-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KX0sl/FySOCT3ADjV308+CIOfbo+0WVCJ0933yJfgx3X+3sqKo/mz63KCwBW+6xL j1ZiBuDeRw35omF9VIrLtQ== 0000950115-96-000137.txt : 19960216 0000950115-96-000137.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950115-96-000137 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIQ INC CENTRAL INDEX KEY: 0000350920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 510219413 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08147 FILM NUMBER: 96519761 BUSINESS ADDRESS: STREET 1: ONE MEDIQ PLZ CITY: PENNSAUKEN STATE: NJ ZIP: 08110 BUSINESS PHONE: 6096656300 MAIL ADDRESS: STREET 1: ONE MEDIQ PLZ CITY: PENNSAUKEN STATE: NJ ZIP: 08110 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: December 31, 1995 Commission File Number: 1-8147 MEDIQ Incorporated (Exact name of registrant as specified in its charter) Delaware 51-0219413 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One MEDIQ Plaza, Pennsauken, New Jersey 08110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 665-9300 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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____ As of February 9, 1996, there were 18,377,193 shares of Common Stock, par value $1.00 per share and 6,349,928 shares of Preferred Stock, par value $.50 per share, outstanding. MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1995 INDEX Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements. Condensed Consolidated Statements of Operations- Three Months Ended December 31, 1995 and 1994 (Unaudited) 4 Condensed Consolidated Balance Sheets- December 31, 1995 (Unaudited) and September 30, 1995 5 Condensed Consolidated Statements of Cash Flows- Three Months Ended December 31, 1995 and 1994 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10-12 PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K. 13 MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1995 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended December 31, ------------------ 1995 1994 ---- ---- Revenues $ 32,093 $ 31,842 Costs and expenses: Operating 14,128 13,821 Selling and administrative 5,430 6,242 Restructuring 2,200 -- Depreciation and amortization 7,499 7,103 ------ ------ 29,257 27,166 ------ ------ Operating income 2,836 4,676 Other (charges) credits: Interest expense (6,635) (7,403) Equity in earnings of unconsolidated affiliates 1,517 1,071 Other - net 414 430 ------ ------ Loss from continuing operations before income taxes and extraordinary item (1,868) (1,226) Income tax benefit (500) (610) ------ ------ Loss from continuing operations before discontinued operations and extraordinary item (1,368) (616) Discontinued operations -- 405 Extraordinary item - early retirement of debt (net of taxes) 1,001 -- ------ ------ Net loss $ (367) $ (211) ====== ====== Earnings per share: Loss from continuing operations $ (.05) $ (.03) Discontinued operations -- .02 Extraordinary item .04 -- ------ ------ Net loss $ (.01) $ (.01) ====== ====== Weighted average shares outstanding 24,581 24,447 ====== ======
See Notes to Condensed Consolidated Financial Statements MEDIQ INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
Dec. 31, Sept. 30, 1995 1995 ---- ---- (Unaudited) (See Note) Assets Current assets: Cash $ 1,803 $ 2,966 Accounts receivable - net 31,806 27,884 Investment in discontinued operations 18,529 19,009 Inventories 4,726 4,181 Deferred income taxes 3,933 4,310 Other current assets 3,137 5,095 -------- -------- Total current assets 63,934 63,445 Investments in unconsolidated affiliates 44,609 43,092 Investment in discontinued operations 8,135 8,061 Note receivable from MHM 10,542 10,733 Property, plant and equipment - net 133,883 132,823 Goodwill - net 60,818 61,744 Other assets 14,050 14,272 -------- -------- Total assets $335,971 $334,170 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Notes payable to financial institutions $ 12,325 $ -- Accounts payable 8,266 6,694 Accrued expenses 26,104 20,691 Current portion of long-term debt 34,751 37,300 -------- -------- Total current liabilities 81,446 64,685 Senior debt 134,666 136,949 Subordinated debt 70,931 81,907 Deferred income taxes and other liabilities 17,778 19,112 Stockholders' equity 31,150 31,517 -------- -------- Total liabilities and stockholders' equity $335,971 $334,170 ======== ========
