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 Section 240.14a-11(c) or Section 240.14a-12
Span-America Medical Systems, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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>
[SPAN-AMERICA MEDICAL SYSTEMS, INC. LOGO HERE]
SPAN-AMERICA MEDICAL SYSTEMS, INC.
POST OFFICE BOX 5231
GREENVILLE, SOUTH CAROLINA 29606
___________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 28, 1999
_____________________________________________
TO THE SHAREHOLDERS OF SPAN-AMERICA MEDICAL SYSTEMS, INC.
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Span-America Medical Systems, Inc., (the "Company") will be
held at the Company's headquarters at 70 Commerce Ctr., Greenville, South
Carolina, on January 28, 1999, at 9:00 a.m., for the purpose of considering and
acting upon the following matters:
(1) the election of four directors; and
(2) the transaction of such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 10,
1998 as the record date for the determination of the shareholders entitled to
notice and to vote at the Annual Meeting.
YOU ARE REQUESTED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON. THE PROXY WILL BE RETURNED TO ANY SHAREHOLDER WHO IS PRESENT IN PERSON
AND REQUESTS SUCH RETURN.
By Order of the Board of
Directors,
Richard C. Coggins
SECRETARY
December 28, 1998
Greenville, South Carolina
PLEASE RETURN THE ENCLOSED PROXY IMMEDIATELY
<PAGE>
SPAN-AMERICA MEDICAL SYSTEMS, INC.
POST OFFICE BOX 5231
GREENVILLE, SOUTH CAROLINA 29606
(864) 288-8877
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 28, 1999
SOLICITATION OF PROXIES
This Notice of Annual Meeting, Proxy Statement and Proxy (these "Proxy
Materials") are being furnished to shareholders in connection with the
solicitation of proxies by the Board of Directors ("the Board") of Span-America
Medical Systems, Inc. (the "Company") to be voted at the annual meeting of
shareholders (the "Annual Meeting") to be held at 9:00 a.m. on January 28, 1999
at the Company's headquarters at 70 Commerce Center, Greenville, South Carolina.
The approximate mailing date of these Proxy Materials is December 28, 1998.
VOTING AT THE ANNUAL MEETING
Shareholders of record at the close of business on December 10, 1998 will
be entitled to notice of and to vote at the Annual Meeting. At the close of
business on such record date, there were outstanding 2,617,929 shares of the
Company's no par value common stock (the "Common Stock"). The Common Stock is
the only class of voting securities of the Company. Holders of shares of Common
Stock are entitled to one vote for each share held on December 10, 1998 (the
"Record Date") on all matters presented for action by the shareholders. The
presence, either in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company as of the Record Date is
necessary to constitute a quorum at the Annual Meeting. All shares represented
by valid proxies received prior to the Annual Meeting and not revoked before
they are exercised will be voted in accordance with specifications thereon. If
no contrary instructions are indicated, all shares represented by a proxy will
be voted FOR the election to the Board of Directors of the Nominees described
herein, and in the discretion of the proxy holders as to all other matters that
may properly come before the Annual Meeting or any adjournment thereof.
Shares will be tabulated by inspectors of election appointed by the
Company, with the aid of the Company's transfer agent. The inspectors will not
be directors or nominees for director. The inspectors shall determine, among
other things, the number of shares represented at the Annual Meeting, the
existence of a quorum and the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, determine the result, and do such
acts as are proper to conduct the election and vote with fairness to all
shareholders. Directors are elected by a plurality of votes. Abstentions and
broker non-votes are each included in the determination of the number of shares
present and voting. In connection with the election of directors, broker
non-votes are not counted for purposes of determining the votes cast for
directors.
1
<PAGE>
REVOCATION OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by: (i) filing
with the secretary of the Company, at or before the Annual Meeting, a written
notice of revocation bearing a later date than the proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the secretary
of the Company at or before the Annual Meeting; or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy). Any written notice
revoking a proxy should be sent to: Span-America Medical Systems, Inc., Post
Office Box 5231, Greenville, South Carolina 29606, Attention: Secretary.
ELECTION OF DIRECTORS
The number of the Company's directors is currently set at nine persons in
accordance with the Company's Articles of Incorporation. As provided in the
Company's Articles of Incorporation, the Board is divided into three classes of
directors, with each class being comprised of three persons who serve three-year
terms. Accordingly, as set forth below, management has nominated Thomas F.
Grady, Jr., J. Ernest Lathem, M.D., and James M. Shoemaker, Jr. to serve as
directors under terms which will expire at the 2002 annual meeting of
shareholders or when their successors are duly elected. Management has also
nominated Robert H. Dick to fill the unexpired term of Brien Laing who will
retire from the Board at the 1999 annual meeting of shareholders, at which time
he will have reached the Board's normal retirement age.
