<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MEDICAL ACTION INDUSTRIES 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):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/x/ 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:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/x/ 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: $125.00
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.: Pre-Schedule 14 A
- --------------------------------------------------------------------------------
(3) Filing Party: Registrant
- --------------------------------------------------------------------------------
(4) Date Filed: May 10, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MEDICAL ACTION INDUSTRIES INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 14, 1996
------------------------
To the Stockholders of
MEDICAL ACTION INDUSTRIES INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MEDICAL
ACTION INDUSTRIES INC. will be held on August 14, 1996 at Ernst & Young LLP, 395
N. Service Road, lower level, Melville, New York at 3:00 p.m. (the 'Annual
Meeting'), for the following purposes:
1. To elect two directors to serve in Class III until the 1999 Annual
Meeting of Stockholders;
2. To consider and act upon a proposal to amend the Company's 1989
Non-Qualified Stock Option Plan, as more fully described in the accompanying
Proxy Statement;
3. To consider and act upon a proposal to adopt the Company's 1996
Non-Employee Directors Stock Option Plan as more fully described in the
accompanying Proxy Statement;
4. To consider and act upon the ratification of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending March 31, 1997;
and
5. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 22, 1996 shall
be entitled to vote at the Annual Meeting.
By Order of the Board of Directors,
Richard G. Satin
Vice President--Operations
and General Counsel
Dated: Hauppauge, New York
July 1, 1996
<PAGE>
MEDICAL ACTION INDUSTRIES INC.
150 MOTOR PARKWAY
HAUPPAUGE, NEW YORK 11788
------------------------
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, AUGUST 14, 1996
------------------------
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Medical
Action Industries Inc. (the 'Company') for use at the Annual Meeting of
Stockholders to be held on Wednesday, August 14, 1996 at Ernst & Young LLP, 395
N. Service Road, lower level, Melville, New York at 3:00 p.m. (the 'Annual
Meeting') and any adjournments or postponements thereof. This Proxy Statement
and accompanying Proxy Card are being mailed to stockholders on or about July 1,
1996.
The Company's Common Stock represented by an unrevoked proxy in the
enclosed form, and if such proxy has been properly executed and received prior
to the Annual Meeting, will be voted in accordance with the specifications made
on such proxy. Any properly executed Proxy received on a timely basis on which
no specification has been made by the stockholder will be voted 'FOR' election
of the nominees listed in this Proxy Statement, 'FOR' the approval of an
Amendment to the 1989 Non-Qualified Stock Option Plan, 'FOR' the adoption of the
1996 Non-Employee Directors Stock Option Plan and 'FOR' the ratification of
Ernst & Young LLP as independent auditors for the fiscal year ending March 31,
1997. Any stockholder giving a proxy has the power to revoke it prior to its
exercise either by giving written notice to the Secretary of the Company, by
voting in person at the Annual Meeting, or by execution of a subsequent proxy.
VOTING RIGHTS
On June 22, 1996 (the 'Record Date'), the Company had outstanding one class
of voting securities, namely 8,199,789 shares of Common Stock, $.001 par value.
Stockholders are entitled to one vote for each share registered in their names
at the close of business on the Record Date. A majority of the outstanding
shares will constitute a quorum at the meeting. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions are counted in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
1
<PAGE>
BENEFICIAL OWNERSHIP
The following table sets forth as of the Record Date certain information
with regard to ownership of the Company's Common Stock by (i) each beneficial
owner of 5% or more of the Company's Common Stock; (ii) each director; and (iii)
all executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Joseph R. Meringola 1,919,684(2) 23.4%
$.001 par value 150 Motor Parkway
Hauppauge, New York
Common Stock Paul D. Meringola 423,000(2) 5.1%
$.001 par value 150 Motor Parkway
Hauppauge, New York
Common Stock Richard G. Satin 203,325(2) 2.5%
$.001 par value 150 Motor Parkway
Hauppauge, New York
Common Stock Dr. Philip F. Corso 18,000 --
$.001 par value 1200 Post Road East
Westport, Connecticut
Common Stock Dr. Thomas A. Nicosia 1,000 --
$.001 par value 1615 Northern Blvd.
Manhasset, New York
Common Stock Bernard Wengrover 50,000 --
$.001 par value 111 Great Neck Road
Great Neck, New York
Common Stock Directors and 2,789,509(2) 32.7%
$.001 par value Officers
as a Group (7
Persons)
</TABLE>
- ------------------
(1) Unless otherwise indicated, no director beneficially owns more than 1% of
the Company's Common Stock.
(2) Includes (i) shares awarded under the Company's Restricted Management Stock
Bonus Plan, and (ii) options exercisable under the Company's 1989
Non-Qualified Stock Option Plan, Incentive Stock Option Plan and 1994 Stock
Incentive Plan.
2
<PAGE>
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of six directors,
classified into three classes equal in number, whose terms of office expire in
successive years. The two directors named below in Class III, both of whom are
presently directors of the Company, have been nominated for election as
directors of the Company until the Annual Meeting of Stockholders in 1999 or
until their respective successors are chosen and qualified. Shares represented
by executed proxies in the form enclosed will be voted, unless otherwise
indicated, for the election as directors of the aforesaid nominees, unless they
shall be unavailable, in which event such shares may be voted for substitute
nominee(s) designated by the Board of Directors. The Board of Directors has no
reason to believe that the nominees will be unavailable or, if elected, will
decline to serve. The following table sets forth the directors of the Company.
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
(TO SERVE UNTIL THE (TO SERVE UNTIL THE (TO SERVE UNTIL THE
ANNUAL MEETING OF ANNUAL MEETING OF ANNUAL MEETING OF
STOCKHOLDERS IN 1997) STOCKHOLDERS IN 1998) STOCKHOLDERS IN 1996)
- -------------------------------------------------------------------------
<S> <C> <C>
Dr. Thomas A. Nicosia Bernard Wengrover Joseph R. Meringola
Richard G. Satin Paul D. Meringola Dr. Philip F. Corso
</TABLE>
BIOGRAPHICAL INFORMATION
The following information is submitted concerning each member of the Board
of Directors.
Joseph R. Meringola has been Chairman of the Board and Chief Executive
Officer of the Company since its inception in 1977. Mr. Meringola has served in
various executive management and operating positions for the Company, including
President and Chief Operating Officer. Mr. Meringola received a Bachelor of
Science degree in business administration from C.W. Post College of Long Island
University.
Paul D. Meringola, a director and President of the Company since November,
1992, has been employed by the Company for more than the past fifteen years in
various executive positions. He previously served the Company as Vice
President--Operations from March, 1989 to October, 1991 and Senior Vice
President (Chief Operating Officer) from October, 1991 to November, 1992.
