SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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)
N/A
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / 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:
- - - - -------------------------------------------------------------------------------
<PAGE>
MEDIQ INCORPORATED
ONE MEDIQ PLAZA
PENNSAUKEN, NEW JERSEY 08110-1460
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 5, 1997
------------------------------
January 30, 1997
To the Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of MEDIQ Incorporated, which will be held at 10:00 a.m. on Wednesday, March 5,
1997, at the Company's corporate headquarters, One MEDIQ Plaza, Pennsauken, New
Jersey, for the following purposes:
1. To elect a Board of seven Directors; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on January 27, 1997
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments thereof.
The Company's Annual Report for fiscal 1996 is enclosed.
WHETHER OR NOT YOU PLAN TO ATTEND THE 1997 ANNUAL MEETING, 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. RETURNING
YOUR PROXY CARD DOES NOT DEPRIVE YOU OF YOUR RIGHT TO ATTEND THE MEETING AND
VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
EUGENE M. SCHLOSS, JR.
Secretary
<PAGE>
MEDIQ INCORPORATED
ONE MEDIQ PLAZA
PENNSAUKEN, NEW JERSEY 08110-1460
-------------------
PROXY STATEMENT
-------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MEDIQ Incorporated (the 'Company'), a
Delaware corporation, for use at the 1997 Annual Meeting of Stockholders
scheduled for 10:00 a.m. on Wednesday, March 5, 1997 at the Company's corporate
headquarters, One MEDIQ Plaza, Pennsauken, New Jersey 08110-1460, and at any
postponements or adjournments thereof. This proxy statement and the accompanying
forms of proxy are first being mailed to stockholders on or about January 30,
1997.
Shares represented by properly executed proxy cards received by the Company
at or before the meeting will be voted according to the instructions indicated
on the proxy card. Unless contrary instructions are given, the persons named on
the proxy card intend to vote the shares so represented FOR the election of the
nominees for directors named in this proxy statement. The persons named on the
proxy card will vote according to their best judgment as to any other business
which properly comes before the meeting.
Signing and returning the accompanying proxy will not affect a
stockholder's right to attend the Annual Meeting or vote in person. A proxy may
be revoked at any time before it is voted at the meeting by filing with the
Secretary of the Company an instrument revoking it, by a duly executed proxy
bearing a later date, or by attending the 1997 Annual Meeting and voting by
ballot at the meeting. Only stockholders of record at the close of business on
January 27, 1997, the record date for the meeting, will be entitled to vote at
the Annual Meeting.
The cost of this proxy statement will be paid by the Company. Additional
solicitation by mail, telephone, telecopy or by personal solicitation may be
done by directors, officers and employees of the Company, for which they will
receive no additional compensation. Brokerage houses, fiduciaries and other
nominees holding shares of the Company's stock as of the record date will be
requested to forward proxy soliciting material to the beneficial owners of such
shares, and will be reimbursed by the Company for their reasonable expenses.
QUORUM AND OTHER MATTERS
The presence at the 1997 Annual Meeting, in person or by proxy, of the
holders of shares representing a majority of the total number of votes
authorized to be cast by outstanding shares of all authorized classes of the
Company's capital stock at the close of business on January 27, 1997 is
1
<PAGE>
necessary to constitute a quorum. In determining whether a quorum exists,
holders of shares will be treated as being present at the Annual Meeting if the
holders of such shares are present in person or are represented by valid
proxies, whether the proxy cards granting such proxies are marked as casting a
vote or abstaining or are left blank.
In the election of directors, assuming a quorum is present, the seven
nominees receiving the highest number of votes cast at the Annual Meeting will
be elected directors. The affirmative vote of a majority of the votes cast at
the meeting is required for the approval of any other matter to come before the
annual meeting. In determining the number of votes cast, shares abstaining from
voting and shares held in street name that are indicated as not being voted due
to lack of discretionary authority will not be treated as votes cast.
Stockholders do not have cumulative voting rights in the election of directors.