Unless authority to vote with respect to the election of one or more
nominees is "WITHHELD," it is the intention of the persons named in the
accompanying proxy to vote such proxy for the election of the nominees set forth
below. All of these nominees are United States citizens. In the event that any
of the nominees for director should become unavailable to serve as director,
which is not anticipated, the persons named in the accompanying proxy will vote
for other persons in their places in accordance with their best judgment. There
are no family relationships among the directors and the executive officers of
the Company.
Directors will be elected by a plurality of votes cast at the Annual
Meeting. The Company's Articles of Incorporation provide that cumulative voting
is not available in the election of directors.
2
<PAGE>
INFORMATION REGARDING NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS
The following table sets forth the names and ages of the four nominees for
director and the directors continuing in office, the positions and offices with
the Company held by each such person, and the period that each such person has
served as a director of the Company.
DIRECTOR
NAME AGE POSITION OR OFFICE WITH THE COMPANY SINCE
- ---- --- ----------------------------------- -----
NOMINEES FOR DIRECTOR WITH TERMS EXPIRING IN 2002
Thomas F. Grady, Jr. 56 Director 1975
J. Ernest Lathem, M.D. 65 Director 1996
James M. Shoemaker, Jr. 66 Director 1992
NOMINEE FOR DIRECTOR WITH TERM EXPIRING IN 2001
Robert H. Dick 55 Nominee ---
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2001
Richard C. Coggins 41 Director, Chief Financial Officer, 1993
Vice President and Secretary
James D. Ferguson 41 President and Chief Executive Officer 1998
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2000
Roy W. Black 62 Director 1997
Thomas D. Henrion 56 Director 1996
Douglas E. Kennemore, M.D. 66 Director 1975
BUSINESS EXPERIENCE OF NOMINEES AND DIRECTORS
Mr. Grady has been employed by Federal Paper Board Company, Inc. since
1971, serving in various sales and marketing management positions. Federal Paper
Board Company, Inc. was acquired by International Paper Company in 1996. Mr.
Grady is currently Vice President of Sales with International Paper Company, in
which position he has served since 1990.
Dr. Lathem retired in 1993 after 28 years in the private practice of
urological surgery in Greenville, South Carolina. He is a director of Southern
National Corporation and one of its subsidiaries, BB&T of South Carolina. He has
also served as a director of several closely held corporations.
Mr. Shoemaker has been a member of the law firm of Wyche, Burgess, Freeman
& Parham, P.A., since 1965 and concentrates his practice in corporate and
securities law. Mr. Shoemaker also serves as a director of One Price Clothing
Stores, Inc., Palmetto Bancshares, Inc., and Ryan's Family Steak Houses, Inc.
Mr. Dick is president of R. H. Dick & Company, Inc., an investment banking
and management consulting firm based in Wellington, Florida. From 1996 to early
1998, Mr. Dick was a partner with Boles, Knop & Company, Inc., an investment
banking firm in Middleburg, Virginia. Prior to that, Mr. Dick served as
President, Chief Executive Officer and Chief Financial Officer of Biomagnetic
Therapy Systems, Inc. (1995-1996) and Pharmx, Inc. (1994-1995). Both companies
were clients of Boles, Knop & Company. From 1982 until 1994, Mr. Dick served in
various executive roles with Codman &
3
<PAGE>
Shurtleff, Inc., a subsidiary of Johnson & Johnson and a manufacturer of
surgical instruments, implants, equipment, and other surgical products. Mr.
Dick's positions with Codman included Director, Vice President-New Business
Development, Vice President-U.S. Sales and Marketing, and Vice
President-International. Mr. Dick also serves on the board of Valley Forge
Scientific Corporation, which designs and manufactures bipolar electrosurgery
equipment.
Mr. Coggins joined the Company as Controller in May 1986. He was elected
Treasurer in January 1987, Vice President of Finance in January 1989, and
Secretary and Chief Financial Officer in January 1990. He currently serves as
the Company's Chief Financial Officer, Vice President and Secretary. Mr. Coggins
was previously employed by NCNB National Bank in Charlotte, North Carolina from
1984 to 1986, where he served as Commercial Banking Officer and Metropolitan
Area Director.
Mr. Ferguson joined the Company as Materials Manager in April 1990. He was
promoted to Plant Manager of the Company's contract packaging business in 1992,
Director of Contract Packaging in 1994, and Vice President of Operations in
1995. Mr. Ferguson was named President and Chief Executive Officer of the
Company in August 1996. From 1981 to 1990, Mr. Ferguson worked for C.B. Fleet in
Lynchburg, Virginia, where he served in various manufacturing management
positions, ending as Director of Manufacturing.
Mr. Black retired on January 1, 1997 from his positions with Johnson and
Johnson, Inc., where he had been employed by several of its companies in various
sales, marketing, and executive roles since 1961. He served since 1994 as
Vice-Chairman, Board of Directors of Johnson and Johnson Professional, Inc. and
Vice President of Johnson and Johnson International, Inc. Both companies
manufacture products for neurospinal, joint replacement, and other surgical
applications. Since 1989, Mr. Black also served as Vice-Chairman, Board of
Directors of Codman and Shurtleff, Inc., which manufactures surgical
instruments, implants, equipment, and other surgical products primarily for
neurological surgery. From 1982 to 1989, Mr. Black was President and Chief
Executive Officer of Codman and Shurtleff, Inc., a subsidiary of Johnson and
Johnson, Inc. Mr. Black also serves as a director of Spinal Concepts, Inc.
