
Options granted 275,775 7.26
__________
Shares under option, January 31, 1998 1,013,292 8.29
Options exercised (7,673) 7.57
Options forfeited or canceled (41,892) 7.95
Options granted 331,000 6.12
__________
Shares under option, January 31, 1999 1,294,727 7.74
Options exercised (22,833) 5.30
Options forfeited or canceled (95,091) 8.30
Options granted 586,750 2.69
__________
Shares under option, January 31, 2000 1,763,553 6.01
==========
The following table summarizes information about options,
including options granted to consultants, at January 31, 2000
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
__________________________________________________________________________
_______________________________
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Prices of Options Contractual Life Exercise Price of Options Exercise Price
_________________ ____________ ____________________ ___________________
_____________ ________________
<C> <C> <C> <C> <C> <C>
$ 1.95-2.27 423,250 4.2 $1.93 50,000 $ 1.88
2.28-5.12 292,467 3.1 4.36 244,803 4.55
5.13-7.68 671,336 3.3 6.59 448,008 6.58
7.69-11.52 190,500 2.1 9.69 186,834 9.70
11.53-17.30 186,000 2.4 12.02 133,500 12.06
____________ ____________
1,763,553 3.2 6.01 1,063,145 7.13
============ ============
</TABLE
In June 1998, the Board of Directors approved the MedPlus, Inc.
Employee Stock Purchase Plan (the "Plan"), to provide employees of
the Company the opportunity to purchase shares of the Company's
common stock. The Company is authorized to issue up to 350,000
shares of common stock to its full-time employees, nearly all of
whom are eligible to participate. Under the terms of the Plan,
employees can choose biannually, to have up to 10% of their annual
base earnings withheld to purchase the Company's common stock.
The purchase price of the stock is 85% of the lower of its
beginning-of-period or end-or-period market price. For fiscal
2000 and 1999, the Company issued 67,422 and 17,701 shares,
respectively, to employees for stock purchases. As the Plan has
been created as a noncompensatory plan, no compensation expense
under APB 25 has been recognized in the Company's financial
statements. Under SFAS 123, the aggregate fair value of the
purchase rights, which would have resulted in expense to the
Company was $186,000, resulting in a consolidated pro forma net
loss of $5.9 million and a net loss per share of $ .98 for the
year ended January 31, 2000. For fiscal 1999, the effect of the
purchase rights to the Company's net loss, on a pro forma basis,
was not material. The fair value for fiscal 2000 was estimated
using the Black-Scholes model with the following assumptions:
dividend yield of 0%, expected life of 6 months, expected
volatility of 69%, and risk free interest rates ranging from of 5-
6%. The weighted average fair value of the employee's purchase
rights utilizing these assumptions was $2.77 and $.55 for fiscal
years 2000 and 1999, respectively.
(11) Retirement Savings and Investment Plan
The Company has a Retirement Savings and Investment Plan, a 401(k)
Plan, in which employees may participate by contributing specified
percentages of qualified compensation subject to Internal Revenue
Service limitation. The Company may make discretionary
contributions to a maximum of 100% of each participant's
contribution. For the years ended January 31, 2000 and 1999, the
Company recognized expense of $18,045 and $23,633, respectively,
for discretionary contributions into the Plan. For the year ended
January 31, 1998, the Company recognized expense of $213,495, of
which $147,174 related to continuing operations. The Company's
contributions to the Plan were funded subsequent to each year end
through the issuance of 3,208, 12,197 and 31,629 shares of the
Company's common stock for fiscal 2000, 1999 and 1998,
respectively.
(12) Related Party Transactions
In fiscal 1998, the Company purchased a majority interest in
DiaLogos Incorporated. The Company also arranged for approximately
$400,000 of funding for DiaLogos from investors who are officers
and directors of the Company. In exchange for the funding, these
investors received 18.5% of DiaLogos' common shares. As of March
10, 2000, the Company had divested its ownership in the stock of
DiaLogos (see footnote 3, Discontinued Operations); however,
certain officers of the Company have maintained or increased their
effective ownership in DiaLogos.
(13) Commitments and Contingencies
(a) Leases
The Company leases office space and certain equipment under
noncancelable operating lease agreements extending through May,
2004. Rent expense related to these operating leases amounted to
approximately $300,000, $272,000, and $201,000 for the years ended
January 31, 2000, 1999 and 1998, respectively.
The Company also leases certain equipment and furniture and
fixtures under capital leases with terms ranging from three to
five years. The cost of these capital assets, included in fixed
assets in the Consolidated Balance Sheet, was fully amortized as
of January 31, 2000. Amortization expense related to fixed assets
held under capital leases is included with depreciation and
amortization expense.
Future minimum lease payments under capital leases as of January
31, 2000 were $18,186, excluding interest of $575, and are
classified as current in the consolidated balance sheet.
As of January 31, 2000, future minimum lease payments under non-
cancelable operating leases with remaining terms in excess of one
year were as follows: $311,000 for fiscal 2001, $305,000for
fiscal 2002, $154,000 for fiscal 2003, and $15,000 for fiscal
2004.
(b) Legal Contingencies
Various lawsuits arising during the normal course of business are
pending against the Company and its consolidated subsidiaries. In
the opinion of management, no material effect on the Company's
consolidated financial position or results of operations is
expected to result from these matters.
During the third quarter of fiscal 2000, the Company settled a
claim filed by a former contractor of the Company for $375,000.
The Company has made cash payments of $262,500 in fiscal 2000
which have been included in operating activities in the
Consolidated Statement of Cash Flows. The remaining amount will
be paid during fiscal 2001. The Company recorded the expense as a
sales and marketing expense in the Consolidated Income Statement.
(14) Operating Segments
Based upon management's organization of its products and services,
the company has two reportable segments: Health Care Solutions
(ChartMaxx, E-Maxx, OptiMaxx, and FutureCORE) and Workflow and
Content Management (Universal Document). The Company's management
evaluates performance of each segment based on profit or loss from
operations before allocation of corporate expenses, other
income(expense), including interest expense, and income taxes.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see
Note 1 to the Consolidated Financial Statements).
The following table presents the revenues, segment operating
profit (loss), capital expenditures, depreciation and
amortization, and total assets of the Company by operating
segment
</TABLE>
<TABLE>
<CAPTION>
January 31, January 31, January 31,
2000 1999 1998
________________ __________________ ________________
<S> <C> <C> <C>
Revenues:
Health Care solutions $ 11,426,327 9,285,097 9,256,064
Workflow and Content Management 1,171,419 1,421,963 1,186,825
Less intercompany (a) (59,851) (748,122) (241,737)
________________ __________________ ________________
$ 12,537,895 9,958,938 10,201,152
================ ==================
================
Segment operating loss (b):
Health Care solutions $ (150,059) (3,233,699) (1,049,406)
Workflow and Content Management 300,084 (27,231) (1,498,981)
________________ __________________ ________________
$ 150,025 (3,260,930) (2,548,387)
================ ==================
================
Capital expenditures:
Health Care solutions (c) $ 278,738 432,293 326,747
Workflow and Content Management 4,034 1,768 24,482
________________ __________________ ________________
$ 282,772 434,061 351,229
================ ==================
================
Depreciation and amortization of
fixed assets:
Health Care solutions (c) $ 388,744 324,459 201,717
Workflow and Content Management 31,378 30,643 24,483
________________ __________________ ________________
$ 420,122 355,102 226,200
================ ==================
================
Total assets:
Health Care solutions (c) $ 11,347,639 11,397,918 22,917,353
Workflow and Content Management 502,136 475,932 546,978
Net assets from discontinued operations 204,198 1,238,408 -
________________ __________________ ________________
$ 12,053,973 13,112,258 23,464,331
================ ==================
================
(a) Intercompany revenues are based upon fair value of the transaction.
(b) Before corporate expenses.
(c) The Company has not historically maintained a separate balance sheet for its corporate assets.
The
Health Care Solutions' balances include segment and corporate activity. </TABLE>
<TABLE>
<CAPTION>
Reconciliations of segment data to the Company's consolidated data follow:
January 31, January 31, January 31,
2000 1999 1998
________________ __________________ ________________
<S> <C> <C> <C>
Operating loss:
Segments $ 150,025 (3,260,930) (2,548,387)
Corporate (3,024,462) (3,434,866) (4,288,604)
________________ __________________ ________________
Operating loss (2,874,437) (6,695,796) (6,836,991)
Other income (expenses):
Synergis expenses (179,663) (2,070,731) (3,707,945)
Interest expense (518,838) (131,470) (346,315)
Other income(expense), net 140,866 375,864 114,393
________________ __________________ ________________
Loss from continuing operations
before income tax benefit $ (3,432,072) (8,522,133) (10,776,858)
================ ==================
================
All of the company's operations are located in the United States. Also, the company primarily sells
to
customers within the United States. Revenues from customers located internationally were not
material.
</TABLE
(15) Significant Customers
Due to the size of certain of the Company's contracts, one
contract can represent a significant portion of the Company's
total revenue in a given year. However, the customer base
representing this portion of revenue varies each year making the
Company not necessarily dependent upon one significant customer.
For the year ended January 31, 2000, the Company's consolidated
revenues included two customers who accounted for a total of 31%
of consolidated revenues. For the years ended January 31, 1999,
and 1998, a single customer accounted for 36%, and 12% of the
Company's total revenues, respectively.
(16) Quarterly Results of Operations (Unaudited)
The following tables set forth selected quarterly financial
information for the fiscal years ended January 31, 2000 and 1999
</TABLE>
<TABLE>
<CAPTION>
Year ended January 31, 2000
_______________________________________________________________________
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
____________ ____________ _____________ _____________
___________
<S> <C> <C> <C> <C> <C>
Revenues $ 3,818,708 1,669,912 2,700,726 4,348,549 12,537,895
Operating loss from
continuing operations (530,683) (1,628,972) (1,158,721) 443,939 (2,874,437)
Income (loss) from
continuing operations (760,874) (1,729,636) (1,249,732) 319,346 (3,420,896)
Income (loss) from
discontinued operations (a) (318,953) (329,778) (264,280) (844,692) (1,757,703)
Net loss (1,079,827) (2,059,414) (1,514,012) (525,346) (5,178,599)
Net loss attributable
to common shareholders $(1,079,827) (2,487,699) (1,596,012) (607,346)
(5,770,884)
============= ============ ============= ==============
============
Earnings per share - basic (b)
Continuing operations (0.13) (0.36) (0.22) 0.04 (0.66)
Discontinued operations (0.05) (0.05) (0.04) (0.14) (0.29)
____________ ____________ _____________ _____________
___________
Net loss - basic $ (0.18) (0.41) (0.26) (0.10) (0.95)
============= ============ ============= ==============
============
Earnings per share - diluted (b)
Continuing operations (0.13) (0.36) (0.22) 0.03 (0.66)
Discontinued operations (0.05) (0.05) (0.04) (0.09) (0.29)
____________ ____________ _____________ _____________
___________
Net loss - diluted $ (0.18) (0.41) (0.26) (0.07) (0.95)
============= ============ ============= ==============
============
Weighted average shares
outstanding-basic 6,050,198 6,041,269 6,098,955 6,128,259 6,086,970
============= ============ ============= ==============
============
Weighted average shares
outstanding-diluted (d) 6,050,198 6,041,269 6,098,955 9,033,028 6,086,970
============= ============ ============= ==============
============
Year ended January 31, 1999
_______________________________________________________________________
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
____________ ____________ _____________ _____________
___________
Revenues $ 1,596,332 1,478,349 3,575,587 3,308,670 9,958,938
Operating loss from
continuing operations (c) (2,304,763) (2,386,645) (1,061,305) (943,083) (6,695,796)
Loss from continuing
operations (1,602,049) (2,289,637) (1,209,057) (1,805,020) (6,905,763)
Income from discontinued
operations (143,925) (318,367) (291,001) (888,697) (1,641,990)
Net loss $(1,745,974) (2,608,004) (1,500,058) (2,693,717) (8,547,753)
============= ============ ============= ==============
============
Earnings per share - basic (b)
and diluted:
Continuing operations (0.26) (0.37) (0.20) (0.30) (1.13)
Discontinued operations (0.02) (0.05) (0.05) (0.15) (0.27)
____________ ____________ _____________ _____________
___________
Net loss $ (0.28) (0.42) (0.25) (0.45) (1.40)
============= ============ ============= ==============
============
Weighted average shares
outstanding 6,160,157 6,170,726 6,085,537 6,016,325 6,109,439
============= ============ ============= ==============
============
</TABLE
Notes to quarterly results of operations:
(a) Included in the fourth quarter of fiscal 2000 is a loss
of $885,527 relating to the expected loss on the disposal of
DiaLogos.
(b) Quarterly amounts are not additive.
(c) Certain amounts from prior quarters have been restated to
conform to fiscal 2000 presentation.
(d) Weighted average shares outstanding-diluted for the
fourth quarter of fiscal 2000 includes the effect of potentially
dilutive securities as the Company had income from continuing
operations. Potentially dilutive securities include convertible
preferred stock, and the effect of warrants and options issued to
employees and calculated based upon the treasury stock method.
The calculation excludes 721,702 warrants on the preferred stock
as these warrants had not met the requirements for becoming
exercisable. The effect of potentially dilutive securities has
been omitted from the calculation of weighted average shares
outstanding for all other quarters because the effect of the
securities would be antidilutive.
(17) Liquidity
Since inception in 1991, the Company has funded its operations,
working capital needs and capital expenditures primarily through a
combination of cash generated by operations, the sale of its
IntelliCode division, debt financing, offerings of its common
stock to the public and, most recently, a subordinated debt and
preferred share equity financing. In order to continue its growth
strategy in the E-Health market, the Company may be replacing or
extending its line of credit and may consider alternative
financing including equity financing or potentially the sale of
certain of its assets. Management believes that its current
operating plan will enable the Company to continue its growth
strategy in the E-Health market. There can be no assurances,
however, that these goals will be accomplished or that the Company
will return to profitability in the near term.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Company's executive officers and directors are as
follows:
Name Age Position
Richard A. Mahoney 52 Chairman of the Board,
Chief Executive Officer
President and Director
Philip S. Present II 49 Senior Vice President,
Chief Operating Officer
and Director
Paul F. Albrecht 44 Vice President and Chief
Technology Officer
Daniel A. Silber 51 Vice President of
Finance and Chief
Financial Officer
Peter W. Stephan 44 Vice President of Sales
Thomas R. Wagner 36 Vice President of
Strategic Planning
Edward L. Cahill 47 Director
Jay Hilnbrand 66 Director and Retired
General Manager of
Universal Document
Robert E. Kenny III 44 Secretary and Director
Martin A. Neads 51 Director
Edward L. Samek 63 Director
Paul J. Stein 53 Director
Directors are elected annually by the shareholders and serve for
one-year terms. Officers serve at the discretion of the Board of
Directors and are elected on an annual basis.
Richard A. Mahoney 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. Mr. Mahoney has extensive
experience in the areas of strategic planning, marketing, and
financing for health care institutions. In addition, he has
lectured on subjects such as managed care, capitation, integrated
provider networks, computer-based patient record systems, and
regional health care alliances. Prior to joining MedPlus, Inc.,
Mr. Mahoney was president of a company that provided equipment
financing for hospitals and related organizations.
Philip S. Present II 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. Mr. Present
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; most recently serving as
the Partner-in-Charge of the Information, Communication and
Entertainment Practice for the Ohio Valley and Southeast regions
of the United States. From 1987 to 1993, Mr. Present was Partner-
in-charge of the Audit Practice - Cincinnati.
Paul F. Albrecht was elected Vice President and Chief Technology
Officer on December 13, 1997 following his tenure as General
Manager of the ChartMaxx Division of MedPlus since May 16, 1994.
Prior to joining the Company, Mr. Albrecht was Director of the
Platform Development Center for Cincinnati Bell Information
Systems and oversaw the development of distributed client/server
systems for high volume, mission critical applications. Prior to
that, Mr. Albrecht was a software engineer and technical manager
at AT&T Bell Labs. While at AT&T Bell Labs, he led the
development of a health care clinical information system and
developed core technology for the UNIX operating system. Mr.
Albrecht has published technical articles on programming
languages, UNIX, neural networks and health care applications.
Daniel A. Silber joined the Company in May 1995 as Vice President
of Finance and Chief Financial Officer. Prior to joining the
Company, Mr. Silber was Chief Financial Officer of Saturday Knight
Ltd., Chief Financial Officer of Tipton Associates, Treasurer of
Emery Realty, Inc. and CPA and Senior Accountant with Coopers and
Lybrand.
Peter W. Stephan joined the Company in February, 2000. Prior to
joining the Company, Mr. Stephan spent his entire business career
with Wallace Computer Services, Inc. (Wallace), based in Lisle,
Illinois, serving in a variety of senior-level sales and marketing
positions. His most recent position at Wallace was General
Manager of the Health Care Division where he was responsible for
the health care sales, sales support and marketing operations.
During his career at Wallace, Mr. Stephan also served as a
Divisional Vice President for West Coast sales, General Sales
Manager in Dallas and Director of Corporate Marketing. Mr.
Stephan replaced Timothy McMullen, who left the Company is
February 2000.
Thomas R. Wagner joined the Company in June 1999 as Vice President
of Strategic Planning. Mr. Wagner has over twelve years of
experience with software development companies. Prior to joining
the Company, Mr. Wagner spent two years as Chief Technology
Officer of DiaLogos Incorporated, previously a majority owned
subsidiary of MedPlus. Prior to his work at DiaLogos, Wagner
served as Director of Advanced Research and Development with
Cincom Systems, Inc., where he developed a product that was later
voted among the top 10 products of the year by Client-Server Tools
Bulletin.
Edward L. Cahill joined the Company as a director in June 1999.
Cahill is a founding partner of Cahill, Warnock & Company, a
company specializing in private equity and negotiated direct
investments in emerging public and private companies. Prior to
founding Cahill, Warnock & Company, Cahill was a Managing Director
at Alex. Brown & Sons. From 1986 to 1995 he headed that firm's
Health Care Investment Banking Group, specializing in health care
growth companies. While at Alex. Brown, his group completed
offerings for the first public companies in the home health care,
health maintenance organization, ambulatory surgery center, and
physician practice management industries, as well as several of
the leading biopharmaceutical companies.
Jay Hilnbrand, a director of the Company since April 1994, is the
retired General Manager of Universal Document which became a
wholly owned subsidiary of the Company in 1995.
Robert E. Kenny III, 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. Prior
to 1985, Mr. Kenny was an associate with Seeley, Savage, and
Aussem, a law firm in Cleveland, Ohio. Prior to that, Mr. Kenny
was a tax accountant with Price Waterhouse.
Martin A. Neads became a director of the Company in December 1998.
Mr. Neads is currently an executive director and business
consultant with European IT Solutions, Ltd. (EITS). Prior to
joining EITS, Mr. Neads was Vice President and General Manager of
Operations and Senior Vice President and General Manager of the
Software Products Division for Structural Dynamics Research Corp.,
a leading international provider of mechanical design automation
software and engineering services.
Edward L. Samek joined the Company as a director in February,
2000. Samek currently serves as the Vice Chairman and as a
director of MedQuist Inc., the country's largest provider of
electronic medical transcription services to hospitals, clinics
and group practices. Mr. Samek had been the Chairman and Chief
Executive Officer of The MRC Group, a leading privately-held
electronic medical transcription company that was acquired by
MedQuist in December 1998. He has also served as President of
SecrePhone Ltd., also a provider of medical transcription
services, Hudson Pharmaceutical Corporation and Childcraft
Education Corporation. Mr. Samek, a director of the Medical
Transcription Industry Alliance, served as president of that
organization for two terms during the period 1996-1999.
Paul J. Stein 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.
Additional information regarding the Company's officers and
directors is incorporated herein by reference to the information
set forth under the caption "Certain Relationships and Related
Transactions" of the Proxy Statement for the Company's Annual
Meeting of Shareholders to be held on June 27, 2000. Such Proxy
Statement will be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year
covered by this Form 10-KSB.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
All transactions executed in 1999 by the Company's directors,
officers and beneficial owners, were, to the Company's knowledge,
reported in a timely fashion as required by Section 16(a).
ITEM 10. EXECUTIVE COMPENSATION.
The information set forth under the caption "Executive
Compensation" of the Proxy Statement for the Company's Annual and
Special Meeting of Shareholders scheduled for June 27, 2000, is
incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this Form 10-KSB.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" of the Proxy Statement
for the Company's Annual and Special Meeting of Shareholders
scheduled for June 27, 2000, is incorporated herein by reference.
Such Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days after the end of the fiscal
year covered by this Form 10-KSB.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Certain Relationships
and Related Transactions" of the Proxy Statement for the Company's
Annual and Special Meeting of Shareholders scheduled for June 27,
2000, is incorporated herein by reference. Such Proxy Statement
will be filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Form 10-
KSB.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are hereby filed as part of this
Form 10-KSB:
</TABLE>
<TABLE>
<CAPTION>
Sequential
Exhibit Number Description of Exhibits Page Number
<S> <C> <C>
2 Asset Purchase Agreement, dated January 28, 1998, by and between Becton,
Dickinson and Company and MedPlus, Inc. See note 1
3 Amended Articles of Incorporation and Code of Regulations See note 2
10.1 Lease between MedPlus, Inc. and Duke Realty Limited Partnership for
principal offices, dated April 24, 1995 See note 3
10.2 Executive Employment Agreement dated October 31, 1995 between MedPlus, Inc.
and Richard A. Mahoney See note 3
10.3 First Lease Amendment between MedPlus, Inc. and Duke Realty Limited
Partnership for principal offices, dated December 6, 1996 See note 4
10.4 Second Lease Amendment between MedPlus, Inc. and Duke Realty Limited
Partnership for principal offices, dated December 6, 1996 [most recent?] See note 4
10.5 OptiMaxx[R] And Step2000[R] Software License, Hardware Purchase and Related
Services Agreement dated August 31, 1998 by and between MedPlus, Inc. and
Quest Diagnostics Incorporated See note 5
10.6 Securities Purchase Agreement dated April 30, 1999 by and among MedPlus,
Inc. and Cahill, Warnock Strategic Partners, L.P., et al. See note 5
10.7 Amended and Restated Securities Purchase Agreement dated
June 8, 1999 by and among MedPlus, Inc. and Cahill, Warnock Strategic
Partners, L.P., et al. See note 6
10.8 MedPlus, Inc. Software License and Database Maintenance Agreement dated
December 9, 1999 by and between MedPlus, Inc. and Quest Diagnostics
Incorporated
10.9 MedPlus, Inc. ChartMaxx[TM] Software License Agreement dated January 4, 2000
by and between MedPlus, Inc. and Cybear, Inc.
10.10 Employment Agreement dated February 1, 2000 by and between MedPlus, Inc.
and Philip S. Present II
10.11 Employment Agreement dated February 1, 2000 by and between MedPlus, Inc.
and Thomas Wagner
10.12 Employment Agreement dated February 15, 2000 by and between Peter
Stephan and MedPlus, Inc.
10.13 Employment Agreement dated February 1, 2000 by and between Daniel A.
Silber and MedPlus, Inc.
10.14 Employment Agreement dated February 1, 2000 by and between Paul F.
Albrecht and MedPlus, Inc.
10.15 Pledge and Security Agreement dated March 1, 2000 by and between MedPlus,
Inc. and LV Acquisition, LLC
10.16 Stock Redemption Agreement dated March 1, 2000 by and between MedPlus, Inc.
and Learning Voyage, Inc.
10.17 Promissory Note dated March 1, 2000 from Learning Voyage, Inc.
10.18 Common Stock Warrant dated March 1, 2000 for 80,000 shares of
Learning Voyage, Inc.
13 Annual Report to Shareholders See note 7
21 Subsidiaries of MedPlus, Inc.
23 Consent of KPMG LLP
</TABLE
Note 1: Incorporated by reference to the Company's Report on Form
8-K filed on February 11, 1998.
Note 2: Amended Articles of Incorporation are attached hereto and
the Company's Code of Regulations is Incorporated by reference to
the Registration Statement on Form SB-2, Registration No. 33-
77896C, effective May 24, 1994.
Note 3: Incorporated by reference to the Registration Statement on
Form S-1, Registration No. 33-98696, effective November 21, 1995.
Note 4: Incorporated by reference to the Company's Annual Report
on Form 10-KSB filed March 27, 1997.
Note 5: Incorporated by reference to the Company's Annual Report
on Form 10K-SB filed May 3, 1999.
Note 6: Incorporated by reference to the Company's Report on Form
8-K filed on June 9, 1999.
Note 7: Pursuant to general Instruction F of Form 10-KSB and
Regulation 240.14a(d) of the Securities Exchange Act of 1934, the
Issuer's Annual Report to the Security Holders for its fiscal year
ended January 31, 2000 has been combined with the required
information of Form 10-KSB and is being filed with the U.S.
Securities and Exchange Commission and submitted to the
registrant's shareholders on an integrated basis.
(b) No Reports on Form 8-K were filed during the three-month
period ended January 31, 2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDPLUS, INC., Registrant
By: /s/ Richard A. Mahoney
Richard A. Mahoney
President
Date: April 28, 2000
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
/s/ Richard A. Mahoney Chairman of the Board, April 28, 2000
Richard A. Mahoney Chief Executive Officer
and President (Principal
Executive Officer)
/s/ Daniel A. Silber Vice President of April 28, 2000
Daniel A. Silber Finance and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Philip S. Present II Chief Operating Officer April 28, 2000
Philip S. Present II and Director
/s/ Robert E. Kenny III Secretary and Director April 28, 2000
Robert E. Kenny III
/s/ Edward L. Cahill Director April 28, 2000
Edward L. Cahill
/s/ Jay Hilnbrand Director April 28, 2000
Jay Hilnbrand
/s/ Martin A. Neads Director April 28, 2000
Martin A. Neads
/s/ Edward L. Samek Director April 28, 2000
Edward L. Samek
/s/ Paul Stein Director April 28, 2000
Paul Stein
Exhibit 21
Subsidiaries of MedPlus, Inc.
ChartMaxx, Inc.: an Ohio corporation wholly owned by MedPlus, Inc.
FutureCORE, Inc.: an Ohio corporation wholly owned by MedPlus,
Inc.
Synergis Acquisition, Inc.: an Ohio corporation wholly owned by
MedPlus, Inc.
Synergis Technologies, Inc.: an Ohio corporation wholly owned by
MedPlus, Inc.
Universal Document Management Systems, Inc.: an Ohio corporation
wholly owned by
MedPlus, Inc.
Valcor Associates, Inc.: a Pennsylvania corporation wholly owned
by MedPlus, Inc.
Exhibit 23
Consent Independent Auditors
The Board of Directors
MedPlus, Inc.:
We consent to the incorporation by reference in the registration
statements of MedPlus, Inc. and subsidiaries on Form S-8 (No. 33-
94426) and Form S-3 (No. 333-20547) of our report dated April 14,
2000, relating to the consolidated balance sheets of MedPlus, Inc.
and subsidiaries as of January 31, 2000 and 1999, and the related
consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three year period ended
January 31, 2000, which report appears in the January 31, 2000
annual report on Form 10-KSB of MedPlus, Inc. and subsidiaries.
/s/ KPMG, LLP
Cincinnati, Ohio
April 14, 2000
</TABLE>
AMENDED ARTICLES OF INCORPORATION OF
MEDPLUS, INC.
FIRST: The name of the Corporation shall be MedPlus, Inc.
SECOND: The place in Ohio where the principal office of the
Corporation is to be located is Cincinnati, Hamilton County, Ohio.
THIRD: The purpose for which the Corporation is formed is to
engage in any lawful act or activity for which corporations may be
formed under Chapter 1701 of the Ohio Revised Code.
FOURTH: The aggregate number of shares which the Corporation
shall have the authority to issue shall be (a) 15,000,000 shares
of Common Stock without par value; and (b) 5,000,000 shares of
Series A Convertible Preferred Stock as follows:
1. Number of Shares. The series of Preferred Stock
designated and known as "Series A Convertible Preferred Stock"
shall consist of 5,000,000 shares.
2. Voting. Except as may be otherwise provided in these
terms of the Series A Convertible Preferred Stock or by law, the
Series A Convertible Preferred Stock shall vote together with all
other classes and series of stock of the Corporation as a single
class on all actions to be taken by the stockholders of the
Corporation, including, but not limited to actions amending the
Certificate of Incorporation of the Corporation to increase the
number of authorized shares of Common Stock. Each share of
Series A Convertible Preferred Stock shall entitle the holder
thereof to such number of votes per share on each such action as
shall equal the number of shares of Common Stock (including
fractions of a share) into which each share of Series A
Convertible Preferred Stock is then convertible; provided,
however, that if the number of such number of votes is greater
than such number of shares of Series A Convertible Preferred Stock
and is consequently a violation of the rules of the Nasdaq Stock
Market applicable to the Company, then the number of votes shall
equal the number of shares of Series A Convertible Preferred
Stock.
3. Dividends. The holders of the Series A Convertible
Preferred Stock shall be entitled to receive, out of funds legally
available therefor, quarterly cash dividends at the rate per annum
of $0.06916 per share until June 23, 2002 and thereafter at the
rate of $0.1729 per share (the "Accruing Dividends"). Accruing
Dividends shall accrue from day to day, whether or not earned or
declared, and shall be cumulative. Accruing Dividends shall be
declared by the Board of Directors and paid by the Corporation
quarterly on January 31, April 30, July 31 and October 31 of each
year with respect to each share of Series A Convertible Preferred
Stock then issued and outstanding. At the sole option of the
holder of shares of Series A Convertible Preferred Stock, the
Accruing Dividends may be paid in the form of additional shares of
Common Stock. Upon declaration by the Board of Directors of the
Accruing Dividends, notice shall be sent to each holder of Series
A Convertible Preferred Stock of such declaration and notifying
each such holder (such notice, the "Dividend Notice") that the
Accruing Dividends shall be paid in cash unless such holder
elects, by notice to the Corporation within 15 days of receipt of
the Dividend Notice, to have the Accruing Dividends paid in the
form of additional shares of Common Stock. If any holder so
elects, such holder shall receive in payment in full of the
Accruing Dividends that number of shares of Common Stock as is
equal to the aggregate value of the Accruing Dividends to be paid
divided by the Fair Market Value (as defined in subparagraph 6Q
below) of one share of Common Stock on the date such Accruing
Dividends were declared (a statement as to such Fair Market Value
shall be included in the Dividend Notice). If payment of the
Accruing Dividends as provided above would violate applicable law,
the Corporation's Articles of Incorporation or its Code of
Regulations, then the Corporation shall notify the holders of
shares of Series A Convertible Preferred Stock of such fact and at
the election of at least a majority of the holders of the Series A
Convertible Preferred Stock, the Accruing Dividends shall be
declared and paid in the form of additional shares of Common Stock
as provided above. The holders of the Series A Convertible
Preferred Stock shall also be entitled to receive, out of funds
legally available therefor, dividends at the same rate as
dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating
each share of Series A Convertible Preferred Stock as being equal
to the number of shares of Common Stock (including fractions of a
share) into which each share of Series A Convertible Preferred
Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of Series A Convertible Preferred Stock
shall be entitled, before any distribution or payment is made upon
any stock ranking on liquidation junior to the Series A
Convertible Preferred Stock, to be paid an amount equal to the
greater of (i) $1.729 per share plus, in the case of each share,
an amount equal to all Accruing Dividends unpaid thereon (whether
or not declared) and any other dividends declared but unpaid
thereon, computed to the date payment thereof is made available,
or (ii) such amount per share as would have been payable had each
such share been converted to Common Stock pursuant to paragraph 6
immediately prior to such liquidation, dissolution or winding up,
and the holders of Series A Convertible Preferred Stock shall not
be entitled to any further payment, such amount payable with
respect to one share of Series A Convertible Preferred Stock being
sometimes referred to as the "Liquidation Preference Payment" and
with respect to all shares of Series A Convertible Preferred Stock
being sometimes referred to as the "Liquidation Preference
Payments". If upon such liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Series A Convertible Preferred
Stock shall be insufficient to permit payment to the holders of
Series A Convertible Preferred Stock of the amount distributable
as aforesaid, then the entire assets of the Corporation to be so
distributed shall be distributed ratably among the holders of
Series A Convertible Preferred Stock. Upon any such liquidation,
dissolution or winding up of the Corporation, after the holders of
Series A Convertible Preferred Stock shall have been paid in full
the amounts to which they shall be entitled, the remaining net
assets of the Corporation may be distributed to the holders of
stock ranking on liquidation junior to the Series A Convertible
Preferred Stock. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the
Liquidation Preference Payments and the place where said
Liquidation Preference Payments shall be payable, shall be
delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less
than 20 days prior to the payment date stated therein, to the
holders of record of Series A Convertible Preferred Stock, such
notice to be addressed to each such holder at its address as shown
by the records of the Corporation. Any of (i) the consolidation
or merger of the Corporation (other than a merger to reincorporate
the Corporation in a different jurisdiction) into or with any
other entity or entities in which the shares of the Corporation
outstanding immediately prior to the closing of such event
represent or are converted into shares of the surviving or
resulting entity that represent less than a majority of the total
number of shares of the surviving or resulting entity that are
outstanding or are reserved for issuance upon the exercise or
conversion of outstanding securities immediately after the closing
of such event, (ii) the sale or transfer of fifty percent (50%) or
more of the capital stock of the Corporation in a single
transaction or series of related transactions, and (iii) the sale,
lease, exchange or transfer of all or substantially all of the
assets of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of
the provisions of this paragraph 4, unless the holders of at least
sixty percent (60%) of the then outstanding Series A Convertible
Preferred Stock otherwise agree. For purposes hereof, the Common
Stock shall rank on liquidation junior to the Series A Convertible
Preferred Stock.
5. Restrictions. At any time when shares of Series A
Convertible Preferred Stock are outstanding, except where the vote
or written consent of the holders of a greater number of shares of
the Corporation is required by law or by the Articles of
Incorporation, and in addition to any other vote required by law
or the Articles of Incorporation, without the approval of the
holders of at least two-thirds of the then outstanding shares of
Series A Convertible Preferred Stock, given in writing or by vote
at a meeting, consenting or voting (as the case may be) separately
as a series, the Corporation will not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same
ranks junior to the Series A Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding
up of the Corporation, or increase the authorized amount of the
Series A Convertible Preferred Stock or increase the authorized
amount of any additional class or series of shares of stock unless
the same ranks junior to the Series A Convertible Preferred Stock
as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, or create or authorize any
obligation or security convertible into shares of Series A
Convertible Preferred Stock or into shares of any other class or
series of stock unless the same ranks junior to the Series A
Convertible Preferred Stock as to the distribution of assets on
the liquidation, dissolution or winding up of the Corporation,
whether any such creation, authorization or increase shall be by
means of amendment to the Articles of Incorporation or by merger,
consolidation or otherwise;
5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with
any other entity or entities or sell, lease, abandon, transfer or
otherwise dispose of all or substantially all its assets;
5C. Amend, alter or repeal its Articles of
Incorporation if the effect would be detrimental or adverse in any
manner with respect to the rights of the holders of the Series A
Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of
stock other than the Series A Convertible Preferred Stock, except
for dividends or other distributions payable on the Common Stock
solely in the form of additional shares of Common Stock and except
for the purchase of shares of Common Stock from former employees
of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of
employment of such former employee and the purchase price does not
exceed the original issue price paid by such former employee to
the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of
Series A Convertible Preferred Stock except as expressly
authorized in paragraph 7 hereof or pursuant to a purchase offer
made pro rata to all holders of the shares of Series A Convertible
Preferred Stock on the basis of the aggregate number of
outstanding shares of Series A Convertible Preferred Stock then
held by each such holder.
