SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MEDIQ INCORPORATED
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
MEDIQ INCORPORATED
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[ LOGO ]
MEDIQ INCORPORATED
ONE MEDIQ PLAZA
PENNSAUKEN, NEW JERSEY 08110-1460
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 23, 1995
------------------------------
May 22, 1995
To The Shareholders:
The Annual Meeting of Shareholders of MEDIQ Incorporated will be held at
10:00 a.m. on Friday, June 23, 1995, at the Company's corporate headquarters,
One MEDIQ Plaza, Pennsauken, New Jersey, for the following purposes:
1. To elect a Board of eight Directors; and
2. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on May 15, 1995 are
entitled to notice of, and to vote at, the meeting.
The Company's Annual Report for 1994 is enclosed.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING, BUT WHETHER OR NOT YOU
PLAN TO BE PRESENT, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY OR PROXIES IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
EUGENE M. SCHLOSS, JR.
Secretary
<PAGE>
[ LOGO ]
MEDIQ INCORPORATED
ONE MEDIQ PLAZA
PENNSAUKEN, NEW JERSEY 08110-1460
------------------------------
PROXY STATEMENT
------------------------------
The accompanying proxies are solicited by the Board of Directors of MEDIQ
Incorporated ('Company'). The person giving a proxy has the right to revoke it
at any time before it is voted by giving written notice of revocation to the
Secretary of the Company. The expense of this proxy solicitation will be paid by
the Company. This proxy statement and the accompanying forms of proxy are first
being mailed to shareholders on or about May 22, 1995. In addition to
solicitation by mail, employees of the Company may personally solicit proxies.
The Company had 17,791,863 shares of Common Stock, par value $1.00 per
share ('Common Stock'), and 6,357,089 shares of Series A Preferred Stock, par
value $.50 per share ('Preferred Stock'), outstanding and entitled to vote at
the close of business on May 15, 1995. Only shareholders of record on that date
will be entitled to vote.
The holders of shares of Common Stock are entitled to one vote per share.
The holders of shares of Preferred Stock are entitled to ten votes per share.
The Common Stock and Preferred Stock generally vote together as a single class,
except that the Company's Certificate of Incorporation provides that not less
than 25% of the total number of directors of the Company will consist of
individuals who are not officers or employees of the Company ('Outside
Directors') and that such Outside Directors shall be elected solely by the
holders of Common Stock, voting as a separate class. The Outside Directors
nominated by the Board of Directors ('Board') for election are Lionel Felzer,
Mark S. Levitan, H. Scott Miller, Bessie G. Rotko and Jacob A. Shipon.
Members of the Board and the officers of the Company own in the aggregate
5,884,841 shares of Common Stock and 5,096,183 shares of Preferred Stock, or
approximately 33% and 80% of the outstanding Common Stock and Preferred Stock,
respectively (exclusive of stock options and securities convertible into common
stock). These holdings entitle the Board and officers to an aggregate of 70% of
the total outstanding votes on all matters scheduled to come before the meeting,
except the election of Outside Directors, who are elected by the holders of
Common Stock voting as a single class. In the election of Outside Directors, by
virtue of their ownership of Common Stock, members of the Board and officers of
the Company are entitled to cast an aggregate of 33% of the total outstanding
votes. Each director, nominee and officer has advised the Company of the
intention to vote his or her Common Stock for the election of those persons
nominated by the Board for reelection as Outside Directors, and his or her
Common Stock and Preferred Stock for the election of the persons nominated by
the Board for election as directors not considered to be Outside Directors.
It is intended that shares of stock represented by proxies in the
accompanying form, unless otherwise specified, will be voted for the election of
the persons nominated below. The votes will be tabulated by American Stock
Transfer & Trust Co., the Company's transfer agent. Abstentions and broker
non-votes will be treated in accordance with applicable provisions of Delaware
law and the Certificate of Incorporation and Bylaws of the Company.
1
<PAGE>
ELECTION OF DIRECTORS
A Board of eight directors will be elected at the 1994 Annual Meeting. All
directors are elected annually, and if elected, will serve until the next Annual
Meeting and until the election and qualification of their successors.
Shareholders do not have cumulative voting rights in the election of directors.
NOMINEES FOR ELECTION AS DIRECTORS
Set forth below is information concerning the nominees for election as a
director. The Board has no reason to anticipate that any nominee will decline or
be unable to serve. In case any nominee does decline or is unable to serve,
proxies may be voted for the election of a substitute nominee, or the Board may
elect to reduce the number of directors.
<TABLE>
<CAPTION>
NAME AND OFFICES DIRECTOR PRINCIPAL OCCUPATION AND EXPERIENCE DURING
WITH THE COMPANY AGE SINCE THE PAST FIVE YEARS, OTHER THAN WITH THE COMPANY
- ---------------- --- -------- ------------------------------------------------
<S> <C> <C> <C>
Michael J. Rotko 56 1965 Partner, Drinker, Biddle & Reath (legal services); formerly U.S.