Note: The balance sheet at September 30, 1995 has been condensed from the audited financial statements at that date. See Notes to Condensed Consolidated Financial Statements MEDIQ INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended December 31, ------------------ 1995 1994 ---- ---- Cash flows from operating activities: Net loss $ (367) $ (211) Adjustments to reconcile net loss to net cash provided by operating activities 4,188 1,109 -------- -------- Net cash provided by operating activities 3,821 898 Cash flows from investing activities: Proceeds from sale of equipment and other assets 824 469 Proceeds from sale of discontinued operations 1,500 -- Purchase of equipment (4,968) (1,807) Other (283) 125 -------- -------- Net cash used in investing activities (2,927) (1,213) Cash flows from financing activities: Borrowings 12,042 3,019 Debt repayments (14,099) (3,984) -------- -------- Net cash used in financing activities (2,057) (965) -------- -------- Decrease in cash (1,163) (1,280) Cash: Beginning balance 2,966 1,495 -------- -------- Ending balance $ 1,803 $ 215 ======== ======== Supplemental disclosure of cash flow information: Interest paid $ 3,838 $ 4,375 ======== ======== Supplemental disclosure of non-cash investing and financing activities: Equipment financed with long-term debt and capital leases $ 2,740 $ 1,936 ======== ========
See Notes to Condensed Consolidated Financial Statements MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of December 31, 1995 and the condensed consolidated statements of operations and cash flows for the three months ended December 31, 1995 and 1994 have been prepared by the Company, without audit. In the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at December 31, 1995 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 1995 Annual Report on Form 10-K. The results of operations for the period ended December 31, 1995 are not necessarily indicative of the operating results for the full year. Note B - Discontinued Operations In the second quarter of fiscal 1995, the Company adopted a plan to sell four non-core businesses, Medifac, Inc., Health Examinetics, Inc., MEDIQ Mobile X-Ray Services, Inc. and MEDIQ Imaging Services, Inc., within twelve months. During fiscal 1995, the Company sold Medifac and MEDIQ Imaging Services. In the fourth quarter, the Company revised the plan to include the operations of HealthQuest, Inc., which is anticipated to be sold in fiscal 1996. As a result, operating results and net assets of these businesses have been reported as discontinued operations. Discontinued operations also include the Company's equity investment in InnoServ Technologies, Inc. ("InnoServ", formerly MMI Medical, Inc.), which is anticipated to be distributed to the Company's shareholders during fiscal 1996. The Company's prior year consolidated financial statements have been restated to report the net assets and operating results of these businesses as discontinued operations. The Company anticipates that the disposal of Mobile X-Ray, Health Examinetics and HealthQuest will be completed in fiscal 1996. The estimated loss on the sale of these operations was recorded in fiscal 1995. The investment in discontinued operations as of December 31, 1995 consisted of (in thousands): Current assets $13,168 Current liabilities 9,197 ------- Net current assets 3,971 Net fixed assets 4,933 Other noncurrent assets 9,625 ------- 18,529 Investment in InnoServ 8,135 ------- $26,664 ======= The investment in InnoServ, which is expected to be distributed to the Company's shareholders in the form of a dividend, is classified as a long-term asset. MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note B - Discontinued Operations (Continued) Revenues from discontinued operations were $9.8 million and $19.1 million in the first quarter of fiscal 1996 and 1995, respectively. Note C - Inventories Inventories, which consist primarily of repair parts for rental equipment and finished goods held for sale, are stated at the lower of cost (first-in, first-out method) or market. Note D - Investments in Unconsolidated Affiliates As of December 31, 1995, the Company's ownership interests in NutraMax Products, Inc. and PCI Services, Inc. were 47.4% and 46.9%, respectively. Summarized income statement information for NutraMax and PCI is presented below. NutraMax Products, Inc. Thirteen Weeks Ended --------------------------------- Dec. 30, Dec. 31, 1995 1994 -------- -------- Net sales $18,148,000 $15,123,000 Gross profit 5,577,000 4,602,000 Net income 1,330,000 1,238,000 PCI Services, Inc. Three Months Ended December 31, ------------------------------- 1995 1994 ---- ---- Net revenue $37,092,000 $28,610,000 Gross profit 8,675,000 6,024,000 Net income 2,117,000 1,041,000 MEDIQ INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note E - Long-Term Debt Under the terms of its 7.25% subordinated convertible debentures due 2006, the Company is required to offer to repurchase a portion of the debentures if stockholders' equity is $40 million or less at the end of two consecutive fiscal quarters. Since June 30, 1994, the