The Company has two classes of outstanding stock, Common Stock ('Common
Stock'), par value $1.00 per share and Series A Preferred Stock ('Preferred
Stock'), par value $.50 per share. At the close of business on January 27, 1997,
the record date for the Annual Meeting, there were outstanding 18,511,394 shares
of Common Stock, and 6,300,501 shares of Preferred Stock.
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 pursuant to the Company's Certificate of Incorporation, the nominees
for director who are not officers or employees of the Company ('Outside
Directors') are to be elected solely by the holders of Common Stock, voting as a
separate class.
As of January 27, 1997, the directors and executive officers of the Company
owned approximately 4,942,618 shares of Common Stock and 4,958,213 shares
of Preferred Stock, or approximately 27% and 79% of the outstanding Common
Stock and Preferred Stock, respectively (including for this purpose shares held
by certain Trusts for which certain directors act as trustees (the 'Trusts')).
Consequently, the directors and executive officers can cast approximately 67%
of the total outstanding votes on all matters scheduled to come before the
meeting, other than on the election of Outside Directors, who are elected by the
holders of Common Stock voting separately. In the election of Outside Directors,
directors and executive officers can cast approximately 27% of the total
outstanding votes (including for this purpose shares owned by the Trusts). Each
director and executive officer has advised the Company that he or she intends to
vote his or her shares of Common Stock and Preferred Stock for the election of
those persons nominated by the Board (including those persons nominated as
Outside Directors).
1. ELECTION OF DIRECTORS
A Board of seven directors will be elected at the 1997 Annual Meeting. All
directors are elected annually and, if elected, will hold office until the next
annual meeting of stockholders and until the election and qualification of their
successors.
2
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS/IDENTIFICATION OF EXECUTIVE OFFICERS
Set forth below is certain information concerning the nominees for election
as a director. The nominees for election as Outside Directors, to be elected by
the holders of Common Stock, voting separately, are: Sheldon M. Bonovitz, Mark
S. Levitan, H. Scott Miller and Jacob A. Shipon. Each nominee for director is
currently serving as a director of the Company. Although the Board has no reason
to anticipate that any nominee will decline or be unable to serve, if any
nominee does decline or is unable to serve, proxies may be voted for the
election of a substitute nominee, or the Board may reduce the number of
directors. The table also sets forth certain information concerning an
executive officer who is not a director of the Company.
<TABLE>
<CAPTION>
NAME AND OFFICES DIRECTOR
WITH THE COMPANY AGE SINCE PRINCIPAL OCCUPATION AND EXPERIENCE
- - - - -------------------- --- -------- ----------------------------------------------------------------------
<S> <C> <C> <C>
Nominees for Election
as Director
-----------
Michael J. Rotko 58 1965 Partner, Drinker Biddle & Reath, a law firm (since 1993); formerly U.S.
Chairman of the Board Attorney, Eastern District of Pennsylvania (1993); previously First
of Directors Assistant U.S. Attorney, Eastern District of Pennsylvania (1990-1993)
Jacob A. Shipon 58 1981 Physician in private practice; formerly Director, Copelco Financial
Vice Chairman of the Services Group, Inc.
Board of Directors
Thomas E. Carroll 53 1995 President and Chief Executive Officer (since 1995); formerly President
President and Chief and Chief Operating Officer of MEDIQ/PRN (1994-95); formerly Executive
Executive Officer Vice President and Chief Operating Officer of MEDIQ/PRN (1990-94)
Michael F. Sandler 51 1994 Senior Vice President, Finance and Chief Financial Officer (since 1988)
Director, Senior Vice and Treasurer (since 1991); and Director, InnoServ Technologies, Inc.
President -- Finance, (medical equipment support services)
Treasurer and Chief
Financial Officer
Sheldon M. Bonovitz 59 1995 Partner, Duane, Morris & Heckscher, a law firm; Director of Comcast
Director Corporation (cable and cellular technologies) and Surgical Laser
Technologies, Inc. (medical technologies)
Mark S. Levitan 63 1981 Executive Director of the Foundation for Ichthyosis and Related Skin
Director Types; Chairman of the Board of Directors of HOMECARE USA (home medical
equipment rentals); formerly Vice President -- Consulting Division,
MedQuist Inc. (healthcare information services); formerly Partner,
Management Partners, Inc. (healthcare consultants), which was acquired
in 1994 by MedQuist Inc.