Chairman of the Board Attorney, Eastern District of Pennsylvania; previously First Assistant
of Directors U.S. Attorney, Eastern District of Pennsylvania; previously Attorney in
private practice
Jacob A. Shipon 56 1981 Physician in private practice.
Vice Chairman of the
Board of Directors
Bernard J. Korman 63 1977 Chairman of the Board of Directors, NutraMax Products, Inc. (consumer
President, Chief healthcare products) and PCI Services, Inc. (pharmaceutical packaging
Executive Officer and services); Chairman of the Board of Directors and Chief Executive
Director Officer, PRN Holdings, Inc., a wholly-owned subsidiary of MEDIQ (life
support and critical care equipment rental services); Director, Mental
Health Management, Inc. (behavioral health management services), The New
America High Income Fund (financial services), The Pep Boys, Inc. (auto
supplies), Today's Man, Inc. (retail men's clothing sales), Omega
Healthcare Investors, Inc. (real estate investment trust) and MMI
Medical, Inc. (provider of specialized services to hospital radiology
departments)
Michael F. Sandler 49 1994 Vice President, Treasurer and Director, PRN Holdings, Inc.; Vice
Director, Senior Vice President and Chief Financial Officer, PCI Services, Inc. and Director,
President -- Finance, and formerly Vice President and Chief Financial Officer, NutraMax
Treasurer and Chief Products, Inc.; Director, Mental Health Management, Inc. and MMI
Financial Officer Medical, Inc.
Lionel Felzer 71 1968 Retired; formerly Senior Vice President and Treasurer of the Company
Director
Mark S. Levitan 61 1981 Chairman of the Board of Directors of HOMECARE USA (home medical
Director equipment rentals); Vice President -- Consulting Division, MedQuist Inc.
(healthcare information services); formerly Partner, Management
Partners, Inc. (healthcare consultants), which was acquired in January
1994 by MedQuist Inc.; previously Executive Vice President and Chief
Operating Officer of the Company
H. Scott Miller 45 1992 Partner, Pulsar Equity Partners (merchant banking); formerly Manager,
Director Private Investor Group, Miller, Anderson & Sherrerd (financial
management services); previously Vice President, Investment Banking
Division, Goldman Sachs & Co. (investment banking services)
Bessie G. Rotko 85 1989
Director
</TABLE>
Regulations adopted by the Securities and Exchange Commission require the
Company to identify persons who failed to file or filed late reports required
under Section 16(a) of the Securities
2
<PAGE>
Exchange Act of 1934. Generally, directors and officers are required to report
changes in their ownership of the Company's equity securities. Based upon
available information, the Company believes that all reports required to be
filed in fiscal 1994 were filed on a timely basis except as follows: Mr. Korman
filed a report in August 1994 to correct information as to holdings of the
Company's convertible debentures in his retirement accounts and to report
acquisitions in May and June 1994 of the Company's convertible debentures in
such retirement accounts, indicating debentures convertible into an aggregate of
16,933 shares of the Company's Common Stock. The Company has undertaken a
compliance program to assist in the timely filing of required reports.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held twenty-six meetings (including action by
unanimous consent) during the fiscal year ended September 30, 1994. During this
period, each director attended the meetings of the Board and of each committee
of which he or she was a member. The Board of Directors has a Compensation
Committee, a Stock Option Committee and an Audit Committee. The Board serves as
the Nominating Committee, and will consider nominees recommended by shareholders
in writing, addressed to the Secretary of the Company, not later than September
30 of each year.
Messrs. Korman, Miller and Rotko, Mrs. Rotko and Dr. Shipon were members of
the Compensation Committee during the 1994 fiscal year. This Committee reviews
categories of compensation levels of the Company's employees and determines
guidelines for the future, including incentive compensation. This Committee did
not hold any meetings during the fiscal year.
Messrs. Miller and Rotko, Mrs. Rotko and Dr. Shipon served as members of
the Stock Option Committee during the 1994 fiscal year. This Committee is
authorized to grant options to officers and key employees of the Company
pursuant to the Company's Stock Option Plan. This Committee held two meetings
during the fiscal year.
Messrs. Felzer, Miller and Rotko, Mrs. Rotko and Dr. Shipon were members of
the Audit Committee during the 1994 fiscal year. The primary responsibilities of
this Committee are to recommend annually the independent public accountants for
appointment by the Board as auditors for the Company, review the scope of the
audit made by the accountants, review the audit reports submitted by the
accountants, conduct such other reviews as the Committee deems appropriate and
make reports and recommendations to the Board within the scope of its functions.
This Committee held one meeting during the fiscal year.
RECENT DEVELOPMENTS
In November 1994, a Special Committee of the Board of Directors was formed
for the purpose of exploring alternative ways to maximize shareholder value.