Mr. Richard G. Satin, previously a director of the Company from October,
1987 to February, 1992, was reappointed to the Board of Directors in February,
1993. Mr. Satin has been employed by the Company as Vice President and General
Counsel since January, 1993 and has been Corporate Secretary of the Company
since October, 1991. In February, 1994, Mr. Satin was appointed Vice
President--Operations. Mr. Satin, a practicing attorney in the State of New York
for more than the past ten years, was associated with the law firm of Blau,
Kramer, Wactlar, Lieberman & Satin, P.C. from May, 1983 to January, 1993.
Dr. Philip F. Corso, a director of the Company since March, 1984, has been
associated with the Yale University School of Medicine for more than the past
ten years and is presently Assistant Clinical Professor. In addition, Dr. Corso
is Senior Attending and Chief of Plastic Surgery at Bridgeport and Norwalk
Hospitals in Connecticut. Dr. Corso has also published numerous articles in
professional journals on plastic and reconstructive surgery.
Dr. Thomas A. Nicosia, a director of the Company since November, 1985, has
been a practicing cardiologist for more than the past five years. Dr. Nicosia is
a fellow of the American College of Cardiology and is affiliated with St.
Francis Hospital in Roslyn, New York and North Shore University Hospital in
Manhasset, New York.
Mr. Bernard Wengrover, a director of the Company since October, 1990, has
been a certified public accountant in the State of New York for more than the
past twenty years and is a partner in the accounting firm of Schneider, Ehrlich,
Sosinsky, Rudis & Wengrover, LLP. Mr. Wengrover was the Company's independent
auditor from 1977 until March 31, 1989.
3
<PAGE>
BOARD COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors held four meetings during the fiscal year ended
March 31, 1996. Except for Dr. Nicosia and Joseph R. Meringola, all directors
attended 75% or more of the aggregate number of meetings of the Board and its
committees, on which they serve. Non-employee directors receive $500 for each
board meeting they attend. In addition, Mr. Wengrover is compensated pursuant to
a separate consulting agreement. The Company's proposed 1996 Non- Employee
Directors Stock Option Plan, if approved, will provide for an annual grant of
2,500 non-qualified stock options to each director who is not also an employee.
(See 'Proposal to Approve the Medical Action Industries Inc. 1996 Non-Employee
Directors Stock Option Plan' for a description of such plan).
The Board of Directors has established the following committees, all of
which consist of three non-employee directors, Mr. Wengrover, Dr. Corso and Dr.
Nicosia, to perform certain specific functions. Included among the committees
are an Audit Committee, a Compensation Committee and a Stock Option Committee.
There is no Nominating Committee of the Board of Directors.
AUDIT COMMITTEE. This Committee reviews the plan for and the results of
the independent audit and internal audit, reviews the Company's financial
information and internal accounting and management controls, and performs other
related duties. The Audit Committee held one meeting during the last fiscal
year.
COMPENSATION COMMITTEE. This Committee makes recommendations to the Board
of Directors with respect to compensation for the officers of the Company and
the Chief Executive Officer. This Committee met one time during fiscal year
1996.
STOCK OPTION COMMITTEE. This Committee has reviewed and approved the grant
of options pursuant to the Company's stock option plans for the Company's
directors and officers. The Committee held three meetings during the last fiscal
year.
MANAGEMENT
OFFICERS OF THE COMPANY
The Company's executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH THE COMPANY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph R. Meringola.......................... 53 Chairman of the Board (Chief Executive Officer)
Paul D. Meringola............................ 38 President (Chief Operating Officer)
Richard G. Satin............................. 41 Vice President--Operations, General Counsel
and Corporate Secretary
Daniel Marsh................................. 38 Vice President--Sales and Marketing
</TABLE>
All of the executive officers of the Company hold office at the pleasure of
the Board of Directors. Joseph R. and Paul D. Meringola are brothers.
Mr. Daniel Marsh has been employed by the Company for more than the past
five years in various sales and marketing positions. Mr. Marsh was appointed
Vice President of Sales and Marketing in February, 1994 and for the period
between April 1, 1993 until February, 1994 was Vice President--International.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of the Company's Chief Executive Officer and each of the
Company's most highly compensated executive officers (referred to collectively
with the Chief Executive Officer as the 'named executives') during the years
ended March 31, 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------- ------------------------------ ALL OTHER
FISCAL RESTRICTED STOCK COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) AWARDS($)(2) OPTIONS(#) ($)(3)(4)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Meringola ................. 1996 $ 208,000 $ -- $ -- -- $ 4,596
Chairman of the Board and CEO 1995 208,000 -- -- -- 5,959
1994 209,695 -- -- -- 4,497
Paul D. Meringola(3) ................ 1996 $ 174,933 -- -- 90,000 6,352
President and Chief Operating 1995 172,593 -- 13,281 -- 7,105
Officer 1994 158,046 10,000 112,500 50,000 17,865
Richard G. Satin(3) ................. 1996 $ 128,000 -- -- 90,000 5,048
Vice President--Operations 1995 127,692 -- 12,750 -- 5,036
and General Counsel 1994 119,772 7,500 45,000 25,000 1,477
Daniel Marsh(3) ..................... 1996 $ 140,000 -- -- 90,000 867
Vice President--Sales 1995 139,666 -- 12,750 -- 1,811
and Marketing 1994 131,244 7,500 33,750 15,000 3,931
</TABLE>
- ------------------
(1) Includes Chairman of the Board and Chief Executive Officer and the other
most highly compensated executive officers as measured by salary and bonus.
(2) Represents the dollar value of restricted shares granted during the year in
question, calculated by multiplying the closing market price of the
Company's Common Stock on the date of grant by the number of shares
awarded. The aggregate number of shares of restricted stock held by each
named executive as of March 31, 1996, together with the value of those
shares is as follows: Mr. Joseph R. Meringola--50,000 shares/$93,750; Mr.
Paul D. Meringola--99,500 shares/$186,562; Richard G. Satin--52,000
shares/$97,500 and Daniel Marsh--27,000 shares/$50,625. The shares of
restricted stock vest in four equal installments (25% increments) on the
second, third, fourth and fifth anniversaries of the date of issuance.
Dividends are paid in shares of restricted stock if and to the extent paid
on the Company's Common Stock generally.
(3) The Company has entered into an Employment Agreement with Mr. Paul D.
Meringola and Change of Control Agreements with Messrs. Paul D. Meringola,
Satin and Marsh that may result in payments to each of them upon a change
of control of the Company. These arrangements are described under
'Management--Employment Agreement' and 'Change of Control Arrangements'.