Company's stockholders' equity has been less than $40 million. In October and November 1995, the Company repurchased an aggregate of $11.25 million of its debentures at a discount in the open market and through a private transaction, which resulted in a pretax gain of $1.5 million, or $1.0 million net of taxes. This gain was recorded as an extraordinary item in the Company's Condensed Consolidated Statement of Operations. The Company is required to either repurchase or redeem $11.25 million of debentures prior to June 30, 1996 and semi-annually thereafter until all of the debentures are repurchased or stockholders' equity is more than $40 million. As of December 31, 1995, $22.5 million of the debentures have been classified as a current liability. In December 1995, the Company's $13.4 million revolving credit facility was extended to December 1996 and increased to $15.0 million with interest reduced to the prime rate plus 1/2%. In addition, as amended, the facility will be reduced by an amount equal to 50% of the net cash proceeds from the sale of discontinued operations and certain other assets. As of December 31, 1995, $8.7 million was outstanding under this facility which was included in Notes Payable to Financial Institutions in the Condensed Consolidated Balance Sheet. Note F - Stock Options In the first quarter of fiscal 1995, the Company granted stock options to acquire 100,000 and 980,000 shares of common stock at $4.00 per share and $4.53 per share, respectively, to 35 officers and managers of the Company and certain subsidiaries, including 250,000 options to Mr. Thomas E. Carroll, the Company's President and Chief Executive Officer. Note G - Restructuring Charge In the first quarter of fiscal 1996, the Company recorded a restructuring charge of $2.2 million for employee severance costs incurred in connection with a plan approved by the Board of Directors to downsize corporate functions and consolidate certain activities with the operations of MEDIQ/PRN. The plan is expected to result in the termination of 29 employees in fiscal 1996. The Company anticipates reductions in corporate expenses of approximately $1.3 million in 1996 and $2.0 million annually thereafter as a result of the downsizing and consolidation of corporate activities. Note H - Subsequent Event On January 31, 1996, SpectraCair, a 50% owned joint venture of MEDIQ/PRN, acquired certain rental assets from Bio Clinic Corporation, a subsidiary of Sunrise Medical, Inc.. These assets will expand the joint venture's business of renting air therapy bed and mattress systems throughout the United States. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion addresses the financial condition of the Company as of December 31, 1995 and results of operations for the three month periods ended December 31, 1995 and 1994. This discussion should be read in conjunction with the financial statements included elsewhere herein and the Management's Discussion and Analysis and Financial Statement sections of the Company's Annual Report on Form 10-K to which the reader is directed for additional information. Discontinued Operations In the second quarter of fiscal 1995, the Company adopted a plan to sell its non-core businesses: MEDIQ Mobile X-Ray Services, Inc., MEDIQ Imaging Services, Inc., Medifac, Inc., and Health Examinetics, Inc. In the fourth quarter of fiscal 1995, the Company expanded its plan to include the operations of HealthQuest, Inc. These operations, in addition to the Company's equity investment in InnoServ Technologies, Inc. (formerly MMI Medical, Inc.), which is anticipated to be distributed to the Company's shareholders in fiscal 1996, are reported as discontinued operations. In June 1995, the Company sold Medifac and related assets to the management of Medifac for approximately $11 million, consisting of $6 million in cash and $5 million in notes, and the assumption of $26.9 million of non-recourse debt. In August 1995, the Company sold the assets of MEDIQ Imaging to NMC Diagnostic Services, Inc., a division of W.R. Grace & Co., for approximately $17 million in cash and the assumption of $9.7 million of debt. The Company anticipates that the disposal of Mobile X-Ray, Health Examinetics and HealthQuest will be completed in fiscal 1996. Results of Operations Revenues were $32.1 million for the first quarter of fiscal 1996, as compared to $31.8 million in the prior year period. MEDIQ/PRN's revenues for the first quarter of fiscal 1996 increased to $31.3 million, as compared to 1995 revenues of $30.8 million. This increase was primarily attributable to increased sales of disposables and parts and increased levels of service and reconditioning revenue. Revenues from the Company's other