Mr. Henrion has been President, Chief Executive Officer, and Director of
FoodService Purchasing Cooperative, Inc. (the "Cooperative") in Louisville,
Kentucky since 1980. The Cooperative provides equipment, food, packaging items,
and financial services to quick-service restaurant operators including KFC, Taco
Bell, Dairy Queen, and Pizza Hut. Mr. Henrion also serves as a director for
Brinly-Hardy Company, Inc.
Dr. Kennemore has been engaged in the private practice of neurosurgery in
Greenville, South Carolina since 1965.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the 1998 fiscal year, the Board of Directors held six meetings. All
directors attended at least five of the six meetings and all meetings of
committees of the Board on which such directors served during the 1998 fiscal
year.
The Audit Committee is comprised of Messrs. Henrion, Grady, Black, and
Laing. The Audit Committee met one time during the 1998 fiscal year. The Audit
Committee reviews the scope and results of the audit by the independent auditors
and the adequacy of the Company's system of internal accounting controls and
procedures, proposes the appointment of the independent auditors subject to
approval of the Board and approves the fees paid for services rendered by such
auditors.
4
<PAGE>
The Compensation Committee is comprised of Messrs. Shoemaker, Kennemore,
and Lathem. The Compensation Committee met two times during the 1998 fiscal
year. The Compensation Committee reviews and approves the remuneration of
officers of the Company and reviews the overall compensation programs of the
Company. The Compensation Committee's report is included below under "Board
Compensation Committee Report on Executive Compensation."
The Board does not have a standing nominating committee. The functions of
the nominating committee are performed by the outside directors.
The Executive Committee is comprised of Messrs. Shoemaker, Kennemore, and
Lathem. It met two times during fiscal year 1998. The Executive Committee serves
in an advisory capacity to the senior management of the Company.
EXECUTIVE OFFICERS
The following table sets forth all of the current executive officers of
the Company and their respective ages, Company positions and offices, and
periods during which they have served in such positions and offices. There are
no persons who have been selected by the Company to serve as its executive
officers who are not set forth in the following table.
Company
Officer
Name Age Company Offices Currently Held Since
- ---- --- ------------------------------ -----
James D. Ferguson 41 President and Chief Executive Officer 1995
Robert E. Ackley 44 Vice President of Operations 1995
Richard C. Coggins 41 Vice President of Finance, Secretary 1987
and Chief Financial Officer
Melinda J. Gage 54 Vice President of Human Resources 1996
Keith A. Mauldin 38 Director of Custom Products 1995
Clyde A. Shew 41 Vice President of Medical Sales
and Marketing 1996
Wanda J. Totton 43 Director of Quality / R&D 1995
The Company's executive officers are appointed by the Board of Directors
and serve at the pleasure of the Board.
5
<PAGE>
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Mr. Ferguson's business experience is set forth above under "Business
Experience of Nominees and Directors."
Mr. Ackley joined the Company as Materials Manager in 1987. He was named
Director of Consumer Sales in 1993, Vice President of Marketing in 1995, Vice
President of Consumer Sales in 1996, and Vice President of Operations in 1998.
Prior to joining the Company, Mr. Ackley worked in various operations management
roles for Almay Cosmetics in North Carolina and C.B. Fleet in Virginia.
Mr. Coggins' business experience is set forth above under "Business
Experience of Nominees and Directors."
Ms. Gage joined the Company in 1987 as Executive Assistant. She became
Personnel Manager in 1989, Director of Human Resources in 1991, and Vice
President of Human Resources in 1996. From 1974 to 1987 she worked for North
County Health Services in California where her final position was Administrative
Services Coordinator.
Mr. Mauldin joined the Company as Sales Representative for the Industrial
Division in 1988. He became Director of Industrial Sales in 1995 and Director of
Custom Products in 1998. Prior to joining Span-America, Mr. Mauldin was a sales
representative for Isotec International in Atlanta, Georgia.
Mr. Shew joined the Company as Director of Corporate Accounts in May 1996.
He was promoted to Vice President of Medical Sales in October 1996. From 1984 to
1996, Mr. Shew worked in various sales and marketing roles for Professional
Medical Products, Inc. in Greenwood, South Carolina. His final position there
was Director of Corporate Accounts, where he was responsible for contracting
with multi-facility health care organizations in the United States.