6. Conversions. The holders of shares of Series A
Convertible Preferred Stock shall have the following conversion
rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares
of Series A Convertible Preferred Stock shall have the right, at
its option at any time, to convert any such shares of Series A
Convertible Preferred Stock (except that upon any liquidation of
the Corporation the right of conversion shall terminate at the
close of business on the business day fixed for payment of the
amount distributable on the Series A Convertible Preferred Stock)
into such number of fully paid and nonassessable shares of Common
Stock as is obtained by (i) multiplying the number of shares of
Series A Convertible Preferred Stock so to be converted by $1.729
and (ii) dividing the result by the conversion price of $1.729 per
share or, in case an adjustment of such price has taken place
pursuant to the further provisions of this paragraph 6, then by
the conversion price as last adjusted and in effect at the date
any share or shares of Series A Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last
adjusted, being referred to as the "Conversion Price"). Such
rights of conversion shall be exercised by the holder thereof by
giving written notice that the holder elects to convert a stated
number of shares of Series A Convertible Preferred Stock into
Common Stock and by surrender of a certificate or certificates for
the shares so to be converted to the Corporation at its principal
office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of
the Series A Convertible Preferred Stock) at any time during its
usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address) in
which the certificate or certificates for shares of Common Stock
shall be issued.
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice
referred to in subparagraph 6A and surrender of the certificate or
certificates for the share or shares of Series A Convertible
Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a
certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares
of Series A Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and
the Conversion Price shall be determined as of the close of
business on the date on which such written notice shall have been
received by the Corporation and the certificate or certificates
for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares
of Series A Convertible Preferred Stock shall cease, and the
person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial
Conversion. No fractional shares shall be issued upon conversion
of Series A Convertible Preferred Stock into Common Stock and no
payment or adjustment shall be made upon any conversion on account
of any cash dividends on the Common Stock issued upon such
conversion. At the time of each conversion, the Corporation shall
pay in cash an amount equal to all dividends accrued and unpaid on
the shares of Series A Convertible Preferred Stock surrendered for
conversion to the date upon which such conversion is deemed to
take place as provided in subparagraph 6B. In case the number of
shares of Series A Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to
subparagraph 6A exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to
the holder, at the expense of the Corporation, a new certificate
or certificates for the number of shares of Series A Convertible
Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted. If any fractional
share of Common Stock would, except for the provisions of the
first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional
share, shall pay to the holder surrendering the Series A
Convertible Preferred Stock for conversion an amount in cash equal
to the current market price of such fractional share as determined
in good faith by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever,
after the date one or more shares of Series A Convertible
Preferred Stock is first issued, the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(7),
deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then,
forthwith upon such issue or sale, the Conversion Price shall be
reduced to the price at which the Corporation issued or sold, or
is deemed to have issued or sold, such shares of Common Stock.
For purposes of this subparagraph 6D, the following subpara-
graphs 6D(1) to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at
any time the Corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any warrants
or other rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or security
convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of
the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be
outstanding. In the event that all Options referred to in this
subparagraph 6D(1) are terminated or expire without any such
Options having been exercised, the Conversion Price shall be
increased to the Conversion Price which would have been in effect
at the time of such expiration or termination had all such Options
never been issued. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Conversion Price shall be
made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case
the Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon such
conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration
for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then
the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date
of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible
Securities, (b) if any such issue or sale of such Convertible
Securities is made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other
provisions of this subparagraph 6D, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale,
and (c) in the event that all Convertible Securities referred to
in this subparagraph 6D(2) are terminated or expire without any
such Convertible Securities having been converted or exchanged,
the Conversion Price shall be increased to the Conversion Price
which would have been in effect at the time of such expiration or
termination had all such Convertible Securities never been issued.
6D(3) Change in Option Price or Conversion Rate.
Upon the happening of any of the following events, namely, if the
purchase price provided for in any Option referred to in
subparagraph 6D(1), the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities
referred to in subparagraph 6D(1) or 6D(2), or the rate at which
Convertible Securities referred to in subparagraph 6D(1) or 6D(2)
are convertible into or exchangeable for Common Stock shall change
at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the
Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold, but only if
as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced; and on the termination of any such
Option or any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereunder shall
forthwith be increased to the Conversion Price which would have
been in effect at the time of such termination had such Option or
Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
6D(4) Stock Dividends. In case the Corporation
shall declare a dividend (other than the Accruing Dividends) or
make any other distribution upon any stock of the Corporation
(other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution shall be deemed to have been issued
or sold at a price per share equal to $.00001.
6D(5) Consideration for Stock. In case any shares
of Common Stock, Options or Convertible Securities shall be issued
or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor,
without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be
deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with
the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of
Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall
take a record of the holders of its Common Stock for the purpose
of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii)
to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Corporation, and
the disposition of any such shares shall be considered an issue or
sale of Common Stock for the purpose of this subparagraph 6D.
6E. Certain Issues of Common Stock Excepted.
Anything herein to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Conversion
Price in the case of the issuance from and after the date of
filing of these terms of the Series A Convertible Preferred Stock
of up to an aggregate of 1,096,391 shares (appropriately adjusted
to reflect the occurrence of any event described in
subparagraph 6F) of Common Stock to directors, officers, employees
or consultants of the Corporation in connection with their service
as directors of the Corporation, their employment by the
Corporation or their retention as consultants by the Corporation,
plus such number of shares of Common Stock which are repurchased
by the Corporation from such persons after such date pursuant to
contractual rights held by the Corporation and at repurchase
prices not exceeding the respective original purchase prices paid
by such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock
split, stock dividend or otherwise) its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price
in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased. In the case of
any such subdivision, no further adjustment shall be made pursuant
to subparagraph 6D(4) by reason thereof.
6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of
the Corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and
adequate provisions shall be made whereby each holder of a share
or shares of Series A Convertible Preferred Stock shall thereupon
have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore receivable upon the conversion of
such share or shares of Series A Convertible Preferred Stock, such
shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares
of such Common Stock equal to the number of shares of such Common
Stock immediately theretofore receivable upon such conversion had
such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to
the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for
adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the
exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of
the Conversion Price, then and in each such case the Corporation
shall give written notice thereof, by delivery in person,
certified or registered mail, return receipt requested, telecopier
or telex, addressed to each holder of shares of Series A
Convertible Preferred Stock at the address of such holder as shown
on the books of the Corporation, which notice shall state the
Conversion Price resulting from such adjustment, setting forth in
reasonable detail the method upon which such calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend
upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or other rights;
(3) there shall be any capital reorganization
or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another
entity or entities, or a sale, lease, abandonment, transfer or
other disposition of all or substantially all its assets, or any
Change of Control ("Change of Control" shall mean the acquisition
by a person or related persons, or entity or related entities, of
voting securities of the Corporation (including securities
convertible into voting securities, "Voting Securities") which,
together with all other Voting Securities owned by such person,
persons, entity or entities (A) exceeds fifty percent (50%) of all
outstanding Voting Securities of the Corporation at such time, or
(B) represents greater than fifty percent (50%) of the voting
power of all outstanding Voting Securities at such time);
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation; or
(5) the election by at least a majority of the
holders of Series A Convertible Stock to have the Corporation
redeem the outstanding shares of Series A Convertible Preferred
Stock pursuant to paragraph 7 hereof;
then, in any one or more of said cases, the Corporation shall
give, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder
of any shares of Series A Convertible Preferred Stock at the
address of such holder as shown on the books of the Corporation,
(a) at least 20 days' prior written notice of the date on which
the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation, winding up and (b) in the
case of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation, winding up, Change
of Control or redemption, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be
entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, as the case
may be.
6J. Stock to be Reserved. The Corporation will at
all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issuance upon the conversion of
Series A Convertible Preferred Stock as herein provided, such
number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series A Convertible
Preferred Stock. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly
issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Corporation
covenants that it will from time to time take all such action as
may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such
action as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securi-
ties exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjust-
ment of the Conversion Price if the total number of shares of
Common Stock issued and issuable after such action upon conversion
of the Series A Convertible Preferred Stock would exceed the total
number of shares of Common Stock then authorized by the Articles
of Incorporation.
6K. No Reissuance of Series A Convertible Preferred
Stock. Shares of Series A Convertible Preferred Stock which are
converted into shares of Common Stock as provided herein shall not
be reissued.
6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Series A Convertible
Preferred Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the
holder of the Series A Convertible Preferred Stock which is being
converted.
6M. Closing of Books. The Corporation will at no
time close its transfer books against the transfer of any Series A
Convertible Preferred Stock or of any shares of Common Stock
issued or issuable upon the conversion of any shares of Series A
Convertible Preferred Stock in any manner which interferes with
the timely conversion of such Series A Convertible Preferred
Stock, except as may otherwise be required to comply with applic-
able securities laws.
6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, no par value per share, as
constituted on the date of filing of these terms of the Series A
Convertible Preferred Stock, and shall also include any capital
stock of any class of the Corporation thereafter authorized which
shall not be limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in dividends or
in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
provided that the shares of Common Stock receivable upon
conversion of shares of Series A Convertible Preferred Stock shall
include only shares designated as Common Stock of the Corporation
on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in
subparagraph 6G.
6O. Mandatory Conversion. If at any time the Corpora-
tion shall effect a firm commitment underwritten public offering
of shares of Common Stock in which (i) the aggregate price paid
for such shares by the public shall be at least $25,000,000 and
(ii) the price paid by the public for such shares shall be at
least $5.00 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F), then
effective upon the closing of the sale of such shares by the
Corporation pursuant to such public offering, all outstanding
shares of Series A Convertible Preferred Stock shall automatically
convert to shares of Common Stock on the basis set forth in this
paragraph 6. If at any time after June 23, 2002 the Fair Market
Value (as defined below) of one share of Common Stock exceeds
$3.458 (appropriately adjusted to reflect the occurrence of any
event described in subparagraph 6F), then effective upon delivery
of a notice of such Fair Market Value to each holder of any shares
of Series A Convertible Preferred Stock, such delivery to be in
person, certified or registered mail, return receipt requested,
telecopier or telex, to the address of such holder as shown on the
books of the Corporation, all outstanding shares of Series A
Convertible Preferred stock shall automatically convert to shares
of Common Stock on the basis set forth in this paragraph 6.
Holders of shares of Series A Convertible Preferred Stock
converted pursuant to this subparagraph 6O may deliver to the
Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by
notice in writing to such holders) during its usual business
hours, the certificate or certificates for the shares so
converted. As promptly as practicable thereafter, the Corporation
shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to
which such holder is entitled, together with any cash dividends
and payment in lieu of fractional shares to which such holder may
be entitled pursuant to subparagraph 6C. Until such time as a
holder of shares of Series A Convertible Preferred Stock shall
surrender his or its certificates therefor as provided above, such
certificates shall be deemed to represent the shares of Common
Stock to which such holder shall be entitled upon the surrender
thereof.
6P. Additional Adjustment to Conversion Price. If
on June 23, 2001, the product of (A) the Fair Market Value of one
share of Common Stock, multiplied by (B) 2,371,815, is less than
the difference of (i) $6,250,000, minus (ii) the aggregate total
of all Accruing Dividends which have been declared and paid until
such date, then the Conversion Price shall be reduced to the price
which equals two-thirds of the Conversion Price in effect
immediately prior to such reduction.
6Q. Fair Market Value. For the purposes of
paragraph 3 and subparagraphs 6O and 6P, "Fair Market Value" of
one share of Common Stock on any specified date shall mean:
(i) If shares of Common Stock are traded on an
exchange or are quoted on the Nasdaq National Market, the average
of the last reported sale price of the Common Stock on the twenty
trading days before such date;
(ii) If shares of the Common Stock are not traded on
an exchange or on the Nasdaq National Market but are traded in the
over-the-counter market, the average of the mean of the last bid
and asked prices reported on the twenty trading days before such
date (1) by the Nasdaq or (2) if reports are unavailable under
clause (1) by the National Quotation Bureau Incorporated; and
(iii) If shares of the Company's Common Stock are
not publicly traded, then as determined in good faith by the Board
of Directors upon review of relevant factors.
6R. Adjustment for Dividends in Other Stock, Property,
etc.; Reclassification, etc. In case at any time or from time to
time, the holders of Common Stock shall have received, or (on or
after the record date fixed for the determination of shareholders
eligible to receive) shall have become entitled to receive,
without payment therefor:
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable
solely out of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock
dividend or in a stock-split, then and in each such case each
holder of shares of Series A Convertible Preferred Stock shall be
entitled to receive such stock and other securities and property
(including cash in the cases referred to in subparagraphs 6R(b)
and (c)) at the same rate as such stock and other securities and
property (including cash in the cases referred to in subparagraphs
6R(b) and (c)) are paid with respect to the Common Stock (treating
each share of Series A Convertible Preferred Stock as being equal
to the number of shares of Common Stock (including fractions of a
share) into which each share of Series A Convertible Preferred
Stock is then convertible).
7. Amendments. No provision of these terms of the
Series A Convertible Preferred Stock may be amended (whether by
merger, consolidation or otherwise), modified or waived without
the written consent or affirmative vote of the holders of at least
two-thirds of the then outstanding shares of Series A Convertible
Preferred Stock.
FIFTH: To the extent allowed under Ohio law, an action on any
matter taken by the shareholders of the Corporation, regarding
which the statutes of Ohio provide that unless otherwise provided
in the articles of incorporation or code of regulations of a
corporation there shall be the affirmative role of a larger
proportion than the holders of a majority of the shares entitled
to vote thereon, may be taken by the affirmative vote of the
holders of a majority of shares entitled to vote thereon.
SIXTH: No holder of shares of any class of the Corporation shall
be entitled as of right, preemptive or otherwise, to subscribe for
or to purchase from the Corporation any shares of the Corporation
hereafter issued or sold.
SEVENTH: When authorized by an affirmative vote of the Board
of Directors, without the action or approval of the shareholders
of this Corporation, this Corporation may redeem, purchase, or
contract to purchase, at any time and from time to time, shares of
any class issued by this Corporation for such prices an upon and
subject to such terms and conditions as the Board of Directors may
determine.
EIGHTH: No holder of shares of any class of the Corporation
shall be entitled to vote cumulatively in the election of
directors.
###
1
MEDPLUS, INC. SOFTWARE LICENSE
AND DATABASE MAINTENANCE AGREEMENT
Agreement No. Q993001
This Agreement is made effective as of December 9, 1999
("Effective Date") by and between MedPlus, Inc. (hereinafter
"MedPlus"), an Ohio corporation with its principal place of
business located at 8805 Governor's Hill Drive, Ste. 100,
Cincinnati, Ohio 45249 and Quest Diagnostics Incorporated
(hereinafter "Quest Diagnostics," as defined below).
W I T N E S S E T H:
WHEREAS, Quest Diagnostics is the owner and operator of
clinical laboratories which transmit and receive Laboratory Orders
and Laboratory Results Reports (as defined below) to and from
Quest Diagnostics' customers; and
WHEREAS, MedPlus is a healthcare technology company which,
as part of its business, owns and operates the ChartMaxx[TM]
System, an electronic patient record system, including the
ChartMaxx Data Capture[TM] Software, which provides an interface
mechanism to the ChartMaxx System, and the ChartMaxx Web
Client[TM] Software, which allows customers to access the
ChartMaxx System via the Internet; and
WHEREAS, Quest Diagnostics desires to license the ChartMaxx
Data Capture Software and the ChartMaxx Web Client Software from
MedPlus to facilitate the electronic transmission of Laboratory
Orders from Providers to Quest Diagnostics, and of Laboratory
Results Reports from Quest Diagnostics to Providers, and to allow
Quest Diagnostics to view such Orders and Reports via the Internet;
and
WHEREAS, Quest Diagnostics desires to use the ChartMaxx
System to receive Laboratory Orders from Providers and to transmit
Laboratory Results Reports to Providers for their own patients.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties agree
as follows:
A. GENERAL DEFINITIONS
The following terms shall be defined herein as follows:
1. "Applicable Law(s)" means any statute, law, ordinance,
regulation, requirement, order or rule of any federal, state,
local government or other governmental agency or body or of any
other type of regulatory body, or any governmental or
administrative interpretation of any thereof, including, without
limitation, (i) requirements imposed by any governmental or
regulatory body which must be satisfied to qualify for Medicare,
Medicaid or other health care program reimbursements, and (ii) any
and all federal, state and local health care laws, including but
not limited to, those laws relating to or covering the methods and
ways in which clinical laboratory electronic data information
services and other related or incidental services or benefits, if
any, are provided to the providers, the federal Physician Self-
Referral Law, 42 U.S.C. Section 1395bb, and the regulations
promulgated thereunder (together, the "Stark Law"), similar state
physician self-referral laws and regulations (together with the
Stark Law, the "Self-Referral Laws"), the Federal Health Care
Program Anti-kickback Law and regulations promulgated thereunder
(the "Federal Anti-kickback Law"), and similar state anti-kickback
laws and regulations (together with the Federal Anti-kickback Law,
the "Anti-kickback Laws"), the Clinical Laboratory Improvements
Act of 1967, as amended, the Health Insurance Portability and
Accountability Act of 1996, as amended, and regulations (proposed
or final) promulgated thereunder, the HCFA Internet Security
Policy of 1998, all state and local statutes addressing privacy
and security of healthcare information, and the Balanced Budget
Act of 1997, P.L. 105-23, as amended, and regulations promulgated
thereunder.
2. "ChartMaxx Data Capture Software" means that portion of
the ChartMaxx Software that allows Quest Diagnostics to transmit
data to the Database for access by Providers, as more specifically
described on Exhibit A hereto.
3. "ChartMaxx Software" means all of the software utilized
by MedPlus in operating its ChartMaxx electronic patient record
system.
4. "ChartMaxx System" means the ChartMaxx electronic
patient record system software licensed by MedPlus to entities in
the healthcare industry, including, but not limited to, those
versions of MedPlus' proprietary software, the ChartMaxx Software,
the ChartMaxx Data Capture Software and the Web Client Software,
and user manuals (including any defect corrections, releases,
revisions, enhancements, and updates thereto), used to transmit
Laboratory Orders and Laboratory Results Reports.
5. "Computer System(s)" means any computer hardware
configuration on which Quest Diagnostics has elected to install
and/or execute the Licensed Software (as defined below) from time
to time, provided that such hardware configuration has a central
processing unit capable of running the Licensed Software,
including but not limited to any encryption software embedded
therein.
6. "Confidential Information" shall have the meaning
accorded to it in this Agreement.
7. "Database" means the electronic patient record,
maintained by MedPlus, which contains the Laboratory Orders and
Laboratory Result Reports (as defined below) supplied to the
Provider electronically by Quest Diagnostics for access by
authorized Providers.
8. "Documentation" means documentation relating to or
describing the Software including, but not limited to, user
manuals now or hereafter provided by MedPlus or by third parties
through MedPlus.
9. "Illicit Code" means any computer instructions commonly
known as computer viruses, anomalies or any other computer
instructions which interfere with or prevent Quest Diagnostics
from using the Software as contemplated by this Agreement, but
does not include errors or bugs in the Software.
10. "Laboratory Order" shall mean a single order from a
Provider for one or more laboratory tests for a single patient
that meets the then current Transaction Specifications and is
successfully transmitted to Quest Diagnostics.
11. "Laboratory Results Report" shall mean a partial or
final results report, originated by Quest Diagnostics, for a
single Laboratory Order that meets the then current Transaction
Specifications and is transmitted to the Provider via the
Database.
12. "Licensed Software" shall mean the ChartMaxx Data
Capture Software and Web Client Software as herein defined.
13. "Provider" means any physician, clinic, service center
or other entity or individual that is or services a then current
or future Quest Diagnostics customer who (i) has been granted a
license to use the Web Client Software, and (ii) has received all
necessary patient authorizations to access the Laboratory Results
Reports.
14. "Quest Diagnostics Incorporated" or "Quest Diagnostics"
means Quest Diagnostics Incorporated, a Delaware corporation, with
its principal place of business located at One Malcolm Avenue,
Teterboro, New Jersey 07608 and all of its affiliates,
subsidiaries and parent entities, and joint venture entities in
which Quest Diagnostics is a partner or member.
15. "Site" means each discrete laboratory system of Quest
Diagnostics.
16. "Software" means the ChartMaxx Software (which includes
the ChartMaxx Data Capture Software), the Web Client Software and
the Interfaces (as defined in Section D1(d)), and any revisions,
modifications, enhancements or updates thereto.
17. "Transaction" shall mean a successfully, accurately and
fully completed transmission between Quest Diagnostics and
ChartMaxx, of (i) a single Laboratory Order; or (ii) all
Laboratory Results Reports that arise in connection with a single
laboratory order (including retransmissions), whether such order
is transmitted via the Database or by any other method.
18. "Transaction Specifications" shall mean those certain
documents and other related materials, as updated from time to
time, developed and maintained by Quest Diagnostics, which
describe in detail all of the required formats, data fields, code
sets, protocols and other transaction specifications required to
send successfully and receive Transactions to and from Quest
Diagnostics, via the Database and the Licensed Software.
19. "Web Client Software" means the executable code of the
software supplied by MedPlus that is required to access the
Database remotely via the Internet, but shall not include any
software (which at times may be supplied with the Web Client
Software for Quest Diagnostics' convenience) that is required to
access the Internet in general, as more specifically described on
Exhibit A hereto.
B. SOFTWARE LICENSE TERMS AND CONDITIONS
1. The Licensed Software License Grant/Fee. In exchange for a
license fee and certain transaction fees, as more specifically
described on Exhibit B hereto, MedPlus hereby furnishes to Quest
Diagnostics the Licensed Software and Documentation, to use for
the limited purpose of processing Laboratory Orders and Laboratory
Results Reports under the terms and conditions of this Agreement,
under a non-exclusive and, except as otherwise provided herein,
non-transferable license.
2. Installation and Use of the Licensed Software. At no
additional charge, MedPlus shall provide installation,
configuration and implementation services with respect to the
Licensed Software at the Sites.
3. Proprietary Rights in the Licensed Software. No title to or
ownership in the Licensed Software or the Documentation
(collectively the "MedPlus Products") is transferred to Quest
Diagnostics hereby. Title to and all applicable rights in
patents, copyrights and trade secrets, if any, in the MedPlus
Products, including but not limited to the format of screens and
reports associated with the MedPlus Products, shall remain in
MedPlus or third parties from whom MedPlus has obtained rights to
license the MedPlus Products, which third parties shall be
considered third party beneficiaries of the license agreement
contained herein. Except as otherwise permitted in writing by
MedPlus, Quest Diagnostics shall not provide, or otherwise make
available, the MedPlus Products or copies thereof to any third
party. In no event may the Licensed Software be reverse compiled,
disassembled or otherwise reverse engineered.
4. Copies of Licensed Software /Documentation. Quest
Diagnostics may make sufficient copies of the Licensed Software
for archival and for back-up purposes. Quest Diagnostics may make
additional copies of the Documentation solely for Quest
Diagnostics' internal use. All copies of the Licensed Software
and/or Documentation must include MedPlus' copyright notice and
other proprietary notices and legends as indicated thereon and
shall be subject to the terms and conditions of this Agreement.
5. Permitted Disclosure. Nothing in this Agreement shall
prohibit (i) disclosure of Licensed Software to any third party
(such as an independent contract programmer) who is obligated to
protect as confidential the Licensed Software and MedPlus' or any
third party's proprietary rights therein who is under contract to
Quest Diagnostics for the purpose of assisting Quest Diagnostics
in the customization, maintenance or other use of the Licensed
Software in a manner not prohibited by this Agreement, or (ii)
delivery of copies of the Licensed Software to any third party
disaster recovery firm engaged by Quest Diagnostics, in each case
so long as the applicable third party is informed of and bound by
an obligation to use the Licensed Software under the terms of this
Agreement.
6. Customization. During the Term, MedPlus shall distribute to
Quest Diagnostics, at no charge, those enhancements to specific
applications included in the Licensed Software which are released
by MedPlus for general commercial availability to other similar
licensees. ("Applications" are collections of related features
and/or functions integrated into executable programs that are
accessible from the ChartMaxx System main menu). Any
customization or enhancements paid for by Quest Diagnostics, shall
be owned by Quest Diagnostics and cannot be used by anyone other
than Quest Diagnostics, for any purpose, without the prior written
consent of Quest Diagnostics.
7. Software Warranty. MedPlus represents and warrants to Quest
Diagnostics that MedPlus has the right, or has been granted the
right by a third party who has the right, title and interest in
the Licensed Software, to license the Licensed Software to Quest
Diagnostics in accordance with terms and provisions of this
Agreement free from any lien, claim or encumbrance. In addition,
during the Term of this Agreement, MedPlus will use commercially
reasonable efforts to ensure that the Software is free from
Illicit Code. Furthermore, MedPlus warrants that for the Term of
this Agreement, the Software will perform in accordance with the
Documentation, Performance Standards, Transaction Specifications
and any other functional specifications (collectively, the
"Specifications"). MedPlus also warrants that the ChartMaxx System
shall be able to accurately process date data (including but not
limited to, calculating, comparing and sequencing) from, into and
between the twentieth and twenty-first centuries, including leap
year calculations, when used in accordance with the Documentation,
provided that all products used in combination with the ChartMaxx
System properly exchange date data with it (the "Y2K Compliance
Warranty"). If the Software does not perform in accordance with
these Warranties, then with respect to any defect or variation as
to which MedPlus is notified by Quest Diagnostics and/or any
Provider, MedPlus shall, at its option, and its sole cost, either
(i) correct such defect or variation so as to cause the Software
to perform in the manner set forth in the Specifications and as
warranted herein, or (ii) replace the Software with functionally
equivalent software. MedPlus shall reimburse Quest Diagnostics
for all incremental costs reasonably incurred by Quest Diagnostics
as a result of such defect or variation, to enable Quest
Diagnostics to maintain the same service levels for its customers.
Notwithstanding the foregoing, if MedPlus is unable to complete
either item (i) or (ii) above within the earlier of ninety (90)
days of (a) its receipt of written notice from Quest Diagnostics
and/or any Provider of the defect or variation, or, (b) MedPlus'
actual knowledge of the defect or variation, then MedPlus shall
refund to Quest Diagnostics all monies paid by Quest Diagnostics
to MedPlus pursuant hereto, excluding Transaction Fees (as defined
in Section E(3) below), plus, all incremental costs reasonably
incurred by Quest Diagnostics in switching to another system,
including but not limited to the difference in the amount of the
Integration Services Fee, if greater; the cost of receiving
Laboratory Orders and transmitting Laboratory Results Reports via
an alternative method, until the new system is up and running; the
difference in the Transaction Fees, if greater (a) for the
duration of the Initial Term, plus the transition period specified
in Section F3(e) hereof , or for one year, whichever is greater,
or (b) for the duration of the then-current Renewal Term, plus the
transition period specified in Section F3(e) hereof, whichever is
applicable, less any undisputed fees then due and owing by Quest
Diagnostics. Thereafter, Quest Diagnostics shall have no further
obligation hereunder.
This Warranty shall apply provided that: (i) the Software has not
been modified by Quest Diagnostics, its employees or agents, or as
a result of some act or omission of Quest Diagnostics, its
employees or agents, unless authorized in writing by MedPlus; (ii)
the Computer System on which the Software has been installed has
not been modified by Quest Diagnostics, its employees or agents,
or as a result of some act of omission of Quest Diagnostics, its
employees or agents, in any way that impairs the functioning of
the Software; and (iii) the Software and the Computer System on
which it has been installed have been maintained according to
procedures reasonably recommended by the relevant hardware
manufacturer(s) and/or by MedPlus, as evidenced by a writing to
Quest Diagnostics.
THE ABOVE WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, WHICH WARRANTIES ARE HEREBY DISCLAIMED,
INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
8. Patent and Copyright Indemnification as to Software.
Notwithstanding anything herein to the contrary, MedPlus shall
protect, indemnify, hold harmless and defend any action, suit or
proceeding brought against Quest Diagnostics insofar as it is
based on a claim that the Software or the use thereof by Quest
Diagnostics in accordance with this Agreement, infringes any
patent, copyright, or any other intellectual property of a third
party ("Infringement"), provided that MedPlus is promptly notified
by Quest Diagnostics of the action and given full authority,
information and assistance (at MedPlus' expense) for the defense
of the action. MedPlus shall pay all damages and costs awarded
therein against Quest Diagnostics, but shall not be responsible
for any compromise made without its written consent. In the event
that the Software or the use thereof by Quest Diagnostics in
accordance with this Agreement, is held to constitute an
Infringement, or in the reasonable opinion of counsel for Quest
Diagnostics constitutes Infringement, MedPlus shall have the
obligation to, at its option and expense, and at no cost to Quest
Diagnostics (i) modify such software without impairing in any
material respect the functionality or performance thereof so that
it does not constitute an Infringement, (ii) procure for Quest
Diagnostics the right to continue to use such software, or (iii)
replace such software with an equally suitable, non-infringing
product. If Quest Diagnostics is enjoined from use of the
Software as a result of an Infringement, then MedPlus shall
reimburse Quest Diagnostics for all incremental costs reasonably
incurred by Quest Diagnostics as a result of such defect or
variation, to enable Quest Diagnostics to maintain the same
service levels for its customers. If none of the foregoing
alternatives, (i), (ii) or (iii) above, is available to MedPlus,
then MedPlus shall refund all amounts paid by Quest Diagnostics to
MedPlus pursuant to this Agreement, excluding Transaction Fees (as
defined below), plus, all incremental cost reasonably incurred by
Quest Diagnostics in switching to another system, including but
not limited to, the difference in the amount of the Integration
Services Fee, if greater; the cost of receiving Laboratory Orders
and transmitting Laboratory Results Reports via an alternative
method, until the new system is up and running; the difference in
the Transaction Fees, if greater (a) for the duration of the
Initial Term, plus the transition period specified in Section
F3(e) hereof , or for one year, whichever is greater, or (b) for
the duration of the then-current Renewal Term, plus the transition
period specified in Section F3(e) hereof, whichever is
applicable), less any undisputed fees then due and owing by Quest
Diagnostics. Thereafter, Quest Diagnostics shall have no further
obligations hereunder. MedPlus' commitment hereunder shall not
extend to any infringement or claim thereof which is based upon
the unauthorized combination by Quest Diagnostics, its employees
or agents of the Software with products or services not supplied
by MedPlus.
9. Use of Licensed Software. Quest Diagnostics acknowledges and
agrees that the Licensed Software is designed merely to assist
Quest Diagnostics and its agents in the performance of their
professional activities and is not intended to replace the
professional skill and judgment of Quest Diagnostics and/or its
agents and/or clients. Except as specifically described in any
exhibits hereto, Quest Diagnostics agrees to be solely responsible
for Quest Diagnostics' design, repair and configuration of Quest
Diagnostics' equipment, machinery, systems and/or products and for
the input of Laboratory Results Reports into the Database through
the use of the Licensed Software. Quest Diagnostics understands
the crucial nature of all backup procedures and the importance of
maintaining copies of all Laboratory Orders and Laboratory Results
Reports so that its inability to access the Database for any
reason whatsoever will not prevent Providers or others who require
access to the Laboratory Orders and Laboratory Result Reports from
obtaining such access.
10. Patient Data.
Each party agrees that patient clinical information, Laboratory
Orders, Laboratory Results Reports, and all patient-related
information, including any derivatives resulting from the
manipulation or compilation thereof ("Patient Data") are
Confidential Information (as defined herein) and each party agrees
it will not disclose or utilize individual laboratory test
information or other Patient Data in any way that would violate
any patient confidentiality obligations or any Applicable Laws, as
defined above. Without limiting MedPlus' obligations regarding
Confidential Information which may be otherwise provided for in
this Agreement, MedPlus shall be responsible to ensure the
confidentiality and security of Patient Data transmitted or
otherwise available to MedPlus in any form, manner, on any media,
and in any format now known or hereafter developed, in accordance
with all Applicable Laws governing such Patient Data now or in the
future, including those to prevent anyone other than the sender
and addressee of each Transaction or their respective authorized
employees from monitoring, using, gaining access to or learning
the import or contents of any Transaction. Notwithstanding the
foregoing, but subject to the restrictions of the foregoing, the
parties recognize that MedPlus, its employees and agents and
permitted assigns, who have a need to know, will have access to
the Patient Data for the sole purpose of performing MedPlus'
obligations under this Agreement.
All Patient Data associated with Laboratory Orders, Laboratory
Results Reports, and all information contained in Transactions
("Quest Diagnostics Patient Data"), shall be owned by Quest
Diagnostics and not by MedPlus. Except as otherwise specifically
contemplated by this Agreement, MedPlus shall not aggregate,
integrate, compile, regenerate, merge, manipulate or otherwise use
the Quest Diagnostics Patient Data for any purposes, including to
derive revenue therefrom, and shall not provide the Quest
Diagnostics Patient Data to any other person or entity, other than
as specifically required or allowed under the terms of this
Agreement to perform the services hereunder, without the prior
written consent of Quest Diagnostics. MedPlus agrees that Quest
Diagnostics Patient Data cannot be aggregated for any third party,
including but not limited to any Provider, or among different
customers of MedPlus or other health care providers, payors or
laboratory service providers for any purpose, without Quest
Diagnostics' prior written consent.
If MedPlus is served with a warrant, subpoena, order or request
from a court of competent jurisdiction, administrative agency or
other governmental body or any other entity or person for any
Quest Diagnostics Patient Data, records, or files of information
transmitted through, and to, the ChartMaxx System, MedPlus will as
soon as practicable, and not in violation of law, deliver to Quest
Diagnostics a copy of such warrant, subpoena, order or request and
will not, without Quest Diagnostics' proper written consent, which
shall not be unreasonably withheld or delayed, accede to the same
unless upon the advice of counsel it reasonably believes that it
is required to do so under applicable law.
Without limiting the foregoing, MedPlus agrees that it shall limit
the MedPlus employees, agents and contractors who have access to
any Patient Data, including without limitation, Laboratory Orders
or Laboratory Results Reports, if any, to only those "need to
know" employees, agents and contractors of MedPlus as are required
to perform the services hereunder in accordance with the highest
level of professionalism and MedPlus' established and maintained
security measures, which shall be subject reasonably to audit from
time to time by Quest Diagnostics.
11. Confidential Information of the Parties.
Without limiting the foregoing, and in addition to the Patient
Data provisions stated above, any and all trade secrets, if any,
and confidential information and all physical embodiments thereof
("Confidential Information") received by either party (the
"Receiving Party") from the other party (the "Disclosing Party")
during the term of this Agreement are confidential to and are and
will remain the sole and exclusive property of the Disclosing
Party. Confidential Information shall also include all other
forms of information designated as Confidential Information in
this Agreement. With respect to Quest Diagnostics, the Quest
Diagnostics Confidential Information may include, without
limitation, knowledge, information and material concerning Quest
Diagnostics, including its products, services, data processing
systems, equipment, software, supplies and services, and
proprietary information concerning Quest Diagnostics and the names
and addresses of Providers. With respect to MedPlus, the MedPlus
Confidential Information may include, without limitation,
knowledge, information and material concerning the Software,
related source code, computer programs and screens and proprietary
information concerning MedPlus, its affiliated companies and their
respective products and services.
At all times, both during the term of this Agreement and after its
termination, the Receiving Party shall hold all Confidential
Information of the Disclosing Party in confidence, and will not
use, copy or disclose such Confidential Information or cause any
of such Confidential Information to lose its character as
Confidential Information. At all times during the term of this
Agreement and for a period of eighteen (18) months following the
termination of this Agreement (except where a longer period is
required pursuant to this Agreement or Applicable Laws), the
Receiving Party shall hold the Confidential Information of the
Disclosing Party in confidence, and will not use, copy or disclose
such Confidential Information or cause any of such Confidential
Information to lose its character or cease to qualify as
Confidential Information.
Confidential Information shall be maintained under secure
conditions by the Receiving Party, using reasonable security
measures and in any event (i) not less than the same security
measures used by the Receiving Party for the protection of its own
Confidential Information of a similar kind, and (ii) any specific
security measures required by this Agreement or by Applicable
Laws. Within thirty (30) days after termination of this Agreement,
the Receiving Party shall deliver to the Disclosing Party all of
the Disclosing Party's Confidential Information then in the
custody, control or possession of the Receiving Party.