Among those matters to be considered by the Special Committee are the possible
sale of all or substantially all the stock or assets of the Company, its
wholly-owned subsidiaries or its equity investments to a buyer or group of
buyers, which may include members of the management of the Company and its
subsidiaries. The Board of Directors appointed Messrs. Rotko, Korman and Miller
and Dr. Shipon to serve on the Special Committee. At a meeting of the Special
Committee in November 1994, Mr. Korman advised the committee that, since members
of the Company's management, including Mr. Korman, might
3
<PAGE>
be interested in proposing the purchase of the Company, in order to avoid any
conflict of interest, he would resign from the committee for as long as
management was involved in a potential purchase. In December 1994, the Company's
Board of Directors decided that Mr. Korman shall join the committee in the event
the Board of Directors is advised that a management group including Mr. Korman
will not pursue the purchase of the Company. The Special Committee has retained
the investment banking firm of Lazard Freres & Co. to act as its exclusive
financial advisor to assist it in considering these alternatives.
On March 14, 1995, the Company announced that it received an offer from
MEDIQ Acquisition Corp., representing several members of the Company's
management, including Messrs. Korman and Sandler, to acquire all of the
outstanding common and preferred stock and repay or assume all debt of the
Company and its subsidiaries in a transaction valued at $437 million. The offer
was referred to the Special Committee for review. The offer proposed to pay
stockholders $6.87 per share of common and preferred stock consisting of $4.00
in cash and $2.87, representing the current market value, as of that date, on a
per share basis of the Company's equity investments in MMI Medical, Inc.,
NutraMax Products, Inc. and PCI Services, Inc., and the face value of the note
receivable from Mental Health Management, Inc. The offer proposed distributing
the equity investments and note either directly to stockholders of the Company
or to a liquidating trust for the benefit of the stockholders of the Company.
The offer was conditioned upon negotiating and executing a mutually acceptable
merger agreement by April 14, 1995, and was subject to certain other customary
conditions including financing, and among other matters specifically encouraged
the Special Committee to continue to solicit other acquisition proposals from
interested parties.
On March 17, 1995, the Company announced that the Special Committee
reviewed the offer that was made March 14, 1995 by MEDIQ Acquisition Corp. to
acquire the Company, and recommended that the Board reject the offer as
inadequate. In determining to recommend that the Board reject the offer, the
Special Committee consulted with its investment bankers, Lazard Freres & Co. The
Special Committee has advised MEDIQ Acquisition Corp. that it could submit an
improved offer as part of that process.
On April 13, 1995, the Company announced that its Board of Directors
accepted the recommendation of its Special Committee rejecting the offer of
MEDIQ Acquisition Corp. to acquire the Company. In accepting the Special
Committee recommendation, the Board of Directors consulted with its investment
bankers, Lazard Freres & Co. The Company also stated that it will continue to
solicit offers for the Company and its wholly-owned subsidiaries including
MEDIQ/PRN, and has directed Lazard Freres & Co. to continue its efforts in this
regard. In addition, the Company announced that it entered into an agreement to
sell Medifac, Inc., its healthcare facility planning, design and project
management subsidiary, and certain real estate, to the management group of
Medifac, led by James W. Eastwood, President and Chief Executive Officer of
Medifac, for an aggregate sale price of $11.8 million. The Company also
announced that it continues to focus on the sale of its non-core businesses
including Health Examinetics, Inc., MEDIQ Mobile X-Ray Services, Inc. and MEDIQ
Imaging Services, Inc.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of April 1, 1995, the beneficial
ownership of shares of the Company's Common Stock, par value $1.00 per share,
and Series A Preferred Stock, par value $.50 per share, by each of the nominees
for director of the Company, each executive officer named in the Summary
Compensation Table (included elsewhere herein) and by all directors and officers
of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------------------- ----------------------------------
PERCENT PERCENT
NUMBER OF CLASS NUMBER OF CLASS
NAME OF SHARES(1) OUTSTANDING(2) OF SHARES(1) OUTSTANDING(2)
- --------------------------------------------- ------------- ------------------- ------------- -------------------
<S> <C> <C> <C> <C>
Michael J. Rotko 448,655(3) 2.5% 448,655(3) 7.0%
Bernard J. Korman(4)(5) 2,051,625(6) 11.0% 801,030(6) 12.5%
Lionel Felzer 380,013(7) 2.1% 490(7) *
Mark S. Levitan 5,134(8) *
H. Scott Miller 3,700(9) * 4,300(9) *
Bessie G. Rotko(5) 3,811,458(10) 21.5% 3,840,058(10) 60.0%
Michael F. Sandler(5) 177,284(11) *
Jacob A. Shipon(5) 1,650(12) * 1,650(12) *
Donald M. Gleklen(5) 164,325(13) * 25,465(13) *
All directors and officers as a group (10
persons) 7,165,404(14) 37.7% 5,134,661(14) 79.7%
</TABLE>
- ------------------
* Less than one percent.
(1) Unless otherwise noted below, beneficial ownership is based on sole voting
and investment power with respect to the shares, and shares are held by the
person listed or members of his or her family.
(2) All percentages are rounded to the nearest tenth, and are based upon the
number of shares outstanding, including, as appropriate, the shares
referred to in the notes below.
(3) Michael J. Rotko is the son of Bessie G. Rotko. Includes 7,308 shares of
Common Stock and 7,308 shares of Preferred Stock, respectively, held as
custodian for children. Mr. Rotko is a trustee of the Trust described in
note 10, and may be deemed a beneficial owner of the shares owned by the
Trust.