Ms. Totton joined the Company in 1987 as Quality Control Manager. She
became Production Manager of the Company's contract packaging business unit in
1990. She was promoted to Director of Quality in 1995 and was named Director of
Quality / R&D in 1998.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth below is furnished as of December 10, 1998, with
respect to Common stock owned beneficially or of record by persons known to the
Company to be the beneficial owner of more than 5% of the Common Stock as of the
Record Date, each of the directors and nominees individually, the named officers
included in the compensation table, and all directors and executive officers as
a group. Unless otherwise noted, each person has sole voting and investment
power with respect to such person's shares owned. All share amounts in the table
include shares which are not outstanding but which are the subject of options
exercisable in the 60 days following the Record Date. All percentages are
calculated based on the total number of outstanding shares, plus the number of
shares for the particular person or group which are not outstanding but which
are the subject of options exercisable in the 60 days following the Record Date.
AMOUNT/NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- --------------- ---------
BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMPANY'S COMMON STOCK
---------------------------------------------------------------
Douglas E. Kennemore, M.D. 206,876 (1) 7.9% (1)
27 Memorial Medical Drive
Greenville, SC 29605
Dimensional Fund Advisors 186,700 (2) 7.1% (2)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Lawrence J. Goldstein 175,847 (3) 6.7% (3)
Santa Monica Partners, LP
1865 Palmer Avenue
Larchmont, NY 10538
Robert Wilner 157,272 (4) 6.0% (4)
Edgar Road
Greenwich, CT 06830
DIRECTORS AND NOMINEES
Roy W. Black 17,000 *
Richard C. Coggins 29,366 (5) 1.1% (5)
Robert H. Dick 0 *
James D. Ferguson 17,551 (6) * (6)
Thomas F. Grady, Jr., 26,595 (7) 1.0% (7)
Thomas D. Henrion 12,000 *
Douglas E. Kennemore, M.D. 206,876 (1) 7.9% (1)
J. Ernest Lathem, M.D. 18,043 *
James M. Shoemaker, Jr. 22,000 (1) * (1)
7
<PAGE>
AMOUNT/NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- -------------- --------
NAMED OFFICERS
--------------
James D. Ferguson 17,551 (6) * (6)
Robert E. Ackley 26,388 (8) 1.0% (8)
Richard C. Coggins 29,366 (5) 1.1% (5)
Keith A. Mauldin 8,469 (9) * (9)
Clyde A. Shew 5,000(10) * (10)
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
-------------------------------------------
All Directors and Executive 409,370 15.0%
Officers of the Company as a
Group (14 persons)
- ----------------------
(1) The shares shown as beneficially owned by Messrs. Kennemore and Shoemaker
include 3,000 shares which are currently not outstanding but which are
subject to options which are exercisable within 60 days of the Record
Date.
(2) The figure shown as beneficially owned by Dimensional Fund Advisors is
based on Securities and Exchange Commission filings as of September 30,
1998.
(3) The figure shown as beneficially owned by Lawrence J. Goldstein of Santa
Monica Partners is based on current Securities and Exchange Commission
filings (through December 18, 1998), the most recent of which was filed on
April 21, 1998.
(4) The figure shown as beneficially owned by Mr. Wilner excludes 4,820 shares
owned by his spouse and 1,430 shares owned by his adult children. Mr.
Wilner disclaims beneficial ownership with respect to these shares. The
share information for Mr. Wilner is based upon information provided by the
owner as of December 18, 1998.
(5) The shares shown as beneficially owned by Mr. Coggins include 23,700
shares which are currently not outstanding but which are subject to
options held by Mr. Coggins which are exercisable within 60 days of the
Record Date.
(6) The shares shown as beneficially owned by Mr. Ferguson include 16,600
shares which are currently not outstanding but which are subject to
options held by Mr. Ferguson which are exercisable within 60 days of the
Record Date.
(7) The figure shown as beneficially owned by Mr. Grady excludes an aggregate
of 7,109 shares owned by his adult children. Mr. Grady disclaims
beneficial ownership with respect to these shares. This figure also
includes 3,000 shares which are currently not outstanding but which are
subject to options held by Mr. Grady which are exercisable within 60 days
of the Record Date.
(8) The shares shown as beneficially owned by Mr. Ackley include 24,500 shares
which are not currently outstanding but which are subject to options held
by Mr. Ackley which are exercisable within 60 days of the Record Date.
8
<PAGE>
(9) The shares shown as beneficially owned by Mr. Mauldin include 7,000 shares
which are not currently outstanding but which are subject to options held
by Mr. Mauldin which are exercisable within 60 days of the Record Date.
(10) The shares shown as beneficially owned by Mr. Shew are not currently
outstanding but are comprised of options held by Mr. Shew which are
exercisable within 60 days of the Record Date.