If the Receiving Party is ordered by a court of competent
jurisdiction, administrative agency, or other governmental body to
disclose Confidential Information, or it if is served with or
otherwise becomes aware of a motion or similar request that such
an order be issued, then the Receiving Party will not be liable to
the Disclosing Party for disclosure of Confidential Information or
Confidential Information required by such order if the Receiving
Party provides reasonable prior written notice of such disclosure
and reasonably cooperates with the efforts of the Disclosing
Party, at the Disclosing Party's expense, to protect the
confidentiality of such Confidential Information.
Confidential Information shall exclude information that (i) was
known to the Receiving Party prior to its first receipt from the
Disclosing Party; or (ii) at any time becomes a matter of public
knowledge without any fault of the Receiving Party; or (iii) is at
any time lawfully received by the Receiving Party from a third
party under circumstances permitting its disclosure to others; or
(iv) is independently developed by the Receiving Party as evidenced
by the Receiving Party's records; or (v) is at any time furnished
to a third party by the Disclosing Party without restriction on use
or disclosure; or (vi) is disclosed pursuant to a lawful
requirement or request of a government agency, subject to the
express provisions of this Agreement; or (vii) is approved for
release by written authorization of the Disclosing Party. The
Receiving Party shall bear the burden of showing that any of the
foregoing exclusions applies to any information or materials.
Each party will cooperate with the other in the protection of
Confidential Information. Each party acknowledges and agrees that
in the event of a material breach of these obligations of
confidentiality, the non-breaching party will suffer irreparable
harm and injury, which may not be adequately compensated by
monetary damages. Accordingly, in the event of a material breach
or threatened breach, the non-breaching party shall be entitled to
seek preliminary and final injunctive relief and any other
equitable remedies it may have. Such remedies shall be in addition
to and not in limitation of any and all other remedies, which such
party, may have at law. Notwithstanding anything contained herein
to the contrary, both parties agree that the other party may
disclose relevant terms of this Agreement to third parties with a
business need to know; provided that such party has obtained the
other party's prior written consent as to (i) the identity of the
disclosee and (ii) the scope of the disclosure, and has entered
into a confidentiality agreement with such third party in a form
acceptable to the other party and the other party is made a third
party beneficiary thereof. For purposes hereof, both parties
agree that the Confidentiality Agreement attached hereto as
Exhibit D is acceptable and that MedPlus may disclose to the party
indicated on Exhibit I relevant terms hereof, including but not
limited to pricing if in fact directly relevant to its
negotiations with such party.
12. Export/Limitations on Dangerous Application. Quest
Diagnostics acknowledges that the Software provided hereunder is
subject to export and import controls and agrees that Quest
Diagnostics will not export the Licensed Software, directly or
indirectly (unless by MedPlus, on Quest Diagnostics' behalf),
separately or as part of a system, without Quest Diagnostics, at
its own cost, first obtaining all licenses from any applicable
government agency of the United States, including but not limited
to the United States Department of Commerce and any other
appropriate agency of the United States Government as may be
required by law. In addition, Quest Diagnostics acknowledges that
the Software is not developed or licensed for use in any nuclear,
aviation, mass transit or medically diagnostic application or in
any other inherently dangerous application and neither MedPlus nor
any third party vendor whose software is contained therein shall
be liable for any damages resulting from such uses.
13. MedPlus Provider Agreements.
(a) MedPlus represents and warrants that it shall use its
best efforts to enter into Web Client Software License or other
applicable agreements with each Provider, which agreements will
include terms and conditions substantially similar to the
following: (i) Each party shall be liable for its own acts and
omissions; and (ii) MedPlus shall represent and warrant that it
will repair or replace any software that fails to operate in
accordance with the applicable specifications and if neither of
those options is possible, refund to the Provider the price
thereof as depreciated or amortized by an equal annual amount over
the lifetime of the software as established by MedPlus provided
that: (i) the software has not been modified by anyone other than
MedPlus or someone authorized, in writing, by MedPlus; (ii) the
Computer System has not been modified in any way that impairs the
functioning of the software; (iii) the software and the Computer
System have been maintained according to procedures recommended by
the relevant hardware manufacturer(s) and/or by MedPlus; and (iv)
all undisputed fees due MedPlus under the Web Client Software
License agreement have been paid.
(b) MedPlus represents and warrants that it will require the
Providers to represent and warrant that they obtain patient
authorization for any and all access to Laboratory Results Reports
and for transmission of Laboratory Orders and receipt of
Laboratory Results Reports via the ChartMaxx System.
C. LICENSED SOFTWARE MAINTENANCE AND SUPPORT TERMS AND
CONDITIONS. MedPlus shall provide, and Quest Diagnostics agrees to
accept, maintenance and support services for the Licensed Software
as more specifically described in the Service and Support
Standards attached as Exhibit C hereto.
D. THE DATABASE
1. MedPlus' Obligations. In exchange for the consideration
described on Exhibit B hereto and Quest Diagnostics' agreement to
use the ChartMaxx System to provide the Laboratory Orders and
Laboratory Results Report as described herein, MedPlus will
maintain the Database so that Quest Diagnostics and the Providers
can have means of access to the Laboratory Orders and Laboratory
Results Reports. Specifically, MedPlus will:
(a) install, configure, staff and maintain all necessary
ChartMaxx System server hardware and software, including all
embedded third party tools, at MedPlus' corporate headquarters in
Cincinnati, Ohio or at a location chosen by MedPlus in its sole,
reasonable discretion;
(b) coordinate and arrange for a secure results communication
connection between Quest Diagnostics and the ChartMaxx System, the
ChartMaxx System and the Providers, for the purpose of
transmitting Laboratory Orders and Laboratory Results Reports.
Quest Diagnostics acknowledges that a 128-bit encryption
algorithm, or greater, is sufficient security, as of the Effective
Date, for purposes of communication via the Internet. MedPlus
acknowledges that in the future when communication is made via the
Internet, a 128-bit encryption algorithm may no longer provide a
sufficient level of security. Accordingly, MedPlus agrees to
conduct periodic reviews to ensure that the encryption level used
to transmit Laboratory Orders and Laboratory Results Reports via
the Internet meets with Quest Diagnostics' security standards.
Within sixty (60) days of its receipt of written notice from Quest
Diagnostics that the encryption level then being used by MedPlus
or its assigns to transmit Laboratory Orders and Laboratory
Results Reports via the Internet does not provide a sufficient
level of security, subject to the capabilities of then-current
commercially available Web-browser and Web server technology,
MedPlus shall modify the encryption level as requested by Quest
Diagnostics;
(c) develop a local site implementation plan for each Site (an
"Implementation Plan") and provide Quest Diagnostics with a
Statement of Work for such Site;
(d) configure appropriate report format interfaces, followed by a
discrete lab interface for each Site (the "Interfaces"),
fulfilling all legal and regulatory requirements as provided to
MedPlus by Quest Diagnostics from time to time;
(e) ensure that an MPI function is integrated into the ChartMaxx
System so that patients may be uniquely identified based on a core
set of patient demographics specifically supplied by Quest
Diagnostics with each lab result as available;
(f) license the Web Client Software to the Providers, at their
cost, so that they can access the Database with respect to their
patients only via the Internet, and, at Quest Diagnostics' request
and expense, install the Web Client Software on the Providers'
office systems;
(g) provide training services with respect to the Software as
requested from time to time by Quest Diagnostics;
(h) maintain a toll-free number for telephone support with
respect to the Software and the Database;
(i) subject to the capabilities of each Site, develop, install
and maintain test ordering logic to include billing information.
Programming must be done in accordance with the order entry rules
of Quest Diagnostics and maintained with regular updates;
(j) subject to capabilities of each Site, maintain all tables and
files associated with the products that are not provided by the
Quest Diagnostics data feeds. These would include, but are not
limited to, insurance tables, billing edits, limited coverages
tests, and test code mapping;
(k) certify to Quest Diagnostics, on an annual basis and in a
format to be mutually agreed upon by the parties, as to the
content of the Database, the form of the reports transmitted by
MedPlus to the Providers and the ability of Quest Diagnostics to
do quality assurance testing of the Database. The documentation
and Records that substantiate the certifications shall all be
subject to Quest Diagnostics' audit rights contained in Section G6
hereto; and
(l) work with Quest Diagnostics to negotiate in good faith the
terms pursuant to which Quest Diagnostics may be trained with
respect to providing, and may provide; support services to
Providers for the ChartMaxx System.
2. Quest Diagnostics' Obligations. To ensure proper operation of
the Database, and in consideration of MedPlus' continued
maintenance of the Database, Quest Diagnostics will:
(a) provide local technical and systems support at each Site to
assist in establishing a data communications interface between the
Quest Diagnostics laboratory system(s) and the ChartMaxx System;
(b) as soon as commercially practicable, the parties mutually
agree to develop a reporting methodology, pursuant to which Quest
Diagnostics will, on no less than a monthly basis, provide to
MedPlus a written listing (via e-mail, facsimile, etc.) of the
Laboratory Orders and Laboratory Results Reports sent to MedPlus
during such reporting period, so that MedPlus may reconcile its
electronic records;
(c) provide technical contacts and sample data so MedPlus can
design and implement the lab results interface;
(d) provide Transaction Specifications; and
(e) use commercially reasonable efforts to comply with requests
that it receives from Providers to use the ChartMaxx System for
the transmission of Laboratory Orders and Laboratory Results
Reports.
3. Each Party's Obligations. Each party hereto shall be
responsible for its own access to the Internet (or such other
telecommunication network, as necessary) and costs associated
therewith
E. PRICING AND PAYMENT TERMS.
1. General Payment Terms. Quest Diagnostics shall pay all
undisputed fees, costs and all other amounts payable pursuant to
this Agreement as described on Exhibit B hereto, and in no event
later than forty-five (45) days from the date of receipt of
invoice. Following the first two years of the Term, Consulting
Services and Support Fees (as described in Section C of Exhibit B)
may be increased annually by MedPlus; however, in no event shall
the percentage of any such increase over the preceding year exceed
the rise in Consumer Price Index average for such year. All
amounts indicated herein are in U.S. dollars. In the event an
error in payment is made by Quest Diagnostics hereunder, Quest
Diagnostics reserves the right to adjust later payments to MedPlus
to compensate for the error, notwithstanding the fact that later
payments might be unrelated to those products and/or services for
which the erroneous payment was made. In the event that Quest
Diagnostics withholds payment for fees, on the basis they are
disputed, and it is later determined by the mutual consent of the
parties or by a court of competent jurisdiction that the fees were
withheld in error, then Quest Diagnostics shall pay the fees no
longer subject to dispute, plus interest on such amount,
calculated at the Prime Rate in effect, from time to time, as
listed in the Money Rates section of the Wall Street Journal.
2. Tax Liability. Fees herein include any and all federal,
state or local sales, use, excise or similar taxes or governmental
charges or assessments that may be levied on either party as a
result of this Agreement or any Transactions arising out of it.
3. Transaction Fees. Quest Diagnostics shall pay MedPlus
Transaction Fees in accordance with Exhibit B.
4. Most Favored Nations Pricing. The pricing structure
included herein specifically applies to the initial installation
in Denver, Colorado. With respect to any further installations of
the Licensed Software for Quest Diagnostics, MedPlus represents
and warrants that the all fees and amounts charged under this
Agreement shall never be greater than those fees and amounts
charged by MedPlus, or its successors, to any other clinical
laboratory for the same or similar products and/or services, as
follows:
(a) In the event that MedPlus enters into an agreement with
another clinical laboratory which agreement provides Transaction
Fees that are lower or more favorable than those under this
Agreement, MedPlus shall adjust any less-favorable Transaction
Fees under this Agreement to equal the Effective Rate of the
Transaction Fees in such other agreement, as of the date such fees
under such other agreement become effective, For purposes hereof,
the "Effective Rate" of such other agreement shall equal the
quotient of the transaction fees charged to such other laboratory
on a particular invoice divided by the total amount of
transactions indicated on such invoice. Notwithstanding the
foregoing, in the event that the transaction fees under the other
agreement are bundled with other fees or amounts, then the parties
shall choose a commercially reasonable approach to adjust the
Effective Rate.
(b) In the event that MedPlus enters into an agreement with
another clinical laboratory which agreement provides any fees or
amounts (other than Transaction Fees) that are lower or more
favorable than those under this Agreement, MedPlus shall adjust
any such less-favorable fees or amounts under this Agreement to
equal the fees or amounts under such other agreement.
Notwithstanding the foregoing, in the event that any fees or
amounts under the other agreement are bundled, then the parties
shall choose a commercially reasonable approach to unbundle them
and make the appropriate adjustments.
(c) Within sixty (60) days of the beginning of each calendar
year of the Term, MedPlus will certify in writing to Quest
Diagnostics that MedPlus is in compliance with the provisions of
this Section.
(d) In the event that MedPlus fails to automatically begin
charging Quest Diagnostics lower fees as provided in this Section,
then, as soon as MedPlus has been notified of such failure or has
become aware of such failure, it will pay to Quest Diagnostics the
difference between the actual fees charged to Quest Diagnostics
and the Effective Rate of fees that should have been charged to
Quest Diagnostics, retroactive to the effective date of the
lowered fees, plus interest on such amount, calculated at the
Prime Rate in effect, from time to time, as listed in the Money
Rates section of the Wall Street Journal.
5. Specific Payment Terms. Quest Diagnostics shall pay
MedPlus only for Transactions completed, as follows:
(a) Quest Diagnostics will not owe any fee to MedPlus for
any Transactions (i) not in accordance with the Performance
Standards or (ii) that did not meet the Transaction
Specifications.
(b) Quest Diagnostics will owe a Transaction fee to MedPlus
for any Transaction rejected solely by Quest Diagnostics as a
result of Quest Diagnostics own act or omission, so long as the
Transaction meets the Performance Standards and the Transaction
Specifications.
(c) MedPlus will provide reports and invoices in hard
copy, to Quest Diagnostics for all deliverables under this
Agreement at the end of each calendar month and shall provide all
supporting documentation (transaction detail) to Quest Diagnostics
in electronic format with the level of detail agreed to by the
parties from time to time.
(d) Quest Diagnostics will use commercially reasonable
efforts to provide written notice to MedPlus of any disputed
amounts within ninety (90) days of Quest Diagnostics receipt of
MedPlus' invoice.
6. Expenses. MedPlus shall be responsible for all ordinary
and reasonable expenses that it may incur in connection with this
Agreement, including any Addenda and/or Exhibits attached hereto.
Quest Diagnostics agrees, however, to reimburse MedPlus for any
extraordinary expenses previously approved in writing by Quest
Diagnostics.
F. TERM AND TERMINATION.
1. Term of Agreement. The term of this Agreement shall commence
upon the Effective Date and shall continue for five years unless
otherwise terminated as provided herein (the "Initial Term").
Thereafter, this Agreement will automatically renew for additional
one-year terms (any such terms shall be referred to as "Renewal
Terms") (the Initial Term and any Renewal Term and the transition
period referred to in Section F3(e) shall be referred to
collectively as the "Term") unless earlier terminated as provided
herein.
2. Term of Licenses. The term of any software license granted
hereunder shall commence on the date on which such software is
delivered to Quest Diagnostics and shall continue until expiration
of the Term.
3. Termination of Agreement
(a) Either party may terminate this Agreement, with or without
cause, at the end of the Initial or any Renewal Term by written
notice received by the other party no less than ninety (90) days
prior to the end of the then-current term.
(b) If one party breaches any material provision of this
Agreement, the non-breaching party may terminate this Agreement,
provided that the non-breaching party has given written notice to
the other party of the breach and afforded a thirty (30) day cure
period. Failure of MedPlus to meet the Performance Standards set
forth on Exhibit F, to respond to and/or resolve a Category One
problem as defined on Exhibit C or a breach of the Y2K Compliance
Warranty that results in a Category One problem as defined on
Exhibit C or an alteration of the contents of a Laboratory Order
or a Laboratory Results Report shall be deemed a breach of a
material provision of this Agreement. Notwithstanding the
foregoing, the breaching party shall reimburse the non-breaching
party for all incremental costs reasonably incurred by the non-
breaching party as a result of such breach, regardless of whether
or not the breach is cured within the thirty (30) day cure period.
In the event that MedPlus is the breaching party and MedPlus is
unable to cure such breach within the thirty (30) day cure period,
then Quest Diagnostics shall have the right to avail itself of the
remedies contained in Section B7 hereto, as applicable to the
relevant Site(s), only.
(c) If one party breaches any other provision of this Agreement,
the non-breaching party may terminate this Agreement, provided
that the non-breaching party has given written notice to the other
party of the breach and afforded a sixty (60) day cure period.
Notwithstanding the foregoing, the breaching party shall reimburse
the non-breaching party for all incremental costs reasonably
incurred by the non-breaching party as a result of such breach,
regardless of whether or not the breach is cured with the sixty
(60) day cure period. In the event that MedPlus is the breaching
party and MedPlus is unable to cure such breach within the sixty
(60) day cure period, then Quest Diagnostics shall have the right
to avail itself of the remedies contained in Section B7 hereto, as
applicable to the relevant Site(s), only.
(d) Quest Diagnostics may terminate this Agreement with
respect to a particular Site on five (5) days notice if, as a
result of an act or omission of MedPlus, the initial
implementation of the Interface at such Site is not completed
within thirty (30) days of the scheduled due date as mutually
agreed by the parties and as specified in the Performance
Standards. Within thirty (30) days of the date of the notice of
termination herein, MedPlus shall refund to Quest Diagnostics all
amounts paid by Quest Diagnostics pursuant to this Agreement for
the Integration Services Fee for such Site and Quest Diagnostics
will have no further obligation to make any further payments
pursuant to this Agreement, for the particular Site.
(e) Notwithstanding anything in this Agreement to the
contrary, upon termination of this Agreement, MedPlus will
continue to process Transactions for a period of no less than one
hundred twenty (120) days after the date of termination. For each
such Transaction, Quest Diagnostics agrees to pay MedPlus the fees
then in effect on the date of termination. In addition, during
such one hundred twenty (120) day period, the parties shall
effect, and shall cooperate with each other in effecting, the
orderly and reasonable removal of MedPlus for transmission of
Laboratory Orders and/or Laboratory Results Reports in the manner
that is least disruptive to such Providers and which allows
connectivity between Quest Diagnostics and its Providers to
continue uninterrupted. The parties shall jointly develop a
removal plan, which will provide a reasonable level of support
consistent with Exhibit C of this Agreement to transition Quest
Diagnostics off of ChartMaxx. In addition to, and in furtherance
of, the foregoing, MedPlus will continue to provide Quest
Diagnostics with access to any and all software and equipment used
for connectivity, which is necessary to process Transactions
during such transition period.
4. Disposition of Licensed Software upon Termination.
Quest Diagnostics agrees, upon expiration of the Term, to return
to MedPlus within 60 days or destroy the Licensed Software and
Documentation, and copies thereof. Upon request by MedPlus, Quest
Diagnostics agrees to certify in writing as to such destruction or
return.
5. Source Code Escrow. MedPlus shall place in escrow, and
will regularly update (at least as often as each update, revision,
modification, enhancement and/or new version occurs), one
electronic copy of the Software source code and Documentation in
accordance with the Escrow Agreement attached hereto as Exhibit G,
of which Quest Diagnostics shall be a third party beneficiary. In
addition to the events triggering release of the Software source
code and Documentation specified in Exhibit G hereto, Quest
Diagnostics shall be entitled to release of the Software source
code and Documentation upon the occurrence of any of the
following: (i) MedPlus has a decree entered against it by a court
of competent jurisdiction appointing a receiver, liquidator,
trustee, or assignee in bankruptcy or in insolvency covering all
or substantially all of MedPlus' property or providing for the
liquidation of MedPlus' property or business affairs, (ii) MedPlus
has ceased it ongoing business operations in the ordinary course,
or has ceased the sale, licensing, maintenance or other support of
the Software, or (iii) the occurrence of any other event or
circumstance which demonstrates MedPlus' inability or
unwillingness to fulfill its obligations to Quest Diagnostics
under this Agreement, including, without limitation, the
correction of defects in the Software.
G. MISCELLANEOUS.
1. Limitations on Database Content. MedPlus agrees that,
unless otherwise authorized in writing by Quest Diagnostics, it
will not store any laboratory data in the Database, or transmit
Laboratory Orders or Laboratory Results Reports to or from any
Clinical Laboratory via the Database, other than Quest
Diagnostics. Notwithstanding the foregoing, MedPlus may transmit
only Laboratory Results Reports to any Clinical Laboratory whose
primary purpose is to provide diagnostic services for the
prevention, diagnosis and treatment of disease and other medical
conditions for hospital-based patients. For purposes of this
Section, Clinical Laboratory shall mean any clinical laboratory
that provides diagnostic services for the prevention, diagnosis
and treatment of disease and other medical conditions.
2. ChartMaxx Reseller Agreement. MedPlus agrees
that Quest Diagnostics shall have the right to resell the
ChartMaxx System under its brand name, and on terms at least as
favorable as those provided to MedPlus' then-current ChartMaxx
System resellers. At Quest Diagnostics' request, the parties
shall negotiate in good faith to define the terms of such
agreement.
3. Limitation to Actual Damages/Indemnification. Unless
otherwise specifically provided herein, in no event shall either
party be liable to the other for lost profits, consequential,
exemplary, special, indirect, incidental, or punitive damages,
howsoever arising from its performance hereunder and any permitted
liability, regardless of the form or forum, shall not exceed the
limits of insurance coverage contained in Exhibit H. MedPlus and
Quest Diagnostics shall each indemnify, defend and save the other
harmless from and against any and all losses, claims, suits,
damages, liabilities and expenses (including, without limitation,
reasonable attorneys' fees) based upon, arising out of or
attributable to any acts or omissions arising from such party's
performance hereunder or otherwise related to this Agreement.
This provision shall survive termination of this Agreement.
4. Insurance. MedPlus agrees to maintain general and
professional liability insurance in the amount of its policy
coverage, which is $15,000,000 per occurrence and $16,000,000 and
$17,000,000, respectively, to cover the acts and omissions of its
employees, agents and representatives for services rendered
pursuant to this Agreement.
Attached hereto, as Exhibit H, is a current and valid Certificate
of Insurance relating to the extent of general and professional
liability coverage and naming Quest Diagnostics as an additional
insured. MedPlus agrees to keep and to maintain said insurance
coverage in full force and effect during the Term of this
Agreement. Any modification or alteration in such coverage, by
MedPlus, which shall have a material effect on this Section shall
be promptly communicated to Quest Diagnostics.
Both parties agree to re-review the scope of MedPlus' insurance
coverage one year after the Effective Date of this Agreement, and
each year thereafter, in order to determine whether the
Transaction level warrants an increase in the amount of such
coverage. In the event that the insurance coverage levels are
increased by MedPlus at any time during the Term of this
Agreement, the indemnification caps contained in Section G3 hereto
shall be increased, accordingly.
5. Compliance With Laws. Each party accepts full responsibility
for, and will comply with all Applicable Law(s) and industry
practices in connection with their respective rights and
obligations under this Agreement.
(a) In furtherance and not in limitation of the foregoing,
Quest Diagnostics and MedPlus will, from time to time, agree upon
certain principles, activities, agreements, standard operating
procedures and/or actions (the "SOPs") that one or both parties,
as applicable, will follow or undertake to help Quest Diagnostics
and/or MedPlus assure its compliance with Applicable Laws and each
party will follow any such SOPs applicable to it in the course of
conducting its respective business.
(b) MedPlus represents and warrants that in the event that
an issue arises, in Quest Diagnostics' reasonable judgment, with
respect to compliance with this Section, MedPlus will promptly
address such issue and take action to remedy any such issue to the
reasonable satisfaction of Quest Diagnostics.
(c) Each party agrees that it will notify the other party
of any proposed changes in the notifying party's business
practices with respect to electronic data interchange or the
provision of network services, as the case may be, that are likely
to affect either party or any Provider a reasonable period prior
to the proposed implementation of such change or changes and will
provide the other party with a reasonable opportunity to review
those proposed changes for compliance with this Section prior to
implementation. If either party objects to any such proposed
changes based on an issue relating to this Section, both parties
will work together in good faith to attempt to reach a mutually
satisfactory resolution of those issues before such change or
changes are implemented.
(d) To the extent reasonably necessary to permit Quest
Diagnostics to comply with the Applicable Laws described in this
Section, Quest Diagnostics shall have Audit Rights (as defined in
Section G6(d)) exercisable from time to time in Quest Diagnostics'
discretion, but not more often than once every calendar year, with
respect to all of MedPlus' records, books, and other materials
that relate to any compliance issues covered by this Section in
order for Quest Diagnostics to determine MedPlus' fulfillment of
its obligations hereunder or under any separately agreed upon
SOPs. When MedPlus enters into agreements with Providers, MedPlus
will use commercially reasonable efforts to secure the right for
MedPlus and for Quest Diagnostics to audit such Provider's books
and records, and other materials and/or to inspect the Provider's
premises to assure that any compliance requirements established
with such Provider are being satisfied, and, upon request from
Quest Diagnostics, MedPlus will permit Quest Diagnostics to
exercise such rights.
(e) Effect of Regulatory Changes. In the event
any Applicable Law or any Medicare and/or Medicaid payment
policies, or any rules or policies of any third-party payor at any
time during the term of this Agreement is modified, implemented,
threatened to be implemented, or determined by the parties to
prohibit, restrict or in any way have a materially adverse effect
on the ability of either party to engage in any commercial
activity on terms at least as favorable to that party as those
reasonably attributable as of the date hereof by virtue of the
existence of this Agreement (collectively "Regulatory Changes" and
individually a "Regulatory Change"), then the parties to this
Agreement shall negotiate in good faith to amend this Agreement to
address any issues raised by such Regulatory Changes. If the
parties cannot agree on an amendment to this Agreement to address
such Regulatory Change(s), and one party will be at risk of
substantial damage to its overall business as a result of the
impact of such Regulatory Changes on its obligations hereunder,
then that party may terminate this Agreement upon ninety (90) days
written notice to the other party hereto.
6. Records and Audit Rights.
(a) MedPlus shall maintain accurate and complete records
of all of the following (collectively "Records"): (i) All
transmissions and Transactions between Providers and Quest
Diagnostics; (ii) licenses under this Agreement; (iii) all other
deliverables under this Agreement; (iv) all of the monies charged
by MedPlus to Quest Diagnostics, Providers and others under this
Agreement, including those applicable to the Most Favored Nation
Pricing contained in Section E4 herein; (v) all records and
documents relating to the Internet service provider; and (vi) all
design documents, source code, flow charts and other technical
documentation for the ChartMaxx System, and all other deliverables
under this Agreement. All Records shall be considered
Confidential Information (as defined herein).
(b) MedPlus shall maintain all records in accordance with
both accepted information storage practices and record retention
periods in the clinical laboratories industry and in compliance
with Applicable Laws, but in no event for less than six (6) years
or such longer period as may be required by Applicable Laws or
Quest Diagnostics policies as may be adopted from time to time.
(c) In accordance with written guidelines and instructions
provided from time to time to MedPlus by Quest Diagnostics, and in
accordance with prudent business practice, MedPlus shall maintain
the Records with a system of audit trails and controls sufficient
to allow Quest Diagnostics to audit such Records under this
Agreement and to assure satisfaction of any requirements imposed
on Quest Diagnostics by Quest Diagnostics' external auditors, as
well as by government officials enforcing Applicable Laws as to
both Quest Diagnostics and MedPlus.
(d) "Audit Rights" means the rights of Quest Diagnostics
and its representatives to examine the Records of MedPlus that
relate to the subject matter of this Agreement, including without
limitation the right to:
(1) examine MedPlus' Records, including without limitations
all books and systems of account, records,
reports, technical documentation, and other papers, except to the
extent that such action would, in the reasonable opinion of
MedPlus' counsel, constitute a waiver of the attorney-client
privilege or if such Records constitute work-product; and
(2) make copies and take extracts from any thereof; and
(3) to the extent reasonably necessary, and upon prior
written notice to MedPlus, discuss the affairs, finances and
accounts of MedPlus with MedPlus' officers and independent
certified public accountants (and by this provision MedPlus hereby
authorizes its certified public accountants to discuss with Quest
Diagnostics auditor and its representatives, the finances and
accounts of MedPlus as part of any audit relevant to this
Agreement); and
(4) visit MedPlus' premises and inspect MedPlus' Records,
at reasonable times and on reasonable notice,
during normal business hours; and
(5) in addition to the grant of Audit Rights pursuant to
this Agreement, Quest Diagnostics shall have the
right to have any of its agents or employees to audit, in
accordance with the Audit Rights, the Records of MedPlus relating
to such Transactions, Software, Basic Support services and other
deliverables under this Agreement to examine or determine the
proper amounts which should have been billed, the amounts that
were billed, and the amounts paid under this Agreement, by Quest
Diagnostics, Providers or others.
(e) In any exercise of Audit Rights hereunder, including
without limitation pursuant to the compliance provisions Quest
Diagnostics shall give MedPlus fourteen (14) calendar days' prior
notice of any such audit, and shall abide by reasonable MedPlus
security and confidentiality procedures during the audit. MedPlus
and Quest Diagnostics agree that any security and confidentiality
procedures, which unduly burden, delay or interfere with Quest
Diagnostics' Audit Rights, shall be deemed to be unreasonable for
the purposes of this Agreement. MedPlus agrees to make a good
faith attempt to obtain access to any third party's books and
records that are directly pertinent to MedPlus' performance under
this Agreement and that are subject to confidentiality between
MedPlus and such third parties. Quest Diagnostics and MedPlus
shall each bear their own costs associated with such audit. If
the audit reveals an overpayment by Quest Diagnostics to MedPlus,
MedPlus shall promptly refund such overpayment to Quest
Diagnostics. If the audit reveals an underpayment by Quest
Diagnostics, Quest Diagnostics shall promptly pay to MedPlus the
amount of such underpayment.
7. Assignment/Delegation/Subcontracting. This Agreement is not
assignable or otherwise transferable in whole or in part (by
operation of law or otherwise) by either party without the prior
written consent of the other party hereto, which consent shall not
be unreasonably withheld or delayed. Notwithstanding the
foregoing, Quest Diagnostics shall be entitled to assign this
Agreement and its rights hereunder to a Quest Diagnostics
Affiliate upon notice to MedPlus. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the
parties and their permitted successors and assigns. Each party
reserves the right to terminate this Agreement after a change in
the direct or indirect controlling interest of the other party, if
the controlling interest is held by a competitor of the non-
assigning party, or if, in the non-assigning party's reasonable
discretion, the change adversely affects the non-assigning party's
rights, goodwill, client relationships, proprietary information or
competitive position in a material respect. In the event that
MedPlus merges with, acquires, or is acquired by another company
with which Quest Diagnostics has an agreement for products and/or
services similar to those provided hereunder, Quest Diagnostics at
its discretion shall have the option of choosing to continue the
terms and conditions of this Agreement for the benefit of all
Providers under this Agreement. With respect to any permitted
assignment or other permitted transfer, the parties agree that
they shall otherwise remain bound to the terms and conditions of
this Agreement, and any assignor or transferee shall remain bound
by all the terms and conditions of this Agreement, including,
without limitation, the confidentiality, compliance with laws and
patient data provisions of this Agreement. Any attempted
assignment or other transfer not in compliance with the terms of
this Section shall be void and shall be deemed a material breach
of this Agreement. In addition, except as provided on Exhibit I,
MedPlus may not delegate or otherwise subcontract any of its
material obligations hereunder without the prior written consent
of Quest Diagnostics, which consent may not be unreasonably
withheld. Notwithstanding anything herein to the contrary, in the
event that there shall be a permitted assignment, delegation or
subcontract pursuant to the terms of this Agreement, unless all of
a party's obligations hereunder are assigned in accordance
herewith, the original party to this Agreement shall remain
primarily liable under the terms of this Agreement. The parties
expressly agree that MedPlus may continue in the ordinary course
of its business to subcontract certain software development
projects related to the ChartMaxx System.
8. Amendment. No waiver, alteration or modification of any of
the provisions of this Agreement shall be binding unless in
writing and signed by a duly authorized representative of the
party to be bound thereby.
9. Notices. All notices will have been properly given hereunder
when delivered in person or mailed via certified mail, return
receipt requested, or via nationally recognized overnight courier
to the addresses indicated in the first paragraph hereof. Notices
shall be sent to the following addresses:
If to Quest Diagnostics: Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Attn: President, Quest
Diagnostics Ventures
Attn: Chief Information Officer
with a copy to: Quest Diagnostics Incorporated
One Malcolm Avenue,
Teterboro, New Jersey 07608
Attn: General Counsel
If to MedPlus: MedPlus, Inc.
8805 Governor's Hill Drive,
Ste. 100
Cincinnati, OH 45249
Attn: General Counsel
10. Corporate Authority/Resources. Each of the parties
hereby warrants and represents that it has full corporate power
and authority to enter into this Agreement without the consent of
any other person, organization or other entity and that this
Agreement represents the valid and binding agreement of such party
enforceable in accordance with its terms as executed by the party
signing below on its behalf.
11. Severability. The invalidity in whole or in part of
any provision of this Agreement shall not affect the validity of
any other provision. In the event that a court of competent
jurisdiction determines that any part or provision of this
Agreement is unlawful or unenforceable, then such part or
provision shall be revised as appropriate to make it lawful and
enforceable.
12. Survival. Notwithstanding any termination or expiration
of this Agreement, the provisions of this Agreement, which by
their nature or context are intended or required to survive such
expiration or termination, shall survive and remain in full force
and effect in accordance with their terms.
13. Choice of Law. The rights and obligations of the
parties hereto shall be construed under and be governed in all
respects by the internal laws of the State of Ohio excluding any
provisions of law governing conflicts of law.
14. Entire Agreement. This Agreement, along with all
Exhibits and addenda hereto, contains the entire agreement between
the parties with respect to the subject matter hereof. All
previous and collateral agreements, representations, warranties
and promises regarding the subject matter hereof are superseded by
this Agreement. Any representation, promise or condition not
incorporated in this Agreement shall not be binding on either
party.
15. Uncontrollable Circumstances. If the performance of
any part of this Agreement by MedPlus or Quest Diagnostics is
prevented or delayed by acts of civil or military authority,
flood, fire, epidemic, war or riot, or other acts beyond the
reasonable control of either party, the party affected shall be
excused from such performance only during the continuance of any
such event. Breach of the Y2K Compliance Warranty by MedPlus
shall not be considered a force majeure.
16. Independent Contractor. It is understood that
MedPlus' and its agents' services hereunder are to be rendered in
the capacity of an independent contractor of Quest Diagnostics,
and that neither MedPlus nor its agents are in any respect or
under any circumstances employees of Quest Diagnostics. Neither
party has authority to enter into contracts or assume any
obligations for or on behalf of the other party or to make any
warranties or representations for or on behalf of the other party.
17. Disclosure of Customer Status/Public Representations.
During the License Term and thereafter, MedPlus shall not
represent itself to be owned or controlled by Quest Diagnostics or
as authorized to represent Quest Diagnostics or to obligate Quest
Diagnostics with respect to any matters not expressly provided
herein. MedPlus may represent to the general public or to any
person that it is an independent contractor affiliated with Quest
Diagnostics, and shall do so if reasonably necessary to clarify
any misunderstanding by the general public of the relationship of
the parties. However, neither party, its employees, agents and/or
representatives shall originate any publicity, news release, or
other public announcement, whether written or oral, relating to
the terms to performance hereof, without the prior written
approval of the other party hereto. Additionally, neither party
shall use the name, trademarks, service marks or logos of the
other party, without the prior written consent of such party.
