<PAGE> 1
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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
SPAN-AMERICA MEDICAL SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1) 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> 2
(LOGO)
SPAN-AMERICA MEDICAL SYSTEMS, INC.
POST OFFICE BOX 5231
GREENVILLE, SOUTH CAROLINA 29606
____________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 3, 2000
____________________________________________
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 February 3, 2000, at 9:00 a.m., for the purpose of considering and
acting upon the following matters:
(1) the election of three 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 13,
1999 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, 1999
Greenville, South Carolina
PLEASE RETURN THE ENCLOSED PROXY IMMEDIATELY
<PAGE> 3
SPAN-AMERICA MEDICAL SYSTEMS, INC.
POST OFFICE BOX 5231
GREENVILLE, SOUTH CAROLINA 29606
(864) 288-8877
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 3, 2000
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 February 3, 2000
at the Company's headquarters at 70 Commerce Center, Greenville, South
Carolina. The approximate mailing date of these Proxy Materials is December 28,
1999.
VOTING AT THE ANNUAL MEETING
Shareholders of record at the close of business on December 13, 1999
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 2,495,400 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 13, 1999 (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> 4
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 B.
Kenneth Bolt, Thomas D. Henrion, and Douglas E. Kennemore, M.D., to serve as
directors under terms which will expire at the earlier of the 2003 annual
meeting of shareholders or when their successors are duly elected.
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.
INFORMATION REGARDING NOMINEES FOR DIRECTOR AND CURRENT DIRECTORS
The following table sets forth the names and ages of the three
nominees for director and the seven current directors, six of whom are
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.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION OR OFFICE WITH THE COMPANY SINCE
- ---- --- ----------------------------------- -----
<S> <C> <C> <C>
Nominees for Director with Terms Expiring in 2003
B. Kenneth Bolt 57 Nominee ---
Thomas D. Henrion 57 Director 1996
Douglas E. Kennemore, M.D. 67 Director 1975
Continuing Directors with Terms Expiring in 2002
Thomas F. Grady, Jr. 57 Director 1975
J. Ernest Lathem, M.D. 66 Director 1996
James M. Shoemaker, Jr. 67 Director 1992
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION OR OFFICE WITH THE COMPANY SINCE
- ---- --- ----------------------------------- -----
<S> <C> <C> <C>
Continuing Directors with Terms Expiring in 2001
Richard C. Coggins 42 Director, Chief Financial Officer, 1993
Vice President and Secretary
Robert H. Dick 56 Director 1999
James D. Ferguson 42 Director, President and 1998
Chief Executive Officer
Director with Term Expiring in 2000
Roy W. Black 63 Director 1997
</TABLE>
BUSINESS EXPERIENCE OF NOMINEES AND DIRECTORS
Mr. Bolt has served as President of Banyan Retirement Services, Inc.
(Banyan) since 1985. Banyan is a developer and manager of long-term care
communities in the Southeast. The company currently manages six senior living
communities in three states and is developing a seventh. Prior to joining
Banyan, Mr. Bolt was employed from 1975 to 1985 by Daniel International and its
successor, Fluor Corporation. While at Fluor, Mr. Bolt served in various
management positions, including VP-Sales, VP-Procurement, VP-Project
Support, and VP-Technical Services.
Mr. Henrion was named President of EquiSource, LLC in November 1999.
EquiSource is based in Louisville, Kentucky and provides group purchasing and
e-commerce services to the equine industry in the United States. EquiSource is
member of the UniStar group of companies. Mr. Henrion has also served as a
consultant to Unified Foodservice Purchasing Co-op, LLC since March 1999. From
1980 to 1999, Mr. Henrion was President, Chief Executive Officer, and Director
of FoodService Purchasing Cooperative, Inc. (FSPC) in Louisville, Kentucky.
FSPC provided equipment, food, packaging items, and financial services to
quick-service restaurant operators including KFC, Taco Bell, Dairy Queen, and
Pizza Hut. In March 1999, FSPC merged with the purchasing organization of
Tricon Global Restaurants, Inc. to form Unified Foodservice Purchasing Co-op.