* Less than one percent.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the 1998, 1997, and 1996 fiscal years, the
cash compensation paid by the Company, as well as certain other compensation
paid or accrued for those years, to the Company's Chief Executive Officer and to
each of the four other most highly compensated officers during fiscal year 1998
(the "Named Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
------
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION OTHER ANNUAL OPTIONS COMPENSATION
DURING FISCAL 1998 YEAR SALARY($) BONUS($) COMPENSATION($) SARS (#) ($)
- ------------------------ ---- -------- ------- --------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
James D. Ferguson 1998 131,250 0 (1) 10,000 4,743(2)
President/CEO 1997 112,604 66,735 (1) 30,300 3,427
1996 79,251 0 (1) 10,000 3,142
Robert E. Ackley 1998 100,500 0 (1) 5,000 2,880(3)
VP of Operations 1997 94,583 38,501 (1) 14,500 2,656
1996 89,721 0 (1) 7,500 3,349
Richard C. Coggins 1998 106,667 0 (1) 6,000 3,349(4)
Chief Financial Officer 1997 98,667 39,357 (1) 15,000 2,574
VP and Secretary 1996 91,388 0 (1) 7,500 3,250
Keith A. Mauldin 1998 107,894 0 (1) 4,000 4,315(4)
Director of Custom Products 1997 101,959 0 (1) 12,500 2,312
1996 99,871 0 (1) 4,000 3,665
Clyde A. Shew 1998 102,000 0 (1) 5,000 4,285(6)
VP of Medical Sales & Marketing 1997 98,906 40,640 (1) 19,500 32,959
1996 27,045 0 (1) 0 338
- -----
</TABLE>
(1) Certain amounts may have been expended by the Company, which may have had
value as a personal benefit to the Named Officers. However, the total
value of such benefits did not exceed the lesser of $50,000 or 10% of the
annual salary and bonus for each person.
9
<PAGE>
(2) This amount is comprised of (i) contributions of $3,558 to the Company's
401(k) plan by the Company on behalf of Mr. Ferguson to match pre-tax
deferral contributions, all of which is vested, and (ii) $1,185 in annual
premiums paid by the Company on behalf of Mr. Ferguson for life insurance
not generally available to all Company employees.
(3) This amount is comprised of (i) contributions of $1,888 to the Company's
401(k) plan by the Company on behalf of Mr. Ackley to match pre-tax
deferral contributions, all of which is vested, and (ii) $992 in annual
premiums paid by the Company on behalf of Mr. Ackley for life insurance
not generally available to all Company employees.
(4) This amount is comprised of (i) contributions of $2,500 to the Company's
401(k) plan by the Company on behalf of Mr. Coggins to match pre-tax
deferral contributions, all of which is vested, and (ii) $849 in annual
premiums paid by the Company on behalf of Mr. Coggins for life insurance
not generally available to all Company employees.
(5) This amount is comprised of (i) contributions of $3,277 to the Company's
401(k) plan by the Company on behalf of Mr. Mauldin to match pre-tax
deferral contributions, all of which is vested, and (ii) $1,038 in annual
premiums paid by the Company on behalf of Mr. Mauldin for life insurance
not generally available to all Company employees.
(6) This amount is comprised of (i) contributions of $3,070 to the Company's
401(k) plan by the Company on behalf of Mr. Shew to match pre-tax deferral
contributions, all of which is vested, and (ii) $1,215 in annual premiums
paid by the Company on behalf of Mr. Shew for life insurance not generally
available to all Company employees.
OPTION/SAR GRANTS IN FISCAL YEAR 1998
The following stock options were granted during fiscal year 1998 to the
Named Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS/SAR'S EXERCISE MARKET ASSUMED RATES OF STOCK PRICE
UNDERLYING GRANTED TO OR BASE PRICE ON APPRECIATION FOR OPTION TERM
OPTIONS/SAR'S EMPLOYEES IN PRICE GRANT EXPIRATION -----------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE (1) DATE 0%($) 5%($) 10%($)
- ---- -------------------------------------------------------------------------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James D Ferguson 10,000 (2) 23% $ 7.09 $ 7.25 02/04/08 1,563 47,157 117,109
Robert E. Ackley 5,000 (2) 11% $ 7.09 $ 7.25 02/04/08 781 23,579 58,554
Richard C. Coggins 6,000 (2) 14% $ 7.09 $ 7.25 02/04/08 938 28,294 70,265
Keith A. Mauldin 4,000 (2) 9% $ 7.09 $ 7.25 02/04/08 625 18,863 46,844
Clyde A. Shew 5,000 (2) 11% $ 7.09 $ 7.25 02/04/08 781 23,579 58,554
- --------------------
</TABLE>
(1) Based on the average of the high and low sales prices on the grant date.
(2) The options shown will become exercisable at the greater of 1,000 shares
per year or 20% per year, beginning July 1, 1998. In addition, the Plan
contains certain customary conditions for the early expiration of the
options.