(4) The address of Mr. Korman is One MEDIQ Plaza, Pennsauken, NJ 08110-1460.
(5) The Company owns approximately 47% of the outstanding common stock of
NutraMax Products, Inc. ('NutraMax Stock'). Mr. Korman, Mrs. Rotko, Dr.
Shipon and Messrs. Sandler and Gleklen beneficially own 40,535, 3,600,
2,240, 17,880 and 27,000 shares, respectively, of NutraMax Stock, and all
of the directors and officers of the Company, as a group (10 persons)
beneficially own an aggregate of 98,255 shares of NutraMax Stock, which
aggregate amount represents approximately one percent of the outstanding
shares. The Company owns approximately 47% of the outstanding common stock
of PCI Services, Inc. ('PCI Stock'). Messrs. Korman, Felzer and Miller,
Mrs. Rotko and Messrs. Sandler and Gleklen beneficially own 94,000, 1,000,
4,000, 3,000, 27,000 and 5,000 shares, respectively, of PCI Stock, and all
of the directors and officers of the Company as a group (10 persons)
beneficially own an aggregate of 137,000 shares of PCI Stock, which
aggregate amount represents approximately two percent of the outstanding
shares.
(6) Includes 21,204 shares of Common Stock and 21,204 shares of Preferred
Stock, respectively, held as custodian for children, 36,800 shares of
Common Stock owned by Mr. Korman's spouse, and 898,895 shares of Common
Stock which may be acquired upon exercise of stock options, acquired upon
conversion of outstanding convertible debentures, and/or held in retirement
accounts.
(7) Lionel Felzer is the brother-in-law of Bessie G. Rotko. Includes 31,726
shares of Common Stock which may be acquired upon exercise of stock options
and 490 shares of Preferred Stock held in a retirement account. Mr. Felzer
is a trustee of the Trust described in note 10, and may be deemed a
beneficial owner of the shares owned by the Trust.
(8) Includes 1,805 shares of Common Stock held in retirement accounts.
(9) Mr. Miller provides financial advisory services to the Trust described in
note 10. Includes 3,600 shares of Common Stock and 2,700 shares of
Preferred Stock held in a retirement account and 1,600 shares of Preferred
Stock held by the estate of Mr. Miller's mother.
(Footnotes continued on next page)
5
<PAGE>
(10) Mrs. Rotko is the income beneficiary, during her lifetime, of a trust
created by her late husband, Bernard B. Rotko, M.D., who was the founder of
the Company. The trust holds 3,570,969 shares of Common Stock and 3,570,969
shares of Preferred Stock. The Trustees, Bessie G. Rotko, Michael J. Rotko,
Judith M. Shipon, Lionel Felzer and PNC Bank, National Association, share
voting and investment power with respect to these shares, which are not
included in the amounts set forth as being beneficially owned by the other
named Trustees as individuals. The address of the Trustees is c/o Lionel
Felzer, MEDIQ Incorporated, One MEDIQ Plaza, Pennsauken, New Jersey
08110-1460.
(11) Includes 172,784 shares of Common Stock which may be acquired upon exercise
of stock options, acquired upon conversion of outstanding convertible
debentures, or held in retirement accounts.
(12) Jacob A. Shipon is the son-in-law of Bessie G. Rotko. Excludes 459,007
shares of Common Stock and 458,757 shares of Preferred Stock, respectively,
which are owned beneficially by Judith M. Shipon, Dr. Shipon's spouse, and
as to which Dr. Shipon disclaims beneficial ownership. Judith M. Shipon is
a trustee of the Trust described in note 10, and may be deemed a beneficial
owner of the shares owned by the Trust.
(13) Includes 164,325 shares of Common Stock and 25,465 shares of Preferred
Stock, respectively, which may be acquired upon exercise of stock options
or held in retirement accounts.
(14) Includes an aggregate of 28,512 shares of Common Stock and 28,512 shares of
Preferred Stock, respectively, held as custodian for children, 36,800
shares of Common Stock held by a spouse and an aggregate of 1,304,807
shares of Common Stock and 38,478 shares of Preferred Stock, respectively,
which may be acquired upon exercise of stock options, acquired upon
conversion of outstanding convertible debentures, and/or held in retirement
accounts.
PRINCIPAL SHAREHOLDERS
According to a filing with the Securities and Exchange Commission, Merrill
Lynch & Co., Inc., together with certain affiliates, is the beneficial owner of
an aggregate of approximately $7,141,000 principal amount, or approximately
13.8% of the Company's 7 1/4% Convertible Subordinated Debentures Due 2006,
which are convertible into an aggregate of 952,109 shares of Common Stock, or
approximately 5% of the outstanding Common Stock. The address of such
shareholder is World Financial Center, North Tower, 250 Vesey Street, New York,
New York 10281. Except as set forth in this paragraph and the table and notes
thereto above, the Company is not aware of any person or entity which is the
beneficial owner of more than five (5%) percent of any class of the voting
securities of the Company.