Notwithstanding anything herein to the contrary, Quest Diagnostics
agrees to use its best efforts to work with MedPlus within two
weeks following the effective date to approve a press release
regarding the general nature of this Agreement, and that at any
time MedPlus may disclose to third parties the fact that Quest
Diagnostics is a client or customer of MedPlus.
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed as of the Effective Date.
QUEST DIAGNOSTICS INCORPORATED MEDPLUS, INC.
By: /s/ Vijay Aggarwal By: /s/ Philip S. Present II
Name: Vijay Aggarwal Name: Philip S. Present II
Title: President Ventures Title: Chief Operating Officer
MEDPLUS, INC.
CHARTMAXX[tm] SOFTWARE
LICENSE AGREEMENT
Agreement No. C003001
This Agreement is made effective as of January 4, 2000 (the
"Effective Date") by and between MedPlus, Inc. ("MedPlus"), an
Ohio corporation with its principal place of business located at
8805 Governor's Hill Drive, Cincinnati, Ohio 45249 and Cybear,
Inc. ("Cybear"), a Delaware corporation located at 5000 Blue Lake
Drive, Suite 200, Boca Raton, Florida 33431.
W I T N E S S E T H:
WHEREAS, MedPlus has developed and owns software that provides
entities in the health care industry with a secure means of
electronically storing confidential patient record information
("ChartMaxx Software"); and
WHEREAS, MedPlus has entered into a Software License and Database
Maintenance Agreement dated December 9, 1999 with Quest
Diagnostics Incorporated ("Quest") pursuant to which it agreed to
license to Quest certain software to facilitate the electronic
transmission of Laboratory Orders from Providers to Quest, and of
Laboratory Results Reports from Quest to Providers, and to allow
Quest to view such Orders and Reports via the Internet (the "Quest
Agreement"); and
WHEREAS, Cybear is an Internet service provider that provides a
secure means of transmitting confidential patient record
information between entities in the health care industry,
including but not limited to secure World Wide Web (the "Web")
access to such information; and
WHEREAS, MedPlus agrees to license the ChartMaxx Software to
Cybear for the limited purposes of (1) storing confidential
patient record information transmitted directly to Cybear from
third parties to whom MedPlus has provided, directly or
indirectly, an interface to the ChartMaxx Software and (2)
allowing Cybear to provide physicians and other medical
professionals with access, via the Internet, to medical records;
and
WHEREAS, Cybear agrees to provide to MedPlus on behalf of its
customers storage space for and Web-based access to electronic
confidential patient record information transmitted directly to
Cybear from third parties to whom MedPlus has provided an
interface to the ChartMaxx Software; and
WHEREAS, because Cybear desires to increase the use and visibility
of its Web sites, Cybear also agrees, as more specifically
described herein, to (1) pay to MedPlus a cash referral fee for
certain subscriptions to Cybear Web sites and (2) compensate
MedPlus, through the issuance of stock and following an initial
period of Transaction Fee income, for certain customers and
physicians who subscribe to Cybear's Web sites in order to gain
access the ChartMaxx Software; and
WHEREAS, because MedPlus desires to increase sales of its
ChartMaxx system to hospitals, laboratories and other information
providers, MedPlus agrees to (1) install interfaces to the
ChartMaxx system at information provider sites, upon the request
of Cybear, and (2) pay to Cybear a cash referral fee for each sale
of a ChartMaxx system which results substantially from the efforts
of Cybear; and
WHEREAS, MedPlus has also developed software that allows
authorized third parties in the health care industry to retrieve,
via the Web, confidential patient record information that has been
electronically stored (the "Web Client Software"); and
WHEREAS, within 30 days of the Effective Date, MedPlus and Cybear
will enter into a RESELLER AGREEMENT, in substantially the form
attached hereto as Exhibit A, pursuant to which Cybear may
sublicense the Web Client Software to third parties via download
from Cybear's Web site so that such third parties may gain access
to confidential patient record information by MedPlus customers
through the ChartMaxx Software.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties agree
as follows:
A. GENERAL DEFINITIONS
The following terms shall be defined herein as follows:
1. "Acquisition Price" means a price per share of Cybear common
stock equal to its average closing price on the NASDAQ National
Market System for the thirty (30) day period immediately prior to
the Effective Date.
2. "Archived Data" means confidential patient information
provided to Cybear and/or MedPlus by each of their customers for
storage and transmission purposes, which has been written to tape
or optical disk for long-term storage.
3. "Applicable Law(s)" means any statute, law, ordinance,
regulation, requirement, order or rule of any federal, state,
local government or other governmental agency or body or of any
other type of regulatory body, or any governmental or
administrative interpretation of any thereof, including, without
limitation, (i) requirements imposed by any governmental or
regulatory body which must be satisfied to qualify for Medicare,
Medicaid or other health care program reimbursements, and (ii) any
and all federal, state and local health care laws, including but
not limited to, those laws relating to or covering the methods and
ways in which clinical laboratory electronic data information
services and other related or incidental services or benefits, if
any, are provided to the providers, the federal Physician Self-
Referral Law, 42 U.S.C. Section 1395bb, and the regulations
promulgated thereunder (together, the "Stark Law"), similar state
physician self-referral laws and regulations (together with the
Stark Law, the "Self-Referral Laws"), the Federal Health Care
Program Anti-kickback Law and regulations promulgated thereunder
(the "Federal Anti-kickback Law"), and similar state anti-kickback
laws and regulations (together with the Federal Anti-kickback Law,
the "Anti-kickback Laws"), the Clinical Laboratory Improvements
Act of 1967, as amended, the Health Insurance Portability and
Accountability Act of 1996, as amended, and regulations (proposed
or final) promulgated thereunder, the HCFA Internet Security
Policy of 1998, all state and local statutes addressing privacy
and security of healthcare information, and the Balanced Budget
Act of 1997, P.L. 105-23, as amended, and regulations promulgated
thereunder.
4. "ChartMaxx Interface" means an interface to the ChartMaxx
System, which interface is installed at the site of an information
provider such as a hospital or laboratory and which provides the
information provider with the means to transmit and access
transcription and laboratory data via the Internet through
Internet access provided by Cybear.
5. "ChartMaxx Software" means the executable code of MedPlus'
ChartMaxx System software, including enhancements thereto, that is
described in detail on Exhibit B.
6. "ChartMaxx System" means the executable code of MedPlus'
ChartMaxx System software and the hardware and services associated
therewith, as licensed and sold by MedPlus to hospitals,
laboratories and other information providers for on-site storage
and retrieval of medical records and related data.
7. "Computer System" means the computer hardware configuration
currently employed by Cybear and such other configuration that
Cybear may hereafter elect to install and/or utilize for the
ChartMaxx Software from time to time, provided such hardware
configuration is authorized by MedPlus, which authority shall not
be withheld unless that configuration does not employ a central
processing unit or is not capable of running the ChartMaxx
Software.
8. "Cybear Subscriber" means an individual, a corporation or a
legal entity that registers with Cybear as a subscriber for
Cybear's basic services, including Dr.Cybear and up to six e-mail
accounts, regardless of fees, if any, to be paid by such
subscriber.
9. "Database" means the electronic patient record, maintained by
MedPlus and Cybear, which contains the Laboratory Orders and
Laboratory Result Reports (as defined below) transmitted
electronically for access by authorized Providers.
10. "Documentation" means documentation relating to or describing
the ChartMaxx Software including, but not limited to, user manuals
now or hereafter provided by MedPlus or by third parties through
MedPlus.
11. "Dr.Cybear" means the executable code of Cybear's
subscription-based Internet Service Provider system software.
12. "Exclusivity Period" means five years from the Effective
Date.
13. "Illicit Code" means any computer instructions commonly known
as computer viruses, anomalies or any other computer instructions
which interfere with or prevent an end user from using software as
contemplated by this Agreement, but does not include errors or
bugs in the ChartMaxx Software.
14. "Integration" means the process of integrating the ChartMaxx
Software and Dr.Cybear so that physicians using the Web Client
Software can access Patient Data stored through the ChartMaxx
Software via a Web site provided and maintained by Cybear.
15. "Laboratory Order" shall mean a single order from a Provider
for one or more laboratory tests for a single patient (and, with
respect to laboratory tests provided by Quest, which meets the
then current Quest Transaction Specifications and is successfully
transmitted to Quest).
16. "Laboratory Results Report" shall mean a partial or final
results report for a single Laboratory Order that is transmitted
to a Provider via the Database (and, with respect to laboratory
tests provided by Quest, which meets the then current Quest
Transactions Specifications).
17. "MedPlus Customer Patient Data" shall mean Patient Data
provided by or ordered from individuals or entities with whom
MedPlus has contracted to store, transmit and/or process such
data.
18. "Patient Data" means confidential patient information
provided to Cybear and/or MedPlus by each of their customers for
storage and transmission purposes, including but not limited to
Laboratory Orders and Laboratory Results Reports.
19. "Provider" means any physician, clinic, service center or
other entity or individual that (i) has been granted a license to
use the Web Client Software to access or provide Patient Data via
the Database, and (ii) has received all necessary patient
authorizations to access the Laboratory Results Reports.
20. "Quest Patient Data" means Patient Data provided by or
ordered from Quest.
21. "Quest Transaction Specifications" shall mean those certain
documents and other related materials, as updated from time to
time, developed and maintained by Quest, which describe in detail
all of the required formats, data fields, code sets, protocols and
other transaction specifications required to send successfully and
receive Transactions to and from Quest, via the Database.
22. "Transaction" shall mean a successfully, accurately and fully
completed transmission between a Cybear and/or MedPlus customer
and the Database, of (i) a single Laboratory Order; or (ii) all
Laboratory Results Reports that arise in connection with a single
laboratory order (including retransmissions).
23. "Transaction Fee" means a fee to be charged by MedPlus for
the one-time entry of Patient Data into storage and retrieval
venues accessed via the ChartMaxx Software and/or the Web Client
Software.
24. "Web Client Software" means the executable code of MedPlus'
Web Client software, including enhancements thereto, which allows
end-users, including but not limited to physicians, to access
Patient Data stored through the ChartMaxx Software via a Web site.
B. CHARTMAXX SOFTWARE LICENSE TERMS AND CONDITIONS
1. Software License Grant.
1.1 Use of the ChartMaxx Software. MedPlus hereby furnishes to
Cybear the ChartMaxx Software and Documentation, except as
otherwise provided herein, under a non-exclusive and non-
transferable license. The ChartMaxx Software and the
Documentation are furnished solely for Cybear's own use as a
provider of Internet service and Web-based applications at a
single site or location on the designated Computer System on which
the ChartMaxx Software is installed or such other designated
Computer System on which the ChartMaxx Software is subsequently
installed from time to time in accordance with the terms of this
Agreement. Cybear understands that the data storage provided by
the ChartMaxx Software may only be populated with Patient Data
received through interfaces provided directly or indirectly by
MedPlus, or by third parties authorized in writing by MedPlus, and
that, unless otherwise specifically provided herein, Cybear shall
have no ownership interest in or access to MedPlus Customer
Patient Data or Quest Patient Data. Notwithstanding anything
contained herein to the contrary, Cybear may install the ChartMaxx
Software at one additional "mirror" location for disaster recovery
purposes and at such regional operations centers as Cybear deems
appropriate.
1.2 Computer System. The ChartMaxx Software may only be
accessed on the Computer System. If Cybear is unable to operate
the ChartMaxx Software on the Computer System due to equipment
malfunction, the ChartMaxx Software may be transferred temporarily
to another Computer System during the period of equipment
malfunction. However, in no event may the ChartMaxx Software be
reverse compiled, disassembled or otherwise reverse engineered.
2. Implementation, Installation, Training, Integration and On-
going Support.
2.1 Implementation, Installation and Training. At no cost to
Cybear (except as provided in Section 2.3 below), MedPlus shall
provide installation, implementation and training services with
respect to the ChartMaxx Software. Specifically, according to a
detailed implementation plan (including dates) provided by MedPlus
and agreed to by the parties within 30 days of the Effective Date,
MedPlus will:
(i) install the ChartMaxx Software on Cybear's hardware;
(ii) work with Cybear's staff to allow a smooth interface between
the ChartMaxx Software and Providers; and
(iii)train Cybear's staff so that they may provide "Level I" and
"Level II" support (as more specifically described on Exhibit C
hereto) to Cybear subscribers via the telephone.
2.2 Integration. Both parties agree to work together to complete
successfully the Integration. The costs incurred by each party as
a result of the Integration shall be borne by such party.
2.3 MedPlus Systems Administrator. The parties agree MedPlus
will hire and train a systems administrator to work exclusively
throughout the term of this agreement on-site with Cybear to
implement, install, maintain and support the ChartMaxx Software
licensed by Cybear hereunder and generally to assist Cybear in its
support obligations to its customers (the "Systems
Administrator"). MedPlus shall be responsible for all costs
associated with the Systems Administrator, including but not
limited to costs associated with employee benefits and workers'
compensation; notwithstanding the foregoing, Cybear shall
reimburse MedPlus for reasonable direct salary costs associated
with the Systems Administrator.
2. 4 On-going Support. MedPlus will provide additional support
services with respect to the ChartMaxx Software according to the
terms and conditions described in the Service and Support Schedule
attached hereto as Exhibit C. Notwithstanding the foregoing,
although both parties will store Patient Data for the time periods
required by law, neither party shall be obligated to provide
support with respect to any Cybear customer that has not requested
or transmitted data other than Archived Data for at least six
months.
3. Enhancements. During the Software License Term, MedPlus shall
distribute to Cybear, at no charge, those Enhancements to the
specific Applications included in the ChartMaxx Software which are
released by MedPlus for general commercial availability to other
similar licensees. Specifically, "Enhancements" to the ChartMaxx
Software consist of new or added features or functionality to
existing Applications of the ChartMaxx Software, but do not
include entirely new Applications. Cybear shall have a perpetual
license hereunder to all Enhancements, if any, specially designed
for Cybear by MedPlus at MedPlus' then-current fees, provided that
all proprietary rights in such Enhancements shall remain in
MedPlus. MedPlus shall provide installation and implementation or
training with respect to Upgrades and/or Enhancements through the
Systems Administrator and in accordance with the Service and
Support Schedule attached hereto as Exhibit C. Cybear
acknowledges that certain Enhancements may require either
additional hardware or hardware updates to the Computer System for
Cybear to gain the full benefits of such Enhancements. All costs
and responsibilities for such new or additional hardware shall be
borne solely by Cybear.
4. Software License Fee. In exchange for the ChartMaxx Software
license granted to Cybear for use at a single site, and subject to
the terms and conditions described herein, including but not
limited to those described in Section C(2) and on Schedule B(4),
"License Fee Value Assignments" (to be provided by MedPlus within
30 days of the Effective Date), Cybear shall pay to MedPlus a
total of $2.5 million, payable on the Effective Date. Such
payment shall be non-refundable unless otherwise specifically
provided herein.
5. Proprietary Rights in Software and Data.
5.1 Title to and Proprietary Rights in the ChartMaxx Software.
No title to or ownership in the ChartMaxx Software or
Documentation is transferred to Cybear hereby. Title to and all
applicable rights in patents, copyrights and trade secrets in the
ChartMaxx Software and the Documentation, including but not
limited to the format of screens, reports and interfaces
associated with the ChartMaxx Software, shall remain in MedPlus or
third parties from whom MedPlus has obtained rights to license the
ChartMaxx Software or Documentation (which third parties shall be
considered third party beneficiaries of the license agreement
contained herein). Except as may be permitted in writing by
MedPlus, Cybear shall not provide, or otherwise make available,
the ChartMaxx Software, Documentation or copies thereof to any
third party.
5.2 Copies of Software/Documentation. Cybear may make one copy
of the ChartMaxx Software for archival purposes and one copy for
back-up purposes. Cybear may make additional copies of the
Documentation solely for Cybear's internal use. All copies of the
ChartMaxx Software and/or Documentation must include MedPlus'
copyright notice and other proprietary notices and legends as
indicated thereon and shall be subject to the terms and conditions
of this Agreement.
5.3 Permitted Disclosure. Notwithstanding the above, the
foregoing shall not prohibit (i) disclosure of the ChartMaxx
Software to any third party (such as an independent contract
programmer) who has executed a confidentiality agreement with
Cybear protecting the ChartMaxx Software, MedPlus' or any third
party's proprietary rights therein and the Patient Data stored
therein and who is under written contract to Cybear for the
purpose of assisting Cybear in the customization, maintenance or
other use of the ChartMaxx Software in a manner not prohibited by
this Agreement, or (ii) delivery of copies of the ChartMaxx
Software to any third party disaster recovery firm engaged by
Cybear, in each case so long as the applicable third party is
informed of and bound by an obligation to use the ChartMaxx
Software under the terms of this Agreement. If any Patient Data
may be disclosed in any way to a third party pursuant to this
paragraph, and such Patient Data relates to information processed
by Quest, such third party must have executed a copy of the
Confidentiality Agreement attached hereto as Exhibit D prior to
such disclosure.
54. Escrow. MedPlus shall place in escrow, and will regularly
update, one electronic copy of the ChartMaxx Software source code
and Documentation. A copy of the escrow agreement is attached
hereto as Exhibit B(5.4). In accordance with the escrow
agreement, in the event MedPlus (or a successor thereof) no longer
licenses the ChartMaxx Software or MedPlus Materially Defaults
hereunder (as defined below), the escrow agent shall make such
source code and Documentation available to Cybear for the purpose
of allowing Cybear to use the ChartMaxx Software, and make any
modifications thereto, for purposes consistent with the terms of
this Agreement.
5.5 Title to and Limitation on Use of Quest Patient Data. For
purposes of this Agreement, all Quest Patient Data and MedPlus
Customer Patient Data stored or transmitted through the use of the
ChartMaxx Software (collectively, the "Protected Data") shall be
considered the property of Quest or the MedPlus Customer from whom
such data was received, respectively. Absolutely no right of
ownership in such data is granted to Cybear in the Protected Data,
nor should such a right be implied, hereunder. Specifically, each
party agrees that patient clinical information, Laboratory Orders,
Laboratory Results Reports, and all patient-related information,
including any derivatives resulting from the manipulation or
compilation thereof ("Patient Information") are Confidential
Information (as defined herein) and each party agrees it will not
disclose or utilize individual laboratory test information or
other Patient Information in any way that would violate any
patient confidentiality obligations or any Applicable Laws, as
defined above. Without limiting Cybear's obligations regarding
Confidential Information which may be otherwise provided for in
this Agreement, Cybear shall be responsible to ensure the
confidentiality and security of Patient Information transmitted or
otherwise available to Cybear in any form, manner, on any media,
and in any format now known or hereafter developed, in accordance
with all Applicable Laws governing such Patient Information now or
in the future, including those to prevent anyone other than the
sender and addressee of each Transaction or their respective
authorized employees from monitoring, using, gaining access to or
learning the import or contents of any Transaction.
Notwithstanding the foregoing, but subject to the restrictions of
the foregoing, the parties recognize that Cybear, its employees
and agents and permitted assigns, who have a need to know, will
have access to the Patient Information for the sole purpose of
performing Cybear's obligations under this Agreement.
All Patient Information associated with the Protected Data
shall be owned by Quest or the MedPlus Customer from whom such
data was received, as the case may be, and not by Cybear or
MedPlus. Except as otherwise specifically contemplated by this
Agreement, Cybear shall not aggregate, integrate, compile,
regenerate, merge, manipulate or otherwise use the Protected Data
for any purposes, including to derive revenue therefrom, and shall
not provide the Protected Data to any other person or entity,
other than as specifically required or allowed under the terms of
this Agreement to perform the services hereunder, without the
prior written consent of Quest or of the MedPlus Customer from
whom such data was received, as the case may be. Cybear agrees
that Protected Data cannot be aggregated for any third party,
including but not limited to any Provider, or among different
customers of Cybear or other health care providers, payors or
laboratory service providers for any purpose, without Quest's
prior written consent or the prior written consent of the MedPlus
Customer from whom such data was received, as the case may be.
If Cybear is served with a warrant, subpoena, order or
request from a court of competent jurisdiction, administrative
agency or other governmental body or any other entity or person
for any Protected Data, records, or files of information
transmitted through, and to, the ChartMaxx System, Cybear will, as
soon as practicable, and not in violation of law, deliver to
Quest, or the MedPlus Customer from whom such data was received,
as the case may be, a copy of such warrant, subpoena, order or
request and will not, without Quest's proper written consent, or
the proper written consent of the MedPlus Customer from whom such
data was received, as the case may be, which shall not be
unreasonably withheld or delayed, accede to the same unless upon
the advice of counsel it reasonably believes that it is required
to do so under applicable law.
Without limiting the foregoing, Cybear agrees that it
shall limit the Cybear employees, agents and contractors who have
access to any Quest Patient Data, including without limitation,
Laboratory Orders or Laboratory Results Reports, if any, to only
those "need to know" employees, agents and contractors that Cybear
reasonably believes are necessary to perform the services
hereunder in accordance with the highest level of professionalism
and Cybear's established and maintained security measures, which
shall be subject reasonably to audit from time to time by MedPlus.
The parties acknowledge that the provisions of this
Section 5.5 apply only to the Protected Data and that Cybear's use
and management of all other Patient Data is subject only to
Applicable Laws and its agreements with third parties.
Notwithstanding anything contained herein to the contrary,
the parties agree that they may jointly aggregate all Patient Data
processed through the Database, subject to the written consent of
the parties from whom such Patient Data is received.
6. Term and Termination of Software License.
6.1 Term of License. The term of the ChartMaxx Software license
granted hereunder shall commence upon delivery of the ChartMaxx
Software by MedPlus to Cybear and shall continue until such time
as Cybear discontinues use of the ChartMaxx Software on the
Computer System or the license is terminated as provided in
Section 6.2, below, but otherwise shall be without restriction as
to time (the "Software License Term").
6.2 Termination of License. Either party shall have the right to
terminate the Software license if the other party fails to comply
with, or materially defaults under, these license terms and
conditions. A party shall have "Materially Defaulted" hereunder
if it has (1) sought relief under any bankruptcy or similar law or
made any assignment for the benefit of creditors, or if any
creditor has sought to place such party in bankruptcy or
receivership and such request or petition is not dismissed within
forty-five (45) days after it is filed; (2) failed in a material
respect to support the ChartMaxx Software or the operating system
on which such software has been installed, as such party's support
obligations are described herein where such failure is not
remedied within 30 days after written notice of such default is
received from the non-breaching party; or (3) otherwise defaulted
in a material respect hereunder where such default is not remedied
within 30 days after written notice of such default is received
from the non-breaching party. Notwithstanding the foregoing, in
the case of (2) or (3) above, if such default may not possibly be
cured within 30 days and the breaching party is actively
attempting to cure such default to the reasonable satisfaction of
the non-breaching party, the parties shall agree in writing to
extend the cure period described above in their reasonable
discretion. Notwithstanding the foregoing, if Cybear breaches the
terms of Section B(1) or 5 hereof, the period for remediation
shall be an additional 10 days.
6.3 Effect of Termination. Cybear agrees, upon expiration of the
ChartMaxx Software License Term for any reason, immediately to
return to MedPlus or destroy the ChartMaxx Software and
Documentation, and copies thereof, as directed by MedPlus and, if
requested by MedPlus, to certify in writing as to such destruction
or return. Notwithstanding the foregoing, if MedPlus Materially
Defaults hereunder and such Default is not cured by MedPlus in
accordance with Section 6.2 above, Cybear may continue use of the
ChartMaxx Software in accordance with Section 5.4 above and,
except for payments earned by or due MedPlus prior to the date of
such Default, Cybear shall be immediately relieved of and
discharged from all of its payment obligations to MedPlus pursuant
to this Agreement.
7. Software Warranty. The following warranty information is in
addition to any service obligations to be provided by MedPlus by
the Systems Administrator and the obligations of MedPlus as
described in the Service and Support Schedule attached hereto as
Exhibit C.
7.1 Right to License. MedPlus represents and warrants to Cybear
that MedPlus has, and will throughout the term of this Agreement,
all right, title and interest in the ChartMaxx Software, or has
been granted the right by a third party who has the right, title
and interest in the ChartMaxx Software, to license the ChartMaxx
Software to Cybear in accordance with terms and provisions of this
Agreement free from any lien, claim or encumbrance of any third
party and without violation of any agreements, rights or
obligations existing between MedPlus and any other party.
7.2 Warranty of Performance. MedPlus warrants that for a period
of one year from Cybear's receipt of the ChartMaxx Software, the
ChartMaxx Software will perform in accordance with the
Documentation. If the ChartMaxx Software does not perform in
accordance with the Documentation, then with respect to any defect
or variation as to which MedPlus is notified by Cybear during the
one year warranty period, MedPlus shall, at its option, either (i)
correct such defect or variation so as to cause the ChartMaxx
Software to perform in the manner set forth in the Documentation
or (ii) replace the ChartMaxx Software with software that does
perform in accordance with the Documentation. This one year
warranty shall only apply provided that: (i) the ChartMaxx
Software has not been modified by anyone other than MedPlus or
someone authorized by MedPlus; (ii) the Computer System has not
been modified in any way that impairs the functioning of the
ChartMaxx Software; (iii) the ChartMaxx Software and the Computer
System have been maintained according to procedures recommended by
the relevant hardware manufacturer(s) and/or by MedPlus; and (iv)
all fees then due MedPlus under this Agreement have been paid.
7.3 Illicit Code Warranty. During the License Term, MedPlus will
use commercially reasonable efforts to ensure that the ChartMaxx
Software is free from Illicit Code.
7.4 Millenium Warranty. MedPlus warrants that the ChartMaxx
Software shall be able to accurately process date data (including
but not limited to, calculating, comparing and sequencing) from,
into and between the twentieth and twenty-first centuries,
including leap year calculations, when used in accordance with the
Documentation, provided that all products used in combination with
the ChartMaxx Software properly exchange date data with it ("Year
2000 Compliant"). As soon as possible and at no cost to Cybear,
MedPlus will correct any problems that may occur due to the
failure of the ChartMaxx Software to meet the requirements
specified in this paragraph. MedPlus will ensure that Cybear will
encounter no similar problem with subsequent new versions,
upgrades and/or patches to the ChartMaxx Software. MedPlus'
commitment pursuant to this paragraph shall not extend to any
failure of the ChartMaxx Software to be Year 2000 Compliant that
is based upon the combination of the ChartMaxx Software with
software not supplied by MedPlus.
THE WARRANTIES CONTAINED HEREIN ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WHICH WARRANTIES ARE
HEREBY DISCLAIMED, INCLUDING THE WARRANTY OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
8. Patent and Copyright Indemnification as to Software. MedPlus
shall protect, indemnify, hold harmless and defend any action,
suit or proceeding brought against Cybear insofar as it is based
on a claim that the ChartMaxx Software delivered hereunder
infringes any patent, copyright, or any other intellectual
property of a third party, provided that MedPlus is promptly
notified by Cybear of the action and given full authority,
information and assistance (at MedPlus' expense) for the defense
of the action. MedPlus shall pay all damages and costs incurred
by or awarded therein against Cybear, but shall not be responsible
for any compromise made without its written consent. MedPlus may,
at its option and expense (and, if as a result of such action,
suit or proceeding Cybear's use of the ChartMaxx Software is
interrupted by injunction or otherwise, then at Cybear's request
and at MedPlus' expense, shall promptly), (i) replace or modify
the ChartMaxx Software so that infringement will not exist, (ii)
procure for Cybear the right to continue to use the infringing
Software, or (iii) if neither option (i) or (ii) is possible,
refund to Cybear the price thereof as depreciated or amortized by
an equal annual amount over the lifetime of the ChartMaxx Software
as established by MedPlus. MedPlus' commitment hereunder shall
not extend to any infringement or claim thereof which is based
upon the combination of the ChartMaxx Software with software not
supplied by MedPlus.
9. Control of Information/Indemnification.
9.1 Customers' Control of Information. Cybear acknowledges and
agrees that the ChartMaxx Software is designed merely to assist
Cybear and its agents in the provision of information services to
Cybear's customers. As such, Cybear shall make no representation
to its customers that is inconsistent with the following: Cybear's
customers shall retain full control over the input and use of the
information they store in and/or transmit through the ChartMaxx
Software.
9.2 Cybear's Control of Internet Access/Hardware. Except as
otherwise specifically described herein, Cybear agrees to be
solely responsible for Cybear's design, repair and configuration
of all of Cybear's equipment, machinery, systems, Internet access
and products directly or indirectly related to the license granted
hereunder.
9.3 Third Party Protections. Cybear agrees that prior to
providing any customer with access to any MedPlus product pursuant
to this Agreement, Cybear will have required such customer to
become legally bound to the terms and conditions attached hereto
as Exhibit E.
C. ADDITIONAL OBLIGATIONS OF THE PARTIES.
1. Obligations of Cybear. In addition to the software license
fees due and payable hereunder, in exchange for the ChartMaxx
Software license, Cybear agrees as follows:
1.1 System Costs. Cybear agrees that, unless otherwise
specifically described herein or agreed to in writing by the
parties, it will be liable for all costs associated with the
provision of data storage and transfer services described herein -
including but not limited to server and other equipment costs,
operating system software costs, costs of supplies necessary to
operate the system (such as tapes, platters, etc.), maintenance
costs and Internet access and any telephone or other communication
charges associated therewith; provided, however, that Cybear shall
not be responsible for costs incurred directly by Cybear's
Subscriber's or by Quest related to their use of the ChartMaxx
Software (e.g., a subscriber's or Quest's server and other
equipment costs, operating system software costs, costs of
supplies necessary to operate a subscriber's or Quest's internal
system, such as tapes, platters, etc., a subscriber's or Quest's
internal maintenance costs and any of their telephone or other
communication charges.)
1.2 Third Party Software License Fees. Through its existing or
future site license agreements, Cybear will absorb the cost of
license fees that may be incurred by MedPlus related to its use of
Oracle software as a component of the ChartMaxx Software licensed
to Cybear hereunder. In addition, Cybear will use its best
efforts to develop a favorable business relationship between
MedPlus and Cybear's provider of multi-patient indexing software.
1.3 System Capacity. Cybear agrees that it will maintain
equipment, including but not limited to servers and other computer
systems, and Internet access as required to provide sufficient
storage and efficient transmission services for MedPlus' customers
and their customers' clients. Specifically, Cybear agrees to:
1.1.1 meet or exceed the Performance Standards and Support
Standards attached hereto as Exhibits C and F;
1.1.2 update its equipment and Internet access from time to time
to ensure generally that (a) response times and (b) "throughput"
capabilities provided to MedPlus' customers and their customers'
clients through each Cybear-managed Web page remain constant and
at or above industry standards, regardless of the number of
endusers and/or data providers accessing the Web page;
1.1.3 provide a secure results communication connection between
Providers and the Database, for the purpose of transmitting
Laboratory Orders and Laboratory Results Reports, of at least a
128-bit encryption algorithm or greater. (Cybear acknowledges
that in the future when communication is made via the Internet, a
128-bit encryption algorithm may no longer provide a sufficient
level of security. Accordingly, Cybear agrees to conduct periodic
reviews to ensure that the encryption level used to transmit
Laboratory Orders and Laboratory Results Reports via the Internet
meets with MedPlus' security standards. Within forty-five (45)
days of its receipt of written notice from MedPlus that the
encryption level then being used by Cybear to transmit Laboratory
Orders and Laboratory Results Reports via the Internet does not
provide a sufficient level of security, subject to the
capabilities of then-current commercially available Web-browser
and Web server technology, Cybear shall modify the encryption
level as requested by MedPlus; and
1.1.4 license the Web Client Software to the Providers, at their
cost, so that they can access the Database with respect to their
patients only via the Internet.
1.4 Disaster Recovery. Cybear shall have an executable disaster
recovery plan in place to accommodate any Year 2000 or natural
disasters.
1.5 Monthly Reporting/Audit. Within 15 days of the end of each
month during the Software License Term, Cybear shall provide to
MedPlus a written report detailing the number of subscriptions
received by Cybear during such month for which MedPlus may be
entitled a referral fee and/or commission (as more specifically
described in Section C(2) below). At its cost, MedPlus shall have
the right semi-annually to audit the books and records of Cybear
which relate directly to the monthly reports described in this
Section C(1.5).
In addition, Cybear shall maintain accurate and complete
records of all deliverables under this Agreement. All records
shall be considered Confidential Information (as defined herein)
and shall be maintained in accordance with both accepted
information storage practices and record retention periods in the
clinical laboratories industry and in compliance with Applicable
Laws, but in no event for less than six (6) years or such longer
period as may be required by Applicable Laws or MedPlus' policies
as may be adopted from time to time. In accordance with written
guidelines and instructions provided from time to time to Cybear
by MedPlus, and in accordance with prudent business practice,
Cybear shall maintain its records with a system of audit trails
and controls sufficient to allow the audit of such records under
this Agreement and to assure satisfaction of any requirements
imposed by external auditors, as well as by government officials
enforcing Applicable Laws.
1.6 ChartMaxx System Sale Commission. Cybear will use its best
efforts to refer hospitals, laboratories and other information
providers to MedPlus for the purchase and/or license of a
ChartMaxx System. In exchange for every ChartMaxx System sold
substantially as a result of the efforts of Cybear, within 30 days
of the close of MedPlus' fiscal quarter during which a ChartMaxx
Software license agreement has been executed with such customer,
MedPlus will pay to Cybear a commission equal to either (1) 5% of
the Net Margin on software license fees due pursuant to such
ChartMaxx license agreement or (2) 5% of any Transaction Fees
associated with data stored in such ChartMaxx System during the
first year of the license agreement, as the case may be. For
purposes hereof, "Net Margin" shall be defined as software license
fees charged to a customer less any third party software royalties
owed by MedPlus for such software during the first year of the
relevant license agreement. In addition, a ChartMaxx System sale
shall be deemed to have resulted substantially from the efforts of
Cybear if, at the time the sales process was initiated by Cybear,
(a) the information provider has been contacted by Cybear and has
expressed and interest in acquiring Cybear and MedPlus services
and (b) the information provider was not on MedPlus' then-current
Quarterly "Pipeline Report" or "Prospect Report." MedPlus shall
provide Cybear with its Quarterly Pipeline Report and only those
prospects appearing on it shall be deemed MedPlus and not Cybear
prospects.
1.7 Exclusive Use of ChartMaxx System. During the Exclusivity
Period, unless a customer has already contracted with a third
party to provide data repository services and/or functions for its
Patient Data, or specifically requests that its Patient Data not
be stored by Cybear, Cybear shall (i) recommend to its customers
the ChartMaxx Software for all data repository functions and (ii)
store in the Database all Patient Data processed by Cybear,
regardless of whether the Provider has requested that such Patient
Data be stored. Notwithstanding the foregoing, if a customer
desires to contract for a data repository function not currently
offered by MedPlus, Cybear shall offer MedPlus the right to
provide such functionality to such customer. If MedPlus cannot
provide such functionality within a commercially reasonable time
and at a commercially reasonable price, then Cybear may utilize
and/or recommend, as the case may be, a third party to provide
such functionality to such customer.
1.8 Limited Exclusivity as to Quest. Cybear agrees that during
the Exclusivity Period, it will not enter into any agreement with
another electronic patient record system licensor or seller with
respect to the storage or transmission of Patient Data processed
by Quest. Notwithstanding the foregoing, if MedPlus fails to meet
any of the obligations described in Section C(2) below or fails to
cure a material breach hereof as described in Section B(6.2),
Cybear shall no longer be obligated to provide the exclusivity
described above.
1.9 Subscription Fee Percentage Payment for Quest Physicians. On
a quarterly basis, beginning on the date on which the Transaction
Fee Based Payments (as defined in Section 2.1 below) equal $2.5
million, Cybear will pay to MedPlus an amount equal to 25% of all
subscription fees for basic services Cybear collects from
physicians who access Patient Data provided by Quest via the
Database ("Quest Physicians"). Provided however, that if Cybear
changes its business model from payments based on subscription
fees to a revenue model based on other sources of revenue, Cybear
will negotiate in good faith another financial arrangement with
MedPlus that leaves both parties in the same relative position
that they would have been under the subscription fee model.