(4) Includes, among other things, matching contributions under the Company's
401(K) Retirement Plan, the cost to the Company of the nonbusiness use of
Company automobiles and amounts payable to Mr. Paul D. Meringola under his
Employment Agreement.
5
<PAGE>
STOCK OPTION INFORMATION
OPTION GRANT TABLE: The following table sets forth information concerning
individual grants of stock options made to the named executives during the
fiscal year ended March 31, 1996:
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
INDIVIDUAL GRANTS AT ASSUMED
------------------------------------ ANNUAL RATES OF STOCK
% OF TOTAL PRICE
OPTIONS APPRECIATION FOR OPTION
OPTIONS GRANTED TO EXERCISE TERM(2)
GRANTED EMPLOYEES IN PRICE ------------------------
NAME (SHARES) FISCAL 1996 ($/SHARE) 5%($) 10%($)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Joseph R. Meringola ..... -- -- -- -- --
Paul D. Meringola ....... 50,000 9.4% $ .97 $ 13,400 $ 29,610
10,000 1.9% $1.50 $ 4,144 $ 9,158
30,000 5.6% $2.19 $ 18,152 $ 40,111
Richard G. Satin ........ 50,000 9.4% $ .97 $ 13,400 $ 29,610
10,000 1.9% $1.50 $ 4,144 $ 9,158
30,000 5.6% $2.19 $ 18,152 $ 40,111
Daniel Marsh ............ 50,000 9.4% $ .97 $ 13,400 $ 29,610
10,000 1.9% $1.50 $ 4,144 $ 9,158
30,000 5.6% $2.19 $ 18,152 $ 40,111
</TABLE>
- ------------------
(1) All of the options in the above table were non-statutory stock options
awarded under the Company's 1994 Stock Incentive Plan. The stock options
granted to Messrs. Paul D. Meringola, Richard G. Satin and Daniel Marsh
were granted between May 31, 1995 and February 6, 1996 and will be
exercisable to the extent of 50% one year from the date of grant and 100%
two years from date of grant. The stock options granted to Messrs.
Meringola, Satin and Marsh were granted at the closing price of the
Company's Common Stock as reported in the Wall Street Journal on the date
of grant.
(2) The dollar amounts under the 5% and 10% columns in the table are the result
of calculations required by the Securities and Exchange Commission (the
'SEC') and therefore are not intended to forecast possible future
appreciation of the stock price of the Company. Although permitted by the
SEC's rules, the Company did not use an alternate formula for grant date
valuation because the Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors. No gain on the stock options awarded to the named
executives or other employees is possible without appreciation in the price
of the Company's Common Stock, which will benefit all stockholders. The
real value of the options in this table depends upon the actual performance
of the Company's Common Stock during the applicable period. The stock
options will have no value to the named executives if the price of the
Company's Common Stock does not increase above the exercise price of the
option.
6
<PAGE>
AGGREGATE FISCAL YEAR-END OPTION VALUE TABLE: The following table sets
forth, with respect to the named executives, information concerning the exercise
of options during the last fiscal year and unexercised options held as of March
31, 1996:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNEXERCISED MONEY OPTIONS AT YEAR END
SHARES OPTIONS AT YEAR END 1996 1996(1)
ACQUIRED ON VALUE ---------------------------- ------------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Meringola............. -- -- -- -- -- --
Paul D. Meringola............... 67,500 $ 86,287 175,000 65,000 $22,625 $26,325
Richard G. Satin................ 7,500 10,950 125,000 65,000 $22,625 $26,325
Daniel Marsh.................... 45,000 49,531 115,000 65,000 $22,625 $26,325
</TABLE>
- ------------------
(1) Values are calculated by subtracting the exercise price from the fair
market value of the Company's Common Stock as of the exercise date or
fiscal year end, as appropriate.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee is responsible for developing and making
recommendations to the Company with respect to executive officer compensation
policies, addressing such matters as salaries, incentive plans, benefits and
over-all compensation. The Compensation Committee determines the compensation to
be paid to the Chief Executive Officer and each of the other executive officers
of the Company.
The objectives of the Compensation Committee in determining the type and
amount of executive officer compensation are to provide a level of base
compensation which allows the Company to attract and retain superior talent and
to align the executive officers' interests with the success of the Company
through the payment of a bonus based upon Company performance and participation
in stock option and other stock ownership plans which provide the executive
officers with the opportunity to build a substantial ownership interest in the
Company.
The compensation of an executive officer of the Company includes cash
compensation consisting of a base salary plus performance bonus, long-term
incentive compensation in the form of stock options and restricted stock awards,
and participation in various benefit plans generally available to employees of
the Company.
Although the compensation paid to each of the Company's executive officers
is well below the $1 million deduction limit under the Internal Revenue Code of
1986 (the 'Code'), the Company intends to take the necessary steps to conform
its compensation to comply with the Code.
Base Salary. Compensation for each of the named officers consists of a
base salary and annual and longer-term incentive compensation. In the setting of
base salaries, consideration is given to national and local salary surveys and
review of salaries paid to senior executives with comparable qualifications,
experience and responsibilities at other companies in the particular geographic
area. Annual and longer-term incentive compensation is tied to the Company's and
the executive's success in achieving significant financial and non-financial
goals.
The Committee weighs the value of achievement of subjective factors such as
demonstrated management ability, initiative and contributions toward the
Company's goal of leadership within the industry in which it competes. The
Committee also weighs, when appropriate, the value of the individual's actions
during times when
7
<PAGE>
progress towards predetermined goals was hindered by elements outside the
Company's and the executive's control. The Committee recognizes that the
operational challenges faced during unforeseen times or events are often valid
reasons to modify what may otherwise be a negative result to the base salary
decision.
Finally, the Committee considers the individual executive's impact on those
elements that contribute to increased stockholder value. The Committee's
discretion usually determines the weighing of these various factors in its final
determination of base salary development or adjustment.
Incentive Compensation. In evaluating the performance and setting the
incentive compensation of the executive officers of the Company, the Committee
developed an incentive program predominantly predicated on the attainment of
specific levels of revenue and pre-tax income for the Company. To a lesser
extent, the Committee considers other managerial goals stated as objectively as
possible. For the fiscal year ended March 31, 1996, no incentive compensation
was awarded to the named executives.
Stock Options and Grants. The Committee periodically considers the
desirability of granting senior executives, including the named executives,
awards under the Company's stock plans. The Committee believes that its past
grants of stock options and restricted stock awards have successfully focused
the Company's senior management on building profitability and stockholder value.
In determining the amount and nature of awards under such plans to be
granted to the senior management group, including the named executives, the
Committee reviews with the Chief Executive Officer awards recommended by him,
taking into account the respective scope of accountability, strategies and
operational goals and anticipated performance requirements and contributions of
each member of the senior management group. The award to the Chief Executive
Officer is established separately and is based, among other things, on the
Committee's analysis of his past and expected future contributions to the
Company's achievement of its long-term performance goals.