6
<PAGE>
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the last three fiscal years to the Company's Chairman, Chief
Executive Officer and each of the Company's two other executive officers during
fiscal 1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------
---------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION(1)
- -------------------------------------------- --------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael J. Rotko 1994 $ 43,000 -- -- --
Chairman
Bernard J. Korman 1994 395,000 -- -- $ 50,000
President and Chief 1993 395,000 -- 500,000(2) 46,000
Executive Officer 1992 395,000 $ 240,000 --
Michael F. Sandler (3) 1994 250,000 103,500 -- 7,000
Senior Vice President -- 1993 236,000 -- 165,000(2) 7,000
Finance, Treasurer & Chief 1992 215,000 120,000 125,000
Financial Officer
Donald M. Gleklen (4) 1994 236,000 -- 166,075(5) 252,000
Senior Vice President -- 1993 236,000 -- 166,075(2) 15,000
Corporate Development 1992 225,000 111,000 --
</TABLE>
- ------------------
(1) Under transitional rules, amounts in the All Other Compensation column are
not included for 1992. Amounts reported for Mr. Korman for 1994 include
$42,139 of interest on certain compensation deferred in fiscal years 1985,
1986 and 1987, $2,310 representing the Company's matching contributions
under the Employees' Savings Plan and $3,510 representing life insurance
premiums. Amounts reported for Mr. Sandler for 1994 include $2,310
representing the Company's matching contributions under the Employees'
Savings Plan and $870 representing life insurance premiums. Amounts reported
for Mr. Gleklen for 1994 include $8,428 of interest on certain compensation
deferred in fiscal years 1985, 1986 and 1987, $2,310 representing the
Company's matching contributions under the Employees' Savings Plan and
$2,250 representing life insurance premiums.
(2) Represents outstanding options to acquire shares of the Company's Common
Stock and/or Preferred Stock for which exercise prices were reduced in
August 1993 in connection with the distribution to the Company's
stockholders of the stock of Mental Health Management, Inc. Pursuant to the
rules of the Securities & Exchange Commission, these options were reported
as new grants for fiscal 1993.
(3) The Company has an employment agreement with Mr. Sandler, expiring in
November 1995, pursuant to which he is currently entitled to receive annual
base salary of $250,000, and may also receive incentive compensation,
depending upon the Company's performance.
(4) Mr. Gleklen had served as Senior Vice President -- Corporate Development of
the Company since 1985, and resigned on March 2, 1994. Pursuant to an
employment agreement with the Company, Mr. Gleklen received $127,000 for the
remainder of fiscal 1994 (which is included as salary in the table), and
pursuant to a severance agreement will receive $118,000 in each of fiscal
1995 and 1996 (which is included as other compensation in the table).
(5) Represents outstanding options for which the expiration dates were extended
and/or which were reissued by the Company during fiscal 1994 in connection
with Mr. Gleklen's severance agreement with the Company. Pursuant to the
rules of the Securities & Exchange Commission, these options are reported as
new grants for fiscal 1994.
7
<PAGE>
STOCK OPTIONS
The following table summarizes stock option activity during fiscal 1994 for
the executive officers listed in the Summary Compensation Table. All options
included in the table represent options which were previously outstanding for
which the expiration dates were extended and/or which were reissued by the
Company during fiscal 1994 in connection with Mr. Gleklen's severance agreement.
Pursuant to the rules of the Securities and Exchange Commission, these options
are reported as new grants for fiscal 1994.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION FOR
OPTIONS GRANTED MARKET PRICE OPTION TERM (000'S)
OPTIONS TO EMPLOYEES IN EXERCISE AT DATE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR PRICE OF REPRICING DATE 0%(2) 5%(2) 10%(2)
- ------------------ ---------- --------------- -------- ------------ ---------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Rotko -- -- -- -- -- -- -- --
Bernard J. Korman -- -- -- -- -- -- -- --
Michael F. Sandler -- -- -- -- -- -- -- --
Donald M. Gleklen 71,429 41.5% $ 3.057 $ 3.938 9/30/1996 $ 63 $ 98 $ 136
15,000 8.7% 3.494 4.063 2/17/2000 -- -- 4
28,716 16.7% 2.729 4.063 10/10/1998 -- 5 12
9,675 5.6% 4.513 4.063 9/30/1996 38 63 92
15,790 9.2% 4.149 4.063 9/30/1996 9 27 50
9,675(3) 20.5% (3) 4.487 3.906 9/30/1996 -- -- 2
15,790(3) 33.4% (3) 4.125 3.906 9/30/1996 -- 3 9
</TABLE>
- ------------------
(1) Unless otherwise indicated, options are to purchase shares of the Company's
Common Stock.
(2) The information in these columns illustrates the value that might be
realized upon exercise of the options assuming the specified compound rates
of appreciation of the Company's Common Stock and/or Preferred Stock over
the term of the options. The potential realizable value columns do not take
into account amounts required to be paid for federal or state income taxes,
or option provisions regarding termination of the option following
termination of employment or nontransferability requirements. These amounts
were calculated based on requirements of the Securities and Exchange
Commission, and do not necessarily reflect the Company's estimate of future
stock price growth.