H. Scott Miller 47 1992 President, Strategic Advisors, Inc. (merchant banking) (since 1994);
Director formerly Manager, Private Investor Group, Miller, Anderson & Sherrerd
(financial management services) (1989-1993)
Other Executive Officer
- - - - -----------------------
Jay M. Kaplan 48 n/a Senior Vice President and Chief Financial Officer of MEDIQ/PRN Life Support
Senior Vice President Services, Inc. ("MEDIQ/PRN")(since 1992); Assistant Treasurer of MEDIQ, formerly
and Chief Financial Vice President --Controller of MEDIQ (1986-1992).
Officer of MEDIQ/PRN
</TABLE>
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 23 meetings (including action by unanimous
written consent) during the fiscal year ended September 30, 1996. The Board has
six standing committees, the Executive Committee, the Compensation Committee,
the Stock Option Committee, the Audit Committee, the Pension Plan Retirement
Committee and the Nominating Committee. The Nominating Committee considers
nominees recommended by stockholders in writing, addressed to the Secretary of
the Company not later than 120 days in advance of the date the Company's proxy
statement was released to stockholders for the previous year's annual meeting
(approximately October 1 of each year) for consideration by stockholders at the
next following annual meeting of stockholders. During fiscal 1996, all directors
attended at least 75% of the total number of meetings of the Board of Directors
and committees of the Board on which they served.
The Executive Committee. Messrs. Bonovitz, Carroll, Miller, Rotko and
Sandler served as members of the Executive Committee during fiscal 1996. This
committee, between meetings of the Board of Directors and while the Board of
Directors is not in session, has the power to exercise all of the duties of the
Board of Directors in the management of the business of the Company which is
lawfully delegated to it by the Board of Directors. Although the members of this
committee met frequently, there were no formal meetings of this committee during
fiscal 1996.
The Compensation Committee. Messrs. Bonovitz, Carroll, Miller and Rotko
served as members of the Compensation Committee during fiscal 1996. This
committee reviews categories of compensation levels of the Company's employees
and determines guidelines for future compensation, including incentive
compensation. However, Mr. Carroll is not considered as a member of the
Compensation Committee as to any matter relating to his own compensation. This
committee held one meeting during fiscal 1996.
The Stock Option Committee. Until December 1995, Mrs. Bessie G. Rotko,
Mr. Rotko and Dr. Shipon served as the members of the Stock Option Committee,
and following December 1995 through the remainder of fiscal 1996, Messrs.
Bonovitz, Miller, Rotko and Dr. Shipon served as members of the Stock Option
Committee. This committee is authorized to grant options to officers and key
employees of the Company pursuant to the Company's Stock Option Plan and
otherwise. This committee held five meetings during fiscal 1996.
The Audit Committee. Messrs. Bonovitz, Felzer, Levitan and Miller served
as members of the Audit Committee during fiscal 1996. 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 fiscal 1996.
The Nominating Committee. Messrs. Bonovitz, Miller, Rotko and Dr. Shipon
served as members of the Nominating Committee during fiscal 1996. The primary
responsibility of the Nominating Committee is to consider nominees for director
recommended by stockholders. This committee held no meetings during fiscal 1996.
4
<PAGE>
Compensation of Directors. The Chairman of the Board of Directors received
an annual director's fee of $50,000 for his services in such capacity during
fiscal 1996. The other directors who are not executive officers received an
annual director's fee of $15,000 for their services in such capacity during
fiscal 1996. Directors who are executive officers of the Company or of any of
its subsidiaries receive no additional compensation for their service as
directors. In addition, in fiscal 1996 the non-officer directors who served on
the Executive Committee received an hourly stipend for performing services for
the Company on board committees and additional services as requested by the
Executive Committee. This amounted to $126,000 in the case of Mr. Bonovitz and
$30,000 in the case of Mr. Miller.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, as well as persons beneficially owning more
than 10% of the Company's shares of Common Stock and certain other persons
(collectively, 'Covered Persons') to file with the Securities and Exchange
Commission and the American Stock Exchange, within specified time periods,
initial reports of ownership, and subsequent reports of changes in ownership, of
shares of Common Stock and certain other securities of the Company. Based solely
upon the Company's review of copies of such reports furnished to it, to the
Company's knowledge all of the Section 16(a) filing requirements applicable to
Covered Persons were complied with in fiscal 1996.
2. OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the 1997 Annual Meeting, other than those set forth in the attached Notice and
customary procedural matters. However, if any other matters should properly come
before the meeting or any adjournments thereof, the proxies solicited hereby
will be voted on such matters, to the extent permitted by the rules of the
Securities and Exchange Commission, in accordance with the judgment of the
persons voting such proxies.
5
<PAGE>
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 27, 1997, the beneficial
ownership of shares of the Company's Common Stock and Preferred Stock by: (i)
each person who is known by the Company to be the beneficial owner of more than
5% of such shares; (ii) each director and nominee for director of the Company;
(iii) each of the executive officers named in the Summary Compensation Table
(included elsewhere herein); and (iv) all directors and executive officers of
the Company as a group. This information is based upon public filings and in the
case of the Company's officers and directors, information provided to the
Company by such persons.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------------------------- -------------------------------
PERCENT PERCENT
NUMBER OF CLASS NUMBER OF CLASS
NAME(1)(2) OF SHARES OUTSTANDING OF SHARES OUTSTANDING
- - - - ----------------------------------------------------- ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C>
Michael J. Rotko(3) 4,137,260 22.4% 4,150,743 65.9%
Thomas E. Carroll(4) 170,462 * -- --
Michael F. Sandler(5) 173,445 * -- --
Sheldon M. Bonovitz 14,100 * -- --
Lionel Felzer(6) 380,013 2.1% 490 *
Mark S. Levitan 5,150 * -- --
H. Scott Miller(7) 3,600 * 4,300 *
Jacob A. Shipon(3)(8) 1,650 * 1,650 *
Jay M. Kaplan(9) 56,938 * -- --
Bernard J. Korman 2,051,625 11.1% 801,030 12.7%
c/o Graduate Health System
22nd and Chestnut Sts.
Philadelphia, PA 19103
All directors and executive officers as a
group (9 persons) 4,942,618 27% 4,958,213 79%
</TABLE>
- - - - ------------------
* Less than one percent.
(1) Unless otherwise indicated, beneficial ownership is based on sole voting
and dispositive power with respect to the shares, and shares are held by
the person listed or members of his or her family. Shares of Common Stock
which the individual has the right to acquire, upon exercise of options and
in certain other circumstances, are deemed to be outstanding and
beneficially owned by the individual.
(2) Unless otherwise indicated, the address of each person listed in the table
is c/o One MEDIQ Plaza, Pennsauken, NJ 08110-1460.
(3) Michael J. Rotko is the son of Bessie G. Rotko. Mrs. Rotko, who resigned as
a director effective November 29, 1995, is the income beneficiary, during
her lifetime, of certain trusts (the 'Rotko Trusts') created by her late
husband, Bernard B. Rotko, M.D., who was the founder of the Company. The
Rotko Trusts collectively hold 3,638,664 shares of Common Stock, including
shares which may be acquired upon conversion of convertible debentures, and
3,647,197 shares of Preferred Stock, as to which Mrs. Rotko, Mr. Rotko,
Judith M. Shipon, John Iskrant, Esq. and PNC Bank, National Association,
share voting and dispositive power as co-trustees. Mrs. Shipon is the wife
of Jacob A. Shipon and the daughter of Mrs. Rotko and the late Dr. Rotko.
The shares set forth in the above chart for Mr. Rotko include 7,308 shares
of Common Stock and 7,308 shares of Preferred Stock, respectively, held as
custodian for children. Mr. Rotko is also a co-trustee of four additional
Trusts established by the late Dr. Rotko for the benefit of certain
grandchildren of Dr. Rotko. Collectively, these four Trusts hold 49,941
shares of Common Stock and 54,891 shares of Preferred Stock. As a trustee
of the Trusts described above (including the Rotko Trusts), Mr. Rotko may
be deemed a beneficial owner of the shares owned by the Trusts, which
consequently are included in the Stock Ownership Table.