1.10 Sponsorship of Subscription Fees. If, substantially as a
result of the efforts of MedPlus, an entity sponsors or otherwise
pays for the subscription fees of a group of physicians with
respect to Dr.Cybear, then, within 45 days of its receipt thereof,
regardless of any Transaction Fee Based Payments made to Cybear to
date, Cybear shall pay to MedPlus an amount equal to 25% of such
sponsorship amount or subscription fees for basic services;
provided that the Sponsor shall not appear on Cybear's then-
current Quarterly "Pipeline Report." Cybear shall provide MedPlus
with its Quarterly Pipeline Report and only those prospects
appearing on it shall be deemed Cybear and not MedPlus prospects.
Provided however, that if Cybear changes its business model from
payments based on subscription fees to a revenue model based on
other sources of revenue, Cybear will negotiate in good faith
another financial arrangement with MedPlus that leaves both
parties in the same relative position that they would have been
under the subscription fee model. Notwithstanding Sections 1.9
and 1.10 above, the total payments to be made to MedPlus hereunder
for any single Cybear Subscriber shall not exceed 25% of all
subscription fees for basic services paid by such Subscriber to
Cybear.
1.11 Stock Issuance for Incremental Quest Physician
Subscriptions. For every one thousand paid subscriptions to
Dr.Cybear registered to Quest Physicians, Cybear shall issue to
MedPlus that number of the shares of the common stock of Cybear
which, based on (i) the closing price on the Nasdaq National
Market for the last day of the quarter during which such
subscriptions were purchased or (ii) the average of its closing
price on the Nasdaq National Market for the 180 days prior to the
end of such quarter, whichever is less, totals $125,000 in value
(the "Cybear Shares"). Provided however, that if Cybear changes
its business model from payments based on subscription fees to a
revenue model based on other sources of revenue, Cybear will
negotiate in good faith another financial arrangement with MedPlus
that leaves both parties in the same relative position that they
would have been under the subscription fee model. In no event
shall the total value of the Cybear Shares issued in accordance
with this provision exceed $7.5 million.
Except for restrictions imposed by the registration
requirements of the Securities Act of 1933, as amended, or any
state or other securities law, any and all shares of the common
stock of Cybear issued pursuant hereto shall be free from
restriction and freely tradable. MedPlus understands that Cybear
shall not, and shall be under no obligation to, register any such
shares of its common stock.
1.12 Quest Portal. In accordance with the technical
specifications and implementation timeframes reasonably provided
to Cybear by MedPlus on behalf of Quest, and agreed to in writing
by Cybear, Cybear will use its best efforts to develop and
maintain a separate Web-based portal through which Quest Patient
Data shall be accessed.
1.13 Backup. Quarterly, at MedPlus' cost, Cybear will create
archived copies of all Patient Data including, but not limited to,
the master patient index data base and the Database.
2. Obligations of MedPlus. In addition to the software license
granted hereunder, MedPlus agrees to perform the following
obligations:
2.1 Transaction Fee percentage for Quest Internet Access. On a
quarterly basis, in exchange for certain Internet services to be
provided to Quest by Cybear, MedPlus will pay to Cybear an amount
equal to 25% of the Transaction Fees earned by MedPlus pursuant to
the Quest Agreement (such periodic payments shall be referred to
as "Transaction Fee Based Payments"). Cybear shall provide
MedPlus with a quarterly report showing Quest Transactions and
MedPlus shall provide Cybear with a report showing Quest payments
that are the basis for its Quarterly payment to Cybear. MedPlus
shall pay Cybear within 10 days of receipt of payment from Quest.
At its cost, Cybear shall have the right semi-annually to audit
the books and records of MedPlus which relate directly to the
Quest transaction fees described in this Section 2.1.
2.2 Exclusive Use of Cybear Services. During the Exclusivity
Period, unless a customer has already contracted with a third
party to receive Internet or Application services, MedPlus shall
utilize and recommend Cybear to its customers for the provision of
all Internet and/or Application services. Notwithstanding the
foregoing, if a customer desires to contract for Internet or
Application services not currently offered by Cybear, MedPlus
shall offer Cybear the right to provide such services to such
customer. If Cybear cannot provide such services within a
commercially reasonable time and at a commercially reasonable
price, then MedPlus may utilize and/or recommend, as the case may
be, a third party to provide such services to such customer.
2.3 Limited Exclusivity. MedPlus agrees that during the
Exclusivity Period, it will not enter into any agreement with
another Internet service provider with respect to the storage or
transmission of Patient Data provided to MedPlus by Quest.
Notwithstanding the foregoing, if Cybear fails to meet any of the
obligations described in Section C(1) above or fails to cure a
material breach hereof as described in Section B(6.2), MedPlus
shall no longer be obligated to provide the exclusivity described
above.
2.4 ChartMaxx Interface Installation. Where technically and
commercially possible and practicable, MedPlus agrees to install
ChartMaxx Interfaces at information provider sites as requested
from time to time by Cybear. Costs associated with ChartMaxx
Interfaces (which will be based on MedPlus' then-current rates for
such installations) ("Interface Costs") and any Transaction Fees
to be charged by MedPlus for data transmitted via the ChartMaxx
Interface shall be paid to MedPlus by Cybear. Notwithstanding the
foregoing, MedPlus agrees that Cybear may select one information
provider site as a "reference site" and that MedPlus will waive
the Interface Costs associated with such reference site.
2.5 Web Access for MedPlus Customers. MedPlus agrees that it
will provide all information providers who have licensed a
ChartMaxx System with the capability to access Cybear's Web site
at no set-up or initiation charge. This paragraph C(2.4) is not,
however, intended to prevent MedPlus from charging such
information providers Transaction Fees for information transmitted
and accessed via the Cybear Web site.
2.6 Fee Sharing for Certain Transactions. Within sixty days of
the Effective Date, the parties will negotiate in good faith the
means of calculating any Transaction Fee based payments to be made
to Cybear in exchange for Internet services provided by Cybear to
entities that have (i) licensed the ChartMaxx Data Capture
Software by MedPlus and (ii) agreed to compensate MedPlus directly
as a result of discrete and COLD data that is transmitted to a
database maintained at an operations center managed by Cybear
using the ChartMaxx Software.
D. PRICING AND PAYMENT TERMS
1. General Payment Terms. All amounts included herein, on any and
all exhibits hereto and on purchase orders and invoices issued
hereunder shall be in U.S. Dollars. Each party shall pay all
amounts payable pursuant to this Agreement no later than thirty
(30) days from the date of invoice therefor.
2. Tax Liability.
2.1 Cybear's Tax Liability. Cybear shall be responsible for and
shall pay or reimburse MedPlus for any fees, assessments, charges,
duties and taxes (including, but not limited to, sales or use
taxes) which may now or later be paid or payable by Cybear or by
MedPlus by virtue of the ChartMaxx Software License or the Web
Client Software Reseller License granted hereunder or the
performance of any duty related thereto, excluding taxes based
upon the net income of MedPlus.
2.2 MedPlus' Tax Liability. MedPlus shall be responsible for and
shall pay or reimburse Cybear for any fees, assessments, charges,
duties and taxes (including, but not limited to, sales or use
taxes) which may now or later be paid or payable by Cybear or by
MedPlus by virtue of the Cybear Products Reseller License granted
hereunder or the performance of any duty related thereto,
excluding taxes based upon the net income of Cybear.
E. MISCELLANEOUS
1. Confidential Information of the Parties.
Without limiting the foregoing, and in addition to the Patient
Information provisions stated above, any and all trade secrets, if
any, and confidential information and all physical embodiments
thereof ("Confidential Information") received by either party (the
"Receiving Party") from the other party (the "Disclosing Party")
during the term of this Agreement are confidential to and are and
will remain the sole and exclusive property of the Disclosing
Party. Confidential Information shall also include all other
forms of information designated as Confidential Information in
this Agreement, including but not limited to, knowledge,
information and material concerning Quest or any Provider,
including its products, services, data processing systems,
equipment, software, supplies and services, and proprietary
information concerning Quest and the names and addresses of
Providers and knowledge, information and material concerning
software licensed hereunder or in related agreements, related
source code, computer programs and screens and proprietary
information concerning either MedPlus or Cybear, its affiliated
companies and their respective products and services.
At all times, both during the term of this Agreement and after its
termination, the Receiving Party shall hold all Confidential
Information of the Disclosing Party in confidence, and will not
use, copy or disclose such Confidential Information or cause any
of such Confidential Information to lose its character as
Confidential Information. At all times during the term of this
Agreement and for a period of eighteen (18) months following the
termination of this Agreement (except where a longer period is
required pursuant to this Agreement or Applicable Laws), the
Receiving Party shall hold the Confidential Information of the
Disclosing Party in confidence, and will not use, copy or disclose
such Confidential Information or cause any of such Confidential
Information to lose its character or cease to qualify as
Confidential Information.
Confidential Information shall be maintained under secure
conditions by the Receiving Party, using reasonable security
measures and in any event (i) not less than the same security
measures used by the Receiving Party for the protection of its own
Confidential Information of a similar kind, and (ii) any specific
security measures required by this Agreement or by Applicable
Laws. Within thirty (30) days after termination of this Agreement,
the Receiving Party shall deliver to the Disclosing Party all of
the Disclosing Party's Confidential Information then in the
custody, control or possession of the Receiving Party.
If the Receiving Party is ordered by a court of competent
jurisdiction, administrative agency, or other governmental body to
disclose Confidential Information, or it if is served with or
otherwise becomes aware of a motion or similar request that such
an order be issued, then the Receiving Party will not be liable to
the Disclosing Party for disclosure of Confidential Information or
Confidential Information required by such order if the Receiving
Party provides reasonable prior written notice of such disclosure
and reasonably cooperates with the efforts of the Disclosing
Party, at the Disclosing Party's expense, to protect the
confidentiality of such Confidential Information.
Confidential Information shall exclude information that (i) was
known to the Receiving Party prior to its first receipt from the
Disclosing Party; or (ii) at any time becomes a matter of public
knowledge without any fault of the Receiving Party; or (iii) is at
any time lawfully received by the Receiving Party from a third
party under circumstances permitting its disclosure to others; or
(iv) is independently developed by the Receiving Party as evidenced
by the Receiving Party's records; or (v) is at any time furnished
to a third party by the Disclosing Party without restriction on use
or disclosure; or (vi) is disclosed pursuant to a lawful
requirement or request of a government agency, subject to the
express provisions of this Agreement; or (vii) is approved for
release by written authorization of the Disclosing Party. The
Receiving Party shall bear the burden of showing that any of the
foregoing exclusions applies to any information or materials.
Each party will cooperate with the other in the protection of
Confidential Information. Each party acknowledges and agrees that
in case of a material breach of these obligations of
confidentiality, the non-breaching party will suffer irreparable
harm and injury, which may not be adequately compensated by
monetary damages. Accordingly, in case of a material breach or
threatened breach, the non-breaching party shall be entitled to
seek preliminary and final injunctive relief and any other
equitable remedies it may have. Such remedies shall be in addition
to and not in limitation of any and all other remedies, which such
party, may have at law. Notwithstanding anything contained herein
to the contrary, both parties agree that the other party may
disclose relevant terms of this Agreement to third parties with a
business need to know; provided that such party has obtained the
other party's prior written consent as to (i) the identity of the
disclosee and (ii) the scope of the disclosure and has entered
into a confidentiality agreement with such third party in a form
acceptable to the other party and the other party is made a third
party beneficiary thereof.
2. Export/Limitations on Dangerous Application. Cybear
acknowledges that the ChartMaxx Software provided hereunder is
subject to export and import controls. Cybear agrees that any
Software licensed hereunder will not be exported, directly or
indirectly, separately or as part of a system, without Cybear, at
its own cost, first obtaining all licenses from any applicable
government agency of the United States, including but not limited
to the United States Department of Commerce and any other
appropriate agency of the United States Government as may be
required by law. In addition, Cybear acknowledges that the
ChartMaxx Software contains software which on its own is not
specifically developed or licensed for use in any nuclear,
aviation, mass transit or medically diagnostic application or in
any other inherently dangerous application and neither MedPlus nor
any third party vendor whose software is contained in the
ChartMaxx Software shall be liable for any damages resulting from
such uses.
3. Limitation to Actual Damages/Indemnification. Unless
otherwise specifically provided herein, in no event shall either
party be liable to the other for lost profits, consequential,
exemplary, special, indirect, incidental, or punitive damages,
howsoever arising from its performance hereunder and any permitted
liability, regardless of the form or forum, shall not exceed the
limits of insurance coverage contained in this agreement.
MedPlus and Cybear shall each indemnify, defend and save the other
harmless from and against any and all losses, claims, suits,
damages, liabilities and expenses (including, without limitation,
reasonable attorneys' fees) based upon, arising out of or
attributable to any acts or omissions arising from such party's
performance hereunder or otherwise related to this Agreement.
This provision shall survive termination of this Agreement.
4. Insurance. Each party agrees to maintain general and
professional liability insurance in the amount of at least
$15,000,000 per occurrence and $16,000,000 and $17,000,000,
respectively, to cover the acts and omissions of its employees,
agents and representatives for services rendered pursuant to this
Agreement.
Attached hereto, as Exhibits G(1) and G(2) are current and valid
Certificates of Insurance relating to the extent of general and
professional liability coverage and naming the other party hereto
as an additional insured. Each party agrees to keep and to
maintain said insurance coverage in full force and effect during
the Term of this Agreement. Any modification or alteration in
such coverage that shall have a material effect on this Section
shall be promptly communicated to the other party.
Both parties agree to re-review the scope of their insurance
coverage one year after the Effective Date of this Agreement, and
each year thereafter, in order to determine whether the
Transaction level warrants an increase in the amount of such
coverage. In the event that the insurance coverage levels are
increased at any time during the Term of this Agreement, the
indemnification caps contained in Section E3 hereto shall be
increased, accordingly.
5. Payment for Additional Items. Except as otherwise provided in
this Agreement, Cybear shall be responsible for the purchase of
all Internet access and related charges, all hardware associated
with its use of the ChartMaxx Software, discs, tapes, cables,
ribbons, forms and other items required for use in conjunction
with the ChartMaxx Software.
6. Assignment. With the written consent of the other party
hereto, which consent shall not be unreasonably withheld, either
party shall be entitled to assign this Agreement and its rights
hereunder to an entity which purchases substantially all of its
assets, purchases a majority interest in its voting stock or
otherwise assumes its business; provided that any assignee
hereunder must agree to the terms hereof. Except as otherwise
permitted herein, neither party may assign any of its obligations,
rights or remedies hereunder and any such attempted assignment
shall be null and void. Notwithstanding anything contained herein
to the contrary, the parties agree that MedPlus may assign this
Agreement to a subsidiary into which all of MedPlus' ChartMaxx
related business is transferred.
7. Notices. All notices will be said to have been properly given
hereunder when delivered in person or mailed via certified mail
to:
MedPlus:
MedPlus, Inc.
8805 Governor's Hill Drive
Cincinnati, Ohio 45249
Attention: Moira J. Squier, Esq.
Cybear:
Cybear, Inc.
5000 Blue Lake Drive, Suite 200
Boca Raton, Florida 33431
Attention: Vice President- Legal Affairs
Each party shall inform the other in writing of a change of
address or contact person.
8. Corporate Authority/Resources. Each of the parties hereby
warrants and represents that it has full corporate power and
authority to enter into this Agreement without the consent of any
other person, organization or other entity, that this Agreement
represents the valid and binding agreement of such party
enforceable in accordance with its terms
9. General Interpretation. The terms of this Agreement have been
negotiated by the parties hereto and the language used in this
Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent. This Agreement shall be
construed without regard to any presumption or rule requiring
construction against the party causing such instrument or any
portion thereof to be drafted, or in favor of the party receiving
a particular benefit under the agreement. No rule of strict
construction will be applied against any person.
10. Severability. The invalidity in whole or in part of any
provision of this Agreement shall not affect the validity of any
other provision. In the event that a court of competent
jurisdiction determines that any part or provision of this
Agreement is unlawful or unenforceable, then such part or
provision shall be revised as appropriate to make it lawful and
enforceable.
11. Amendments and Waiver. No waiver, alteration or modification
of any of the provisions of this Agreement shall be binding unless
in writing and signed by a duly authorized representative of the
party to be bound thereby.
12. Choice of Law. The rights and obligations of the parties
hereto shall be construed under and be governed in all respects by
the internal laws of the State of Florida excluding any provisions
of law governing conflicts of law.
13. Jurisdiction. Each party hereto irrevocably submits to the
jurisdiction of the state and federal courts located in Palm Beach
County, Florida.
14. Entire Agreement. This Agreement, along with the Reseller
Agreement, any documents related to Cybear's issuance of its
common stock to MedPlus and all exhibits hereto, contain the
entire agreement between the parties with respect to the subject
matter hereof. All previous and collateral agreements,
representations, warranties, promises and conditions of sale are
superseded by this Agreement with the exception of the
Confidentiality and Non-Disclosure Agreement agreed to previously
by Cybear and MedPlus which shall remain in full force and effect.
Any representation, promise or condition not incorporated in this
Agreement shall not be binding on either party.
15. Uncontrollable Circumstances. If the performance of any part
of this Agreement by MedPlus or Cybear is prevented or delayed by
acts of civil or military authority, flood, fire, epidemic, war or
riot, or other acts beyond the reasonable control of either party,
the party affected shall be excused from such performance only
during the continuance of any such event; provided, however, that
if such delay in performance extends for more than 60 days, the
other party, at its discretion, upon giving written notice, may
terminate this Agreement.
16. Disclosure of Relationship Status. Notwithstanding anything
herein to the contrary, the parties agree that the other may
disclose to third parties, at any time, the fact that the other is
its client or customer and within two weeks after the Effective
Date, the parties shall issue a press release describing the
general nature of this Agreement, which release shall be subject
to the reasonable approval of both parties.
17. Piggyback Rights. If, during the Software License Term,
Cybear proposes to register under the Securities Act of 1933
(except by a registration statement on a form that does not permit
the inclusion of shares by its security holders) any of its
securities, it will give written notice to MedPlus of its
intention to do so and, subject to the approval of the
Underwriter, and on the written request of MedPlus given within 20
days after receipt of any such notice (which request shall specify
the shares intended to be sold or disposed of by MedPlus and
describe the nature of any proposed sale or other disposition
thereof), Cybear will use reasonable efforts to cause all such
shares to be included in such notification or registration
statement proposed to be filed by Cybear; provided Cybear may
reduce the amount of MedPlus shares included in its registration
statement to the extent reasonably necessary to reduce the total
amount of securities included in the offering to the amount
recommended by Cybear's managing underwriter. All expenses of
such offering, except the fees of special counsel and brokers'
commissions for MedPlus, shall be borne by Cybear. In the event
MedPlus exercises the rights described in this paragraph, then at
the time of exercise, the parties shall execute customary
indemnification agreements with respect to such registration
18. Commission Payment Obligations. A party's payment obligations
hereunder exist only with respect to the other party hereto and
neither party shall be obligated in any way to separately
compensate any individual sales representative or employee of the
other party.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed as of the date first written above.
CYBEAR, INC. MEDPLUS, INC.
By: /s/ Edward Goldman MD By: /s/ Philip S. Present II
Name: Edward Goldman MD Name: Philip S. Present II
Title: President and CEO Title: Chief Operating Officer
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (the "Company"), and Philip S. Present II (the
"Employee").
WHEREAS, the Company desires to employ or continue to employ the
Employee on certain terms and conditions as set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as
follows:
1. Employment. The Company hereby employs or continues to employ
the Employee in the capacity of Senior Vice President and Chief
Operating Officer, or in such other position as the Company may
direct or desire and Employee hereby accepts the employment, on
the terms and conditions hereinafter set forth.
2. Duties. The Employee's principal duties and responsibilities
shall include overseeing all of the Company's corporate operations
and such other duties which may be assigned to him from time to
time by the Company in connection with the conduct of its
business. Nothing herein shall preclude the Company from changing
the Employee's title and duties if the Company's Board of
Directors has concluded in its reasonable judgement that such
change is in the Company's best interests and commensurate with
the skills and experience of Employee. Employee agrees to well
and faithfully perform and discharge such services and duties and
hold such offices as may be assigned to him from time to time by
the Company and to devote substantially his full time, energies,
and best efforts to the performance thereof to the exclusion of
all other business activities. In the event the Employee is
elected a Director of the Company or any subsidiary during the
term of this Agreement, the Employee agrees to serve in such
capacity without further compensation.
3. Term. The term of employment shall begin on February 1, 2000
and shall continue for a period of twelve (12) months, unless
earlier terminated pursuant to the provisions of this Agreement.
4. Salary and Other Compensation. As compensation for the
services to be rendered by the Employee to the Company pursuant to
this Agreement, the Employee shall be paid the following
compensation and other benefits:
(a) Salary. During the term of this Agreement, Employee shall be
paid at the semi-monthly rate of Nine Thousand and 00/100 Dollars
($9,000.00), payable in arrears, unless adjusted in accordance
with Section 4(b) hereof. Should the employee become disabled,
which for purposes of this Subsection means the inability because
of any physical or emotional illness to perform his assigned
duties under this Agreement at least forty (40) hours per week,
the Employee's salary shall be adjusted in the proportion which
the number of hours the Employee is able to perform his assigned
duties during a week bears to forty (40). If the Employee, during
any period of disability, receives any periodic payments
representing lost compensation under any health and accident
policy or under any salary continuation insurance policy, the
premiums for which have been paid by the Company, the amount of
salary that the Employee would be entitled to receive from the
Company during the disability shall be decreased by the amounts of
such payments.
(b) Corporate Bonus. For each fiscal quarter of the Company in
which the Company has Consolidated Net Income (as reported in the
Company's quarterly financial statements) greater than $250,000,
the Employee shall earn a bonus of $12,500. For each fiscal
quarter of the Company in which the Company's Consolidated Net
Income exceeds $250,000 by at least $12,500, the Employee shall
earn an additional bonus of $12,500. Any bonus earned shall be
paid to Employee on the last day of the month in which the Company
issues its quarterly earnings release to the public.
(c) Automobile Allowance. During the term of this Agreement, the
Company shall pay Employee a $450.00 per month automobile
allowance in order to reimburse Employee for the expense of
owning, operating, maintaining and insuring a personal automobile
for use in performing Employee's duties hereunder.
(d) MedPlus, Inc. 1994 Long-Term Stock Incentive Plan. Subject
to the terms and conditions of the MedPlus, Inc. 1994 Long-Term
Stock Incentive Plan (the "Plan") and to the availability of stock
options for issuance under the Plan, in the event the Board of
Directors of the Company, in its sole and absolute discretion,
elects Employee as President of the Company, Employee shall be
awarded stock options to purchase fifty thousand (50,000) shares
of Company's common stock under the Plan. Such stock option grant
shall be subject to all the terms and conditions of the Plan and
shall be upon such terms and conditions (ex. grant date(s),
vesting period, expiration date, etc.) as the Company's
Compensation Committee shall determine in its sole and absolute
discretion.
(e) Employee Benefit Plans. Employee shall be eligible to
participate, to the extent he may be eligible to participate
pursuant to the terms of such plans, in any profit sharing,
retirement, insurance or other employee benefit plans maintained
by the Company.
5. Key Man Life Insurance. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit,
life insurance on the life of the Employee in any amount or
amounts considered advisable by the Company, and the Employee
shall submit to any medical or other examination, and shall
execute and deliver any application or other instrument in
writing, reasonably necessary to effectuate such insurance.
6. Expenses. The Company shall pay, or reimburse the Employee,
for all reasonable and necessary business expenses of the
Employee, approved by the Company.
7. Vacation and Leave. The Employee shall be entitled to the
same vacation and leave time as the other executive officers of
the Company. Officers of the Company may not carry unused
vacation time from one calendar year to another calendar year.
8. Non-Disclosure of Confidential Information. The Employee
acknowledges that in and as a result of his employment by the
Company, he will be making use of, acquiring, and/or adding to
confidential information of a special and unique nature and value
relating to such matters as the Company's patents, copyrights,
proprietary information, trade secrets, systems, procedures,
manuals, confidential reports, and lists of customers (which are
deemed for all purposes confidential and proprietary), the
equipment and methods used and preferred by the Company's
customers, and the fees paid by them. As a material inducement to
the Company to enter into this Agreement and to pay to Employee
the compensation stated in Section 4, Employee covenants and
agrees that he shall not, at any time during or following the term
of his employment, directly or indirectly divulge or disclose for
any purpose whatsoever any confidential information that has been
obtained by, or disclosed to, him as a result of his employment by
the Company. In the event of a breach or threatened breach by
Employee of any of the provisions of this Section 8, the Company,
in addition to, and not in limitation of, any other rights,
remedies, or damages available to the Company at law or in equity,
shall be entitled to a permanent injunction in order to prevent or
restrain any such breach by the Employee or by Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons directly or indirectly
acting for or with him.
Confidential information does not include information which: (i)
is in the public domain through no act, or failure to act, on the
part of the Employee, (ii) was known to the party receiving the
information prior its disclosure by the Employee, provided such
information did not become known, directly or indirectly, to the
party receiving the information through an act, or failure to act,
on the part of the Employee, and (iii) is required to be disclosed
pursuant to an order of a court of court or governmental authority
of competent jurisdiction, provided Employee gives the Company
notice of such order prior to such disclosure.
9. Covenants Against Competition. The Employee acknowledges that
the services he is to render are of a special and unusual
character with a unique value to the Company, the loss of which
cannot adequately be compensated by damages in an action at law.
In view of the unique value to the Company of the services of
Employee because of the confidential information to be obtained by
or disclosed to Employee, as hereinabove set forth, and as a
material inducement to the Company to enter into this Agreement
and to pay to Employee the compensation stated in Section 4,
Employee covenants and agrees that during Employee's employment
and for a period of two (2) years after he ceases to be employed
by the Company for any reason, he will not, except as otherwise
authorized by this Agreement, compete with the Company or any
affiliate of the Company, solicit the Company's customers or the
customers of an affiliate, or directly or indirectly solicit for
employment any of the Company's employees. For purposes of this
Section 9:
(i) the term "compete" means engaging in any manner whatsoever
(other than as a passive investor) in any business which sells or
otherwise provides, or intends to sell or otherwise provide,
directly or indirectly, products or services similar to those
products and services which the Company or any of its affiliates
sells or otherwise provides, or intends to sell or otherwise
provide, including without limitation, as a proprietor, partner,
investor, shareholder, director, officer, employee, consultant,
independent contractor, or otherwise, within a geographic areas
served by the Company or any of its affiliates;
(ii) the term "affiliate" means any legal entity that directly or
indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the Company; and
(iii) the term "customers" means all persons to whom the Company
or any of its affiliates has sold any product or service, whether
or not for compensation, within a period of two (2) years prior to
the time the Employee ceases to be employed by the Company.
10. Reasonableness of Restrictions.
(a) The Employee has carefully read and considered the provisions
of Sections 8 and 9, and, having done so, agrees that the
restrictions set forth in said Sections, including, but not
limited to, the time period of restriction and geographical areas
of restriction are fair and reasonable and are reasonably required
for the protection of the interests of the Company and its parent
or subsidiary corporations, officers, directors, shareholders, and
other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of Sections 8 and 9 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless
continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. In the event
that any provision of Sections 8 or 9 relating to the time period
and/or the areas of restriction and/or related aspects shall be
declared by a court of competent jurisdiction to exceed the
maximum restrictiveness such court deems reasonable and
enforceable, the time period and/or areas of restriction and/or
related aspects deemed reasonable and enforceable by the court
shall become and thereafter be the maximum restriction in such
regard, and the restriction shall remain enforceable to the
fullest extent deemed reasonable by such court.
11. Remedies for Breach of Employee's Covenants of Non-Disclosure
and Non-Competition. In the event of a breach or threatened
breach of any of the covenants in Sections 8 and 9, the Company
shall have the right to seek monetary damages for any past breach
and equitable relief, including specific performance by means of
an injunction against the Employee or against the Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons acting directly or
indirectly by or with him, to prevent or restrain any further
breach. In lieu thereof, or should a court refuse for any reason
to grant equitable relief to prevent continuing breaches of the
covenants in Sections 8 and 9, the Company shall be entitled to
liquidated damages equal to fifty percent (50%) of the gross
amount derived by the breaching party from all transactions in
breach of said covenants, it being agreed that such amount
represents the estimated amount of profit the Company could have
derived if it had transacted the business in question and is not a
penalty.
11. Termination. Employment of the Employee under this Agreement
will be terminated upon the occurrence of any one or more of the
following events:
(a) By the Employee's death.
(b) If the Employee is Totally Disabled. For the purposes of
this Agreement, the Employee will be Totally Disabled if he (1)
has been declared legally incompetent by a final court decree (the
date of such decree being deemed to be the date on which the
disability occurred), (2) receives disability insurance benefits
from any disability income insurance policy maintained by the
Company for a period of three (3) consecutive months, or (3) has
been found to be disabled pursuant to a Disability Determination.
A "Disability Determination" means a finding that the Employee,
because of a medically determinable disease, injury, or other
mental or physical disability, is unable to perform substantially
all of his regular duties to the Company and that such disability
is determined or reasonably expected to last at least three (3)
months. The Disability Determination shall be based on the
written opinion of the physician regularly attending the Employee.
If the Company disagrees with the opinion of this physician (the
"First Physician"), it may engage at its own expense another
physician (the "Second Physician") to examine the Employee. If
the First and Second Physicians agree in writing that the Employee
is or is not disabled, their written opinion shall, except as
otherwise set forth in this Subsection, be conclusive on the issue
of disability. If the First and Second Physicians disagree on the
disability of the Employee, they shall choose a third consulting
physician (whose expense shall be borne by the Company), and the
written opinion of a majority of these three physicians shall,
except as otherwise provided in this Subsection, be conclusive as
to the Employee's disability. The date of any written opinion
conclusively finding the Employee to be disabled is the date on
which the disability will be deemed to have occurred. If there is
a conclusive finding that the Employee is not Totally Disabled,
the Company shall have the right to request additional Disability
Determinations, provided it agrees to pay all the expenses of the
Disability Determinations and does not request an additional
Disability Determination more frequently than once every two (2)
months. In conjunction with a Disability Determination, the
Employee hereby consents to any required medical examination, and
agrees to furnish any medical information requested by any
examining physician and to waive any applicable physician-patient
privilege that may arise because of such examination. All
physicians except the First Physician must be board-certified in
the specialty most closely related to the nature of the disability
alleged to exist.
(c) At the election of either the Employee or the Company without
cause, upon ninety (90) days written notice; provided however,
that in the event this Agreement is terminated by the Company
pursuant to this Subsection 12(c), at the expiration of the
ninety-day period, Employee shall receive severance pay in the
amount of six months salary at the rate being paid to Employee
under Subsection 4(a) at the time written notice of termination is
given, less any required withholding and deductions.
(d) When the Employee reaches mandatory retirement age under any
retirement policy applicable to all executive officers adopted by
the Company.
(e) By mutual agreement of the Employee and the Company.
(f) By the dissolution and liquidation of the Company (other than
as part of a reorganization, merger, consolidation, or sale of all
or substantially all of the assets of the Company whereby the
business of the Company is continued).
(g) By the Company for Just Cause. For purposes of this
Agreement "Just Cause" shall mean the following: (i) a conviction
of or a plea of guilty or nolo contendre by the Employee to a
felony or misdemeanor involving fraud, embezzlement, theft, or
dishonesty or other criminal conduct against the Company; (ii)
habitual neglect of the Employee's duties or failure by the
Employee to perform or observe any substantial lawful obligation
of such employment that is not remedied within thirty (30) days
after written notice thereof from the Company or its Board of
Directors; or (iii) any material breach of this Agreement by the
Employee. Should the Employee dispute whether he was terminated
for Just Cause, then the Company and the Employee shall enter
immediately into binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, the
cost of which shall be borne by the non-prevailing party.
(h) Liquidation, Dissolution, Consolidation or Merger of Company.
Employee's employment with the Company may be terminated by the
Company upon thirty (30) days prior written notice, with or
without cause, in the event of the liquidation, dissolution,
consolidation, merger or other business combination of the
Company, or transfer of all or substantially all of its assets
("Business Change"). If Employee is terminated as described in
the preceding sentence, the Company shall pay in a lump sum on the
date of such Business Change compensation to the Employee in an
amount derived by multiplying the factor 2.50 by the sum of the
Employee's annual salary, plus the aggregate quarterly bonus
payments paid to Employee from the beginning of the term of this
Agreement through the date of termination [2.50 x (annual salary +
aggregate quarterly bonus payments paid)] (the "Termination Fee").
Provided that, if a successor in interest of the Company as a
result of a Business Change offers to retain Employee in a
position substantially similar to the position held by Employee
with the Company prior to the Business Change, and at a
substantially similar salary, Employee shall only receive payment
of the Termination Fee if he agrees to be employed by such
successor in interest for at least one year. Further, in the
event of such liquidation, dissolution or business combination,
all stock options granted to Employee prior to such event shall
immediately become fully vested in Employee. Notwithstanding the
foregoing sentence, however, in no event shall any stock options
become vested earlier that the minimum vesting period provided by
the Plan, and nothing in this Agreement shall be deemed to modify,
contradict or supercede any provision of the Plan.
In the event of termination of this Agreement other than for
death, the Employee hereby agrees to resign from all positions
held in the Company, including without limitation any position as
a director, officer, agent, trustee, or consultant of the Company
or any affiliate of the Company. For the purposes of this
provision, the term "affiliate" has the same meaning as in Section
9.
13. Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect
the validity or enforceability or constitute a waiver of future
enforcement of that provision or of any other provision of this
Agreement by that party or any other party.
14. Governing Law. This Agreement shall in all respects be
subject to, and governed by, the laws of the State of Ohio.
15. Severability. The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
16. Notice. Any and all notices required or permitted herein
shall be deemed delivered if delivered personally or if mailed by
registered or certified mail to the Company at its principal place
of business and to the Employee at the address hereinafter set
forth following the Employee's signature, or at such other address
or addresses as either party may hereafter designate in writing to
the other.
17. Assignment. This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs
and personal representatives, except that the rights and benefits
of either of the parties under this Agreement may not be assigned
without the prior written consent of the other party.
18. Amendments. This Agreement may be amended at any time by
mutual consent of the parties, provided, however, that no such
amendment shall be valid or enforceable unless in a writing signed
by the Company and the Employee.
19. Applicability of Invention and Non-Disclosure Agreement.
This Employment Agreement is supplemented by that certain
Invention and Non-Disclosure Agreement of even date herewith
between the Company and the Employee, a copy of which is attached
hereto as Schedule A and made a part hereof. These two documents
contain the entire agreement and understanding by and between the
Employee and the Company with respect to the employment of the
Employee with the Company and supersedes and merges all prior
proposals, understandings and all other agreements, oral and
written between the parties. No representations, promises,
agreements, or understandings, written or oral, with respect to
such employment not contained in these two documents shall be of
any force or effect.
20. Headings. The various headings in this Agreement are
inserted for convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Company and Employee have duly executed
this Agreement as of the day and year first above written.
MEDPLUS, INC., Company: Philip S. Present II,
Employee:
By: /s/ Richard A. Mahoney /s/ Philip S. Present II
Richard A. Mahoney, President Philip S. Present II
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 10719 Weatherstone Court
Cincinnati, OH 45249 Loveland, OH 45140
SCHEDULE A
INVENTION AND NON-DISCLOSURE AGREEMENT
This Agreement made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (hereinafter called the "Company," which term includes
any parent or subsidiary corporation as defined in Section 425 of
the Internal Revenue Code), and Philip S. Present II (hereinafter
called "Employee").