Mr. Henrion also serves as a director for Brinly-Hardy Company, Inc.
Dr. Kennemore retired in 1999 after 35 years in the private practice
of neurosurgery in Greenville, South Carolina.
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.
3
<PAGE> 6
Mr. Coggins joined the Company as Controller in 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. Dick has served as president of R. H. Dick & Company, Inc., an
investment banking and management consulting firm based in Wellington, Florida,
since January 1998. 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 &
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. Ferguson joined the Company as Materials Manager in 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 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 in 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. He
has chosen not to stand for reelection to the Company's Board when his term
expires in February 2000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the 1999 fiscal year, the Board of Directors held seven
meetings. All directors except for Mr. Black attended at least 75% of the
aggregate of (i) total board meetings and (ii) total meetings of committees on
which such director served.
The Audit Committee was comprised of Messrs. Black, Grady, and Dick.
The Audit Committee met one time during the 1999 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.
The Compensation Committee is comprised of Messrs. Henrion, Grady,
Lathem, and Shoemaker. The Compensation Committee met one time during the 1999
fiscal year. The Compensation Committee reviews and approves the remuneration
of officers of the Company and reviews the overall compensation
4
<PAGE> 7
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. Henrion, Grady,
Lathem, and Shoemaker. It met three times during fiscal year 1999. 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.
<TABLE>
<CAPTION>
COMPANY
NAME AGE COMPANY OFFICES CURRENTLY HELD OFFICER SINCE
- ---- --- ------------------------------ -------------
<S> <C> <C> <C>
James D. Ferguson 42 President and Chief Executive Officer 1995
Robert E. Ackley 45 Vice President of Operations 1995
Richard C. Coggins 42 Vice President of Finance, Secretary 1987
and Chief Financial Officer
Melinda J. Gage 55 Vice President of Human Resources 1996
Keith A. Mauldin 39 Director of Custom Products 1995
Clyde A. Shew 42 Vice President of Medical Sales and Marketing 1996
Wanda J. Totton 44 Director of Quality / R&D 1995
</TABLE>
The Company's executive officers are appointed by the Board of
Directors and serve at the pleasure of the Board.
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.
5
<PAGE> 8
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth below is furnished as of December 13, 1999,
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.
<TABLE>
<CAPTION>
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
<S> <C> <C>
Douglas E. Kennemore, M.D. 207,876 (1) 8.3%
27 Memorial Medical Drive
Greenville, SC 29605
Lawrence J. Goldstein 175,847 (2) 7.0%
Santa Monica Partners, LP
1865 Palmer Avenue
Larchmont, NY 10538
Dimensional Fund Advisors 174,400 (3) 7.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT/NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- --------- --------
DIRECTORS AND NOMINEES
<S> <C> <C>
Richard C. Coggins 34,150(4) 1.4%
Robert H. Dick 6,000 *
James D. Ferguson 29,651(5) 1.2%
Thomas F. Grady, Jr., 32,595(6) 1.3%
Thomas D. Henrion 113,608(7) 4.6%
Douglas E. Kennemore, M.D. 207,876(1) 8.3%
J. Ernest Lathem, M.D. 19,043 *
James M. Shoemaker, Jr. 28,000(1) 1.1%
NAMED OFFICERS
James D. Ferguson 29,651 (5) 1.2%
Robert E. Ackley 30,888 (8) 1.2%
Richard C. Coggins 34,150 (4) 1.4%
Keith A. Mauldin 12,469 (9) *
Clyde A. She 9,000(10) *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
All Directors and Executive 550,462 21.0%
Officers of the Company as a
Group (14 persons)
</TABLE>
- ----------------------
(1) The shares shown as beneficially owned by Messrs. Kennemore and
Shoemaker include, for each, 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 Lawrence J. Goldstein of
Santa Monica Partners is based on current Securities and Exchange
Commission filings (through December 22, 1999), the most recent of
which was filed on April 21, 1998.