6
<PAGE>
(4) Includes 8,042 shares of Common Stock owned by Mr. Carroll's spouse and
children, 1,167 shares of Common Stock owned jointly by Mr. Carroll and his
spouse and an aggregate of 138,167 shares of Common Stock which may be
acquired upon exercise of stock options, or acquired upon conversion of
outstanding convertible debentures.
(5) Includes 165,000 shares of Common Stock which may be acquired upon exercise
of stock options.
(6) Lionel Felzer is the brother-in-law of Mrs. Rotko. Mr. Felzer is currently
a director of the Company but is not a nominee for re-election. Includes
124,035 shares of Common Stock which is held by a trust for the benefit of
Mr. Felzer's spouse and 31,726 shares of Common Stock which may be acquired
upon exercise of stock options.
(7) H. Scott Miller provides financial advisory services to the Rotko Trusts
described in footnote 3. Includes 1,600 shares of Preferred Stock held by
the estate of Mr. Miller's mother.
(8) Dr. Shipon is the son-in-law of Mrs. Rotko. Excludes 441,351 shares of
Common Stock and 441,351 shares of Preferred Stock, respectively, which are
owned by Mrs. Shipon, Dr. Shipon's spouse. Mrs. Shipon is a trustee of the
Rotko Trusts described in footnote 3, and may be deemed a beneficial owner
of the shares owned by the Rotko Trusts. Mrs. Shipon is also a trustee of
two additional trusts established by the late Dr. Rotko for the benefit of
certain grandchildren. Collectively, the trusts for the benefit of certain
grandchildren of Dr. Rotko of which Mrs. Shipon serves as co-trustee hold
9,900 shares of Common Stock and 9,900 shares of Preferred Stock. Dr.
Shipon disclaims beneficial ownership of the shares held by his wife.
(9) Includes 30,012 shares of Common Stock which may be acquired upon exercise
of stock options and 6,800 shares of Common Stock which may be acquired
upon conversion of outstanding convertible debentures.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the annual
and long-term compensation paid or accrued for the Company's Chief Executive
Officer and the other executive officers whose total annual salary and
bonus exceeded $100,000 for services rendered to the Company and its
subsidiaries during fiscal year 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------------
COMPENSATION(1) COMMON STOCK
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY $ BONUS $ STOCK OPTIONS(#)
- - - - ------------------------------------------------------- -------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Thomas E. Carroll 1996 $297,000 $135,000 250,000
President and Chief 1995 265,000 206,000 --
Executive Officer 1994 213,000 18,000 --
Michael F. Sandler 1996 $250,000 $100,000 --
Senior Vice President -- 1995 250,000 100,000 --
Finance, Treasurer & Chief 1994 250,000 104,000 --
Financial Officer
Jay M. Kaplan 1996 $177,000 $ 70,000 85,000
Senior Vice President and 1995 165,000 74,000 --
Chief Financial Officer of 1994 154,000 29,000 --
MEDIQ/PRN
</TABLE>
- - - - ------------------
(1) The Company has omitted in the Summary Compensation Table information
concerning the value of perquisites and other personal benefits which, in
the aggregate, do not exceed the lesser of $50,000 or 10% of the total
salary and bonus reported for the named executive officers. The Table also
omits information regarding the SARs granted to Mr. Carroll respecting
MEDIQ/PRN, as described elsewhere in this Proxy Statement.
7
<PAGE>
OPTION/SAR GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - - - --------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICES APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- - - - --------------------------------- ------------- --------------- ------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Carroll(1) 100,000 8.67% $4.00 10/23/05 $252,000 $ 637,000
150,000 13.01% $4.53 12/12/05 $427,000 $1,083,000
Michael F. Sandler -- -- -- -- -- --
Jay M. Kaplan 85,000 7.37% $4.53 12/12/05 $242,000 $ 614,000
</TABLE>
- - - - ------------------
(1) The Table omits information regarding the SARs granted to Mr. Carroll
respecting MEDIQ/PRN, as described elsewhere in this Proxy Statement.