CEO COMPENSATION
Determination of the Company's compensation of its Chief Executive officer
and founder, Joseph R. Meringola, takes into account the factors described above
as pertinent to the remainder of the Company's executives, while also taking
into consideration the nature of the Company's business and efforts expended in
connection with development of the Company's strategy and product development
activities.
The Committee has concluded that Mr. Meringola's performance warrants the
compensation for fiscal 1996 as reflected in the Summary Compensation table on
page 5.
The Compensation Committee
Bernard Wengrover
Dr. Philip Corso
Dr. Thomas Nicosia
8
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor 500 Stock Index and a Peer Group Index for the period of five years
commencing April 1, 1991 and ending March 31, 1996.
The Peer Group Index is comprised of the following publicly traded
companies, all of whom are contained within the Standard Industry Code 3841:
<TABLE>
<S> <C>
Acme UTD Corp. Alliance Imaging Inc.
Allied Healthcare Products, Inc. Electromedics Inc.
Graham Field Health Products Namic USA Corp.
Personal Diagnostics Inc. Protocol Systems Inc.
Quest Medical Inc. Survival Technology Inc.
</TABLE>
[CHART]
3/91 3/92 3/93 3/94 3/95 3/96
Medical Action Industries Inc. 100 300 273 164 77 136
Peer Group 100 119 78 92 93 119
S&P 500 100 111 128 130 150 198
None of the companies in the Peer Group offers a fully comparable range of
products and services. The returns of each company have been weighed according
to their respective stock market capitalization for purposes of arriving at a
peer group average.
The line graph assumes that $100 was invested on April 1, 1991 in each of
the companies' common stock, the Standard & Poor 500 Stock Index and the Peer
Group Index and that all dividends were reinvested.
9
<PAGE>
EMPLOYMENT AGREEMENT
In February, 1993, the Company entered into an Employment Agreement with
Paul D. Meringola. The Agreement, as amended, presently covers the three year
period ending March 31, 1999 and provides for a salary at an annual rate of
$165,000, together with cost of living increments and the reimbursement of
medical expenses not otherwise covered by the Company's medical plans, up to a
maximum of $5,000. The Agreement further provides that in the event there is a
change in control of the Company, as defined therein, or in any person directly
or indirectly controlling the Company, as also defined therein, Mr. Meringola
has the option, exercisable within six months of becoming aware of such event,
to terminate his Employment Agreement. Upon such termination, Mr. Meringola has
the right to receive as a lump sum payment an amount equal to the compensation
remaining to be paid for the balance of the term of the Agreement.
PROPOSED AMENDMENT TO THE COMPANY'S 1989 NON-QUALIFIED STOCK OPTION PLAN
At the Annual Meeting there will be presented to stockholders a proposal to
amend its 1989 Non-Qualified Stock Option Plan (the 'Plan'). The proposed
amendment is set forth in the italicized portion of Exhibit 'A' annexed hereto.
The Plan, which expires in 1999, was approved by the stockholders in
October, 1990 and amended in September, 1992, and covers 1,150,000 shares of the
Company's Common Stock. Under the terms of the Plan, the purchase price of the
shares subject to each option granted will not be less than 85% of the fair
market value at the date of grant. The date of exercise may be determined at the
time of grant by the Board of Directors. During fiscal 1996, options were
granted under the Plan to purchase 261,500 shares of Common Stock, none of which
were to the named executives, at exercise prices ranging between $.97 and $2.19.
PROPOSED AMENDMENT
The purpose of this Amendment is to increase the number of authorized
shares available for options to 1,650,000 shares. Presently, only 51,500 options
remain available for issuance under the Plan. The Board of Directors believes
that this amount is insufficient. As the Company's principal stock option plan,
along with the Stock Incentive Plan, it is intended to serve as an additional
incentive to all employees to devote themselves to the future success of the
Company by providing them with an opportunity to increase their proprietary
interest in the Company through the receipt of options to purchase the Company's
Common Stock. The Board of Directors of the Company believes this Amendment to
be in the best interests of the Company and recommends its approval.
The following table sets forth the benefits or amounts that were received
by or allocated to the persons listed below under the Plan for the Company's
last completed fiscal year. The dollar value of the option grants set forth
below has been calculated based on the difference between the fair market value
of the Common Stock on the date of grant and June 1, 1996:
1989 PLAN BENEFITS
<TABLE>
<CAPTION>
NAME DOLLAR VALUE # OF OPTIONS
- ----------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Executive Officer Group...................................................... -- --
Non-Executive Director Group................................................. -- --
Non-Executive Officer Employee Group......................................... $210,420 261,500
</TABLE>
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VOTING REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT TO THE 1989 NON-QUALIFIED
STOCK OPTION PLAN.
Ratification of this action requires the affirmative vote of the majority
of the votes cast on this matter at the Annual Meeting. If this Amendment is not
approved, the Plan will remain in effect but the amendment shall become null and
void.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE AMENDMENT TO
THE 1989 NON-QUALIFIED STOCK OPTION PLAN.
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PROPOSAL TO APPROVE THE MEDICAL ACTION INDUSTRIES INC.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
INTRODUCTION
Pursuant to the 1996 Medical Action Industries Inc. Stock Option Plan for
Non-Employee Directors (the '1996 Non-Employee Directors Plan'), each
non-employee director of the Company will be granted each year, in connection
with his or her election or re-election to the Board, an option to purchase
2,500 shares of Common Stock. The authorization for such grants under the 1996
Non-Employee Directors Plan will expire after the annual Meeting in 2006. The
Corporation believes that the 1996 Non-Employee Directors Plan will encourage
stock ownership by non-employee directors, thus benefitting stockholders by
giving such directors a proprietary interest in the Company. Also, the 1996
Non-Employee Directors Plan will enhance the Company's ability to attract,
retain and suitably reward Directors of exceptional ability, upon whose
leadership and management skill the Company's future rests in large part.
Accordingly, the Board of Directors has unanimously recommended the adoption of
the 1996 Non-Employee Directors Plan as described below.
SUMMARY OF THE 1996 NON-EMPLOYEE DIRECTORS PLAN
The following summary of the 1996 Non-Employee Directors Plan is qualified
in its entirety by reference to the complete text of the 1996 Non-Employee
Directors Plan, which is attached to this Proxy Statement as Exhibit 'A'.
Administration. The Board of Directors is authorized to administer the
1996 Non-Employee Directors Plan in accordance with its terms; however, the
Board of Directors shall have no discretion with respect to the selection of
Directors to receive options, the number of shares of Common Stock subject to
any such option, or the exercise price thereunder.