10
<PAGE>
OPTION/SAR EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the Company's
Named Officers concerning the exercise of options during the 1998 fiscal year
and unexercised options held as of the end of the 1998 fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
SHARES YEAR-END (#) AT FISCAL YEAR-END ($) (1)
ACQUIRED ON VALUE ------------------------- -----------------------------
NAME EXERCISE (#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James D. Ferguson 0 0 16,600 34,700 8,088 28,331
Robert E. Ackley 2,000 7,856 24,500 19,500 32,688 18,281
Richard C. Coggins 3,000 12,000 23,700 20,800 24,938 19,031
Keith A. Mauldin 0 0 7,000 14,500 3,500 15,438
Clyde A. Shew 0 0 5,000 19,500 4,813 21,469
- ---------------
</TABLE>
(1) The "value" of any option set forth in the table above is determined by
subtracting the amount which must be paid upon exercise of the options
from the market value of the underlying Common Stock as of the exercise
date or the fiscal year-end date as applicable.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions with respect to the compensation of the Company's Named Officers
are made by the three-member Compensation Committee of the Board comprised of
Messrs. Shoemaker, Kennemore, and Lathem. Each member of the Compensation
Committee is a non-employee director. All decisions by the Compensation
Committee relating to the compensation of the Company's Named Officers is
reviewed by the full Board. Set forth below is a report submitted by the
Compensation Committee in its capacity as such addressing the Company's
compensation policies for 1998 with respect to the Named Officers of the
Company.
11
<PAGE>
COMPENSATION COMMITTEE REPORT
GENERAL COMPENSATION POLICIES WITH RESPECT TO NAMED OFFICERS
The Compensation Committee does not maintain formal, written executive
compensation policies. However, in general, the Committee has structured officer
compensation so as to provide competitive levels of compensation that integrate
pay with the Company's annual and long-term performance goals, reward
above-average corporate performance, recognize individual initiative,
responsibility and achievements, and assist the Company in attracting and
retaining qualified executives. The Compensation Committee also endorses the
position that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
shareholders' interest in the enhancement of shareholder value.
The Named Officers' overall compensation is intended to be consistent with
the compensation paid to executives of companies similar in size and character
to the Company, provided that the Company's performance warrants the
compensation being paid. In determining the appropriate compensation, the
Compensation Committee has utilized a combination of salary, incentive cash
compensation, Company stock ownership and benefits. The Compensation Committee
has also attempted to maintain an appropriate relationship between the
compensation among the Named Officers and their relative levels of
responsibility within the Company.
Compensation paid to the Company's Named Officers in fiscal year 1998, as
reflected in the foregoing compensation tables, consisted of the following
elements: base salary, matching contributions paid with respect to the Company's
401(k) plan, and certain benefits. Payments under the Company's 401(k) plan are
made to all employees on a non-discriminatory basis.
RELATIONSHIP OF PERFORMANCE TO EXECUTIVE COMPENSATION
The Compensation Committee believes that a significant portion of the Named
Officers' compensation should be based on individual and corporate performance.
The principal means through which the Company ties compensation to performance
is through the Company's Management Bonus Plan (the "Bonus Plan"). Participants
in the Bonus plan include officers and members of the Company's senior
management team. Pursuant to the Bonus Plan, prior to the beginning of each
fiscal year the Board of Directors approves the Company's operating plan which
contains target earnings projections for the coming year. The target earnings
projections must provide a reasonable increase over the prior year's earnings
and must be consistent with the Company's long-term growth goals. The Bonus Plan
is structured so that each participant has an opportunity to earn bonuses equal
to approximately 30% of his or her base salary if the Company reaches 100% of
the target earnings performance. The percentage of salary potentially earned by
each participant under the Bonus Plan ranges from 0% if the Company earnings are
less than approximately 90% of the target earnings, to a maximum of 45% if the
Company's earnings exceed approximately 130% of target earnings and if certain
predefined individual goals are met. Approximately 40% of each participant's
bonus earnings are contingent on achievement of these specific individual goals.
These individual goals are determined by the chief executive officer and
reviewed by the Compensation Committee.
Options to purchase Company Common Stock are also granted periodically by
the Compensation Committee to officers and members of the senior management
team. The number of shares granted is based primarily on individual performance
and, secondarily, on Company performance relative to the Company's operating and
strategic plans.
12
<PAGE>
SALARIES, CASH BONUSES, STOCK OPTION GRANTS, INCENTIVE PAYMENTS
The 1998 salary levels of the Company's Named Officers were determined on
the anniversary date of the employee's last performance review and were based
generally on the criteria set forth above. Each employee of the Company,
including the Named Officers, is assigned a particular job grade level. The job
grade level is determined by a quantitative scoring system which considers
various factors under the major categories of job demands, knowledge, job
content, and level of responsibility. A salary range has been assigned to each
job grade level based on input from independent consultants and the Company's
management. The salary levels of the Named Officers were based primarily on
individual performance, overall Company performance and achievement of specific
individual and corporate goals for the prior fiscal year. The salary levels of
the Named Officers must fall within the designated salary ranges for the
appropriate job grade level, pursuant to the Company's salary administration
plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER DURING FISCAL 1998
Mr. Ferguson's compensation is determined by the Compensation Committee
using the same factors as those applied to other Company officers as described
above. The Compensation Committee granted Mr. Ferguson the stock options shown
in the table entitled "Option/SAR Grants in Last Fiscal Year" to reward Mr.