(3) Represents options to purchase shares of the Company's Preferred Stock.
The following table provides information relating to the value of
unexercised options held by the above-named executive officers at the end of
fiscal 1994.
UNEXERCISED STOCK OPTIONS AT FISCAL YEAR END (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
NAME UNEXERCISED OPTIONS AT YEAR END(#)(2) IN-THE-MONEY OPTIONS AT YEAR END(3)
- ---------------------- ----------------------------------------- ----------------------------------------
<S> <C> <C>
Michael J. Rotko -- --
Bernard J. Korman 500,000 $ 581,500
Michael F. Sandler 165,000 146,315
Donald M. Gleklen 166,075(4) 111,446
</TABLE>
- ------------------
(1) No stock options were exercised during fiscal 1994 by the named executive
officers.
(2) Unless otherwise noted, options are to acquire shares of the Company's
Common Stock. All options indicated are currently exercisable.
(3) Based upon the closing prices at September 30, 1994.
(4) Includes options to acquire 25,465 shares of the Company's Preferred Stock.
8
<PAGE>
RETIREMENT PLAN
The following table shows the estimated annual pension benefits payable
upon retirement to participants of the Company's noncontributory defined benefit
pension plan (the 'Pension Plan') for various salary levels and years of
service:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS
PAYABLE AT AGE 65 FOR VARIOUS
AVERAGE ANNUAL YEARS OF PLAN MEMBERSHIP
COMPENSATION DURING -----------------------------------------------
PLAN MEMBERSHIP 10 20 30 40
- ------------------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
$500,000 $ 19,280 $ 37,575 $ 55,740 $ 65,016
400,000 19,280 37,575 55,740 65,016
300,000 19,280 37,575 55,740 65,016
200,000 19,280 37,575 55,740 65,016
100,000 12,280 23,575 34,740 40,516
</TABLE>
Average annual compensation is based upon the participant's annual
compensation (including bonuses and similar special pay), as more fully defined
in the Pension Plan, over the number of years of participation up to a maximum
of 35 years. During fiscal 1994, the maximum amount of annual compensation which
may be included for Pension Plan purposes is $150,000. The figures shown above
apply under the Pension Plan as of December 31, 1994. Estimated annual benefits
are determined in part by the average Social Security wage base during the 35
years ending in the year of Social Security Normal Retirement Age. The benefit
amounts listed are not subject to any deduction for Social Security or other
offset amounts. As a result of limitations imposed under Federal income tax law,
the maximum annual benefit payable under the Pension Plan is $118,800, although
the amount will be actuarially adjusted in accordance with Federal income tax
regulations if payments commence prior to or following the date that unreduced
Social Security benefits become payable. As of December 31, 1994, Messrs.
Korman, Sandler and Gleklen had 20, 6 and 10 years of service credited,
respectively, under the Pension Plan. Mr. Rotko did not participate in the
Pension Plan.
COMPENSATION OF DIRECTORS
Directors who are officers of the Company or of any subsidiary of the
Company receive no additional compensation for their service as directors or as
members of committees of the Board. Non-officer directors received an annual
director's fee of $15,000 for their services in such capacity during fiscal
1994.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The compensation arrangements of the Company reflect the philosophy of the
Compensation Committee and Stock Option Committee of the Company's Board of
Directors, and the Board of Directors as a whole, that a significant portion of
the annual compensation of the Company's Chief Executive Officer and the
Company's other executive officers should be linked to the Company's
performance. The Company's compensation programs are designed to provide
competitive financial
9
<PAGE>
rewards for successfully meeting the Company's strategic and operating
objectives, with the purposes of retaining personnel and supporting a
performance-oriented environment.
The compensation of the Company's President and Chief Executive Officer is
determined by the Compensation Committee. During fiscal 1994, the compensation
of the Company's other executive officers was determined by the Company's
President and Chief Executive Officer based upon the compensation philosophy of
the Compensation Committee, the Stock Option Committee and the Board of
Directors as a whole, and his subjective assessment of the contribution of such
officers to the Company.
The compensation of the Company's Chief Executive Officer and other
executive officers is comprised of annual salary and cash and stock incentives
based on annual and long-term results of the Company. Mr. Sandler's annual
salary is based on an employment agreement, which commenced in 1988, with annual
increases based on the President and Chief Executive Officer's subjective
evaluation of Mr. Sandler's individual performance, level of responsibilities
and the Company's overall performance. Mr. Sandler's annual salary was increased
in the first quarter of fiscal 1994 from $236,000 to $250,000 in accordance with
the terms of his employment agreement with the Company, and in recognition of
his assumption of increased responsibilities as a result of the continued
downsizing of the Company's corporate staff and Mr. Gleklen's departure. In
connection with Mr. Gleklen's resignation in March 1994, and in accordance with
the terms of his employment agreement with the Company, he continued to receive
salary through September 30, 1994 (the termination date of such agreement). In
addition, in recognition of his ten years of service with the Company, the
Company entered into a severance agreement with Mr. Gleklen pursuant to which he
will receive one year's salary (or $236,000) as severance payable over two
years. Pursuant to the severance agreement, Mr. Gleklen continues to be
available to the Company on an as-needed consulting basis.