Eligibility. Only Eligible Directors, as defined in the 1996 Non-Employee
Directors Plan, are eligible for grant of options under the 1996 Non-Employee
Directors Plan. The 1996 Non-Employee Directors Plan defines Eligible Director
as a director of the Company who is not an employee of the Company or its
subsidiaries and has not, within one year immediately preceding the time such
determination is made, received any award under any plan of the Company
providing for the discretionary issuance of stock, stock options or stock
appreciation rights. There are currently three Eligible Directors.
Shares Subject to the 1996 Non-Employee Directors Plan. An aggregate of
100,000 shares of Common Stock shall be available for issuance upon the exercise
of options granted under the 1996 Non-Employee Directors Plan. This number is
subject to adjustment in the event of a stock split, stock dividend, subdivision
or combination of the Common Stock or other change in corporate structure
affecting the Common Stock.
Grant, Term and Conditions of Options. As of the date of the first Annual
Stockholders Meeting at which Directors are elected following the Annual
Stockholders Meeting at which Stockholders first approve the 1996 Non-Employee
Directors Plan, and as of the date of each of the subsequent ten Annual
Stockholders Meetings at which Directors are elected, each individual who is
then an Eligible Director will be granted an option to purchase 2,500 shares of
Common Stock. The options will be nonstatutory stock options not intended to
qualify under Section 422 of the Code. The purchase price per share of the
Common Stock deliverable upon exercise of the option shall be 100% of the fair
market value per share of Common Stock, determined as provided in the 1996
Non-Employee Directors Plan, on the day the option is granted. Eligible
Directors shall pay the exercise price of the options in either cash or in
Common Stock. Except as set forth below, options shall be exercisable in whole
or in part at all times after the date of grant.
All outstanding options held by an optionee shall automatically be
cancelled upon such optionee's termination of service as an Eligible Director
except in the following circumstances. If such termination of service as an
Eligible Director occurs by reason of voluntary mid-term resignation, declining
to stand for re-
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election, or becoming an employee of the Company or a subsidiary, all
outstanding options held by such optionee on the date of such termination shall
continue to be fully exercisable for five years following the date of such
termination. In the event of the death of an optionee (whether before or after
termination of service as an Eligible Director), all outstanding options held by
such optionee and not previously cancelled or expired on the date of death shall
be fully exercisable by such optionee's legal representative within one year
after the date of death (without regard to the expiration date of the option
specified in accordance with the preceding sentence). No option shall be
transferable by an optionee otherwise than by will or the laws of descent and
distribution, except that options may be transferred pursuant to a qualified
domestic relations order, and during the lifetime of the individual to whom an
option is granted it may be exercised only by such individual or such
individual's guardian or legal representative.
Mergers, Sales and Change of Control. In case of certain mergers,
consolidations or combinations of the Corporation with or into other
corporations, or in the event of a Change of Control of the Corporation, as
defined in the 1996 Non-Employee Directors Plan, the holder of each option then
outstanding shall (unless the Board of Directors determines otherwise) have the
right to receive on the date or effective date of such event a cash payment in
an amount calculated as set forth in the 1996 Non-Employee Directors Plan, which
is equivalent to the economic value of the option on such date.
Plan Amendments. The 1996 Non-Employee Directors Plan may be amended by
the Board of Directors as it shall deem advisable. Without the authorization and
approval of stockholders, however, the Board may not increase the number of
shares which may be purchased pursuant to options granted under the 1996 Non-
Employee Directors Plan, change the requirement that option grants be priced at
100% of fair market value on the date of grant, modify in any respect the class
of individuals who constitute Eligible Directors or materially increase the
benefits accruing to optionees under the 1996 Non-Employee Directors Plan. Plan
provisions relating to the class of directors eligible to receive options under
the 1996 Non-Employee Directors Plan and to the price, amount and timing of
option grants under the 1996 Non-Employee Directors Plan may not be amended more
than once every six months, other than to comport with changes in applicable
law.
Term of Plan. The adoption of the 1996 Non-Employee Directors Plan has
been approved by the Board of Directors and shall become effective upon its
approval by the stockholders. The 1996 Non-Employee Directors Plan shall
terminate on the day following the tenth Annual Stockholders Meeting at which
Directors are elected succeeding the Annual Stockholders Meeting at which the
1996 Non-Employee Directors Plan is adopted unless the 1996 Non-Employee
Directors Plan is extended or terminated at an earlier date by Stockholders.
FEDERAL INCOME TAX CONSEQUENCES
Under present Federal income tax laws, options granted under the 1996
Non-Employee Directors Plan would have the following tax consequences.
1. When an optionee exercises an option, the difference between the
option price and any higher market value of the stock on the date of
exercise will be ordinary income to the optionee and will be allowed as a
deduction for Federal income tax purposes to the Company. When an optionee
disposes of shares acquired by the exercise of the option, any amount
received in excess of the market value of the shares on the date of
exercise will be treated as long or short term capital gain, depending upon
the holding period of the shares. If the amount received is less than the
market value of the shares on the date of exercise, the loss will be
treated as long or short term capital loss, depending upon the holding
period of the shares.
2. To the extent that an optionee pays all or part of the option
price of a nonstatutory option by tendering shares of Common Stock owned by
the optionee, the rules described in paragraph 1 above apply, except that
the number of shares received upon such exercise which is equal to the
number of shares surrendered as payment of the option price shall have the
same tax basis and tax holding period as the shares surrendered. If the
shares surrendered by the optionee had previously been acquired by reason
of the
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<PAGE>
exercise of an incentive stock option granted to such optionee, the
surrender of such shares is not a disqualifying disposition of such shares.
Generally, the additional shares received upon such exercise have a tax
basis equal to the amount of ordinary income recognized on such exercise
and a holding period which commences on the date of exercise.
3. Special rules may apply if the option is exercised within six
months of its grant by an optionee who is subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended.
The 1996 Non-Employee Directors Plan is not subject to any provision of
ERISA and is not qualified under Section 401(a) of the Code.
The foregoing discussion summarizes the Federal income tax consequences of
the 1996 Non-Employee Directors Plan based on current provisions of the Code,
which are subject to change. The summary does not cover any state or local tax
consequences of participation in the 1996 Non-Employee Directors Plan.
VOTING REQUIRED FOR ADOPTION OF THE 1996 NON-EMPLOYEE DIRECTORS PLAN
Adoption of the 1996 Non-Employee Directors Plan requires the affirmative
vote of the holders of at least a majority of the shares of the Company's Common
Stock present or represented at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE ADOPTION OF
THE 1996 NON-EMPLOYEE DIRECTORS PLAN.