operating activities (before intercompany eliminations) were $839,000 in the current quarter, as compared to $933,000 in the prior year period. Operating income decreased $1.9 million, to $2.8 million, for the first quarter of fiscal 1996, as compared to $4.7 million in the prior year period. The decrease in operating income was primarily attributable to a restructuring charge of $2.2 million for employee severance costs incurred in connection with a plan approved by the Board of Directors to downsize corporate functions and consolidate certain activities with the operations of MEDIQ/PRN. MEDIQ/PRN's operating income decreased $251,000, which was primarily attributable to increased depreciation as a result of increased levels of rental assets. Operating income from the Company's other operating activities was $92,000, which was consistent with the prior year. Corporate overhead decreased $634,000 primarily as a result of the reduction in corporate personnel in connection with the restructuring plan discussed above. The Company expects this trend of decreased corporate overhead to continue throughout fiscal 1996. Interest expense decreased 10% to $6.6 million for the first quarter of fiscal 1996 from $7.4 million in the prior year period as a result of the repurchase of $11.25 million of subordinated convertible debentures and debt service of approximately $13.5 million of term loans related to the KCI acquisition, partially offset by the 1% increase in the interest rate related to MEDIQ/PRN's $100 million of senior secured notes. The Company's equity in the earnings of its unconsolidated affiliates was $1.5 million, as compared to $1.1 million in the prior year period. The increase was primarily attributable to the improved operating results of PCI and NutraMax. Revenues and operating income from discontinued operations were $9.8 million and $1.5 million, respectively, as compared to $19.1 million and $1.9 million in the prior year period. Estimated operating results from discontinued operations through the expected date of disposal were included in the estimated loss on disposal recognized in the fourth quarter of fiscal 1995. In October and November 1995, the Company repurchased an aggregate of $11.25 million of its 7.25% subordinated convertible debentures at a discount in the open market and through a private transaction resulting in a pretax gain of $1.5 million ($1.0 million, net of taxes). This gain has been reflected as an extraordinary item in the Company's Consolidated Statement of Operations. Income Taxes The Company's effective tax rates were disproportionate compared to the statutory rate as a result of goodwill amortization and non-recognition of certain operating losses for state income tax purposes. Liquidity and Capital Resources Cash provided by operating activities was $3.8 million in the current quarter, as compared to $898,000 in the prior year period. The increase was primarily attributable to improved operating results, exclusive of the restructuring charge, and the stabilization of accounts receivable growth resulting from the KCI acquisition, partially offset by other working capital fluctuations. As of December 31, 1995, the Company had cash of $1.8 million and a working capital deficit of $17.5 million. Current liabilities include $22.5 million representing the portion of the 7.25% subordinated convertible debentures expected to be repurchased by December 31, 1996. Net cash used in investing activities was $2.9 million, and consisted principally of capital expenditures for equipment of $5.0 million, partially offset by collections on a note receivable from the sale of discontinued operations of $1.5 million. Net cash used in financing activities consisted of borrowings of $12.0 million and debt repayments of $14.1 million. As of December 31, 1995, the Company had $3.7 million outstanding under lines of credit aggregating $16.0 million. The amount of available credit fluctuates based upon the amount of eligible accounts receivable. Under the terms of its 7.25% subordinated convertible debentures due 2006, the Company is required to offer to repurchase a portion of the debentures if stockholders' equity is $40 million or less at the end of two consecutive fiscal quarters. Since June 30, 1994, the Company's stockholders' equity has been less than $40 million. In October and November 1995, the Company repurchased an aggregate of $11.25 million of its debentures at a discount in the open market and through a private transaction. The Company is required to either repurchase or redeem $11.25 million of debentures prior to June 30, 1996 and semi-annually thereafter until all of the debentures are repurchased or stockholders' equity is more than $40 million. As of December 31, 1995, $22.5 million of the debentures have been classified as a current liability. In December 1995, the Company's $13.4 million revolving credit facility was extended to December 1996 and increased to $15.0 million with interest reduced to the prime rate plus 1/2%. In addition, as amended, the facility will be reduced by an amount equal to 50% of the net cash proceeds from the sale of discontinued operations and certain other assets. As of December 31, 1995, $8.7 million was outstanding under this facility. The Company expects that its primary sources of liquidity for operating activities will continue to be generated through cash flows from MEDIQ/PRN and the sale of discontinued operations and miscellaneous assets. The proceeds from such sales and MEDIQ/PRN's cash flows will be used to repay long-term debt. The Company believes that sufficient funds will be available from operating cash flows and the sale of assets to meet the Company's anticipated operating and capital requirements, including obligations to redeem or repurchase in the open market a portion of the 7.25% subordinated convertible debentures. In addition, the Company is currently evaluating the possibility of refinancing all or a portion of its consolidated senior and subordinated debt, but there can be no assurances that such refinancing will occur. MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1995 PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 10 - Bernard J. Korman Severance Agreement. Exhibit 11 - Computation of Net Income Per Share. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K The Company filed the following report on Form 8-K during the quarter ended December 31, 1995: Date of Earliest Event Requiring Report: October 19, 1995 Date of Filing: November 6, 1995 Items Reported: Item 5 Subject: Board of Directors accepts recommendation of its Special Committee to reject the two outstanding offers to acquire the Company and terminate any further efforts to sell the Company at the present time; resignation of Bernard J. Korman, President and Chief Executive Officer; announcement of the election of Thomas E. Carroll as President and Chief Executive Officer of the Company. MEDIQ INCORPORATED AND SUBSIDIARIES Quarter Ended December 31, 1995 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDIQ Incorporated --------------------- (Registrant) February 14, 1996 - ------------------ (Date) /s/ Michael F. Sandler -------------------------- Michael F. Sandler Senior Vice President - Finance and Chief Financial Officer EX-10 2 AGREEMENT AGREEMENT dated as of this 1st day of January, 1996 by and among MEDIQ, Incorporated, a Delaware corporation on its own behalf and on behalf of its subsidiary corporations and its officers, directors and employees and the officers, directors and employees of its subsidiary corporations, ('MEDIQ' or 'Company') and Bernard J. Korman on his own behalf and on behalf of his executors, administrator, successors and assigns ('Mr. Korman'). W I T N E S S E T H: WHEREAS, Mr. Korman has been employed by MEDIQ as its President and Chief Executive Officer and he has served as a member of MEDIQ's Board of Directors and as a director of Nutramax, PCI, MHM, and MMI, all affiliates of MEDIQ or its principal stockholders; WHEREAS, Mr. Korman is a participant in and has certain rights with respect to the Company's deferred compensation plan, employees savings plan and pension plan, as well as options to purchase Company stock, which expire on January 23, 1996, all as are set forth in Schedule I appended hereto; WHEREAS, in connection with a change in the Company's business direction, Mr. Korman's employment as President and Chief Executive Officer of MEDIQ terminated on October 23, 1995 and in connection therewith has made certain claims against MEDIQ with respect to compensation and severance; WHEREAS, since October 23, 1995 MEDIQ has tendered Mr. Korman and Mr. Korman has received the appropriate documentation permitting him to elect to preserve his rights to continue certain benefits at his expense under COBRA; WHEREAS, the parties hereto desire to compromise and settle all claims which each may have against the other. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is acknowledged, the parties hereto, intending to be legally bound hereby agree as follows: 1. Resignation from Employment. Mr. Korman hereby acknowledges and affirms that his employment as President and Chief Executive Officer of MEDIQ and its subsidiary MEDIQ/PRN terminated as of October 23, 1995. He has or will promptly relinquish and return all Company property including credit cards, computers, lists and accounts. 