Mr. Korman's base salary has not increased since 1989. Changes in Mr.
Korman's annual salary, if any, would be determined by the Compensation
Committee based upon an analysis of his performance during the year and the
Company's overall performance. In particular, the Committee would evaluate Mr.
Korman's leadership of the Company during a very challenging period in the
Company's operations -- the implementation of the Company's strategic plan to
reduce debt, clarify corporate focus, enhance shareholder value and increase
market liquidity. Mr. Korman does not participate in deliberations concerning
his compensation.
The Company has an incentive compensation plan which rewards executive
officers based upon individual performance and the Company's achievement of its
internal financial objectives. The plan provides for annual cash bonuses for the
Company's executive officers ranging from 10% to 60% of base salary, with each
executive officer becoming entitled to receive a percentage of the bonus
potential based upon the percentage achievement of the Company's internal
operating objectives. Through this plan, a significant portion of each executive
officer's annual total compensation is placed at risk in order to provide an
incentive toward sustained high performance. For Messrs. Korman, Sandler and
Gleklen, the bonus potential is entirely dependent upon the Company's operating
performance, without regard to individual achievements. For fiscal 1994, the
Company did not meet its projected financial goals and, as a result, Messrs.
Korman, Sandler and Gleklen did not receive any bonus payments under this plan.
However, in recognition of Mr. Sandler's extraordinary performance on behalf of
the Company in connection with a significant acquisition in 1994, he received a
bonus payment in the amount of $103,500. The amount of this
10
<PAGE>
special bonus was determined by the Company's President and Chief Executive
Officer, and is equal to the bonus that Mr. Sandler would have received under
the Company's incentive compensation plan had the Company achieved its
objectives.
In addition, it is the policy of the Stock Option Committee and the Board
of Directors to utilize stock options to provide a link between compensation and
the market performance of the Company's stock, and to focus attention of
management on the enhancement of shareholder value. Since the adoption of the
Company's stock option plans in 1981 and 1987, the Company's executive officers
have all been granted options to acquire shares of the Company's stock. If the
efforts of the executive officers create additional value for the Company's
shareholders, evidenced by increases in the Company's stock price, the officers
will also benefit through appreciation of the potential value of outstanding
stock options. The Stock Option Committee believes that the long-term nature of
stock options also encourages executive officers to remain in the employ of the
Company. As required by his employment agreement and severance agreement with
the Company and in recognition of his continued availability to the Company, all
of Mr. Gleklen's stock options were reissued on the same terms, and certain
stock options which were scheduled to expire in September 1994 and January 1995
were extended to September 1996.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
Bernard J. Korman H. Scott Miller
H. Scott Miller Bessie G. Rotko
Bessie G. Rotko Michael J. Rotko
Michael J. Rotko Jacob A. Shipon
Jacob A. Shipon
</TABLE>
STOCK PERFORMANCE CHART
The following chart compares the percentage change in the cumulative total
shareholder return on the Company's Common Stock, the Standard & Poors 500 Index
and the Standard & Poors Medical Products and Supplies Index.
<TABLE>
<CAPTION>
MEDIQ Incorporated S & P 500 Index S & P Medical Products & Supplies Index
<S> <C> <C> <C>
9/89 100 100 100
9/90 49 91 107
9/91 78 119 168
9/92 97 132 164
9/93 102 149 124
9/94 Fiscal Year End 91 155 159
12/94 Quarter End 88 155 160
3/95 Quarter End 119 170 188
</TABLE>
$100 invested on 9/30/89 in Stock or Index --
including reinvestment of dividends. Fiscal year ending September 30.
11
<PAGE>
CERTAIN TRANSACTIONS / COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
NUTRAMAX PRODUCTS, INC.
The Company owns approximately 47% of the common stock of NutraMax. Messrs.
Korman, Sandler and Gleklen, Mrs. Rotko and Dr. Shipon are shareholders of
NutraMax, and Mr. Korman is Chairman of the Board of Directors of NutraMax.
Messrs. Gleklen and Sandler are directors of NutraMax, and Messrs. Korman and
Sandler are officers of NutraMax. For the fiscal year ended September 30, 1994,
the Company was paid $100,000 by NutraMax pursuant to a services agreement for
accounting, legal, tax and other services. The Company and NutraMax have a tax
allocation/sharing agreement, which provides that NutraMax will reimburse the
Company for any future tax assessment against the Company resulting from
NutraMax's operations, and the Company will reimburse NutraMax for any future
tax benefit resulting from NutraMax's operations, for periods of time during
which NutraMax was a member of the Company's consolidated federal tax group.
NutraMax was included in the Company's consolidated group until August 1991.
NutraMax obtains certain of its insurance through the Company's insurance
programs. For the fiscal year ended September 30, 1994, NutraMax paid $464,000
of insurance premiums under these programs.