1994 STOCK INCENTIVE PLAN
The Company's Board of Directors and stockholders have approved the 1994
Stock Incentive Plan (the 'Incentive Plan'), which presently covers 500,000
shares of the Company's Common Stock. The Incentive Plan, which expires in 2004,
permits the granting of incentive stock options, shares of restricted stock and
non-qualified stock options. All officers and key employees of the Company and
its affiliates are eligible to participate in the Incentive Plan. The Incentive
Plan is administered by the Stock Option Committee, who determine the persons to
whom, and the times at which, awards will be granted, the type of awards to be
granted and all other related terms and conditions of the awards. The per share
exercise price of any options may not be less than the fair market value of a
share of Common Stock at the time of grant. As of March 31, 1995, no issuances
have been made under the Incentive Plan.
INCENTIVE STOCK OPTION PLAN
The Company's Incentive Stock Option Plan, which covered 350,000 shares of
the Company's Common Stock, $.001 par value per share, expired in May, 1994. The
option price was the fair market value on the date of grant, unless the employee
owns, as defined in the applicable sections of the Internal Revenue Code of
1954, as amended, 10% of the total combined voting power or value of the Common
Stock of the Company immediately before the grant of any option, in which case
the option price shall be at least 110% of the fair market value at the date of
grant. Options expire five years from date of grant unless the employment is
terminated, in which event, subject to certain exceptions, the options terminate
three months subsequent to date of termination.
RESTRICTED MANAGEMENT STOCK BONUS PLAN
The Company's Restricted Management Stock Bonus Plan (the 'Bonus Plan'),
which covered 500,000 shares of the Company's Common Stock, $.001 par value per
share, expired in May, 1994. Shares issued under the Bonus Plan vest in four
equal installments on the second, third, fourth and fifth anniversaries of the
date of issuance. Except for those shares which have vested, shares issued under
the Bonus Plan may not be sold, transferred or otherwise disposed of unless they
are first offered to the Company for the same amount paid by the recipient.
14
<PAGE>
MEDICAL ACTION INDUSTRIES INC. RETIREMENT PLAN
The Company has adopted, effective April 1, 1988, the Medical Action
Industries Inc. Retirement Plan (the 'Retirement Plan') for certain employees
pursuant to Section 401(k) of the Internal Revenue Code. All employees of the
Company and its subsidiaries are eligible to participate in the Retirement Plan.
Subject to the terms and conditions of the Retirement Plan, each eligible
employee may contribute up to 15% of his compensation, as defined therein. Each
participant's contribution vests immediately.
In addition, the Retirement Plan provides for discretionary Company
contributions, up to a maximum of 3% of such participant's compensation. Each
participant's portion of the discretionary contribution vests over a period of
four years.
For the fiscal year ended March 31, 1996, contributions under the
Retirement Plan for Messrs. Joseph R. Meringola, Paul D. Meringola, Richard G.
Satin and Daniel Marsh were approximately $480, $377, $295 and $323,
respectively, and $1,475 for all officers as a group.
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into agreements with three of its executive
officers, Messrs. Paul D. Meringola, Satin and Marsh, which provide certain
benefits in the event of a change in control of the Company. A 'change in
control' of the Company is defined as, in general, the acquisition by any person
of beneficial ownership of 20% or more of the voting stock of the Company,
certain business combinations involving the Company or a change in a majority of
the incumbent members of the Board of Directors, except for changes in the
majority of such members approved by such members. If, within two years after a
change in control, the Company or, in certain circumstances, the executive,
terminates his employment, the executive is entitled to a severance payment
equal to three times (i) such executive's highest annual salary within the
five-year period preceding termination plus (ii) a bonus increment equal to the
average of the two highest of the last five bonuses paid to such executive. In
addition, the executive is entitled to the continuation of all employment
benefits for a three-year period, the vesting of all stock options and certain
other benefits, including payment of an amount sufficient to offset any 'excess
parachute payment' excise tax payable by the executive pursuant to the
provisions of the Internal Revenue Code or any comparable provision of state
law. The Company has also entered into a similar agreement with one of its
senior managers.
Prior to a change in control, the rights and obligations of the executive
with regard to his employment by the Company shall be determined in accordance
with the policies and procedures adopted from time to time by the Company. The
agreements deal only with certain rights and obligations of the executive
subsequent to a change in control, and the existence of the agreement shall not
be treated as raising any inference with respect to what rights and obligations
exist prior to a change in control.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors recommends that the stockholders approve the
appointment of Ernst & Young LLP as the Company's independent auditors to
examine the financial statements of the Company for the fiscal year ending March
31, 1997. A representative of the firm plans to be present at the Annual
Meeting, with the opportunity to make a statement if he desires to do so, and
will be available to respond to appropriate questions.
15
<PAGE>
CERTAIN TRANSACTIONS
During fiscal 1996, the Company's Chairman of the Board, Joseph R.
Meringola, borrowed and repaid an outstanding loan made to him in the aggregate
amount of $60,000.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Pursuant to Section 16(a) of the Exchange Act of 1934, directors, certain
officers, and beneficial owners of 10% or more of the Company's Common Stock
('reporting persons') are required from time to time to file with the Securities
and Exchange Commission (the 'Commission') reports on Forms 3, 4 or 5, relating
principally to transactions in Company securities by such persons. Based solely
upon its review of the copies of such reports furnished to the Company, or
written representations received by the company that no other reports were
required, the Company believes during fiscal 1996 that the reporting persons
filed on a timely basis the reports required by Section 16(a) of the Securities
Act of 1934.
ADDITIONAL INFORMATION
The Board of Directors does not intend to present to the meeting any
matters not referred to in the form of proxy. If any proposal not set forth in
this Proxy Statement should be presented for action at the meeting, and is a
matter which should come before the meeting, it is intended that the shares
represented by proxies will be voted with respect to such matters in accordance
with the judgment of the persons voting them.
The cost of soliciting proxies in the accompanying form has been or will be
paid by the Company. In addition to solicitation by mail, arrangements may be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy material to their principals, and the Company may reimburse them for
their expenses in so doing. To the extent necessary in order to assure
sufficient representation, officers and regular employees of the Company may
request the return of proxies personally, by telephone or telegram. The extent
to which this will be necessary depends entirely upon how promptly proxies are
received, and stockholders are urged to send in their proxies without delay.
Stockholder proposals with respect to the Company's next Annual Meeting of
Stockholders must be received by the Company no later than April 1, 1997 to be
considered for inclusion in the Company's next Proxy Statement.
A copy of the Annual Report has been mailed to every stockholder of record.
The Annual Report is not to be considered proxy soliciting material.