In consideration of the employment or continued employment of
Employee by the Company and for other good and valuable
consideration, the parties hereto agree as follows:
1. Disclosure of Inventions to Employer. For the purpose of this
Agreement, the word "invention" shall include, but not be limited
to, the following: any discovery, idea, device, process, design,
development, improvement, conception, concept, application,
technique, or invention whether patentable or not, and whether
reduced to practice or not; provided, however, that any invention
as so defined, conceived or made by Employee after termination of
employment with the Company, shall not be deemed to be within this
Agreement if it is not within the scope of the Company's business,
research, and investigations, or resulting from or suggested by
any of the work Employee has performed or may perform for the
Company. Employee will forthwith communicate to the President of
the Company (or such other individual as the President may
designate from time to time) a full and complete disclosure of
each and every invention conceived or made by Employee whether
solely or jointly with others (a) while in the employ of the
Company, whether or not while actually engaged in the Company's
affairs, and (b) within two years subsequent to termination of the
employment for any reason.
2. Assignment of Inventions. Employee agrees to assign and
transfer to the Company, without any separate remuneration or
compensation other than the wages or salary received or
compensation paid to Employee from time to time in the course of
his employment by the Company, his entire right, title, and
interest in and to all inventions conceived or made by Employee,
together with all United States and foreign patent rights and any
other legal protection in and with respect to any and all such
inventions, (a) while in the employ of the Company, whether or not
while Employee is actually engaged in the Company's affairs, or
(b) within two years subsequent thereto and as a direct or
indirect result of such employment. Upon request by the Company,
Employee agrees to execute, and deliver all appropriate patent
applications for securing all United States and foreign patents on
all such inventions, and to do, execute, and deliver any and all
acts and instruments that may be necessary or proper to vest all
such inventions and patents in the Company or its designee, and to
enable the Company or its designee to obtain all such letters
patent. Employee agrees to render to the Company or its designee
all such assistance as may be required in the prosecution of all
such patent applications and applications for the reissue of such
patents and in the prosecution or defense of all interferences
which may be declared involving any of said patent applications or
patents. Employee further agrees not to contest the validity of
any patent, United States or foreign, which is issued to the
Company or its designee, on which Employee made any contribution,
or in which Employee participated in any way, and not to assist
any other party in any way in contesting the validity of any such
patent. Employee further agrees that the obligations and
undertakings stated in this Section 2 shall continue beyond the
termination of his employment by the Company, but if Employee
shall be called upon to render such assistance after the
termination of his employment, Employee shall be entitled to a
fair and reasonable per diem fee in addition to reimbursement of
any expenses incurred at the request of the Company.
3. Prior Inventions. As a matter of record, Employee may include
a complete list of inventions made by him prior to the date of
employment by the Company as an appendix to this Agreement. Only
those inventions so listed shall be deemed to be excluded from the
terms and conditions of this Agreement.
4. Unauthorized Disclosure. Except in connection with regularly
assigned duties for the Company, Employee agrees that he will not,
without prior written approval of the President (or such other
person as the president may designate from time to time), divulge
or disclose to anyone outside of the Company, whether by private
communication or by public address or publication, or otherwise,
any invention or any specification, technical or engineering data,
or report, or any other information relating to the business or
affairs of the Company, and will not during his employment by the
Company or at any time thereafter disclose or use for his own
benefit such information or any trade secrets or confidential
information pertaining to any of the business of the Company or
any of its clients, customers, consultants, licensees, or
affiliates, whether or not such information or trade secrets were
acquired while Employee was engaged in the Company's affairs and
regardless of by whom such information or trade secrets were
generated, either by the Company or by the Employee or others in
the employ of the Company. All copies of any such information,
however and wherever produced, shall be and remain the sole
property of the Company and shall not be removed from the premises
or custody of the Company without prior written consent or
authorization of the President of the Company (or such other
person as the President may designate from time to time).
5. Remedies for Breach. Employee expressly recognizes that any
breach of this Agreement by him is likely to result in irreparable
injury to the Company and agrees that the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance of this Agreement by Employee, or
to enjoin Employee from activities in violation of this Agreement.
6. Modification. This instrument contains the entire Agreement
of the parties with respect to the subject matter contained herein
and may be altered, amended, or superseded only by an agreement in
writing, signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
No action or course of conduct shall constitute a waiver of any of
the terms and conditions of this Agreement, unless such waiver is
specified in writing, and then only to the extent so specified. A
waiver of any of the terms and conditions of this Agreement on one
occasion shall not constitute a waiver of the other terms and
conditions of this Agreement, or of such terms and conditions on
any other occasion.
7. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if mailed to
the party to whom such notice is given at the address of such
party hereinafter set forth or at such other address as such party
may provide in writing from time to time. Any such notice mailed
to such address shall be effective when deposited in the United
States mail, duly addressed and with first class postage prepaid.
Such notice may, but need not, be by certified mail, return
receipt requested.
8. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of Employee, without regard for the duration
of his employment by the Company or the reasons for the cessation
of such employment, and upon the administrators, executors, heirs,
and assigns of Employee and shall be binding upon and shall inure
to the benefit of the successors and assigns of the Company, its
subsidiaries, and affiliates.
9. Governing Law. The validity, interpretation and performance
of this Agreement shall be governed and construed by the laws of
Ohio.
10. Severability. The invalidity or unenforceability of any
provision in this Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
11. References to Gender and Number Terms. In construing this
Agreement, feminine or neuter pronouns shall be substituted for
those masculine in form and visa versa, and plural terms shall be
substituted for singular and singular for plural in any place in
which the context requires.
12. Headings. The section numbers and headings in this Agreement
are inserted for convenience only and are not part of the
Agreement.
IN WITNESS WHEREOF, the Company and the Employee have duly
executed this Agreement as of the date and year first above
written.
MEDPLUS, INC., Company: Philip S. Present II,
Employee:
By: /s/ Richard A. Mahoney /s/ Philip S. Present II
Richard A. Mahoney, President Philip S. Present II
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 10719 Weatherstone Court
Cincinnati, OH 45249 Loveland, OH 45140
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (the "Company"), and Thomas R. Wagner (the
"Employee"). This Agreement supersedes all previous Employment
Agreements.
WHEREAS, the Company desires to employ or continue to employ the
Employee on certain terms and conditions as set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as
follows:
1. Employment. The Company hereby employs or continues to employ
the Employee in the capacity of Vice President of Strategic
Planning, or in such other position as the Company may direct or
desire and Employee hereby accepts the employment, on the terms
and conditions hereinafter set forth.
2. Duties. The Employee's principal duties and responsibilities
shall include advising the President in the areas of technology
assessment, product research, market trends, and competitive
analysis, and such other duties which may be assigned to him from
time to time by the Company in connection with its business.
Employee agrees to well and faithfully perform and discharge such
services and duties and hold such offices as may be assigned to
him from time to time by the Company and to devote substantially
his full time, energies, and best efforts to the performance
thereof, to exercise his best efforts, judgment, skills and
talents in performing such duties and, in general, with respect to
the business and affairs of the Company, and, in the performance
thereof, to comply with the policies of and be subject to the
direction of the Board of Directors of the Company (the "Board").
In addition, during the term of this Agreement, Employee shall
not, directly or indirectly, engage or participate in, or become
employed by or render services in connection with, any Competitive
Business, as that term is defined herein, without the prior
express written approval of the Board. In the event the Employee
is elected a Director of the Company or any of its subsidiaries
during the term hereof, the Employee agrees to serve in such
capacity without further compensation.
3. Term. The term of employment shall begin on February 1, 2000
and shall continue for a period of twelve (12) months, unless
earlier terminated pursuant to the provisions of this Agreement.
4. Salary and Other Compensation. As compensation for the
services to be rendered by the Employee to the Company pursuant to
this Agreement, the Employee shall be paid the following
compensation and other benefits:
(a) Salary. During the term of this Agreement, Employee shall be
paid at the semi-monthly rate of Six Thousand Eight Hundred and
Seventy Five and 00/100 Dollars ($6,875.00), payable in arrears,
unless adjusted in accordance with Section 4(b) hereof. Should
the Employee become disabled, which for purposes of this
Subsection means the inability because of any physical or
emotional illness to perform his assigned duties under this
Agreement at least forty (40) hours per week, the Employee's
salary shall be adjusted in the proportion which the number of
hours the Employee is able to perform his assigned duties during a
week bears to forty (40). If the Employee, during any period of
disability, receives any periodic payments representing lost
compensation under any health and accident policy or under any
salary continuation insurance policy, the premiums for which have
been paid by the Company, the amount of salary that the Employee
would be entitled to receive from the Company during the
disability shall be decreased by the amounts of such payments.
(b) Corporate Bonus. Employee will be eligible for an annual
bonus equal to 20% of base salary with 50% of such bonus to be
paid upon the Company exceeding its budgeted net income goal for
fiscal year 2001 and 50% of such bonus to be determined on a
discretionary basis by the Company's President after fiscal year
2001. Employee agrees that the fiscal year 2000 corporate bonus
paid to Employee on February 29, 2000 in the amount of $30,000
will become immediately due and payable to MedPlus if Employee
voluntarily terminates his employment on or before February 28,
2000. This obligation will not apply if the Company terminates
Employee; unless for just cause as defined in paragraph 12 (g).
(c) Automobile Allowance. During the term of this Agreement, the
Company shall pay Employee a $450.00 per month automobile
allowance in order to reimburse Employee for the expense of
owning, operating, maintaining and insuring a personal automobile
for use in performing Employee's duties hereunder.
(d) MedPlus, Inc. 1994 Long-Term Stock Incentive Plan. The
Company's Board of Directors will grant Employee the option to
purchase 15,000 shares of the Company's stock under the MedPlus,
Inc. 1994 Long-Term Stock Incentive Plan on June 21, 2000.
Thereafter, the Company may from time to time enter into
supplemental written agreements with Employee granting Employee
stock options to purchase shares of the Company's common stock
under the MedPlus, Inc. 1994 Long-Term Stock Incentive Plan (the
"Plan"). In the absence of any such agreements, the Company shall
not be obligated to award Employee any stock options, regardless
of whether stock options were awarded to Employee in any other
period or to any other employee of the Company at any time.
(e) Employee Benefit Plans. Employee shall be eligible to
participate, to the extent he may be eligible to participate
pursuant to the terms of such plans, in any profit sharing,
retirement, insurance or other employee benefit plans maintained
by the Company.
5. Key Man Life Insurance. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit,
life insurance on the life of the Employee in any amount or
amounts considered advisable by the Company, and the Employee
shall submit to any medical or other examination, and shall
execute and deliver any application or other instrument in
writing, reasonably necessary to effectuate such insurance.
6. Expenses. The Company shall pay, or reimburse the Employee,
for all reasonable and necessary business expenses of the
Employee, approved by the Company.
7. Vacation and Leave. The Employee shall be entitled to the
same vacation and leave time as the other executive officers of
the Company. Officers of the Company may not carry unused
vacation time from one calendar year to another calendar year.
8. Non-Disclosure of Confidential Information. The Employee
acknowledges that in and as a result of his employment by the
Company, he will be making use of, acquiring, and/or adding to
confidential information of a special and unique nature and value
relating to such matters as the Company's patents, copyrights,
proprietary information, trade secrets, systems, procedures,
manuals, confidential reports, and lists of customers (which are
deemed for all purposes confidential and proprietary), as well as
the nature and type of services rendered by the Company, the
equipment and methods used and preferred by the Company's
customers, and the fees paid by them. As a material inducement to
the Company to enter into this Agreement and to pay to Employee
the compensation stated in Section 4, Employee covenants and
agrees that he shall not, at any time during or following the term
of his employment, directly or indirectly divulge or disclose for
any purpose whatsoever any confidential information that has been
obtained by, or disclosed to, him as a result of his employment by
the Company. In the event of a breach or threatened breach by
Employee of any of the provisions of this Section 8, the Company,
in addition to, and not in limitation of, any other rights,
remedies, or damages available to the Company at law or in equity,
shall be entitled to a permanent injunction in order to prevent or
restrain any such breach by the Employee or by Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons directly or indirectly
acting for or with him.
9. Covenants Against Competition. The Employee acknowledges that
the services he is to render are of a special and unusual
character with a unique value to the Company, the loss of which
cannot adequately be compensated by damages in an action at law.
In view of the unique value to the Company of the services of
Employee because of the confidential information to be obtained by
or disclosed to Employee, as hereinabove set forth, and as a
material inducement to the Company to enter into this Agreement
and to pay to Employee the compensation stated in Section 4,
Employee covenants and agrees that during Employee's employment
and for a period of two (2) years after he ceases to be employed
by the Company for any reason, he will not, except as otherwise
authorized by this Agreement, compete with the Company or any
affiliate of the Company, solicit the Company's customers or the
customers of an affiliate, or directly or indirectly solicit for
employment any of the Company's employees. For purposes of this
Section 9:
(a) the term "compete" means engaging in the same or any similar
business as the Company or any of its affiliates in any manner
whatsoever (other than as a passive investor), including without
limitation, as a proprietor, partner, investor, shareholder,
director, officer, employee, consultant, independent contractor,
or otherwise, within a geographic areas served by the Company or
any of its affiliates;
(b) the term "affiliate" means any legal entity that directly or
indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the Company; and
(c) the term "customers" means all persons to whom the Company or
any of its affiliates has sold any product or service, whether or
not for compensation, within a period of two (2) years prior to
the time the Employee ceases to be employed by the Company.
10. Reasonableness of Restrictions.
(a) The Employee has carefully read and considered the provisions
of Sections 8 and 9, and, having done so, agrees that the
restrictions set forth in said Sections, including, but not
limited to, the time period of restriction and geographical areas
of restriction are fair and reasonable and are reasonably required
for the protection of the interests of the Company and its parent
or subsidiary corporations, officers, directors, shareholders, and
other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of Sections 8 and 9 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless
continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. In the event
that any provision of Sections 8 or 9 relating to the time period
and/or the areas of restriction and/or related aspects shall be
declared by a court of competent jurisdiction to exceed the
maximum restrictiveness such court deems reasonable and
enforceable, the time period and/or areas of restriction and/or
related aspects deemed reasonable and enforceable by the court
shall become and thereafter be the maximum restriction in such
regard, and the restriction shall remain enforceable to the
fullest extent deemed reasonable by such court.
11. Remedies for Breach of Employee's Covenants of Non-Disclosure
and Non-Competition. In the event of a breach or threatened
breach of any of the covenants in Sections 8 and 9, the Company
shall have the right to seek monetary damages for any past breach
and equitable relief, including specific performance by means of
an injunction against the Employee or against the Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons acting directly or
indirectly by or with him, to prevent or restrain any further
breach. In lieu thereof, or should a court refuse for any reason
to grant equitable relief to prevent continuing breaches of the
covenants in Sections 8 and 9, the Company shall be entitled to
liquidated damages equal to fifty percent (50%) of the gross
amount derived by the breaching party from all transactions in
breach of said covenants, it being agreed that such amount
represents the estimated amount of profit the Company could have
derived if it had transacted the business in question and is not a
penalty.
12. Termination. Employment of the Employee under this Agreement
will be terminated upon the occurrence of any one or more of the
following events:
(a) By the Employee's death.
(b) If the Employee is Totally Disabled. For the purposes of
this Agreement, the Employee will be Totally Disabled if he (1)
has been declared legally incompetent by a final court decree (the
date of such decree being deemed to be the date on which the
disability occurred), (2) receives disability insurance benefits
from any disability income insurance policy maintained by the
Company for a period of three (3) consecutive months, or (3) has
been found to be disabled pursuant to a Disability Determination.
A "Disability Determination" means a finding that the Employee,
because of a medically determinable disease, injury, or other
mental or physical disability, is unable to perform substantially
all of his regular duties to the Company and that such disability
is determined or reasonably expected to last at least three (3)
months. The Disability Determination shall be based on the
written opinion of the physician regularly attending the Employee.
If the Company disagrees with the opinion of this physician (the
"First Physician"), it may engage at its own expense another
physician (the "Second Physician") to examine the Employee. If
the First and Second Physicians agree in writing that the Employee
is or is not disabled, their written opinion shall, except as
otherwise set forth in this Subsection, be conclusive on the issue
of disability. If the First and Second Physicians disagree on the
disability of the Employee, they shall choose a third consulting
physician (whose expense shall be borne by the Company), and the
written opinion of a majority of these three physicians shall,
except as otherwise provided in this Subsection, be conclusive as
to the Employee's disability. The date of any written opinion
conclusively finding the Employee to be disabled is the date on
which the disability will be deemed to have occurred. If there is
a conclusive finding that the Employee is not Totally Disabled,
the Company shall have the right to request additional Disability
Determinations, provided it agrees to pay all the expenses of the
Disability Determinations and does not request an additional
Disability Determination more frequently than once every two (2)
months. In conjunction with a Disability Determination, the
Employee hereby consents to any required medical examination, and
agrees to furnish any medical information requested by any
examining physician and to waive any applicable physician-patient
privilege that may arise because of such examination. All
physicians except the First Physician must be board-certified in
the specialty most closely related to the nature of the disability
alleged to exist.
(c) At the election of either the Employee or the Company without
cause, upon ninety (90) days written notice; provided however,
that in the event this Agreement is terminated by the Company
pursuant to this Subsection 12(c), at the expiration of the
ninety-day period, Employee shall receive severance pay in the
amount of six months salary at the rate being paid to Employee
under Subsection 4(a) at the time written notice of termination is
given, less any required withholding and deductions.
(d) When the Employee reaches mandatory retirement age under any
retirement policy applicable to all executive officers adopted by
the Company.
(e) By mutual agreement of the Employee and the Company.
(f) By the dissolution and liquidation of the Company (other than
as part of a reorganization, merger, consolidation, or sale of all
or substantially all of the assets of the Company whereby the
business of the Company is continued).
(g) By the Company for Just Cause. For purposes of this
Agreement "Just Cause" shall mean the following: (i) a conviction
of or a plea of guilty or nolo contendre by the Employee to a
felony or misdemeanor involving fraud, embezzlement, theft, or
dishonesty or other criminal conduct against the Company; (ii)
habitual neglect of the Employee's duties or failure by the
Employee to perform or observe any substantial lawful obligation
of such employment that is not remedied within thirty (30) days
after written notice thereof from the Company or its Board of
Directors; or (iii) any material breach of this Agreement by the
Employee. Should the Employee dispute whether he was terminated
for Just Cause, then the Company and the Employee shall enter
immediately into binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, the
cost of which shall be borne by the non-prevailing party.
In the event of termination of this Agreement other than for
death, the Employee hereby agrees to resign from all positions
held in the Company, including without limitation any position as
a director, officer, agent, trustee, or consultant of the Company
or any affiliate of the Company. For the purposes of this
provision, the term "affiliate" has the same meaning as in Section
9.
13. Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect
the validity or enforceability or constitute a waiver of future
enforcement of that provision or of any other provision of this
Agreement by that party or any other party.
14. Governing Law. This Agreement shall in all respects be
subject to, and governed by, the laws of the State of Ohio.
15. Severability. The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
16. Notice. Any and all notices required or permitted herein
shall be deemed delivered if delivered personally or if mailed by
registered or certified mail to the Company at its principal place
of business and to the Employee at the address hereinafter set
forth following the Employee's signature, or at such other address
or addresses as either party may hereafter designate in writing to
the other.
17. Assignment. This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs
and personal representatives, except that the rights and benefits
of either of the parties under this Agreement may not be assigned
without the prior written consent of the other party.
18. Amendments. This Agreement may be amended at any time by
mutual consent of the parties, provided, however, that no such
amendment shall be valid or enforceable unless in a writing signed
by the Company and the Employee.
19. Applicability of Invention and Non-Disclosure Agreement.
This Employment Agreement is supplemented by that certain
Invention and Non-Disclosure Agreement of even date herewith
between the Company and the Employee, a copy of which is attached
hereto as Schedule A and made a part hereof. These two documents
contain the entire agreement and understanding by and between the
Employee and the Company with respect to the employment of the
Employee with the Company and supersedes and merges all prior
proposals, understandings and all other agreements, oral and
written between the parties. No representations, promises,
agreements, or understandings, written or oral, with respect to
such employment not contained in these two documents shall be of
any force or effect.
20. Headings. The various headings in this Agreement are
inserted for convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Company and Employee have duly executed
this Agreement as of the day and year first above written.
MEDPLUS, INC., Company: Thomas R. Wagner
Employee:
By: /s/ Richard A. Mahoney /s/ Thomas R. Wagner
Richard A. Mahoney, President Thomas R. Wagner
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 6779 Knoll Drive
Cincinnati, OH 45249 Cincinnati, OH 45248
SCHEDULE A
INVENTION AND NON-DISCLOSURE AGREEMENT
This Agreement made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (hereinafter called the "Company," which term includes
any parent or subsidiary corporation as defined in Section 425 of
the Internal Revenue Code), and Thomas R. Wagner (hereinafter
called "Employee").
In consideration of the employment or continued employment of
Employee by the Company and for other good and valuable
consideration, the parties hereto agree as follows:
1. Disclosure of Inventions to Employer. For the purpose of this
Agreement, the word "invention" shall include, but not be limited
to, the following: any discovery, idea, device, process, design,
development, improvement, conception, concept, application,
technique, or invention whether patentable or not, and whether
reduced to practice or not; provided, however, that any invention
as so defined, conceived or made by Employee after termination of
employment with the Company, shall not be deemed to be within this
Agreement if it is not within the scope of the Company's business,
research, and investigations, or resulting from or suggested by
any of the work Employee has performed or may perform for the
Company. Employee will forthwith communicate to the President of
the Company (or such other individual as the President may
designate from time to time) a full and complete disclosure of
each and every invention conceived or made by Employee whether
solely or jointly with others (a) while in the employ of the
Company, whether or not while actually engaged in the Company's
affairs, and (b) within two years subsequent to termination of the
employment for any reason.
2. Assignment of Inventions. Employee agrees to assign and
transfer to the Company, without any separate remuneration or
compensation other than the wages or salary received or
compensation paid to Employee from time to time in the course of
his employment by the Company, his entire right, title, and
interest in and to all inventions conceived or made by Employee,
together with all United States and foreign patent rights and any
other legal protection in and with respect to any and all such
inventions, (a) while in the employ of the Company, whether or not
while Employee is actually engaged in the Company's affairs, or
(b) within two years subsequent thereto and as a direct or
indirect result of such employment. Upon request by the Company,
Employee agrees to execute, and deliver all appropriate patent
applications for securing all United States and foreign patents on
all such inventions, and to do, execute, and deliver any and all
acts and instruments that may be necessary or proper to vest all
such inventions and patents in the Company or its designee, and to
enable the Company or its designee to obtain all such letters
patent. Employee agrees to render to the Company or its designee
all such assistance as may be required in the prosecution of all
such patent applications and applications for the reissue of such
patents and in the prosecution or defense of all interferences
which may be declared involving any of said patent applications or
patents. Employee further agrees not to contest the validity of
any patent, United States or foreign, which is issued to the
Company or its designee, on which Employee made any contribution,
or in which Employee participated in any way, and not to assist
any other party in any way in contesting the validity of any such
patent. Employee further agrees that the obligations and
undertakings stated in this Section 2 shall continue beyond the
termination of his employment by the Company, but if Employee
shall be called upon to render such assistance after the
termination of his employment, Employee shall be entitled to a
fair and reasonable per diem fee in addition to reimbursement of
any expenses incurred at the request of the Company.
3. Prior Inventions. As a matter of record, Employee may include
a complete list of inventions made by him prior to the date of
employment by the Company as an appendix to this Agreement. Only
those inventions so listed shall be deemed to be excluded from the
terms and conditions of this Agreement.
4. Unauthorized Disclosure. Except in connection with regularly
assigned duties for the Company, Employee agrees that he will not,
without prior written approval of the President (or such other
person as the president may designate from time to time), divulge
or disclose to anyone outside of the Company, whether by private
communication or by public address or publication, or otherwise,
any invention or any specification, technical or engineering data,
or report, or any other information relating to the business or
affairs of the Company, and will not during his employment by the
Company or at any time thereafter disclose or use for his own
benefit such information or any trade secrets or confidential
information pertaining to any of the business of the Company or
any of its clients, customers, consultants, licensees, or
affiliates, whether or not such information or trade secrets were
acquired while Employee was engaged in the Company's affairs and
regardless of by whom such information or trade secrets were
generated, either by the Company or by the Employee or others in
the employ of the Company. All copies of any such information,
however and wherever produced, shall be and remain the sole
property of the Company and shall not be removed from the premises
or custody of the Company without prior written consent or
authorization of the President of the Company (or such other
person as the President may designate from time to time).
5. Remedies for Breach. Employee expressly recognizes that any
breach of this Agreement by him is likely to result in irreparable
injury to the Company and agrees that the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance of this Agreement by Employee, or
to enjoin Employee from activities in violation of this Agreement.
6. Modification. This instrument contains the entire Agreement
of the parties with respect to the subject matter contained herein
and may be altered, amended, or superseded only by an agreement in
writing, signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
No action or course of conduct shall constitute a waiver of any of
the terms and conditions of this Agreement, unless such waiver is
specified in writing, and then only to the extent so specified. A
waiver of any of the terms and conditions of this Agreement on one
occasion shall not constitute a waiver of the other terms and
conditions of this Agreement, or of such terms and conditions on
any other occasion.
7. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if mailed to
the party to whom such notice is given at the address of such
party hereinafter set forth or at such other address as such party
may provide in writing from time to time. Any such notice mailed
to such address shall be effective when deposited in the United
States mail, duly addressed and with first class postage prepaid.
Such notice may, but need not, be by certified mail, return
receipt requested.
8. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of Employee, without regard for the duration
of his employment by the Company or the reasons for the cessation
of such employment, and upon the administrators, executors, heirs,
and assigns of Employee and shall be binding upon and shall inure
to the benefit of the successors and assigns of the Company, its
subsidiaries, and affiliates.
9. Governing Law. The validity, interpretation and performance
of this Agreement shall be governed and construed by the laws of
Ohio.
10. Severability. The invalidity or unenforceability of any
provision in this Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
11. References to Gender and Number Terms. In construing this
Agreement, feminine or neuter pronouns shall be substituted for
those masculine in form and visa versa, and plural terms shall be
substituted for singular and singular for plural in any place in
which the context requires.
12. Headings. The section numbers and headings in this Agreement
are inserted for convenience only and are not part of the
Agreement.
IN WITNESS WHEREOF, the Company and the Employee have duly
executed this Agreement as of the date and year first above
written.
MEDPLUS, INC., Company: Thomas R. Wagner,
Employee:
By: /s/ Richard A. Mahoney /s/ Thomas R. Wagner
Richard A. Mahoney, President Thomas R. Wagner
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 6779 Knoll Drive
Cincinnati, OH 45249 Cincinnati, OH 45248
-8-
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of February 15, 2000
by and between MedPlus, Inc., and Ohio corporation with its
principal offices at 8805 Governor's Hill Drive, Cincinnati, OH
45249 (the "Company") and Peter Stephan, who resides at 1514 Fargo
Blvd., Geneva, IL 60134 (the "Employee").
WHEREAS, the Company desires to employ the Employee on
certain terms and conditions as set forth herein; and
WHEREAS, the Employee is willing to accept such employment.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants and promises hereinafter contained, do hereby
agree as follows:
1. Employment. The Company hereby agrees to employ Employee in
the capacity of Vice President of Sales or in such other position
as the Company and Employee may mutually agree and the Employee
hereby accepts such employment on the terms and conditions
hereinafter set forth. Employee shall report to the Chief
Operating Officer of the Company.
2. Duties. The Employee's principal duties and responsibilities
shall include:
a. conceptualizing and implementing sales strategies to develop
new business opportunities;
b. coordinating sales efforts;
c. developing and executing comprehensive sales plans and
programs, both short and long range, to support MedPlus' sales,
revenue and profitability objectives;
d. establishing and maintaining relationships with industry
influencers and strategic partners;
e. ensuring effective control of sales results, including taking
corrective action to guarantee that achievement of objectives
falls within designated budgets;
f. determining target sales volume, budgets and sales strategies
to achieve satisfactory sales and market share in relation to
preset standards and industry and economic trends; and
g. preparing and presenting sales activity reports to corporate
officers and senior management.
Employee agrees well and faithfully to perform and discharge such
services and duties and hold such offices as may be assigned to
him from time to time by the Company and to devote substantially
his full time, energies, and best efforts to the performance
thereof, to exercise his best efforts, judgment, skills and
talents in performing such duties and, in general, with respect to
the business and affairs of the Company, and, in the performance
thereof, to comply with the policies of and be subject to the
direction of the Board of Directors of the Company (the "Board").
In addition, during the term of this Agreement, Employee shall
not, directly or indirectly, engage or participate in, or become
employed by or render services in connection with, any Competitive
Business, as that term is defined herein, without the prior
express written approval of the Board. In the event the Employee
is elected a Director of the Company or any of its subsidiaries
during the term hereof, the Employee agrees to serve in such
capacity without further compensation.
3. Term. The term of employment shall begin on February 15,
2000, shall continue until January 31, 2001 (the "Initial Term"),
and shall be automatically renewed for successive twelve-month
terms (the "Renewal Terms"), unless earlier terminated pursuant to
the provisions hereof or unless one party gives written notice to
the other 30 days prior to any Renewal Term of his or its desire
not to renew this Agreement (the Initial Term and any Renewal
Term(s) shall be referred to as the "Term).
4. Salary and Other Compensation. As compensation for the
services to be rendered by the Employee to the Company pursuant to
this Agreement the Employee shall be compensated as follows:
a. Base Salary. During the Term, Employee shall be paid at the
semi-monthly rate of $6,875.00, payable in arrears, unless
adjusted in accordance with Section 4(b) hereof.
b. Commission. During the Term, Employee shall be eligible for a
commission equal to 1% of Net Margin on new system sales,
including hardware and software upgrades, of the ChartMaxx and
OptiMaxx products. For purposes hereof, "Net Margin" shall mean
(i) gross hardware and software revenue received less hardware and
software costs and (ii) 25% of gross revenue received on
consulting, training, installation and integration services. Net
Margin shall not include any revenue related to support services.
c. Relocation. The Company will provide reasonable relocation
assistance to Employee per the attached Relocation and Moving
Expenses Guidelines (the "Guidelines"). The Company agrees to
reimburse Employee for reasonable expenses incurred in two house
hunting trips, actual relocation expenses, and movement of goods,
as described in the Guidelines. In addition, the Company will
reimburse Employee for (i) reasonable pre-approved closing costs
for the purchase of a new home and (ii) a realtor fee negotiated
to 6% or less on the sale of Employee's current home. The total
amount of all monies reimbursed to Employee or paid on Employee's
behalf in conjunction with his and his family's relocation to
Cincinnati, Ohio shall not exceed $30,000. Should Employee
voluntarily leave the Company or should his employment be
terminated for Just Cause (as hereinafter defined), within one
year following the date Employee has moved into his new home in
Cincinnati, Ohio, Employee will be required to reimburse the
Company immediately for all relocation assistance provided as
described herein.
d. Limited Disability. Should the Employee become disabled,
which for purposes of this subsection means that he is unable to
perform his duties hereunder for at least 40 hours per week due to
any physical or emotional illness, and such disability continues
for more than four consecutive weeks but for less than six months
("Limited Disability"), then Employee's base salary shall be
adjusted as follows: for a period beginning four weeks after the
onset of the Limited Disability and continuing until Employee is
no longer so disabled or until termination of this Agreement,
whichever occurs first (the "Disability Period"), Employee's base
salary shall be reduced in proportion to the number of hours per
week relative to 40 Employee is able to perform his duties
hereunder. In addition, if any payments are made to Employee as a
result of such Limited Disability which payments are made pursuant
to any type of insurance policy, the premiums of which were paid
by the Company, then any base salary owed Employee during such
Disability Period shall be reduced thereby. Nothing in this
paragraph 4(b) shall be interpreted to reduce or increase any
payments which may be due Employee pursuant to a long-term or
short-term disability insurance policy for which the Company has
made premium payments.
e. MedPlus, Inc. 1994 Long-Term Stock Incentive Plan. Subject to
approval by the Board of Directors of the Company, Employee shall
be granted the option to purchase 25,000 shares of the common
stock of the Company in accordance with the MedPlus, Inc. 1994
Long-Term Stock Incentive Plan (the "Plan"). After one year of
employment, the Company may, from time to time enter into
supplemental written agreements with Employee granting Employee
stock options to purchase shares of the Company's common stock
under the Plan. In the absence of any such agreements, the
Company shall not be obligated to award Employee any stock
options, regardless of whether stock options were awarded to
Employee in any other period or to any other employee of the
Company at any time.
f. Employee Benefit Plans. Commencing as of the Effective Date,
Employee shall be entitled to participate in or receive benefits,
to the extent he is eligible, under any Company-sponsored employee
benefit plans and arrangements in effect from time to time during
the Term; provided, however, that the Company shall not be
required to establish or maintain any such plan or arrangement.
5. Key Man Life Insurance. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit life
insurance on the life of the Employee in any amount(s) considered
advisable by the Company. The Employee shall submit to any
medical or other examination and shall execute and deliver any
application or other instrument reasonably necessary to effect
such insurance.
6. Expenses. Commencing as of the Effective Date, the Company
shall pay or reimburse employee during the Term for all reasonable
travel and other business expenses, including the costs associated
with the use of a cellular telephone and a 128K home Internet
connection, incurred by the Employee in the performance of his
duties and obligations hereunder upon submission of appropriate
documentation to the Company therefor.
7. Vacation and Leave. All vacation accrues per pay period. The
Employee shall be entitled to three weeks of vacation during the
Initial Term of this agreement. Officers of the Company may not
carry unused vacation time from one calendar year to another.
8. Non-Disclosure of Confidential Information. The Employee
acknowledges that as a result of his employment by the Company, he
will be making use of, acquiring and/or adding to confidential
information of a special and unique nature and value relating to
the Company's intellectual property, proprietary information,
trade secrets, systems, procedures, manuals, confidential reports
and customer lists and all information specifically related to
customer lists and customer sales and service (collectively
"Confidential Information"). As a material inducement to the
Company to enter into this Agreement and to pay to Employee the
compensation stated in Section 4 hereof, Employee covenants and
agrees that he shall not, at any time during or following the
Term, directly or indirectly divulge or disclose for any purpose
whatsoever any Confidential Information. In the event of a breach
or threatened breach by Employee of any of the provisions of this
Section 8, the Company, in addition to and not in limitation of
any other rights, remedies or damages available to the Company at
law or in equity shall be entitled to a permanent injunction in
order to prevent or restrain any such breach by the Employee or by
Employee's partners, agents, representatives, servants, employers,
employees, family members and/or any and all persons directly or
indirectly acting for or with him.
9. Covenants Against Competition. The Employee acknowledges that
the services he is to render are of a special and unusual
character with a unique value to the Company, the loss of which
cannot adequately be compensated by damages in an action at law.
In view of the unique value to the Company of such services,
because of the confidential information to be obtained by or
disclosed to Employee as hereinabove set forth, and as a material
inducement to the Company to enter into this Agreement and to pay
Employee the compensation stated in Section 4, Employee covenants
and agrees that during Employee's employment and for a period of
one (1) year after he ceases to be employed by the Company for any
reason, he will not, except as otherwise authorized by this
Agreement, compete with the Company or any affiliate of the
Company, solicit the Company's customers or the customers of an
affiliate, or directly or indirectly solicit for employment any of
the Company's employees. For purposes of this Section 9:
a. the term "compete" means engaging in the same or any similar
business as the Company or any of its affiliates in any manner
whatsoever (other than as a passive investor), including without
limitation, as a proprietor, partner, investor, shareholder,
director, officer, employee, consultant, independent contractor,
or otherwise, within a geographic areas served by the Company or
any of its affiliates;
b. the term "affiliate" means any legal entity that directly or
indirectly through one or more intermediaries controls, is
controlled by, controls or is under common control with the
Company; and
c. the term "customers" means all persons to whom the Company or
any of its affiliates has sold any product or service, whether or
not for compensation, within a period of one (1) year prior to
the time the Employee ceases to be employed by the Company.