Ferguson for the increased responsibility associated with his position.
OTHER COMPENSATION PLANS
The Company has adopted certain broad-based employee benefit plans in which
the chief executive officer and the Named Officers have been permitted to
participate. The Company has also adopted certain executive officer life and
health insurance plans. The incremental cost to the Company of the chief
executive officer's and Named Officers' benefits provided under these plans
(which is not set forth in any of the tables) totaled less than 10% of their
cash compensation in fiscal year 1998. Benefits under these plans generally are
not directly or indirectly tied to Company performance.
Submitted by the Compensation Committee
James M. Shoemaker, Jr.
Douglas E. Kennemore, M.D.
J. Ernest Lathem, M.D.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Each director of the Company who is not also an officer of the Company
receives an annual fee of 1,000 shares of unregistered Common Stock plus a per
diem fee of $1,000 for each Board meeting and committee meeting attended. The
Chairman of the Board receives 2,000 shares of unregistered Common Stock plus
the same $1,000 per diem fee. Including the value on the date of receipt of the
Common Stock received in January 1998, no director received more than $23,750 in
fiscal 1998 for his services as a director.
Directors who are also employees of the Company do not receive compensation
for their services as directors.
13
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth the performance of the Company's Common
Stock for the five-year period from October 2, 1993 through October 3, 1998 as
compared to the Russell 2000 Index and a peer group index. The peer group index
was prepared by an unaffiliated third party and is comprised of all
exchange-listed companies having the standard industry classification code 3842
(which relates to medical products and supplies). The companies included in the
peer group index are shown below. All stock prices reflect the reinvestment of
cash dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SPAN-AMERICA MEDICAL SYSTEMS, INC.,
A PEER GROUP, AND THE RUSSELL 2000 INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDING
------------------------------------------------------------------
COMPANY/INDEX/MARKET 10/01/1993 9/30/1994 9/29/1995 9/27/1996 9/26/1997 10/02/1998
Span Amer Med 100.00 106.88 96.68 95.96 128.92 115.01
Peer Group 100.00 109.73 175.85 176.94 209.49 234.84
Russell 2000 Index 100.00 102.67 126.67 143.45 191.02 154.69
</TABLE>
<TABLE>
<CAPTION>
COMPANIES INCLUDED IN PEER GROUP INDEX
STANDARD INDUSTRY CLASSIFICATION CODE 3842
<S> <C> <C>
Allied Healthcare Products, Inc. Armor Holdings, Inc. ATS Medical, Inc.
Bio-Vascular, Inc. Biomet, Inc. Cardima, Inc.
Chad Therapeutics, Inc. Collagen Corp. Depuy, Inc.
DHB Capital Group, Inc. Eastco Industrial Safety Eclipse Surgical Tech, Inc.
Exactech, Inc. Guardian Tech. Intnl., Inc. Hanger Orthopedic Group
Innovasive Devices, Inc. Invacare Corp. Isolyser Co., Inc.
Koala Corporation Lakeland Industries, Inc. Langer Biomechanics Group
Life Medical Science, Inc. Lifequest Medical, Inc. Maxxim Medical, Inc.
Med-Emerg International, Inc. Medical Action Industries Mentor Corporation
Mine Safety Appliance Co. Minimed, Inc. National Healthcare Mfg. Corp.
Orthofix International NV Possis Medical, Inc. Resound Corp.
Respironics, Inc. Sofamor/Danek Group, Inc. Span-America Med. Sys.
Steris Corp. Sulzer Medica Ltd. ADS Sunrise Medical, Inc.
Symphonix Devices, Inc. Thermedics, Inc. Wyant Corp.
X-Ceed, Inc.
</TABLE>
14
<PAGE>
CERTAIN TRANSACTIONS
The law firm of Wyche, Burgess, Freeman & Parham, P.A., whose members
include Mr. Shoemaker, a director of the Company, serves as general counsel to
the Company. Fees paid to this law firm by the Company were less than one
percent of the law firm's gross revenues during the firm's last fiscal year. The
Company believes that the terms of its relationship with the law firm are at
least as favorable as could be obtained from a third party.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Executive officers, directors and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based on a review of the
copies of such reports furnished to the Company and representations that no
other reports were required during the 1998 fiscal year, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were met.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP as the independent
certified public accountants for the Company for its 1999 fiscal year.
Representatives of Ernst & Young LLP will be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions from shareholders. Ernst &
Young LLP have served the Company as independent auditors and tax advisors since
1985. Neither the firm nor any of its members has any relation with the Company
except in the firm's capacity as auditors and tax advisors.
SHAREHOLDER PROPOSALS
Proposals by shareholders for consideration at the 2000 Annual Meeting of
Shareholders must be received at the Company's offices at Post Office Box 5231,
Greenville, South Carolina 29606 no later than August 31, 1999, if any such
proposal is to be eligible for inclusion in the Company's proxy materials for
its 2000 Annual Meeting of Shareholders. Under the regulations of the Securities
and Exchange Commission, the Company is not required to include shareholder
proposals in its proxy materials unless certain other conditions specified in
those regulations are satisfied.