AGGREGATE OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT
YEAR-END (#) FISCAL YEAR-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE (1,2) UNEXERCISABLE (3)
- - - - --------------------------------- ------------------- ------------------- ----------------------- --------------------
<S> <C> <C> <C> <C>
Thomas E. Carroll -- -- 137,500/120,000 $246,000/$161,000(4)
Michael F. Sandler -- -- 165,000/-- $456,000/--
Jay M. Kaplan -- -- 30,012/68,000 $ 58,000/$91,000
</TABLE>
- - - - ------------------
(1) No stock options or SARs were exercised by the named executive officers in
fiscal 1996.
(2) Options are to acquire shares of the Company's Common Stock.
(3) Based upon the closing prices at September 30, 1996.
(4) The SARs granted to Mr. Carroll are based on the value of MEDIQ/PRN, as
described elsewhere herein. At the Company's fiscal year end, these SARs had
no value.
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 $68,192 $112,000 $104,000 $104,000
400,000 54,192 107,404 104,000 104,000
300,000 40,192 79,404 104,000 104,000
200,000 26,192 51,404 76,489 89,222
100,000 12,192 23,404 34,489 40,222
</TABLE>
Average annual benefits are 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 1996, the maximum amount of annual compensation which
may be included for Pension Plan purposes was $150,000 (not reflected in figures
above). The figures shown above apply under the Pension Plan as of December 31,
1996. 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 for 1996 is $120,000, although the amount will be
actuarially adjusted in
8
<PAGE>
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, 1996, Messrs. Carroll, Sandler and Kaplan had 8, 8 and 23 years of
service credited, respectively, under the Pension Plan.
EMPLOYMENT AGREEMENTS
In April 1995, the Company entered into a two-year employment agreement
with Mr. Carroll under which he agreed to serve as President and Chief Operating
Officer of MEDIQ/PRN. This agreement is automatically renewed from year to year
unless and until either party gives prior notice of an election to terminate at
the end of the then-current term. Mr. Carroll was subsequently appointed as
President and Chief Executive Officer of the Company. Pursuant to this
agreement, Mr. Carroll received a one-time special payment of $100,000. He
receives an annual salary of at least $265,000, and an incentive bonus of up to
60% of his base salary based on the achievement of performance criteria approved
by the Compensation Committee. In addition, the agreement provided for a special
bonus to be paid to Mr. Carroll if a Sale Transaction were to occur (as defined
in the agreement). The agreement also provided that, if the Board of Directors
determined not to proceed with a Sale Transaction, it would grant to Mr. Carroll
10-year options to purchase 100,000 shares of Common Stock and stock
appreciation rights in MEDIQ/PRN equal to 2% of the increase, over certain
specified periods, of the earnings of MEDIQ/PRN before interest, taxes,
depreciation and amortization expense, as calculated pursuant to a formula
contained in the agreement, and he would no longer be entitled to a bonus in the
event of a Sale Transaction. Pursuant to the agreement, in October 1995,
following the Board of Directors' determination not to proceed with a Sale
Transaction, the Company granted the options to Mr. Carroll at an exercise price
of $4.00, the market value of the Common Stock as of the date of grant, and
issued to him the stock appreciation rights.
In June 1995, the Company entered into a two-year employment agreement
with Mr. Sandler (which replaced a prior agreement entered into in 1988). This
agreement is automatically renewed from year to year unless and until either
party gives prior notice of an election to terminate at the end of the
then-current term. The agreement provides for a minimum annual salary of
$250,000 and an incentive bonus based on the achievement of performance criteria
approved by the Compensation Committee. The agreement also provides for a
special bonus to be paid to Mr. Sandler upon a Sale Transaction, based on the
value realized by the Company's stockholders in the event of such a transaction,
if a Sale Transaction occurs during the Contract Term (as that term is defined
therein) and the one-year period thereafter. If MEDIQ's stockholders receive
value for the stock equal to $6.50 or more per share, Mr. Sandler's special
bonus shall equal $500,000, plus an additional $1,000 for each additional $.01
by which the value exceeds $6.50. If the value received by the stockholders in a
Sale Transaction is less than $6.50 per share, Mr. Sandler shall receive a
special bonus equal to $200,000, plus any additional bonus at the discretion of
the Board.