PCI SERVICES, INC.
The Company owns approximately 47% of the common stock of PCI. Messrs.
Korman, Felzer, Sandler and Gleklen and Mrs. Rotko are shareholders of PCI, Mr.
Korman is Chairman of the Board of Directors of PCI and Mr. Sandler is Vice
President and Chief Financial Officer of PCI. For the fiscal year ended
September 30, 1994, the Company was paid $100,000 by PCI pursuant to a services
agreement for accounting, legal, tax and other services. The Company and PCI
have a tax allocation/sharing agreement, which provides that PCI will reimburse
the Company for any future tax assessment against the Company resulting from
PCI's operations, and the Company will reimburse PCI for any future tax benefits
resulting from PCI's operations, for periods of time during which PCI was a
member of the Company's consolidated federal tax group. PCI was included in the
Company's consolidated group until January 1992. Pursuant to an agreement with
the Company, PCI was responsible for the principal and interest payments related
to the debt service on PCI's Pennsauken, New Jersey facility, and the costs
related to ownership and operation of the facility through February 1994, when
the facility was transferred to PCI for consideration consisting of the
assumption of the mortgage. During fiscal 1994, PCI paid $173,000 for such
operating expenses, including interest, and $69,000 of principal repayment. As
of February 1994, the remaining principal amount of the mortgage was $2,490,000.
PCI obtains certain of its insurance through the Company's insurance programs.
For the fiscal year ended September 30, 1994, PCI paid $681,000 of insurance
premiums under these programs.
LEGAL FEES
For the fiscal year ended September 30, 1994, the Company incurred legal
fees of approximately $250,000 to Drinker Biddle & Reath, a law firm of which
Mr. Rotko is a partner. During fiscal 1994, the Company was not charged by
Drinker Biddle & Reath for any of Mr. Rotko's time on Company matters.
12
<PAGE>
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche, Certified Public
Accountants, to audit the financial statements of the Company and its
subsidiaries for the fiscal year ending September 30, 1995. A representative of
Deloitte & Touche will be present at the meeting, and will be available to
respond to appropriate questions from shareholders.
OTHER BUSINESS
The Board is not aware of any business to be presented for action at the
meeting, other than the election of directors. However, should any other matter
requiring a vote of shareholders arise, the agents named in the Company's
proxies will vote in accordance with their own best judgment.
SHAREHOLDER PROPOSALS
In order for proposals of shareholders to be considered for inclusion in
the proxy materials for the 1996 Annual Meeting, such proposals must be received
by the Secretary of the Company not later than October 1, 1995.
13
<PAGE>
COMMON STOCK PROXY
MEDIQ Incorporated
One MEDIQ Plaza
Pennsauken, New Jersey 08110
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Michael J. Rotko and Bernard J. Korman
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote as designated below, all the shares of Common
Stock of MEDIQ Incorporated held of record by the undersigned on May 15, 1995,
at the annual meeting of shareholders to be held on June 23, 1995, or any
adjournment(s) thereof.
1. ELECTION OF DIRECTORS
The nominees for election as Directors are: M. Rotko, J. Shipon,
B. Korman, M. Sandler, L. Felzer, M. Levitan, H.S. Miller and B. Rotko.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment(s) thereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR the election of all nominees for election as Directors and FOR
proposal 2.
(Continued and to be signed on reverse side)
<PAGE>
/x/ Please mark your
votes as in this
example.
FOR WITHHELD
1. Election of / / / /
Directors -
For, except
vote withheld from the following nominee(s):
____________________________________________
Please sign exactly as name appears
below. When shares are held by joint
tenants, both should sign. When signing
as attorney, or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
Corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
________________________________________
Signature
________________________________________
Signature if held jointly
Dated: ___________________________, 1995
Please promptly mark, sign, date and
return the proxy card using the enclosed
envelope.
<PAGE>
PREFERRED STOCK PROXY
MEDIQ Incorporated
One MEDIQ Plaza
Pennsauken, New Jersey 08110
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Michael J. Rotko and Bernard J. Korman
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote as designated below, all the shares of Preferred
Stock of MEDIQ Incorporated held of record by the undersigned on May 15, 1995,
at the annual meeting of shareholders to be held on June 23, 1995, or any
adjournment(s) thereof.
1. ELECTION OF DIRECTORS
The nominees for election as Directors are: M. Rotko, B. Korman, and M. Sandler.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment(s) thereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR the election of all nominees for election as Directors and FOR
proposal 2.
(Continued and to be signed on reverse side.)
<PAGE>
/x/ Please mark your
votes as in this
example.
FOR WITHHELD
1. Election of / / / /
Directors -
For, except
vote withheld from the following nominee(s):
____________________________________________
Please sign exactly as name appears
below. When shares are held by joint
tenants, both should sign. When signing
as attorney, or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
Corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
________________________________________
Signature
________________________________________
Signature if held jointly
Dated: ___________________________, 1995
Please promptly mark, sign, date and
return the proxy card using the enclosed
envelope.