PROXY SOLICITATION
COST OF SOLICITATION
The Company will bear the cost of this proxy solicitation, including the
cost of preparing, handling, printing and mailing these Proxy Materials.
Employees and officers will be reimbursed for the actual out-of-pocket expenses
incurred in connection with the solicitation. Proxies will be solicited
principally by mail but may also be solicited by telephone or through personal
solicitation conducted by regular employees of the Company without additional
compensation. The Company has also engaged
15
<PAGE>
Corporate Communications, Inc. in Nashville, Tennessee to assist in investor
relations activities, including distributing shareholder information and
contacting brokerage houses, custodians, nominees and fiduciaries, for a fee of
approximately $5,000 plus reimbursement of reasonable out-of-pocket expenses.
BANKS, BROKERS AND OTHER CUSTODIANS
Banks, brokers and other custodians are requested to forward proxy
solicitation materials to their customers where appropriate, and the Company
will reimburse such banks, brokers and custodians for their reasonable
out-of-pocket expenses in sending the Proxy Materials to beneficial owners of
Common Stock.
FINANCIAL INFORMATION
The Company's 1998 Annual Report containing financial statements reflecting
the financial position and results of operations of the Company for the fiscal
year ended October 3, 1998, is being mailed to shareholders concurrently
herewith. THE COMPANY WILL ALSO PROVIDE WITHOUT CHARGE TO ANY SHAREHOLDER OF
RECORD AS OF DECEMBER 10, 1998, WHO SO REQUESTS IN WRITING, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED
OCTOBER 3, 1998, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
REQUEST SHOULD BE DIRECTED TO SPAN-AMERICA MEDICAL SYSTEMS, INC., P.O. BOX 5231,
GREENVILLE, SOUTH CAROLINA 29606 ATTENTION: RICHARD C. COGGINS.
OTHER MATTERS
Management of the Company is not aware of any other matter to be brought
before the Annual Meeting. If other matters are duly presented for action, it is
the intention of the persons named in the enclosed proxy to vote on such matters
in accordance with their best judgment.
By Order of the Board of Directors
Richard C. Coggins
SECRETARY
December 28, 1998
Greenville, South Carolina
16
<PAGE>
[SPAN-AMERICA MEDICAL SYSTEMS, INC. LOGO HERE]
<PAGE>
SPAN-AMERICA MEDICAL SYSTEMS, INC.
ANNUAL MEETING, JANUARY 28, 1999
The undersigned shareholder of Span-America Medical Systems, Inc. (the
"Company"), hereby revoking all previous proxies, hereby appoints THOMAS D.
HENRION and JAMES D. FERGUSON, and each of them, the attorney of the undersigned
with power of substitution, to vote all stock of the Company standing in the
name of the undersigned upon all matters at the Company's Annual Meeting to be
held at the Company's headquarters at 70 Commerce Center, Greenville, South
Carolina, on Thursday, January 28, 1999, at 9:00 a.m. and at any adjournments
thereof, with all powers the undersigned would possess if personally present,
and without limiting the general authorization and power hereby given, directs
said attorneys or either of them to cast the undersigned's vote as specified
on the reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SPAN-AMERICA
MEDICAL SYSTEMS, INC. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED IN
FAVOR OF THE NOMINEES LISTED ON THE REVERSE SIDE.
- --------------------------------------------------------------------------------
| PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED |
| ENVELOPE. |
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
|Please sign this Proxy as your name or names appear hereon. If stock is held |
|jointly, signatures should appear for both names. When signing as attorney, |
|administrator, trustee, guardian or agent, please indicate the capacity in |
|which you are acting. If stock is held by a corporation, please sign in full |
|corporate name by authorized officer and give title of office. |
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ _________________________________________
____________________________________ _________________________________________
____________________________________ _________________________________________
<PAGE>
*************************************APPENDIX***********************************
<TABLE>
<CAPTION>
<S> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ----------------------------------- 1. Election of Directors as set forth in the
SPAN-AMERICA MEDICAL SYSTEMS, INC. accompanying Proxy Statement (except as marked
- ----------------------------------- to the contrary below).
FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
THOMAS F. GRADY, JR.
J. ERNEST LATHAM, M.D. [ ] [ ] [ ]
JAMES M. SHOEMAKER, JR.
ROBERT H. DICK
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE,
MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF
THE NOMINEE(S). YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE(S).
2. At their discretion upon such matters as may properly come before
the meeting.
Please be sure to sign -------
and date this Proxy. | Date |
- ---------------------------------------------------- Mark box at right if an address change or comment has been noted on the [ ]
| | reverse side of this card.
| |
| |
|___Shareholder sign here________Co-owner sign here_|
</TABLE>