By Order of the Board of Directors,
Richard G. Satin
Vice President--Operations
and General Counsel
Dated: Hauppauge, New York
July 1, 1996
16
<PAGE>
EXHIBIT A
1996 MEDICAL ACTION INDUSTRIES INC. STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of the 1996 Medical Action Industries Inc. Non-Employee
Directors Stock Option Plan (the 'Plan') is to increase the proprietary and
vested interest of the non- employee directors of Medical Action Industries Inc.
(the 'Company') in the growth and performance of the Company by granting such
directors options to purchase shares of Common Stock, $.001 par value per share
(the 'Stock') of the Company.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors (the
'Board'). Subject to the provisions of the Plan, the Board shall be authorized
to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan and to make all other determinations necessary
or advisable for the administration of the Plan; provided, however, that the
Board shall have no discretion with respect to the selection of directors to
receive options under the Plan, the number of shares of Stock subject to any
such options, the purchase price thereunder or the timing of grants of options
under the Plan. The determinations of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Secretary of the
Company shall be authorized to implement the Plan in accordance with its terms
and to take such actions of a ministerial nature as shall be necessary to
effectuate the intent and purposes thereof. The validity, construction and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of New York.
3. ELIGIBILITY
The class of individuals eligible for grants of options under the Plan
shall be Eligible Directors, as defined below. Eligible Director shall mean a
director of the Company who is not an employee of the Company or its
subsidiaries and has not, within one year immediately preceding the
determination of such director's eligibility, received any award under any plan
of the Company or its subsidiaries that entitles the participants therein to
acquire stock, stock options or stock appreciation rights of the Company or its
subsidiaries (other than any other plan which participants' entitlements are
governed by provisions meeting the requirements of Rule 16b-3(c)(2)(ii)
promulgated under the Securities Exchange Act of 1934). Any holder of an option
granted hereunder shall hereinafter be referred to as a 'Participant'.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 7, an aggregate of 100,000
shares of Stock shall be available for issuance upon the exercise of options
granted under the Plan. The shares of Stock deliverable upon the exercise of
options may be made available from authorized but unissued share or shares
reacquired by the Company, including shares purchased in the open market or in
private transactions. If any option granted under the Plan shall terminate for
any reason without having been exercised, the shares subject to, but not
delivered under, such option shall be available for other options.
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5. GRANT, TERMS AND CONDITIONS OF OPTIONS
Each individual who is an Eligible Director will be granted an option to
purchase 2,500 shares of Stock as of the date of each Annual Stockholders
Meeting following the effectiveness of the Plan at which such individual is
elected or re-elected to the office of director. The options granted will be
nonstatutory stock options not intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the 'Code') and shall have the
following terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon the
exercise of each option shall be 100% of the Fair Market Value per share of
the Stock on the date the option is granted. For purposes of determining
Fair Market Value of a share of Common Stock on the date of grant, if the
Common Stock (i) is then listed on any national securities exchange, the
fair market value shall be the closing price per share of the Common Stock
on such exchange at the close of the trading session on the date of grant,
(ii) is then listed on NASDAQ (but not on any national securities
exchange), the Fair Market Value shall be the closing price per share of
the Common Stock on NASDAQ on the date of grant, or (iii) is then traded on
the over-the-counter market (but not on a national securities exchange or
NASDAQ), the Fair Market Value shall be the average of the closing bid and
asked prices of the Common Stock as reported by the National Quotation
Bureau, Inc. or other entity then publishing bid and asked prices for the
Common Stock for the date of grant, or, if unavailable, then the last
trading date on which bid and asked quotations were published immediately
preceding the date of grant.
(b) Payment. Options may be exercised only upon payment of the
purchase price thereof in full. Such payment shall be made in cash or in
Stock, which shall have a Fair Market Value (determined in accordance with
the rules of paragraph (a) above), at least equal to the aggregate exercise
price of the shares being purchased, or a combination of cash and Stock.
(c) Exercisability and Term of Option. Options shall be exercisable
in whole or in part at all times during the period beginning on the date of
grant until terminated, as provided in paragraph (d) below.
(d) Termination of Service as Eligible Director.
(i) Except as provided in subparagraph (ii) of this paragraph (d),
all outstanding options held by a Participant shall be automatically
cancelled upon such Participant's termination of service as an Eligible
Director.
(ii) Upon termination of a Participant's service as an Eligible
Director by reason of such Participant's voluntary mid-term resignation,
declining to stand for reelection (whether as a result of the Company's
mandatory retirement program or otherwise), becoming an employee of the
Company or a subsidiary thereof or becoming disabled (as defined in the
Company's pension plan), all outstanding options held by such
Participant on the date of such termination shall expire five years from
the date upon which the Participant ceases to be an Eligible Director.
In the event of the death of a Participant (whether before or after
termination of service as an Eligible Director), all outstanding options
held by such Participant (and not previously cancelled or expired) on
the date of such death shall be fully exercisable by the Participant's
legal representative within one year after the date of death (without
regard to the expiration date of the option specified in accordance with
the preceding sentence).
(e) Nontransferability of Options. No option shall be transferable by
a Participant otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Participant to whom an option
is granted it may be exercised only by the Participant or by the
Participant's guardian or legal representative. Notwithstanding the above,
options may be transferred pursuant to a qualified domestic relations
order.
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(f) Listing and Registration. Each option shall be subject to the
requirement that if at any time the Board shall determine, in its
discretion, that the listing, registration or qualification of the Stock
subject to such option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with,
the granting of such option or the issue or purchase of shares thereunder,
no such option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free of any condition not acceptable to the Board.
(g) Option Agreement. Each option granted hereunder shall be
evidenced by an agreement with the Company which shall contain the terms
and provisions set forth herein and shall otherwise be consistent with the
provisions of the Plan.
6. ADJUSTMENT OF AND CHANGE IN STOCK
In the event of a stock split, stock dividend, subdivision or combination
of the Stock or other change in corporate structure affecting the Stock, the
number of shares of Stock authorized by the Plan shall be increased or decreased
proportionately, as the case may be, and the number of shares of Stock subject
to any outstanding option shall be increased or decreased proportionately, as
the case may be, with appropriate corresponding adjustment in the purchase price
per share of Stock thereunder.