In June 1995, the Company entered into an eighteen-month employment
agreement with Mr. Kaplan providing for a minimum salary of $165,000 and an
incentive bonus based on the achievement of performance criteria approved by the
Compensation Committee. This agreement automatically renews from year to year
unless and until either party gives prior notice of an election to terminate at
the end of the then-current term. The agreement also provides for a special
bonus to be paid to Mr. Kaplan upon the sale of MEDIQ/PRN if such sale occurs
during the term of the agreement. Mr. Kaplan's special bonus in the event of
such a transaction would be equal to the sum of .025% of the aggregate value, up
to $375 million, of MEDIQ/PRN as determined by such event plus .15% of the value
of MEDIQ/PRN in excess of $375 million.
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<PAGE>
These employment agreements also include other provisions relating to
benefits, confidentiality and other provisions customary in agreements of this
nature. In addition, Mr. Carroll has agreed not to compete with the business of
MEDIQ/PRN for one year following the termination of his employment under certain
circumstances.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company's compensation arrangements reflect the philosophy of the
Compensation Committee and Stock Option Committee, and the Board of Directors as
a whole, that a significant portion of the annual compensation of the Company's
executive officers should generally be linked to the Company's performance. The
Company's compensation programs are designed to provide competitive financial
rewards for successfully meeting the Company's strategic and operating
objectives, with the purposes of retaining personnel and encouraging a
performance-oriented environment. In fiscal 1996 incentive bonus targets were
established for officers of the Company, including the executive officers named
herein, based on achievement of revenue and EBITDA targets as well as personal
goals established by senior management.
The Company's incentive compensation plan rewards executive officers based
upon individual performance and the achievement of targeted financial
objectives. The plan provides for annual cash bonuses for the Company's
executive officers of up to 60% of base salary, with each executive officer
becoming entitled to a percentage of his or her bonus potential based upon the
extent that the targeted objectives are met. 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. In fiscal
1996, in the case of Mr. Kaplan, the criteria used to evaluate his bonus
potential was based on the achievement of revenue and EBITDA targets for
MEDIQ/PRN, as well as individual goals. The bonus potential for Messrs. Carroll
and Sandler in 1996 was based on operating income goals of the Company as well
as continued execution of the Company's strategic plan of divesting
substantially all operating assets other than MEDIQ/PRN and MEDIQ Management
Services, Inc. and using the proceeds thereof to reduce indebtedness. The
Compensation Committee considered these factors, as well as the successful
refinancing of a significant portion of its debt, and determined to provide each
of the named executives with a bonus equal to 40% of their base salary, the
level payable if each of the named executive officers met their targeted goals
for the fiscal year.
It is the Company's policy to use stock options to provide a link between
compensation and the market performance of the Company's stock, and to focus
management's attention on the enhancement of shareholder value. In fiscal 1996
the Company issued options to employees to purchase 1,153,000 shares of the
Common Stock of the Company, including options for Mr. Carroll to purchase
150,000 shares and for Mr. Kaplan to purchase 85,000 shares of the Company's
Common Stock.
COMPENSATION COMMITTEE
Thomas E. Carroll*
Sheldon M. Bonovitz
H. Scott Miller
Michael J. Rotko
- - - - ------------------
* Mr. Carroll was not a member of the Compensation Committee as to any matter
relating to his compensation.
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<PAGE>
STOCK PERFORMANCE CHART
The following chart compares the percentage change in the cumulative total
stockholder return on an investment in the Company's Common Stock, with the
Standard & Poor's ('S&P') 500 Index and the S&P Medical Products and Supplies
Index. The graph assumes that $100 was invested on September 30, 1991 in the
Company's Common Stock and at the same time in each of the Standard & Poor's
Indices. The comparison further assumes that all dividends were reinvested. The
historical performance as reported below provides no assurances that this
performance will continue in the future.