(3) The figure shown as beneficially owned by Dimensional Fund Advisors is
based on Securities and Exchange Commission filings as of September
30, 1999.
(4) The shares shown as beneficially owned by Mr. Coggins include 23,400
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.
(5) The shares shown as beneficially owned by Mr. Ferguson include 24,400
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
<PAGE> 10
(6) The figure shown as beneficially owned by Mr. Grady excludes 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.
(7) The figure shown as beneficially owned by Mr. Henrion includes 4,200
shares owned by a trust for which Mr. Henrion is trustee.
(8) The shares shown as beneficially owned by Mr. Ackley include 21,000
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.
(9) The shares shown as beneficially owned by Mr. Mauldin include 10,000
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 include 8,000
shares which are not currently outstanding but which are subject to
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 1999, 1998, and 1997 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 1999 (the "Named Officers").
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
---------------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION OTHER ANNUAL OPTIONS COMPENSATION
DURING FISCAL 1999 YEAR SALARY ($) BONUS ($) COMPENSATION ($) SARS (#) ($)
- --------------------------- ---- ---------- --------- ----------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
James D. Ferguson 1999 150,750 0 (1) 0 4,954 (2)
President/CEO 1998 131,250 0 (1) 10,000 4,743
1997 112,604 66,735 (1) 30,300 3,427
Robert E. Ackley 1999 109,750 0 (1) 0 3,736 (3)
VP of Operations 1998 100,500 0 (1) 5,000 2,880
1997 94,583 38,501 (1) 14,500 2,656
Richard C. Coggins 1999 112,750 0 (1) 0 3,668 (4)
Chief Financial Officer 1998 106,667 0 (1) 6,000 3,349
VP and Secretary 1997 98,667 39,357 (1) 15,000 2,574
Keith A. Mauldin 1999 98,500 0 (1) 0 3,500 (5)
Director of Custom Products 1998 107,894 0 (1) 4,000 4,315
1997 101,959 0 (1) 12,500 2,312
Clyde A. Shew 1999 116,125 0 (1) 0 4,118 (6)
VP of Medical Sales & Marketing 1998 102,000 0 (1) 5,000 4,285
1997 98,906 40,640 (1) 19,500 32,959
</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.
(2) This amount is comprised of (i) contributions of $3,769 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 $2,744 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 $2,819 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 $2,462 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.
9
<PAGE> 12
(6) This amount is comprised of (i) contributions of $2,903 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)
$1,215 in annual premiums paid by the Company on behalf of Mr. Shew
for life insurance not generally available to all Company employees.
OPTION/SAR GRANTS IN FISCAL YEAR 1999
No stock options were granted during fiscal year 1999 to the Named
Officers.
OPTION/SAR EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the
Company's Named Officers concerning the exercise of options during the 1999
fiscal year and unexercised options held as of the end of the 1999 fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
SHARES YEAR-END (#) AT FISCAL YEAR-END ($) (1)
ACQUIRED ON VALUE ----------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James D. Ferguson 0 0 24,400 26,900 n/a n/a
Robert E. Ackley 7,000 16,625 21,000 16,000 n/a n/a
Richard C. Coggins 4,000 9,500 23,400 17,100 n/a n/a
Keith A. Mauldin 0 0 10,000 11,500 n/a n/a
Clyde A. Shew 0 0 8,000 16,500 n/a n/a
</TABLE>
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(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 four-member Compensation Committee of the Board
comprised of Messrs. Henrion, Grady, Lathem, and Shoemaker. 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 1999 with respect to the Named Officers of the
Company.
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,
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<PAGE> 13
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 1999,
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 80% 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 is 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.
Salaries, Cash Bonuses, Stock Option Grants, Incentive Payments
The 1999 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
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<PAGE> 14
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 1999
Mr. Ferguson's compensation is determined by the Compensation
Committee using the same factors as those applied to other Company officers as
described above.