10. Reasonableness of Restrictions.
a. The Employee has carefully read and considered the provisions
of Sections 8 and 9, and, having done so, agrees that the
restrictions set forth in said Sections, including, but not
limited to, the time period of restriction and geographical areas
of restriction are fair and reasonable and are reasonably required
for the protection of the interests of the Company and its parent
or subsidiary corporations, officers, directors, shareholders, and
other employees.
b. In the event that, notwithstanding the foregoing, any of the
provisions of Sections 8 and 9 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless
continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. In the event
that any provision of Sections 8 or 9 relating to the time period
and/or the areas of restriction and/or related aspects shall be
declared by a court of competent jurisdiction to exceed the
maximum restrictiveness such court deems reasonable and
enforceable, the time period and/or areas of restriction and/or
related aspects deemed reasonable and enforceable by the court
shall become and thereafter be the maximum restriction in such
regard, and the restriction shall remain enforceable to the
fullest extent deemed reasonable by such court.
11. Remedies for Breach of Employee's Covenants of Non-Disclosure
and Non-Competition. In the event of a breach or threatened
breach of any of the covenants in Sections 8 and 9, the Company
shall have the right to seek monetary damages for any past breach
and equitable relief, including specific performance by means of
an injunction against the Employee or against the Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons acting directly or
indirectly by or with him, to prevent or restrain any further
breach. In lieu thereof, or should a court refuse for any reason
to grant equitable relief to prevent continuing breaches of the
covenants in Sections 8 and 9, the Company shall be entitled to
liquidated damages equal to fifty percent (50%) of the gross
amount derived by the breaching party from all transactions in
breach of said covenants, it being agreed that such amount
represents the estimated amount of profit the Company could have
derived if it had transacted the business in question and is not a
penalty.
12. Termination. Employment of the Employee under this Agreement
will be terminated as follows:
a. By the Employee's death.
b. If the Employee is Totally Disabled. For the purposes of this
Agreement, the Employee will be Totally Disabled if he (1) has
been declared legally incompetent by a final court decree (the
date of such decree being deemed to be the date on which the
disability occurred), (2) receives disability insurance benefits
from any disability income insurance maintained by the Company for
a period of three (3) consecutive months, or (3) has been found to
be disabled pursuant of a Disability Determination. A "Disability
Determination" means a finding that the Employee, because of a
medically determinable disease, injury, or other mental or
physical disability, is unable to perform substantially all of his
regular duties to the Company and that such disability is
determined or reasonably expected to last at least six (6) months.
The Disability Determination shall be based on the written
opinion of the physician regularly attending the Employee whose
disability is in question. If the Company disagrees with the
opinion of this physician (the "First Physician"), it may engage
at its own expense another physician (the "Second Physician") to
examine the Employee. If the First and Second Physicians agree in
writing that the Employee is or is not disabled, their written
opinion shall, except as otherwise set forth in this Subsection,
be conclusive on the issue of disability. If the First and Second
Physicians disagree on the disability of the Employee, they shall
choose a third consulting physician (whose expense shall be borne
by the Company), and the written opinion of a majority of these
three physicians shall, except as otherwise provided in this
Subsection, be conclusive as to the Employee's disability. The
date of any written opinion conclusively finding the Employee to
be disabled is the date on which the disability will be deemed to
have occurred. If there is a conclusive finding that the Employee
is not Totally Disabled, the Company shall have the right to
request additional Disability Determinations, provided it agrees
to pay all the expenses of the Disability Determinations and does
not request an additional Disability Determination more frequently
than once every two (2) months. In conjunction with a Disability
Determination, the Employee hereby consents to any required
medical examination, and agrees to furnish any medical information
requested by any examining physician and to waive any applicable
physician-patient privilege that may arise because of such
examination. All physicians except the First Physician must be
board-certified in the specialty most closely related to the
nature of the disability alleged to exist.
c. At the election of either the Employee or the Company without
cause, upon ninety (90) days written notice.
d. When the Employee reaches mandatory retirement age under any
retirement policy applicable to all executive officers adopted by
the Company.
e. By mutual agreement of the Employee and the Company.
f. By the dissolution and liquidation of the Company (other than
as part of a reorganization, merger, consolidation, or sale of all
or substantially all of the assets of the Company whereby the
business of the Company is continued).
g. By the Company for Just Cause. For purposes of the Agreement
"Just Cause" shall mean the following: (i) a conviction of or a
plea of guilty or nolo contendre by the Employee to a felony or
misdemeanor involving fraud, embezzlement, theft, or dishonesty or
other criminal conduct against the Company; (ii) habitual neglect
of the Employee's duties or failure by the Employee to perform or
observe any substantial lawful obligation of such employment that
is not remedied within thirty (30) days after written notice
thereof from the Company or its Board of Directors; or (iii) any
material breach of this Agreement by the Employee. Should the
Employee dispute whether he was terminated for Just Cause, the
Company and the Employee shall enter immediately into binding
arbitration pursuant of the Commercial Arbitration Rules of the
American Arbitration Association, the cost of which shall be borne
by the non-prevailing party.
In the event of termination of this Agreement other than for
death, the Employee hereby agrees to resign from all positions
held in the Company, including without limitation any position as
a director, officer, agent, trustee, or consultant of the Company
or any affiliate of the Company. For the purposes of this
provision, the term "affiliate" has the same meaning as in Section
9.
13. Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect
the validity or enforceability or constitute a waiver of future
enforcement of that provision or of any other provision of this
Agreement by that party or any other party.
14. Governing Law. This Agreement shall in all respects be
subject to, and governed by, the laws of the State of Ohio.
15. Severability. The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the
validity of enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
16. Notice. Any and all notices required or permitted herein
shall be deemed delivered if delivered personally or if mailed by
registered or certified mail to the Company at its principal place
of business and to the Employee at the address first above set
forth, or at such other address or addresses as either party may
hereafter designate in writing to the other.
17. Assignment. This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefits of
the parties hereto and the respective successors, assigns, heirs
and personal representatives, except that the rights and benefits
of either of the parties under this Agreement may not be assigned
without the prior written consent of the other party.
18. Amendments. This Agreement may be amended at any time by
mutual consent of the parties provided, however, that no such
amendment shall be valid or enforceable unless in a writing signed
by the Company, as authorized by it Board of Directors, and the
Employee.
19. Applicability of Invention and Non-Disclosure Agreement.
This Employment Agreement is supplemented by that certain
Invention and Non-Disclosure Agreement of even date herewith
between the Company and the Employee, a copy of which is attached
hereto as Schedule A and made a part hereof. These two documents
contain the entire agreement and understanding by and between the
Employee and the Company with respect to the employment of the
Employee with the Company and supersedes and merges all prior
proposals, understandings and all other agreements, oral and
written between the parties. No representations, promises,
agreements, or understandings, written or oral, with respect to
such employment not contained in these two documents shall be of
any force or effect.
20. Headings. The various headings in this Agreement are
inserted for convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Company and the Employee have duly
executed this Agreement as of the day and year first above
written.
MedPlus, Inc.: Employee:
By: /s/ Richard A. Mahoney /s/ Peter Stephan
Richard A. Mahoney, President Peter Stephan
February 17, 2000
Peter W. Stephan
1514 Fargo Blvd.
Geneva, IL 60134
Dear Pete:
Per our conversation today, MedPlus agrees to the following amendment to
your relocation clause in your Employment Agreement. Section 4(c):
Relocation. The Company will provide reasonable relocation assistance to
Employee per the attached Relocation and Moving Expenses Guidelines (the
"Guidelines"). The Company agrees to reimburse Employee for reasonable
expenses incurred in two house hunting trips, actual relocation expenses,
and movement of goods, as described in the Guidelines. In addition,
the Company will reimburse Employee for (i) reasonable pre-approved closing
costs for the purchase of a new home and (ii) a realtor fee negotiated to 6%
or less on the sale of Employee's current home. The total amount of all
monies reimbursed to Employee or paid on Employee's behalf in conjunction
with his and his family's relocation to Cincinnati, Ohio shall not exceed
$30,000. In addition, during the period from February 11, 2000 through
April 30, 2000, MedPlus agrees to reimburse Employee for 100% of hotel costs
while Employee is commuting to Cincinnati on MedPlus business. During this
period, MedPlus will also reimburse Employee for automobile mileage for two
round-trips between Employee's home and the MedPlus corporate office.
Beginning May 1, 2000, Employee will be reimbursed for these same charges;
however, any reimbursements occurring after April 30, 2000 will go against
the above-mentioned $30,000 relocation limit. Should Employee voluntarily
leave the Company or should his employment be terminated for Just Cause (as
hereinafter defined), within one year following the date Employee has moved
into his new home in Cincinnati, Ohio, Employee will be required to
reimburse the Company immediately for all relocation assistance provided as
described herein.
I am looking forward to working with you.
Sincerely,
/s/ Amy J. Seltz
Amy J. Seltz, SPHR
Director of Human Resources
/s/ Peter W. Stephan February 11, 2000
Peter W. Stephan
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (the "Company"), and Daniel A. Silber (the
"Employee").
WHEREAS, the Company desires to employ or continue to employ the
Employee on certain terms and conditions as set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as
follows:
1. Employment. The Company hereby employs or continues to employ
the Employee in the capacity of Vice President of Finance,
Treasurer and Chief Financial Officer, or in such other position
as the Company may direct or desire and Employee hereby accepts
the employment, on the terms and conditions hereinafter set forth.
2. Duties. The Employee's principal duties and responsibilities
shall include: maintenance of adequate systems of internal
control; timely financial reporting to management, shareholders
and governmental agencies; implementation of appropriate
accounting practices and policies; optimization of return on all
corporate assets; oversight of annual audits of financial
statements; preparation of corporate tax returns; and such other
duties which may be assigned to him from time to time by the
Company in connection with the conduct of its business. Nothing
herein shall preclude the Company from changing the Employee's
title and duties if the Company's Board of Directors has concluded
in its reasonable judgement that such change is in the Company's
best interests. Employee agrees to well and faithfully perform
and discharge such services and duties and hold such offices as
may be assigned to him from time to time by the Company and to
devote substantially his full time, energies, and best efforts to
the performance thereof to the exclusion of all other business
activities. In the event the Employee is elected a Director of
the Company or any subsidiary during the term of this Agreement,
the Employee agrees to serve in such capacity without further
compensation.
3. Term. The term of employment shall begin on February 1, 2000
and shall continue for a period of twelve (12) months, unless
earlier terminated pursuant to the provisions of this Agreement.
4. Salary and Other Compensation. As compensation for the
services to be rendered by the Employee to the Company pursuant to
this Agreement, the Employee shall be paid the following
compensation and other benefits:
(a) Salary. During the term of this Agreement, Employee shall be
paid at the semi-monthly rate of Six Thousand and 00/100 Dollars
($6,000.00), payable in arrears, unless adjusted in accordance
with Section 4(b) hereof. Should the Employee become disabled,
which for purposes of this Subsection means the inability because
of any physical or emotional illness to perform his assigned
duties under this Agreement at least forty (40) hours per week,
the Employee's salary shall be adjusted in the proportion which
the number of hours the Employee is able to perform his assigned
duties during a week bears to forty (40). If the Employee, during
any period of disability, receives any periodic payments
representing lost compensation under any health and accident
policy or under any salary continuation insurance policy, the
premiums for which have been paid by the Company, the amount of
salary that the Employee would be entitled to receive from the
Company during the disability shall be decreased by the amounts of
such payments.
(b) Corporate Bonus. For each fiscal quarter in which the
Company achieves its Financial Goals as defined below, Employee
shall receive a Bonus of $7,500.00. Financial goals will be
determined by the Chief Operating Officer and may include
achieving profitability, achieving specified margins, cost
containment, staying within certain budgets, meeting certain
deadlines, implementation of specified systems or any other
financial or operating goals specified by the Chief Operating
Officer. The Bonus may be paid in full or in part based on the
sole discretion of the Chief Operating Officer. The Bonus shall
be paid to Employee on the last day of the month in which the
Company issues its quarterly earnings release to the public. The
Bonus may be paid in cash or in stock as mutually agreed upon by
Employee and the Chief Operating Officer on a quarterly basis.
(c) Automobile Allowance. During the term of this Agreement, the
Company shall pay Employee a $450.00 per month automobile
allowance in order to reimburse Employee for the expense of
owning, operating, maintaining and insuring a personal automobile
for use in performing Employee's duties hereunder.
(d) Employee Benefit Plans. Employee shall be eligible to
participate, to the extent he may be eligible to participate
pursuant to the terms of such plans, in any profit sharing,
retirement, insurance or other employee benefit plans maintained
by the Company.
5. Key Man Life Insurance. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit,
life insurance on the life of the Employee in any amount or
amounts considered advisable by the Company, and the Employee
shall submit to any medical or other examination, and shall
execute and deliver any application or other instrument in
writing, reasonably necessary to effectuate such insurance.
6. Expenses. The Company shall pay, or reimburse the Employee,
for all reasonable and necessary business expenses of the
Employee, approved by the Company.
7. Vacation and Leave. The Employee shall be entitled to the
same vacation and leave time as the other executive officers of
the Company. Officers of the Company may not carry unused
vacation time from one calendar year to another calendar year.
8. Non-Disclosure of Confidential Information. The Employee
acknowledges that in and as a result of his employment by the
Company, he will be making use of, acquiring, and/or adding to
confidential information of a special and unique nature and value
relating to such matters as the Company's patents, copyrights,
proprietary information, trade secrets, systems, procedures,
manuals, confidential reports, and lists of customers (which are
deemed for all purposes confidential and proprietary), as well as
the nature and type of services rendered by the Company, the
equipment and methods used and preferred by the Company's
customers, and the fees paid by them. As a material inducement to
the Company to enter into this Agreement and to pay to Employee
the compensation stated in Section 4, Employee covenants and
agrees that he shall not, at any time during or following the term
of his employment, directly or indirectly divulge or disclose for
any purpose whatsoever any confidential information that has been
obtained by, or disclosed to, him as a result of his employment by
the Company. In the event of a breach or threatened breach by
Employee of any of the provisions of this Section 8, the Company,
in addition to, and not in limitation of, any other rights,
remedies, or damages available to the Company at law or in equity,
shall be entitled to a permanent injunction in order to prevent or
restrain any such breach by the Employee or by Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons directly or indirectly
acting for or with him.
9. Covenants Against Competition. The Employee acknowledges that
the services he is to render are of a special and unusual
character with a unique value to the Company, the loss of which
cannot adequately be compensated by damages in an action at law.
In view of the unique value to the Company of the services of
Employee because of the confidential information to be obtained by
or disclosed to Employee, as hereinabove set forth, and as a
material inducement to the Company to enter into this Agreement
and to pay to Employee the compensation stated in Section 4,
Employee covenants and agrees that during Employee's employment
and for a period of two (2) years after he ceases to be employed
by the Company for any reason, he will not, except as otherwise
authorized by this Agreement, compete with the Company or any
affiliate of the Company, solicit the Company's customers or the
customers of an affiliate, or directly or indirectly solicit for
employment any of the Company's employees. For purposes of this
Section 9:
(a) the term "compete" means engaging in the same or any similar
business as the Company or any of its affiliates in any manner
whatsoever (other than as a passive investor), including without
limitation, as a proprietor, partner, investor, shareholder,
director, officer, employee, consultant, independent contractor,
or otherwise, within a geographic areas served by the Company or
any of its affiliates;
(b) the term "affiliate" means any legal entity that directly or
indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the Company; and
(c) the term "customers" means all persons to whom the Company or
any of its affiliates has sold any product or service, whether or
not for compensation, within a period of two (2) years prior to
the time the Employee ceases to be employed by the Company.
10. Reasonableness of Restrictions.
(a) The Employee has carefully read and considered the provisions
of Sections 8 and 9, and, having done so, agrees that the
restrictions set forth in said Sections, including, but not
limited to, the time period of restriction and geographical areas
of restriction are fair and reasonable and are reasonably required
for the protection of the interests of the Company and its parent
or subsidiary corporations, officers, directors, shareholders, and
other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of Sections 8 and 9 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless
continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. In the event
that any provision of Sections 8 or 9 relating to the time period
and/or the areas of restriction and/or related aspects shall be
declared by a court of competent jurisdiction to exceed the
maximum restrictiveness such court deems reasonable and
enforceable, the time period and/or areas of restriction and/or
related aspects deemed reasonable and enforceable by the court
shall become and thereafter be the maximum restriction in such
regard, and the restriction shall remain enforceable to the
fullest extent deemed reasonable by such court.
11. Remedies for Breach of Employee's Covenants of Non-Disclosure
and Non-Competition. In the event of a breach or threatened
breach of any of the covenants in Sections 8 and 9, the Company
shall have the right to seek monetary damages for any past breach
and equitable relief, including specific performance by means of
an injunction against the Employee or against the Employee's
partners, agents, representatives, servants, employers, employees,
family members, and/or any and all persons acting directly or
indirectly by or with him, to prevent or restrain any further
breach. In lieu thereof, or should a court refuse for any reason
to grant equitable relief to prevent continuing breaches of the
covenants in Sections 8 and 9, the Company shall be entitled to
liquidated damages equal to fifty percent (50%) of the gross
amount derived by the breaching party from all transactions in
breach of said covenants, it being agreed that such amount
represents the estimated amount of profit the Company could have
derived if it had transacted the business in question and is not a
penalty.
12. Termination. Employment of the Employee under this Agreement
will be terminated upon the occurrence of any one or more of the
following events:
(a) By the Employee's death.
(b) If the Employee is Totally Disabled. For the purposes of
this Agreement, the Employee will be Totally Disabled if he (1)
has been declared legally incompetent by a final court decree (the
date of such decree being deemed to be the date on which the
disability occurred), (2) receives disability insurance benefits
from any disability income insurance policy maintained by the
Company for a period of three (3) consecutive months, or (3) has
been found to be disabled pursuant to a Disability Determination.
A "Disability Determination" means a finding that the Employee,
because of a medically determinable disease, injury, or other
mental or physical disability, is unable to perform substantially
all of his regular duties to the Company and that such disability
is determined or reasonably expected to last at least three (3)
months. The Disability Determination shall be based on the
written opinion of the physician regularly attending the Employee.
If the Company disagrees with the opinion of this physician (the
"First Physician"), it may engage at its own expense another
physician (the "Second Physician") to examine the Employee. If
the First and Second Physicians agree in writing that the Employee
is or is not disabled, their written opinion shall, except as
otherwise set forth in this Subsection, be conclusive on the issue
of disability. If the First and Second Physicians disagree on the
disability of the Employee, they shall choose a third consulting
physician (whose expense shall be borne by the Company), and the
written opinion of a majority of these three physicians shall,
except as otherwise provided in this Subsection, be conclusive as
to the Employee's disability. The date of any written opinion
conclusively finding the Employee to be disabled is the date on
which the disability will be deemed to have occurred. If there is
a conclusive finding that the Employee is not Totally Disabled,
the Company shall have the right to request additional Disability
Determinations, provided it agrees to pay all the expenses of the
Disability Determinations and does not request an additional
Disability Determination more frequently than once every two (2)
months. In conjunction with a Disability Determination, the
Employee hereby consents to any required medical examination, and
agrees to furnish any medical information requested by any
examining physician and to waive any applicable physician-patient
privilege that may arise because of such examination. All
physicians except the First Physician must be board-certified in
the specialty most closely related to the nature of the disability
alleged to exist.
(c) At the election of either the Employee or the Company without
cause, upon ninety (90) days written notice; provided however,
that in the event this Agreement is terminated by the Company
pursuant to this Subsection 12(c), at the expiration of the
ninety-day period, Employee shall receive severance pay in the
amount of six months salary at the rate being paid to Employee
under Subsection 4(a) at the time written notice of termination is
given, less any required withholding and deductions.
(d) When the Employee reaches mandatory retirement age under any
retirement policy applicable to all executive officers adopted by
the Company.
(e) By mutual agreement of the Employee and the Company.
(f) By the dissolution and liquidation of the Company (other than
as part of a reorganization, merger, consolidation, or sale of all
or substantially all of the assets of the Company whereby the
business of the Company is continued).
(g) By the Company for Just Cause. For purposes of this
Agreement "Just Cause" shall mean the following: (i) a conviction
of or a plea of guilty or nolo contendre by the Employee to a
felony or misdemeanor involving fraud, embezzlement, theft, or
dishonesty or other criminal conduct against the Company; (ii)
habitual neglect of the Employee's duties or failure by the
Employee to perform or observe any substantial lawful obligation
of such employment that is not remedied within thirty (30) days
after written notice thereof from the Company or its Board of
Directors; or (iii) any material breach of this Agreement by the
Employee. Should the Employee dispute whether he was terminated
for Just Cause, then the Company and the Employee shall enter
immediately into binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, the
cost of which shall be borne by the non-prevailing party.
In the event of termination of this Agreement other than for
death, the Employee hereby agrees to resign from all positions
held in the Company, including without limitation any position as
a director, officer, agent, trustee, or consultant of the Company
or any affiliate of the Company. For the purposes of this
provision, the term "affiliate" has the same meaning as in Section
9.
13. Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect
the validity or enforceability or constitute a waiver of future
enforcement of that provision or of any other provision of this
Agreement by that party or any other party.
14. Governing Law. This Agreement shall in all respects be
subject to, and governed by, the laws of the State of Ohio.
15. Severability. The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
16. Notice. Any and all notices required or permitted herein
shall be deemed delivered if delivered personally or if mailed by
registered or certified mail to the Company at its principal place
of business and to the Employee at the address hereinafter set
forth following the Employee's signature, or at such other address
or addresses as either party may hereafter designate in writing to
the other.
17. Assignment. This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs
and personal representatives, except that the rights and benefits
of either of the parties under this Agreement may not be assigned
without the prior written consent of the other party.
18. Amendments. This Agreement may be amended at any time by
mutual consent of the parties, provided, however, that no such
amendment shall be valid or enforceable unless in a writing signed
by the Company and the Employee.
19. Applicability of Invention and Non-Disclosure Agreement.
This Employment Agreement is supplemented by that certain
Invention and Non-Disclosure Agreement of even date herewith
between the Company and the Employee, a copy of which is attached
hereto as Schedule A and made a part hereof. These two documents
contain the entire agreement and understanding by and between the
Employee and the Company with respect to the employment of the
Employee with the Company and supersedes and merges all prior
proposals, understandings and all other agreements, oral and
written between the parties. No representations, promises,
agreements, or understandings, written or oral, with respect to
such employment not contained in these two documents shall be of
any force or effect.
20. Headings. The various headings in this Agreement are
inserted for convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Company and Employee have duly executed
this Agreement as of the day and year first above written.
MEDPLUS, INC., Company: Daniel A. Silber,
Employee:
By: /s/ Richard A. Mahoney /s/ Daniel A. Silber
Richard A. Mahoney, President Daniel A. Silber
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 924 Palomino Drive
Cincinnati, OH 45249 Villa Hills, KY 41017
SCHEDULE A
INVENTION AND NON-DISCLOSURE AGREEMENT
This Agreement made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (hereinafter called the "Company," which term includes
any parent or subsidiary corporation as defined in Section 425 of
the Internal Revenue Code), and Daniel A. Silber (hereinafter
called "Employee").
In consideration of the employment or continued employment of
Employee by the Company and for other good and valuable
consideration, the parties hereto agree as follows:
1. Disclosure of Inventions to Employer. For the purpose of this
Agreement, the word "invention" shall include, but not be limited
to, the following: any discovery, idea, device, process, design,
development, improvement, conception, concept, application,
technique, or invention whether patentable or not, and whether
reduced to practice or not; provided, however, that any invention
as so defined, conceived or made by Employee after termination of
employment with the Company, shall not be deemed to be within this
Agreement if it is not within the scope of the Company's business,
research, and investigations, or resulting from or suggested by
any of the work Employee has performed or may perform for the
Company. Employee will forthwith communicate to the President of
the Company (or such other individual as the President may
designate from time to time) a full and complete disclosure of
each and every invention conceived or made by Employee whether
solely or jointly with others (a) while in the employ of the
Company, whether or not while actually engaged in the Company's
affairs, and (b) within two years subsequent to termination of the
employment for any reason.
2. Assignment of Inventions. Employee agrees to assign and
transfer to the Company, without any separate remuneration or
compensation other than the wages or salary received or
compensation paid to Employee from time to time in the course of
his employment by the Company, his entire right, title, and
interest in and to all inventions conceived or made by Employee,
together with all United States and foreign patent rights and any
other legal protection in and with respect to any and all such
inventions, (a) while in the employ of the Company, whether or not
while Employee is actually engaged in the Company's affairs, or
(b) within two years subsequent thereto and as a direct or
indirect result of such employment. Upon request by the Company,
Employee agrees to execute, and deliver all appropriate patent
applications for securing all United States and foreign patents on
all such inventions, and to do, execute, and deliver any and all
acts and instruments that may be necessary or proper to vest all
such inventions and patents in the Company or its designee, and to
enable the Company or its designee to obtain all such letters
patent. Employee agrees to render to the Company or its designee
all such assistance as may be required in the prosecution of all
such patent applications and applications for the reissue of such
patents and in the prosecution or defense of all interferences
which may be declared involving any of said patent applications or
patents. Employee further agrees not to contest the validity of
any patent, United States or foreign, which is issued to the
Company or its designee, on which Employee made any contribution,
or in which Employee participated in any way, and not to assist
any other party in any way in contesting the validity of any such
patent. Employee further agrees that the obligations and
undertakings stated in this Section 2 shall continue beyond the
termination of his employment by the Company, but if Employee
shall be called upon to render such assistance after the
termination of his employment, Employee shall be entitled to a
fair and reasonable per diem fee in addition to reimbursement of
any expenses incurred at the request of the Company.
3. Prior Inventions. As a matter of record, Employee may include
a complete list of inventions made by him prior to the date of
employment by the Company as an appendix to this Agreement. Only
those inventions so listed shall be deemed to be excluded from the
terms and conditions of this Agreement.
4. Unauthorized Disclosure. Except in connection with regularly
assigned duties for the Company, Employee agrees that he will not,
without prior written approval of the President (or such other
person as the president may designate from time to time), divulge
or disclose to anyone outside of the Company, whether by private
communication or by public address or publication, or otherwise,
any invention or any specification, technical or engineering data,
or report, or any other information relating to the business or
affairs of the Company, and will not during his employment by the
Company or at any time thereafter disclose or use for his own
benefit such information or any trade secrets or confidential
information pertaining to any of the business of the Company or
any of its clients, customers, consultants, licensees, or
affiliates, whether or not such information or trade secrets were
acquired while Employee was engaged in the Company's affairs and
regardless of by whom such information or trade secrets were
generated, either by the Company or by the Employee or others in
the employ of the Company. All copies of any such information,
however and wherever produced, shall be and remain the sole
property of the Company and shall not be removed from the premises
or custody of the Company without prior written consent or
authorization of the President of the Company (or such other
person as the President may designate from time to time).
5. Remedies for Breach. Employee expressly recognizes that any
breach of this Agreement by him is likely to result in irreparable
injury to the Company and agrees that the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance of this Agreement by Employee, or
to enjoin Employee from activities in violation of this Agreement.
6. Modification. This instrument contains the entire Agreement
of the parties with respect to the subject matter contained herein
and may be altered, amended, or superseded only by an agreement in
writing, signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
No action or course of conduct shall constitute a waiver of any of
the terms and conditions of this Agreement, unless such waiver is
specified in writing, and then only to the extent so specified. A
waiver of any of the terms and conditions of this Agreement on one
occasion shall not constitute a waiver of the other terms and
conditions of this Agreement, or of such terms and conditions on
any other occasion.
7. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if mailed to
the party to whom such notice is given at the address of such
party hereinafter set forth or at such other address as such party
may provide in writing from time to time. Any such notice mailed
to such address shall be effective when deposited in the United
States mail, duly addressed and with first class postage prepaid.
Such notice may, but need not, be by certified mail, return
receipt requested.
8. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of Employee, without regard for the duration
of his employment by the Company or the reasons for the cessation
of such employment, and upon the administrators, executors, heirs,
and assigns of Employee and shall be binding upon and shall inure
to the benefit of the successors and assigns of the Company, its
subsidiaries, and affiliates.
9. Governing Law. The validity, interpretation and performance
of this Agreement shall be governed and construed by the laws of
Ohio.
10. Severability. The invalidity or unenforceability of any
provision in this Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.
11. References to Gender and Number Terms. In construing this
Agreement, feminine or neuter pronouns shall be substituted for
those masculine in form and visa versa, and plural terms shall be
substituted for singular and singular for plural in any place in
which the context requires.
12. Headings. The section numbers and headings in this Agreement
are inserted for convenience only and are not part of the
Agreement.
IN WITNESS WHEREOF, the Company and the Employee have duly
executed this Agreement as of the date and year first above
written.
MEDPLUS, INC., Company: Daniel A. Silber,
Employee:
By: /s/ Richard A. Mahoney /s/ Daniel A. Silber
Richard A. Mahoney, President Daniel A. Silber
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 924 Palomino Drive
Cincinnati, OH 45249 Villa Hills, KY 41017
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (the "Company"), and Paul Albrecht (the "Employee").
WHEREAS, the Company desires to employ or continue to employ the
Employee on certain terms and conditions as set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants and promises hereinafter contained, do hereby
agree as follows:
1. Employment. The Company hereby employs or continues to
employ the Employee in the capacity of Vice President and Chief
Technology Officer, or in such other position as the Company may
direct or desire and Employee hereby accepts the employment, on
the terms and conditions hereinafter set forth.
2. Duties. The Employee's principal duties and responsibilities
shall include: planning and managing future product and
development activities of the Company; providing technical
support and training for the Company's sales force, assisting in
the promotion and sales of products through participation at
national, local, and regional trade shows and other appropriate
forums; participation in direct end-user sales presentations; and
such other duties which may be assigned to him from time to time
by the Company in connection with the conduct of its business.
Nothing herein shall preclude the Company from changing the
Employee's title and duties if the Company has concluded in its
reasonable judgement that such change is in the Company's best
interests. Employee agrees to well and faithfully perform and
discharge such services and duties and hold such offices as may
be assigned to him from time to time by the Company and to devote
his full time, energies, and best efforts to the performance
thereof to the exclusion of all other business activities. In
the event the Employee is elected a Director of the Company or
any subsidiary during the term of this Agreement, the Employee
agrees to serve in such capacity without further compensation.
3. Term. The term of employment shall begin on February 1, 2000
and shall continue for a period of twelve (12) months, unless
earlier terminated pursuant to the provisions of this Agreement.
4. Salary and Other Compensation. As compensation for the
services to be rendered by the Employee to the Company pursuant
to this Agreement, the Employee shall be paid the following
compensation and other benefits:
(a) Salary. During the Term, Employee shall be paid at the semi-
monthly rate of Six Thousand and 00/100 ($6,000.00), payable in
arrears, unless adjusted in accordance with Section 4(b) hereof.
Should the employee become disabled, which for purposes of this
Subsection means the inability because of any physical or
emotional illness to perform his assigned duties under this
Agreement at least forty (40) hours per week, the Employee's
salary shall be adjusted in the proportion which the number of
hours the Employee is able to perform his assigned duties during
a week bears to forty (40). If the Employee, during any period
of disability, receives any periodic payments representing lost
compensation under any health and accident policy or under any
salary continuation insurance policy, the premiums for which have
been paid by the Company, the amount of salary that the Employee
would be entitled to receive from the Company during the
disability shall be decreased by the amounts of such payments.
(a) Incentive Compensation. For all ChartMaxx and OptiMaxx
hardware and software revenue (including new sales and upgrades)
over $50,000.00 per contract, Employee shall be paid 1% of such
revenue. Employee shall not be eligible for any incentive
compensation related to service revenue. In addition, Employee
shall be eligible for a $10,000.00 bonus upon successful
completion of the e-health project. Successful completion shall
be defined as the completion of lab connectivity for orders and
results for puposes of this bonus. Incentive Compensation shall
be paid to Employee within thirty days of the date on which the
Company has shipped to the customer system hardware & software
representing more than 50% of the dollar value of all hardware
and software to be shipped to such customer with respect to the
relevant system or major upgrade.
(b) Automobile Allowance. During the term of this Agreement,
the Company shall pay Employee a $450.00 per month automobile
allowance in order to reimburse Employee for the expense of
owning, operating, maintaining and insuring a personal automobile
for use in performing Employee's duties hereunder.
(c) Employee Benefit Plans. Employee shall be eligible to
participate, to the extent he may be eligible to participate
pursuant to the terms of such plans, in any profit sharing,
retirement, insurance or other employee benefit plans maintained
by the Company.
5. Key Man Life Insurance. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit,
life insurance on the life of the Employee in any amount or
amounts considered advisable by the Company, and the Employee
shall submit to any medical or other examination, and shall
execute and deliver any application or other instrument in
writing, reasonably necessary to effectuate such insurance.
6. Expenses. The Company shall pay, or reimburse the Employee,
for all reasonable and necessary business expenses of the
Employee approved by the Company.
7. Vacation and Leave. The Employee shall be entitled to the
same vacation and leave time as the other executive level
employees of the Company. Unused vacation time may not be
carried from one calendar year to another calendar year.
8. Non-Disclosure of Confidential Information. The Employee
acknowledges that in and as a result of his employment by the
Company, he will be making use of, acquiring, and/or adding to
confidential information of a special and unique nature and value
relating to such matters as the Company's patents, copyrights,
proprietary information, trade secrets, systems, procedures,
manuals, confidential reports, and lists of customers (which are
deemed for all purposes confidential and proprietary), as well as
the nature and type of services rendered by the Company, the
equipment and methods used and preferred by the Company's
customers, and the fees paid by them. As a material inducement
to the Company to enter into this Agreement and to pay to
Employee the compensation stated in Section 4, Employee covenants
and agrees that he shall not, at any time during or following the
term of his employment, directly or indirectly divulge or
disclose for any purpose whatsoever any confidential information
that has been obtained by, or disclosed to, him as a result of
his employment by the Company. In the event of a breach or
threatened breach by Employee of any of the provisions of this
Section 8, the Company, in addition to, and not in limitation of,
any other rights, remedies, or damages available to the Company
at law or in equity, shall be entitled to a permanent injunction
in order to prevent or restrain any such breach by the Employee
or by Employee's partners, agents, representatives, servants,
employers, employees, family members, and/or any and all persons
directly or indirectly acting for or with him.
9. Covenants Against Competition. The Employee acknowledges
that the services he is to render are of a special and unusual
character with a unique value to the Company, the loss of which
cannot adequately be compensated by damages in an action at law.
In view of the unique value to the Company of the services of
Employee, because of the confidential information to be obtained
by or disclosed to Employee, as hereinabove set forth, and as a
material inducement to the Company to enter into this Agreement
and to pay to Employee the compensation stated in Section 4,
Employee covenants and agrees that during Employee's employment
and for a period of one (1) year after he ceases to be employed
by the Company for any reason, he will not, except as otherwise
authorized by this Agreement, compete with the Company or any
affiliate of the Company, solicit the Company's customers or the
customers of an affiliate, or directly or indirectly solicit for
employment any of the Company's employees. In the event the
Employee ceases to be employed by the Company because the
Employee's work location for the Company is moved more than 100
miles from its present location, the preceding sentence shall not
apply to the Employee, provided, however, that in the event the
Employee ceases to be employed by the Company because the
Employee's work location for the Company is moved more than 100
miles from its present location, the Employee does not take a
position or otherwise compete with the Company at a location
which is also more than 100 miles from the Employee's current
work location. For purposes of this Section 9:
(i) the term "compete" means engaging in the design, development
and/or sale of an electronic patient record system similar to the
Company's ChartMaxx product or engaging in the design,
development and/or sale of a document archival system similar to
the Company's OptiMaxx product (other than as a passive
investor), including without limitation, as a proprietor,
partner, investor, shareholder, director, officer, employee,
consultant, independent contractor, or otherwise, within a
geographic areas served by the Company or any of its affiliates;
(ii) the term "affiliate" means any legal entity that directly
or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the Company; and
(iii) the term "customers" means all persons to whom the Company
or any of its affiliates has sold any product or service, whether
or not for compensation, within a period of two (2) years prior
to the time the Employee ceases to be employed by the Company.