2. Board Positions. Mr. Korman resigns effective January 1, 1996 as a director of MEDIQ. Mr. Korman will not be slated for election as a director at MEDIQ's 1996 annual meeting, and it is understood that MEDIQ and its principal stockholders are free to take such action as they deem appropriate with respect to the slating or voting for the election of Mr. Korman to the boards of directors of Nutramax, PCI, MHM and MMI. Mr. Korman agrees that, if not so slated or voted for, he will make no challenge to the decision of MEDIQ or its principal stockholders. In addition, upon MEDIQ's written request, Mr. Korman will affirmatively inform any of these companies that he is unwilling to be slated for election as a director. 3. Severance. MEDIQ shall pay Mr. Korman as severance pay $1,185,000.00 in 36 equal monthly installments, the first three such payments being due seven days after execution of this Agreement and subsequent payments being due on the 15th day of each month thereafter. Mr. Korman acknowledges that these payments will be subject to any required withholding of federal, state and local taxes. In the event of his death prior to his receipt of the entire severance, the remaining installments shall be paid to Mr. Korman's wife, if she survives him, or to his estate if his wife predeceases him, in either case in a lump sum at its then present value discounted at the then prime interest rate plus one percent. Such severance shall be in full satisfaction of all obligations, including claims for bonus, to Mr. Korman except for his vested rights under various Company plans listed in Schedule I. MEDIQ's severance obligations hereunder shall cease immediately in the event that Mr. Korman shall materially breach his obligations under Paragraph 2, 5 or 6(a) of this Agreement. 4. Cooperation. For a reasonable period following the execution and delivery of this Agreement, Mr. Korman shall make himself reasonably available (with due consideration as to Mr. Korman's other commitments) upon request of MEDIQ to assist MEDIQ with regard to matters where he, as the former CEO, has unique knowledge or perspective. Mr. Korman shall be reimbursed for all out-of-pocket expenses (including first class air travel and accommodations) incurred in connection with any such assistance. 5. Non-Disclosure of Confidential Information. Mr. Korman shall not without the prior written consent of MEDIQ, use or disclose in any manner, directly or indirectly, any non-public information concerning MEDIQ or any of its subsidiaries. 6. Non-Disparagement. (a) Mr. Korman shall make no statement which is directly disparaging of or is otherwise negative about MEDIQ, its officers or directors or about its subsidiaries or their officers, directors and employees. (b) MEDIQ shall make no statement which is directly disparaging of or is otherwise negative about Mr. Korman. 7. Release. (a) In consideration of the benefits herein provided and as a material inducement for MEDIQ to enter into and perform its obligations under this Agreement, Mr. Korman hereby releases MEDIQ, its subsidiaries and their respective shareholders, affiliates, officers, directors, employees, agents and representatives and each of them from and against any and all claims which Mr. Korman may have against them or any of them arising out of events occurring prior to the date of this Agreement, including but not limited to, any claim for employment discrimination, wrongful termination, breach of any agreement, express or implied, written or oral, or any other claim arising under any federal, state, or local common or statutory law including claims of age discrimination. (b) As a material inducement for Mr. Korman to enter into this Agreement, MEDIQ hereby releases Mr. Korman from and against any and all claims which any of them may have against him arising out of events occurring prior to the date of this Agreement. (c) Notwithstanding the mutual releases as set forth in the foregoing subparagraphs (a) and (b), nothing contained herein shall affect the right of any party hereto to enforce the terms of this Agreement, and it is understood that Mr. Korman retains all rights to indemnification as a director or officer of MEDIQ or as a director or officer of its subsidiaries as provided under the respective By-laws of those corporations and applicable law and that this release does not purport to affect any of Mr. Korman's rights under the plans listed on Schedule I. 8. Confidentiality. Each party hereto agrees that the terms and conditions of this Agreement shall remain strictly confidential and shall not be disclosed by any party to any person who is not a party to this Agreement (with the exception of a spouse, financial advisor, accountant or attorney of a party) unless such disclosure is required by law. 9. Certain Representations. Each party hereto represents and agrees that he or it has consulted with counsel, that he or it fully understands the terms of this Agreement and is free and voluntarily entering into this Agreement in consideration of the covenants and agreements herein set forth. Mr. Korman represents that he has had 21 days to consider this Agreement before its execution, and that he may revoke his Agreement for a period of seven days after he has executed it. 10. Legal Fees. Each party hereto shall bear his or its respective legal fees in connection with the negotiation and the consummation of this Agreement. 