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------
9/91 9/92 9/93 9/94 9/95 9/96
<S> <C> <C> <C> <C> <C> <C> <C>
Mediq Inc MED 100 125 131 116 158 171
S & P 500 I500 100 111 125 130 169 203
S & P HLTH CARE (MED PRODS & SUPPLS) IMDP 100 97 74 94 153 183
</TABLE>
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Carroll, the Company's President and Chief Executive Officer, served on
the Compensation Committee of the Board of Directors during fiscal year 1996,
except that Mr. Carroll was not a member of the Compensation Committee as to any
matter relating to his compensation.
OTHER
Messrs. Miller and Sandler served as directors of MHM Services, Inc. during
fiscal 1996, from which positions they resigned in January 1997. The Company is
the payee under a certain note payable from MHM Services, Inc., dated August 31,
1993, with an amount outstanding of $10,477,776 as of January 15, 1997, which
bears interest at a rate of prime plus 1.5%, currently 9.75%. In addition, MHM
Services, Inc. is indebted to the Company for approximately an additional
$390,000 that is not represented by the Note. MHM Services, Inc. made payments
to the Company with respect to principal and interest payments on this
indebtedness of $1,882,000 as well as professional fees totaling $38,000 in
1996. The Rotko Trusts described above together own 906,798 shares of the stock
of MHM Services, Inc.
Mr. Sandler served as a director of NutraMax Products, Inc. until he
resigned from such position in December 1996. In September 1996, the Company
entered into an agreement with NutraMax Products, Inc. pursuant to which
NutraMax has agreed to repurchase all of the shares of NutraMax owned by the
Company. In December 1996, NutraMax paid $19.9 million of the purchase price to
the Company and gave to the Company its promissory note in the amount of $16.4
million. In addition, the Company received payments from NutraMax of $58,000 in
1996 primarily for professional service fees.
Messrs. Bonovitz and Miller served as directors of PCI Services, Inc.
during fiscal 1996, from which positions they resigned in October 1996. In
fiscal 1996, in connection with the acquisition of PCI Services, Inc. by
Cardinal Health, Inc., the Company's interest in PCI Services, Inc. was
converted into shares of common stock of Cardinal Health, Inc. with a market
value of approximately $79.2 million based on the closing price on October 11,
1996. In addition, the Company received payments from PCI of $65,000 in 1996
primarily for professional service fees.
Michael J. Rotko is a partner in the law firm of Drinker Biddle & Reath,
which provided legal services to the Company during fiscal year 1996 and in
prior years. The Company was not charged by Drinker Biddle & Reath for any of
Mr. Rotko's time on Company matters.
INDEPENDENT ACCOUNTANTS
The Board of Directors has not yet met to consider the appointment of an
accountant to audit the financial statements of the Company and its subsidiaries
for the fiscal year ending September 30, 1997. Deloitte & Touche, Certified
Public Accountants, audited the financial statements of the Company and its
subsidiaries for the fiscal year ended September 30, 1996. A representative of
Deloitte & Touche will be present at the meeting, and will be available to
respond to appropriate questions from shareholders.
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<PAGE>
STOCKHOLDERS' PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the
1998 Annual Meeting of Stockholders must forward such proposal to the Secretary
of the Company, at the address indicated on the cover page of this proxy
statement, so that the Secretary receives it no later than October 1, 1997.
FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE FURNISHED TO
ANY STOCKHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST DIRECTED TO THE ATTENTION OF
THE SECRETARY OF THE COMPANY, AT THE COMPANY'S PRINCIPAL ADDRESS SHOWN ON THE
COVER PAGE OF THIS PROXY STATEMENT. THE COMPANY WILL FURNISH TO EACH PERSON
WHOSE PROXY IS BEING SOLICITED, UPON WRITTEN REQUEST, ANY EXHIBIT DESCRIBED IN
THE LIST ACCOMPANYING THE FORM 10-K OF THE COMPANY FOR FISCAL 1996, UPON THE
PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING OF
SUCH EXHIBIT(S).
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