10. Reasonableness of Restrictions.
(a) The Employee has carefully read and considered the
provisions of Sections 8 and 9, and, having done so, agrees that
the restrictions set forth in said Sections, including, but not
limited to, the time period of restriction and geographical areas
of restriction are fair and reasonable and are reasonably
required for the protection of the interests of the Company and
its parent or subsidiary corporations, officers, directors,
shareholders, and other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of Sections 8 and 9 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall
nevertheless continue to be valid and enforceable as though the
invalid or unenforceable parts had not been included therein. In
the event that any provision of Sections 8 or 9 relating to the
time period and/or the areas of restriction and/or related
aspects shall be declared by a court of competent jurisdiction to
exceed the maximum restrictiveness such court deems reasonable
and enforceable, the time period and/or areas of restriction
and/or related aspects deemed reasonable and enforceable by the
court shall become and thereafter be the maximum restriction in
such regard, and the restriction shall remain enforceable to the
fullest extent deemed reasonable by such court.
11. Remedies for Breach of Employee's Covenants of Non-
Disclosure and Non-Competition. In the event of a breach or
threatened breach of any of the covenants in Sections 8 and 9,
the Company shall have the right to seek monetary damages for any
past breach and equitable relief, including specific performance
by means of an injunction against the Employee or against the
Employee's partners, agents, employers, employees, and/or any and
all persons acting directly by or with him, to prevent or
restrain any further breach. In lieu thereof, or should a court
refuse for any reason to grant equitable relief to prevent
continuing breaches of the covenants in Sections 8 and 9, the
Company shall be entitled to liquidated damages equal to fifty
percent (50%) of the gross amount derived by the breaching party
from all transactions in breach of said covenants, it being
agreed that such amount represents the estimated amount of profit
the Company could have derived if it had transacted the business
in question and is not a penalty.
12. Termination. Employment of the Employee under this Agreement
will be terminated upon the occurrence of any one or more of the
following events:
(a) By the Employee's death.
(b) If the Employee is Totally Disabled. For the purposes of
this Agreement, the Employee will be Totally Disabled if he (1)
has been declared legally incompetent by a final court decree
(the date of such decree being deemed to be the date on which the
disability occurred), (2) receives disability insurance benefits
from any disability income insurance policy maintained by the
Company for a period of three (3) consecutive months, or (3) has
been found to be disabled pursuant to a Disability Determination.
A "Disability Determination" means a finding that the Employee,
because of a medically determinable disease, injury, or other
mental or physical disability, is unable to perform substantially
all of his regular duties to the Company and that such disability
is determined or reasonably expected to last at least three (3)
months. The Disability Determination shall be based on the
written opinion of the physician regularly attending the
Employee. If the Company disagrees with the opinion of this
physician (the "First Physician"), it may engage at its own
expense another physician (the "Second Physician") to examine the
Employee. If the First and Second Physicians agree in writing
that the Employee is or is not disabled, their written opinion
shall, except as otherwise set forth in this Subsection, be
conclusive on the issue of disability. If the First and Second
Physicians disagree on the disability of the Employee, they shall
choose a third consulting physician (whose expense shall be borne
by the Company), and the written opinion of a majority of these
three physicians shall, except as otherwise provided in this
Subsection, be conclusive as to the Employee's disability. The
date of any written opinion conclusively finding the Employee to
be disabled is the date on which the disability will be deemed to
have occurred. If there is a conclusive finding that the
Employee is not Totally Disabled, the Company shall have the
right to request additional Disability Determinations, provided
it agrees to pay all the expenses of the Disability
Determinations and does not request an additional Disability
Determination more frequently than once every two (2) months. In
conjunction with a Disability Determination, the Employee hereby
consents to any required medical examination, and agrees to
furnish any medical information requested by any examining
physician and to waive any applicable physician-patient privilege
that may arise because of such examination. All physicians
except the First Physician must be board-certified in the
specialty most closely related to the nature of the disability
alleged to exist.
(c) At the election of either the Employee or the Company
without cause, upon ninety (90) days advance written notice to
the other party.
(d) By mutual agreement of the Employee and the Company.
(e) By the dissolution and liquidation of the Company (other
than as part of a reorganization, merger, consolidation, or sale
of all or substantially all of the assets of the Company whereby
the business of the Company is continued).
(f) By the Company for Just Cause. For purposes of this
Agreement "Just Cause" shall mean the following: (i) a conviction
of or a plea of guilty or nolo contendre by the Employee to a
felony or misdemeanor involving fraud, embezzlement, theft, or
dishonesty or other criminal conduct against the Company; (ii)
habitual neglect of the Employee's duties or failure by the
Employee to perform or observe any substantial lawful obligation
of such employment that is not remedied within thirty (30) days
after written notice thereof from the Company or it Board of
Directors; or (iii) any material breach of this Agreement by the
Employee. Should the Employee dispute whether he was terminated
for Just Cause, then the Company and the Employee shall enter
immediately into binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, the
cost of which shall be borne by the non-prevailing party.
In the event of termination of this Agreement other than for
death, the Employee hereby agrees to resign from all positions
held in the Company, including without limitation any position as
a director, officer, agent, trustee, or consultant of the Company
or any affiliate of the Company. For the purposes of this
provision, the term "affiliate" has the same meaning as in
Section 9.
13. Waiver. A party's failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect
the validity or enforceability or constitute a waiver of future
enforcement of that provision or of any other provision of this
Agreement by that party or any other party.
14. Governing Law. This Agreement shall in all respects be
subject to, and governed by, the laws of the State of Ohio.
15. Severability. The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid
or unenforceable provision had never been in the Agreement.
16. Notice. Any and all notices required or permitted herein
shall be deemed delivered if delivered personally or if mailed by
registered or certified mail to the Company at its principal
place of business and to the Employee at the address hereinafter
set forth following the Employee's signature, or at such other
address or addresses as either party may hereafter designate in
writing to the other.
17. Assignment. This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns,
heirs and personal representatives, except that the rights and
benefits of either of the parties under this Agreement may not be
assigned without the prior written consent of the other party.
18. Amendments. This Agreement may be amended at any time by
mutual consent of the parties, provided, however, that no such
amendment shall be valid or enforceable unless in a writing
signed by the Company and the Employee.
19. Applicability of Invention and Non-Disclosure Agreement.
This Employment Agreement is supplemented by that certain
Invention and Non-Disclosure Agreement of even date herewith
between the Company and the Employee, a copy of which is attached
hereto as Schedule A and made a part hereof. These two documents
contain the entire agreement and understanding by and between the
Employee and the Company with respect to the employment of the
Employee with the Company and supersedes and merges all prior
proposals, understandings and all other agreements, oral and
written between the parties. No representations, promises,
agreements, or understandings, written or oral, with respect to
such employment not contained in these two documents shall be of
any force or effect.
20. Headings. The various headings in this Agreement are
inserted for convenience only and are not part of the Agreement.
IN WITNESS WHEREOF, the Company and Employee have duly executed
this Agreement as of the day and year first above written.
MEDPLUS, INC., Company: Paul F. Albrecht,
Employee:
By: /s/ Richard A. Mahoney /s/ Paul F. Albrecht
Richard A. Mahoney, President Paul F. Albrecht
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 722 Miamiheights Court
Cincinnati, OH 45249 Loveland, OH 45140
SCHEDULE A
INVENTION AND NON-DISCLOSURE AGREEMENT
This Agreement made and entered into effective as of the 1st day
of February, 2000 by and between MedPlus, Inc., an Ohio
corporation (hereinafter called the "Company," which term
includes
any parent or subsidiary corporation as defined in Section 425 of
the Internal Revenue Code), and Paul F. Albrecht (hereinafter
called "Employee").
In consideration of the employment or continued employment of
Employee by the Company and for other good and valuable
consideration, the parties hereto agree as follows:
1. Disclosure of Inventions to Employer. For the purpose of
this
Agreement, the word "invention" shall include, but not be limited
to, the following: any discovery, idea, device, process, design,
development, improvement, conception, concept, application,
technique, or invention whether patentable or not, and whether
reduced to practice or not; provided, however, that any invention
as so defined, conceived or made by Employee after termination of
employment with the Company, shall not be deemed to be within
this
Agreement if it is not within the scope of the Company's
business,
research, and investigations, or resulting from or suggested by
any of the work Employee has performed or may perform for the
Company. Employee will forthwith communicate to the President of
the Company (or such other individual as the President may
designate from time to time) a full and complete disclosure of
each and every invention conceived or made by Employee whether
solely or jointly with others (a) while in the employ of the
Company, whether or not while actually engaged in the Company's
affairs, and (b) within two years subsequent to termination of
the
employment for any reason.
2. Assignment of Inventions. Employee agrees to assign and
transfer to the Company, without any separate remuneration or
compensation other than the wages or salary received or
compensation paid to Employee from time to time in the course of
his employment by the Company, his entire right, title, and
interest in and to all inventions conceived or made by Employee,
together with all United States and foreign patent rights and any
other legal protection in and with respect to any and all such
inventions, (a) while in the employ of the Company, whether or
not
while Employee is actually engaged in the Company's affairs, or
(b) within two years subsequent thereto and as a direct or
indirect result of such employment. Upon request by the Company,
Employee agrees to execute, and deliver all appropriate patent
applications for securing all United States and foreign patents
on
all such inventions, and to do, execute, and deliver any and all
acts and instruments that may be necessary or proper to vest all
such inventions and patents in the Company or its designee, and
to
enable the Company or its designee to obtain all such letters
patent. Employee agrees to render to the Company or its designee
all such assistance as may be required in the prosecution of all
such patent applications and applications for the reissue of such
patents and in the prosecution or defense of all interferences
which may be declared involving any of said patent applications
or
patents. Employee further agrees not to contest the validity of
any patent, United States or foreign, which is issued to the
Company or its designee, on which Employee made any contribution,
or in which Employee participated in any way, and not to assist
any other party in any way in contesting the validity of any such
patent. Employee further agrees that the obligations and
undertakings stated in this Section 2 shall continue beyond the
termination of his employment by the Company, but if Employee
shall be called upon to render such assistance after the
termination of his employment, Employee shall be entitled to a
fair and reasonable per diem fee in addition to reimbursement of
any expenses incurred at the request of the Company.
3. Prior Inventions. As a matter of record, Employee may
include
a complete list of inventions made by him prior to the date of
employment by the Company as an appendix to this Agreement. Only
those inventions so listed shall be deemed to be excluded from
the
terms and conditions of this Agreement.
4. Unauthorized Disclosure. Except in connection with regularly
assigned duties for the Company, Employee agrees that he will
not,
without prior written approval of the President (or such other
person as the president may designate from time to time), divulge
or disclose to anyone outside of the Company, whether by private
communication or by public address or publication, or otherwise,
any invention or any specification, technical or engineering
data,
or report, or any other information relating to the business or
affairs of the Company, and will not during his employment by the
Company or at any time thereafter disclose or use for his own
benefit such information or any trade secrets or confidential
information pertaining to any of the business of the Company or
any of its clients, customers, consultants, licensees, or
affiliates, whether or not such information or trade secrets were
acquired while Employee was engaged in the Company's affairs and
regardless of by whom such information or trade secrets were
generated, either by the Company or by the Employee or others in
the employ of the Company. All copies of any such information,
however and wherever produced, shall be and remain the sole
property of the Company and shall not be removed from the
premises
or custody of the Company without prior written consent or
authorization of the President of the Company (or such other
person as the President may designate from time to time).
5. Remedies for Breach. Employee expressly recognizes that any
breach of this Agreement by him is likely to result in
irreparable
injury to the Company and agrees that the Company shall be
entitled, if it so elects, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in
equity, to obtain damages for any breach of this Agreement, or to
enforce the specific performance of this Agreement by Employee,
or
to enjoin Employee from activities in violation of this
Agreement.
6. Modification. This instrument contains the entire Agreement
of the parties with respect to the subject matter contained
herein
and may be altered, amended, or superseded only by an agreement
in
writing, signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
No action or course of conduct shall constitute a waiver of any
of
the terms and conditions of this Agreement, unless such waiver is
specified in writing, and then only to the extent so specified.
A
waiver of any of the terms and conditions of this Agreement on
one
occasion shall not constitute a waiver of the other terms and
conditions of this Agreement, or of such terms and conditions on
any other occasion.
7. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if mailed to
the party to whom such notice is given at the address of such
party hereinafter set forth or at such other address as such
party
may provide in writing from time to time. Any such notice mailed
to such address shall be effective when deposited in the United
States mail, duly addressed and with first class postage prepaid.
Such notice may, but need not, be by certified mail, return
receipt requested.
8. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of Employee, without regard for the duration
of his employment by the Company or the reasons for the cessation
of such employment, and upon the administrators, executors,
heirs,
and assigns of Employee and shall be binding upon and shall inure
to the benefit of the successors and assigns of the Company, its
subsidiaries, and affiliates.
9. Governing Law. The validity, interpretation and performance
of this Agreement shall be governed and construed by the laws of
Ohio.
10. Severability. The invalidity or unenforceability of any
provision in this Agreement shall not in any way affect the
validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid
or
unenforceable provision had never been in the Agreement.
11. References to Gender and Number Terms. In construing this
Agreement, feminine or neuter pronouns shall be substituted for
those masculine in form and visa versa, and plural terms shall be
substituted for singular and singular for plural in any place in
which the context requires.
12. Headings. The section numbers and headings in this
Agreement
are inserted for convenience only and are not part of the
Agreement.
IN WITNESS WHEREOF, the Company and the Employee have duly
executed this Agreement as of the date and year first above
written.
MEDPLUS, INC., Company: Paul F. Albrecht,
Employee:
By: /s/ Richard A. Mahoney /s/ Paul F. Albrecht
Richard A. Mahoney, President Paul F. Albrecht
Address for Notice Purposes: Address for Notice Purposes:
8805 Governors Hill Drive, Suite 100 722 Miamiheights Court
Cincinnati, OH 45249 Loveland, OH 45140
12
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is
made as of the 1st day of March, 2000 (the "Effective Date"), by
LV ACQUISITION, LLC, an Ohio limited liability company (the
"Pledgor") and MEDPLUS, INC., an Ohio corporation ("Pledgee").
W I T N E S S E T H
WHEREAS, Pledgor is the beneficial owner of 585,000 shares
of the Common Stock of Learning Voyage, Inc., a Delaware
corporation ("LVI") (the "Pledged Shares");
WHEREAS, LVI entered into a Stock Redemption Agreement dated
March 1, 2000 (the "Redemption Agreement") pursuant to which LVI
agreed to redeem 585,000 shares of its Common Stock held by
Pledgee;
WHEREAS, under the terms and conditions of the Redemption
Agreement, LVI executed and delivered a Promissory Note in the
amount of $450,000 to Pledgee (the "Note") and the Note was
guaranteed by Pledgor (the "Guaranty"); and
WHEREAS, Pledgor executes and delivers this Agreement in
order to secure full performance of its obligations under the
Guaranty.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Define Terms. All defined terms used herein, but not
otherwise defined herein, shall have the meaning ascribed to such
terms in the Redemption Agreement.
2. Pledge. The Pledgor hereby pledges and grants to Pledgee, a
security interest in the following (the "Pledged Collateral"):
a. the Pledged Shares, and all proceeds, income, fees, profits,
surplus, dividends, distributions, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Pledged Shares; and
b. all additional shares, options, warrants and rights to
purchase additional shares of LVI from time to time acquired by
the Pledgor (the "Additional Pledged Shares"), and all proceeds,
income, fees, profits, surplus, dividends, distributions, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of the Additional Pledged Shares.
3. Security for Obligations. This Agreement secures the payment
of all obligations of Pledgor now or hereafter existing under the
Guaranty whether for principal, interest, fees, expenses or
otherwise, (collectively, the "Obligations").
4. Delivery of Pledged Collateral. Pledgor shall cause the
pledge granted hereby to be recorded on the books and records of
LVI in accordance with applicable law immediately upon execution
of this Agreement.
5. Financing Statements. Concurrent with the execution of this
Agreement, the Pledgor shall execute Uniform Commercial Code
financing statements in recordable form designating the Pledgee
as the secured party with respect to the Pledged Collateral.
6. Representations and Warranties. The Pledgor hereby
represents and warrants as follows:
a. The Pledgor has full power and authority to enter into and
perform this Agreement. Neither the execution and delivery nor
any performance and observance by the Pledgor of the provisions
of this Agreement will violate any existing provision in any
instruments or agreements to which the Pledgor is bound or any
applicable law or otherwise constitute a default under any
contract or other obligation now existing and binding upon the
Pledgor.
b. The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any liens, pledges, equities,
security interests, assignments, charging orders, restrictions,
options or other charges or encumbrances except for the pledge
and security interest created by this Agreement.
c. The pledge of the Pledged Collateral pursuant to this
Agreement and registration thereof pursuant to Section 5 creates
a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Obligations.
d. No authorization, approval, or other action by, and no notice
to or filing with, any governmental authority or regulatory body
is required either for the pledge by the Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by the Pledgor or the
remedies in respect of the Pledged Collateral pursuant to this
Agreement.
e. The Pledgor maintains its primary residence in Cincinnati,
Ohio.
7. Transfers and Other Liens. The Pledgor covenants and agrees
that it will not (i) sell, assign, transfer or otherwise dispose
of, or grant any option with respect to, any of the Pledged
Collateral, or any interest in the Pledged Collateral, or (ii)
create or permit to exist any lien, pledge, equity, security
interest, assignment, charging order, restriction, option or
other charge or encumbrance upon or with respect to any of the
Pledged Collateral, except for the pledge and security interest
as created by Agreement.
8. Events of Default. The following shall each constitute an
"Event of Default" under this Agreement:
a. A default by the Pledgor under the Guaranty and the
continuance of such default for ten days after Pledgee gives
Pledgor written notice of such default; or
b. Failure of any representation, warranty or covenant of
Pledgor contained in this Agreement in any material respect.
9. Remedies upon Default. If any Default shall have occurred
and be continuing, the Pledgee may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies
provided for herein or otherwise available to Pledgee, all the
rights and remedies of a secured party on default under the
Uniform Commercial Code (the "Code") in effect in the State of
Ohio at that time.
10. Indemnification. The Pledgor shall indemnify and hold
harmless Pledgee from and against any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and of any experts and Pledgee, which the Pledgee may
incur in connection with (i) the sale of, collection from, or
other realization upon, any of the Pledged Collateral, (ii) the
exercise or enforcement of any of the rights of the Pledgee
hereunder, (iii) the defense or protection of the interests
granted or purported to be granted under this Agreement, and/or
(iv) the failure by the Pledgor to perform or observe any of the
provisions hereof.
11. Continuing Security Interest; Transfer of Note. This
Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect
until payment in full of the Obligations, (ii) be binding upon
the Pledgor, its heirs, executors, personal representatives,
successors and assigns, and (iii) inure to the benefit of the
Pledgee and its successors, transferees and assigns. Upon the
payment in full of the Obligations, the Pledgor shall be entitled
to the return, upon its request and at its expense, of such of
the Pledged Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof.
12. General Provisions.
a. The Pledgor agrees that at any time and from time to time,
the Pledgor will promptly execute and deliver all further
instruments and documents, and take all further action that may
be necessary or desirable in order to perfect and protect any
pledged interest or security interest granted or purported to be
granted hereby or to enable the Pledgee to exercise and enforce
its rights and remedies hereunder with respect to any Pledged
Collateral.
b. No amendment or waiver of any provision of this Agreement
nor consent to any departure by the Pledgor herefrom, shall in
any event be effective unless the same shall be in writing and
signed by the Pledgee, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
c. All notices and other communications provided for
hereunder shall be in writing and, if to the Pledgor, mailed or
delivered to it, addressed to it at LV Acquisition, LLC,
Mercantile Center, 120 East Fourth Street, Suite 300, Cincinnati,
Ohio 45202; if to the Pledgee, mailed or delivered to it,
addressed to it at MedPlus, Inc., 8805 Governor's Hill Drive,
Cincinnati, Ohio 45249; or as to either party at such other
address as shall be designated by such party in a written notice
to each other party complying as to delivery with the terms of
this Section 13. All such notices and other communications when
mailed or delivered, shall be effective when deposited in the
mails or delivered, as the case may be, addressed as aforesaid.
d. If any clause or provision of this Agreement is determined
to be illegal, invalid, or unenforceable under any present or
future law by the final judgment of a court of competent
jurisdiction, the remainder of this Agreement will not be
affected thereby. It is the intention of the parties that if any
such provision is held to be illegal, invalid or unenforceable,
there will be added in lieu thereof a provision as similar in
terms to such provisions as is possible that will be legal, valid
and enforceable.
e. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
f. Section headings used in this Agreement are for
convenience only and shall not affect the construction of this
Agreement.
g. This agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered on March 8, 2000 to be
effective as of the Effective Date..
PLEDGEE: PLEDGOR:
MEDPLUS, INC. LV ACQUISITION, LLC
By: /s/ Daniel A. Silber By: /s/ Christopher J. Dirksin
Name: Daniel A. Silber Name: Christopher J. Dirksing
Title: VP Finance, CFO Title: Member
1
pledge and security agreement::ODMA\MHODMA\CINTI;526691;4
pledge and security agreement::ODMA\MHODMA\CINTI;526691;4
STOCK REDEMPTION AGREEMENT
THIS STOCK REDEMPTION AGREEMENT (this "Agreement") is made
and entered into as of the 1st day of March, 2000 (the "Effective
Date"), by and between LEARNING VOYAGE, INC., a Delaware
corporation with its principal location at Mercantile Center, 120
East Fourth Street, Suite 300, Cincinnati, Ohio 45202 (the
"Corporation") and MEDPLUS, INC., an Ohio corporation with its
principal location at 8805 Governor's Hill Drive, Cincinnati,
Ohio 45249 (the "Stockholder").
W I T N E S S E T H :
WHEREAS, the Stockholder owns 585,000 shares of the
outstanding Common Stock of the Corporation (the "Shares"), which
constitutes 78% of the issued and outstanding shares of the
Corporation's Common Stock; and
WHEREAS, the Stockholder desires to sell to the Corporation
the Shares pursuant to the terms and conditions set forth below;
and
WHEREAS, the Corporation desires to purchase the Shares
pursuant to the terms and conditions set forth below.
NOW THEREFORE, for and in consideration of the mutual
promises set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Redemption of Shares. The Stockholder shall, upon the terms
and conditions hereinafter set forth, sell, transfer and deliver
to the Corporation, free and clear of all liens, claims and
encumbrances, all of the Shares. The Stockholder shall endorse
the stock certificates evidencing the Shares of the Corporation
and transfer such certificates to the Corporation. The
Stockholder agrees to take all action necessary, including the
execution and delivery of a stock power, to effectuate the
transfer of the Shares to the Corporation.
2. Payments by the Corporation. In consideration of the
purchase of the Shares, and as full and complete payment for the
Shares, the Corporation shall pay the Stockholder the following:
a. Cash in the amount of $300,000.
b. $450,000 in the form of a Promissory Note of even date
herewith, made by the Corporation and guaranteed by LV
Acquisition, LLC, an Ohio limited liability company ("NewCo"), in
the form attached hereto as Exhibit 2(a)(1), bearing interest at
a rate equal to the rate announced from time to time by Provident
Bank, Ohio, as its prime rate plus 2%, per annum. The guaranty
of NewCo shall be secured by a pledge by NewCo of its Common
Stock of the Corporation in the form attached hereto as Exhibit
2(a)(2).
c. All shares of the outstanding common stock of DiaLogos
Incorporated, a Delaware corporation ("DiaLogos"), held in the
name of the Corporation (the "DiaLogos Shares"), free and clear
of all liens, claims and encumbrances. The Corporation shall
endorse the stock certificates evidencing the DiaLogos Shares and
transfer such certificates to the Stockholder. The Corporation
agrees to take all actions necessary, including the execution and
delivery of a stock power, to effectuate the transfer of the
DiaLogos Shares to the Stockholder.
d. A Common Stock Warrant (the "Warrant"), in the form attached
hereto as Exhibit 2(d), pursuant to which the Stockholder will
have the right to purchase 80,000 shares of the Common Stock of
the Corporation at a price of $.01 per share. As additional
consideration for the issuance of the Warrant by the Corporation,
the Stockholder hereby agrees to forgive any and all amounts owed
by the Corporation to the Stockholder as of the Effective Date.
e. The Stockholder shall be liable for all taxes owed by the
Stockholder as a result of any payments made by the Corporation
to the Stockholder pursuant to this Section 2.
3. Representations and Warranties of the Stockholder. The
Stockholder hereby makes the following representations and
warranties to the Corporation:
a. The Shares constitute all of the Stockholder's interest in
the Corporation.
b. The Stockholder is the sole and exclusive holder and owner of
the Shares free and clear of all liens, pledges, hypothecations,
claims, restrictions or encumbrances, and no other person, firm
or corporation has any interest whatsoever in the Shares. The
sale provided for herein will vest in the Corporation absolute
title to the Shares, free and clear of any and all encumbrances,
liens, restrictions, claims, options, agreements and conditions.
c. The Stockholder has the full right, power, legal capacity and
authority to sell and transfer the Shares, free and clear of any
statutory, contractual or other limitations and to enter into and
perform its obligations under this Agreement.
d. This Agreement constitutes a valid and legally binding
obligation of the Stockholder, enforceable against it in
accordance with the terms hereof, except to the extent
enforcement is affected by laws pertaining to bankruptcy,
reorganization, insolvency, creditors rights and similar laws of
general application relating to and affecting enforcement by
creditors and by the availability of injunctive relief or
specific performance and other equitable remedies.
4. Representations and Warranties of the Corporation. The
Corporation hereby makes the following representations and
warranties to the Stockholder:
a. The Corporation has the full right, power, legal capacity and
authority to purchase the Shares and to enter into and perform
its obligations under this Agreement.
b. This Agreement constitutes a valid and legally binding
obligation of the Corporation, enforceable against it in
accordance with the terms hereof, except to the extent
enforcement is affected by laws pertaining to bankruptcy,
reorganization, insolvency, creditors rights and similar laws of
general application relating to and affecting enforcement by
creditors and by the availability of injunctive relief or
specific performance and other equitable remedies.
c. The DiaLogos Shares constitute all of the Corporation's
interest in DiaLogos.
d. The Corporation is the sole and exclusive holder and owner of
the DiaLogos Shares free and clear of all liens, pledges,
hypothecations, claims, restrictions or encumbrances, and no
other person, firm or corporation has any interest whatsoever in
the DiaLogos Shares. The sale provided for herein will vest in
the Stockholder absolute title to the DiaLogos Shares, free and
clear of any and all encumbrances, liens, restrictions, claims,
options, agreements and conditions.
5. Survival of Representations and Warranties. The
representations and warranties contained in Sections 3 and 4 of
this Agreement shall survive the consummation of the transactions
contemplated by this Agreement and shall not expire.
6. Conditions Precedent to Obligations of the Stockholder. The
obligations of the Stockholder under this Agreement are, at the
option of the Stockholder, subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
a. The Stockholder, the Corporation and any applicable third-
parties shall have reached an agreement with respect to the
division between the Stockholder and the Corporation of leased
equipment set forth on Schedule 6(a).
b. The Corporation shall have obtained all third-party consents,
approvals and authorizations necessary to consummate the
transactions contemplated by this Agreement, including but not
limited to, consents with respect to the agreements set forth on
Schedule 6(b).
c. All material matters, proceedings, instruments and documents
required to consummate the transactions contemplated by this
Agreement shall have been approved at or before the closing by
the Stockholder and counsel for the Stockholder.
7. Conditions Precedent to Obligations of the Corporation. The
obligations of the Corporation under this Agreement are, at the
option of the Corporation, subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
a. The Corporation shall have received an executed stock
subscription agreement from NewCo, pursuant to which NewCo shall
subscribe for 585,000 shares of Common Stock of the Corporation
and pay to the Corporation the consideration set forth on such
stock subscription agreement.
b. DiaLogos and the Corporation shall have executed and
delivered an Assignment and Assumption Agreement substantially in
the form set forth at Exhibit 7(b), pursuant to which the
Corporation shall assign and DiaLogos shall assume those
Agreements set forth on Schedule 7(b).
c. The Stockholder, the Corporation and any applicable third-
parties shall have reached an agreement with respect to the
division between the Stockholder and the Corporation of leased
equipment set forth on Schedule 6(a).
d. The Corporation shall have obtained the consents, approvals
and authorizations necessary to consummate the transactions
contemplated by this Agreement, including but not limited to,
consents with respect to the agreements set forth on Schedule
6(b).
e. All material matters, proceedings, instruments and documents
required to consummate the transactions contemplated by this
Agreement shall have been approved at or before the closing by
the Corporation and counsel for the Corporation.
8. Closing; Closing Date. Unless the parties hereto otherwise
agree, and subject to the conditions set forth herein, the
Closing of this Agreement (the "Closing") shall occur on March 8,
2000 (the "Closing Date").
9. Further Assurances. Each of the parties hereto shall, upon
the request of the other, execute, acknowledge and deliver any
other documents or instruments that may be reasonably required to
effect the intent of this Agreement.
10. General Provisions.
a. This Agreement shall be governed and construed in accordance
with the laws of the State of Ohio.
b. This Agreement sets forth the entire understanding of the
parties hereto and supersedes all prior agreements or
understandings, oral or written, express or implied, with respect
to the subject matter hereof. No terms, conditions or
warranties, other than those contained herein, and no amendments
or modifications hereto shall be binding unless made in writing
and signed by the parties hereto.
c. This Agreement shall be binding on, and shall inure to the
benefit of, the parties hereto and their respective heirs, legal
representatives and successors.
d. If any provisions of this Agreement are held to be illegal,
invalid or unenforceable under present or future laws, now or
hereafter in effect, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision never comprised a
part hereof. The remaining provisions hereof shall remain in
full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance herefrom.
e. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which
together will constitute the same document.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on March 8, 2000 to be effective as of the Effective
Date.
MEDPLUS, INC. LEARNING VOYAGE, INC.
By: /s/ Daniel A. Silber By: /s/ Christopher J. Dirksing
Name: Daniel A. Silber Name: Christopher J. Dirksing
Title: VP Finance, CFO Title: President
1
PROMISSORY NOTE
Cincinnati, Ohio
$450,000.00 March 1, 2000
FOR VALUE RECEIVED, Learning Voyage, Inc., a Delaware
corporation with its principal location at Mercantile Center, 120
East Fourth Street, Suite 300, Cincinnati, Ohio 45202 (the
"Maker") hereby promises to pay to the order of MedPlus, Inc., an
Ohio corporation with its principal location at 8805 Governor's
Hill Drive, Cincinnati, Ohio 45249, (the "Payee"), the principal
amount of $450,000, plus interest thereon at a rate equal to the
rate announced from time to time by Provident Bank, Ohio, as its
prime rate plus 2%, per annum. Interest shall be computed on the
basis of a 360-day year consisting of twelve 30-day months and
accrued on a daily basis for the actual number of days elapsed
from the date hereof on the principal balance from time to time
outstanding.
This Promissory Note is subject to the following additional
terms:
1. Payments. All amounts due and payable hereunder shall be
paid no later than two years after the effective date of this
Promissory Note.
2. Place of Payment. All payments made hereunder shall be
payable at Payee's address set forth above or such other address
as Payee may from time to time designate in writing, which shall
be deemed to have been received two days after being deposited in
the mail by certified or registered mail, return receipt
requested, and postage prepaid.
3. Applicable Law. This Promissory Note shall be governed by
and interpreted under the laws of the State of Ohio applicable to
contracts made and to be performed herein, without giving effect
to the principles of conflicts of laws.
4. Prepayments. Any or all amounts due under this Promissory
Note may be prepaid in full or in part, at any time, without
penalty.
5. Default. Maker shall be in default under this Promissory
Note upon the happening of any of the following events,
circumstances or conditions:
a. default by Maker in the performance of the material terms or
conditions hereof which failure continues for thirty days;
b. default by Maker in the performance of any of the material
terms or conditions of that certain Stock Redemption Agreement by
and among Maker and Payee of even date herewith.
c. the insolvency, appointment of a receiver of any part of the
business of Maker, assignment for the benefit of creditors, or
commencement of any proceeding under bankruptcy or insolvency
laws by or against Maker.
Upon the occurrence of any of the foregoing events, circumstances
or conditions of default, all of the obligations evidenced herein
shall be immediately due and payable without further notice.
6. Notice of Presentment, Etc. Maker hereby waives notice of
demand, notice of protest, protest, presentment for payment, and
diligence in bringing suit against Maker under the occurrence of
any event, circumstance or condition of default.
7. Assignment. This Promissory Note may not be assigned by
Maker.
MAKER:
LEARNING VOYAGE, INC.
By: s/ Christopher J. Dirksing
Name: Christopher J. Dirksing
Title: President
GUARANTY
The undersigned does hereby unconditionally guarantee the
payment and discharge as and when the same shall become due of
any and all amounts owed by Maker under this Promissory Note.
Effective March 1, 2000 LV ACQUISITION, LLC
By: s/ Christopher J. Dirksing
Name: Christopher J. Dirksing
Title: Member
Exhibit 21
Subsidiaries of MedPlus, Inc.
ChartMaxx, Inc.: an Ohio corporation wholly owned by MedPlus,
Inc.
DiaLogos Incorporated: a Delaware corporation wholly owned by MedPlus, Inc.
FutureCORE, Inc.: an Ohio corporation wholly owned by MedPlus,
Inc.
Synergis Acquisition, Inc.: an Ohio corporation wholly owned by
MedPlus, Inc.
Synergis Technologies, Inc.: an Ohio corporation wholly owned by
MedPlus, Inc.
Universal Document Management Systems, Inc.: an Ohio corporation
wholly owned by
MedPlus, Inc.
Valcor Associates, Inc.: a Pennsylvania corporation wholly owned
by MedPlus, Inc.
Exhibit 23
Consent Independent Auditors
The Board of Directors
MedPlus, Inc.:
We consent to the incorporation by reference in the registration
statements of MedPlus, Inc. and subsidiaries on Form S-8 (No. 33-
94426) and Form S-3 (No. 333-20547) of our report dated April 14,
2000, relating to the consolidated balance sheets of MedPlus,
Inc. and subsidiaries as of January 31, 2000 and 1999, and the
related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three year
period ended January 31, 2000, which report appears in the
January 31, 2000 annual report on Form 10-KSB of MedPlus, Inc.
and subsidiaries.
/s/ KPMG, LLP
Cincinnati, Ohio
April 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
HJLK
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 3,471,031
<SECURITIES> 0
<RECEIVABLES> 2,986,780
<ALLOWANCES> 196,000
<INVENTORY> 387,430
<CURRENT-ASSETS> 7,699,970
<PP&E> 2,528,840
<DEPRECIATION> 1,344,014
<TOTAL-ASSETS> 12,161,439
<CURRENT-LIABILITIES> 5,730,429
<BONDS> 0
0
23,718
<COMMON> 0
<OTHER-SE> 4,390,180
<TOTAL-LIABILITY-AND-EQUITY> 12,161,439
<SALES> 8,377,056
<TOTAL-REVENUES> 12,537,895
<CGS> 7,300,219
<TOTAL-COSTS> 15,412,332
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 513,838
<INCOME-PRETAX> (3,432,072)
<INCOME-TAX> (11,176)
<INCOME-CONTINUING> (3,420,895)
<DISCONTINUED> (1,757,703)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,178,599)
<EPS-BASIC> (0.95)
<EPS-DILUTED> (0.95)
</TABLE>