11. Entire Understanding. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject hereof and may be modified or amended only in writing signed by each of the parties hereto. 2 12. New Jersey. This Agreement shall be construed and interpreted under the laws of the State of New Jersey. 13. Non-Admission. MEDIQ does not concede and expressly denies that it has violated any law, statute, ordinance, contract, duty, or obligation whatsoever, or that it committed any tort or engaged in any wrongful conduct with respect to Mr. Korman. 14. No Reemployment. By this Agreement, Mr. Korman agrees that Mr. Korman shall neither apply for employment nor seek reinstatement of employment with MEDIQ in the future. Mr. Korman hereby waives any rights that may accrue to Mr. Korman and releases MEDIQ from any liability that may arise against it because of any rejection of any application for employment with MEDIQ that Mr. Korman may make notwithstanding this provision. 15. Notices. Any notice required or permitted hereunder shall be given to a party in writing at the respective address set forth below by certified or registered mail, return receipt requested, or at such other address as a party may provide by written notice: To Mr. Korman: Bernard J. Korman 3001 Red Lion Road Philadelphia, PA 19114-1123 To MEDIQ: MEDIQ INCORPORATED One Mediq Plaza Pennsauken, NJ 08110-1400
16. Agreement Binding. This Agreement shall be binding upon the parties hereto, their respective successors and assigns, heirs and administrators, as the case may be. 17. PCI Compensation. MEDIQ acknowledges that if Mr. Korman continues to play a role in the sale of PCI and makes a significant positive contribution thereto, MEDIQ may, in MEDIQ's discretion, pay Mr. Korman a bonus in connection therewith. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. /s/_Bernard J. Korman_________________ Bernard J. Korman MEDIQ By:_/s/_Michael J. Rotko______________ Chairman 3 SCHEDULE I LIST OF MR. KORMAN'S ACCOUNTS MEDIQ Employees Savings Plan Executive Security Plan (it being understood that Mr. Korman's deferred benefit account under the Executive Security Plan will continue to be credited at the retirement interest yield until his normal retirement date (age 65) and will be amortized using the same rate) MEDIQ Employees Pension Plan (full benefits payable as of November 1, 1996) Stock options in respect of 500,000 shares of MEDIQ stock pursuant to certificate dated as of August 25, 1993 Rights to continued medical and dental benefits under COBRA 4 EX-11 3 COMPUTATION OF NET INCOME EXHIBIT 11 MEDIQ INCORPORATED AND SUBSIDIARIES Computation of Net Income Per Share (in thousands, except per share amounts) (Unaudited)
Three Months Ended December 31, ------------------- 1995 1994 ---- ---- Computation of Primary Earnings Per Share: Net Loss $ (367) $ (211) ======== ======== Weighted average of primary shares: Common stock 17,853 17,740 Preferred stock 6,374 6,427 Assumed conversion of options 354 280 -------- -------- Total 24,581 24,447 ======== ======== Primary Earnings Per Share $ (.01) $ (.01) ======== ======== Computation of Fully Diluted Earnings Per Share (1): Net Loss $ (367) $ (211) Interest and amortization of deferred costs on convertible debentures - net of tax 456 579 -------- -------- Total $ 89 $ 368 ======== ======== Weighted average of fully diluted shares: Common stock 17,853 17,740 Preferred stock 6,374 6,427 Assumed conversion of options 354 295 Assumed conversion of convertible debentures 5,397 6,897 -------- -------- Total 29,978 31,359 ======== ======== Fully Diluted Earnings Per Share $ -- $ (.01) ======== ========
(1) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB opinion No. 15, because it is anti-dilutive or results in dilution of less than 3%. EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1996 DEC-31-1995 1,803 0 34,223 2,417 4,726 63,934 229,260 95,377 335,971 81,446 205,597 19,145 0 3,367 8,638 335,971 0 32,093 0 29,257 0 0 6,635 (1,868) (500) (1,368) 0 1,001 0 (367) (.01) (.01)
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