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 1999. Benefits under these plans generally are
not directly or indirectly tied to Company performance.
Submitted by the Compensation Committee
Thomas D. Henrion
Thomas F. Grady, Jr.
J. Ernest Lathem, M.D.
James M. Shoemaker, Jr.
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 1999, no director received more than $21,000
in fiscal 1999 for his services as a director.
Directors who are also employees of the Company do not receive
compensation for their services as directors.
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<PAGE> 15
PERFORMANCE GRAPH
The following graph sets forth the performance of the Company's Common
Stock for the five-year period from October 1, 1994 through October 2, 1999 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 investment of
cash dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SPAN-AMERICA MEDICAL SYSTEMS, INC.,
A PEER GROUP, AND THE RUSSELL 2000 INDEX
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPANY/INDEX/MARKET 9/30/1994 9/29/1995 9/27/1996 9/26/1997 10/02/1998 10/01/1999
Span Amer Med 100.00 90.46 89.78 120.62 107.61 67.49
Surgical Appliances & Supplies 100.00 160.26 161.25 190.91 214.01 219.44
Russell 2000 Index 100.00 123.37 139.71 186.04 150.66 177.11
</TABLE>
COMPANIES INCLUDED IN PEER GROUP INDEX
STANDARD INDUSTRY CLASSIFICATION CODE 3842
<TABLE>
<S> <C> <C>
Allied Healthcare Products, Inc. Armor Holdings, Inc. ATS Medical, Inc.
Bio-Vascular, Inc. Biomet, Inc. Cardima, Inc.
Chad Therapeutics, Inc. Dexterity Surgical, Inc. DHB Capital Group, Inc.
Eclipse Surgical Tech, Inc. Exactech, Inc. Guardian Tech. Intnl., Inc.
Hanger Orthopedic Group Innovasive Devices, Inc. Invacare Corp.
Isolyser Co., Inc. Lakeland Industries, Inc. Langer Biomechanics Group
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.
Respironics, Inc. Span-America Med. Sys. Steris Corp.
Sulzer Medica Ltd. ADS Sunrise Medical, Inc. Symphonix Devices, Inc.
Thermedics, Inc. Worksafe Industries, Inc. Wyant Corp.
X-Ceed, Inc.
</TABLE>
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<PAGE> 16
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 1999 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 2000 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 2001 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, 2000, if any
such proposal is to be eligible for inclusion in the Company's proxy materials
for its 2001 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
14
<PAGE> 17
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 1999 Annual Report containing financial statements
reflecting the financial position and results of operations of the Company for
the fiscal year ended October 2, 1999, is being mailed to shareholders
concurrently herewith. The Company will also provide without charge to any
Shareholder of record as of December 13, 1999, who so requests in writing, a
copy of the Company's Annual Report on Form 10-K (without exhibits) for the
year ended October 2, 1999, filed with The Securities and Exchange Commission.
any such request should be directed to Span-America Medical System 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, 1999
Greenville, South Carolina
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<PAGE> 18
(LOGO)
<PAGE> 19
SPAN-AMERICA MEDICAL SYSTEMS, INC.
Annual Meeting, February 3, 2000
The undersigned shareholder of Span-America Medical Systems, Inc. (the
"Company"), hereby revoking all previous proxies, hereby appoints JAMES M.
SHOEMAKER, JR. 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, February 3, 2000, 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
corporation name by authorized officer and give title of office.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
(To be continued and signed on reverse side.)
<PAGE> 20
[X] Please mark your
votes as in this
example.
FOR ALL
NOMINEES WITHHELD
1. Election of [ ] [ ] Nominees:
Directors as
set forth in the accompanying B. Kenneth Bolt
Proxy Statement (except as marked Thomas D. Henrion
to the contrary at right). Douglas E. Kennemore, M.D.
NOTE: If you do not wish your shares voted
"For" a particular nominee, 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.
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 Date
----------------- ------------- -----
NOTE: Please be sure to sign and date this Proxy.