7. MERGERS, SALES AND CHANGE OF CONTROL
In the case of (i) any merger, consolidation or combination of the Company
with or into another corporation (other than a merger, consolidation or
combination in which the Company is the continuing corporation and which does
not result in its outstanding Stock being converted into or exchanged for
different securities, cash or other property, or any combination thereof) or a
sale of all or substantially all of the assets of the Company or (ii) a Change
in Control (as defined below) of the Company, the holder of each option then
outstanding immediately prior to such Change in Control shall (unless the Board
determines otherwise) have the right to receive on the date or effective date of
such event an amount equal to the excess of the Fair Market Value on such date
of (a) the securities, cash or other property, or combination thereof,
receivable upon such merger, consolidation or combination in respect of a share
of Stock, in the cases covered by clause (i) above, or in the case of a sale of
assets referred to in such clause (i), a share of Stock, or (b) the final tender
offer price in the case of a tender offer resulting in a Change in Control or
(c) the value of the Stock covered by the option as determined by the Board, in
the case of Change in Control by reason of any other event, over the exercise
price of such option, multiplied by the number of shares of Stock subject to
such option. Such amount will be payable fully in cash.
Any determination by the Board made pursuant to this Section 7 will be made
as to all outstanding options and shall be made (a) in cases covered by clause
(i) above, prior to the occurrence of such event, (b) in the event of a tender
or exchange offer, prior to the purchase of any Stock pursuant thereto by the
offeror and (c) in the case of a Change in Control by reason of any other event,
just prior to or as soon as practicable after such Change in Control.
A 'Change in Control' shall be deemed to have occurred if (a) any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, shall own beneficially 20% or more of the Stock outstanding, or (b)
if following (i) a tender or exchange offer for voting securities of the Company
(other than any such offer made by the Company), or (ii) a proxy contest for the
election of directors of the Company, the persons who were directors of the
Company immediately before the initiation of such event (or directors who
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were appointed by such directors) cease to constitute a majority of the Board of
Directors of the Company upon the completion of such tender or exchange offer or
proxy contest or within one year after such completion.
8. NO RIGHTS OF STOCKHOLDERS
Neither a Participant nor a Participant's legal representative shall be, or
have any of the rights and privileges of, a shareholder of the Company in
respect of any shares purchasable upon the exercise of any option, in whole or
in part, unless and until certificates for such shares shall have been issued.
9. PLAN AMENDMENTS
The Plan may be amended by the Board, as it shall deem advisable or to
conform to any change in any law or regulation applicable thereto; provided,
that the Board may not, without the authorization and approval of shareholders:
(i) increase the number of shares which may be purchased pursuant to options
hereunder, either individually or in the aggregate, except as permitted by
Section 8, (ii) change the requirements of Section 5(a) that option grants be
priced at Fair Market Value, except as permitted by Section 6, (iii) modify in
any respect the class of individuals who constitute Eligible Directors; or (iv)
materially increase the benefits accruing to Participants hereunder. The
provisions of Sections 3 and 5 may not be amended more than once every six
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules under either such statute.
10. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective on the day after the Company's Annual
Stockholders Meeting at which the Plan is approved by Stockholders. The Plan
shall terminate on the day following the tenth Annual Stockholders Meeting at
which Directors are elected succeeding the Annual Stockholders Meeting at which
the Plan was approved by Stockholders, unless the Plan is extended or terminated
at an earlier date by Stockholders.
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EXHIBIT B
MEDICAL ACTION INDUSTRIES INC.
1989 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED
1. PURPOSE AND EFFECT
(a) The purpose and effect of this plan (the 'Plan') is to induce officers,
directors and other senior executives and management and supervisory personnel
of and consultants to Medical Action Industries Inc., a Delaware corporation
('Medical Action') and its subsidiaries (Medical Action and its subsidiaries
being hereinafter collectively referred to as the 'Company'), who are in a
position to make material contributions to the Company's success, to remain in
the service of the Company, to offer them incentives and rewards in recognition
of their share in the Company's progress, and to encourage them to continue to
promote the best interests of the Company through the grant to them of options
(the 'Options') for the purchase of Common Stock, $.001 par value, of Medical
Action (the 'Common Stock'). The Plan is also intended to aid the Company in
competing with other enterprises for the services of new senior executives
needed to help insure continued development. For purposes of this Plan, the term
'subsidiaries' shall include all corporations at least 50% of the voting stock
of which is owned directly or indirectly by Medical Action.
(b) In the event that this Plan is not approved by the stockholders of
Medical Action, this Plan and all Options granted and to be granted hereunder
shall be null and void, and the Company shall have no obligation of any nature
whatsoever to any employee, director or other person arising out of either the
Plan or any Options granted or to be granted thereunder.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of Medical
Action (the 'Board'), provided however, that the Board may, in the exercise of
its discretion, designate from among its members a Compensation Committee (the
'Committee') consisting of no fewer than three directors, each of whom shall be
a 'disinterested person' within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
('Exchange Act'), and may delegate to the Committee full power and authority,
subject to such orders or resolutions not inconsistent with the provisions of
the Plan as may from time to time be issued or adopted by the Board, to
interpret the provisions and supervise the administration of the Plan. Any
member of the Committee may be removed at any time either with or without cause
by resolution adopted by the Board, and any vacancy on the Committee may at any
time be filled by resolution adopted by the Board. Any or all power and
functions of the Committee may at any time and from time to time be exercised by
the Board; provided, however, that with respect to the participation in the Plan
of persons who are members of the Board, such powers and functions of the
Committee may be exercised by the Board only if, at the time of such exercise, a
majority of the members of the entire Board and a majority of the directors
acting in the particular matter are 'disinterested persons' within the meanings
of Rule 16b-3 promulgated under the Exchange Act.
(b) Each Option shall be evidenced by an Option Agreement that shall
contain terms and conditions (consistent with the terms and conditions of this
Plan) as may be approved by the Board or the Committee, as the case may be, and
shall be signed by an officer of Medical Action and the optionee (the
'Optionee').
(c) Subject to an applicable provision of Medical Action's By-Laws, all
decisions made by the Board or the Committee pursuant to the provisions of the
Plan and related orders or resolutions of the Board shall be final, conclusive
and binding on all persons, including the Company, stockholders, employees and
Optionees.
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<PAGE>
3. SHARES SUBJECT TO THE PLAN
(a) The shares of Common Stock to be delivered upon the exercise of Options
granted under the Plan shall be made available, at the discretion of the Board,
either from the authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by Medical Action and held in treasury.
(b) Subject to adjustments made pursuant to the provisions of Paragraph (c)
of this Section 3, the aggregate number of shares to be delivered upon exercise
of all Options that may be granted under this Plan shall be 1,650,000 shares. If
an Option granted under the Plan shall expire or terminate for any reason during
the term of the Plan, the shares subject to but not delivered under such Option
shall be available for the grant of other Options. The foregoing
notwithstanding, no person may be granted Options in any calendar year to
purchase shares of Common Stock which in the aggregate have a fair market value
of more than $100,000.
(c) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or other change in corporate
structure affecting the Common Stock, appropriate adjustments shall be made in
the aggregate number of shares subject to the Plan and in the number of shares
subject to unexercised Options previously granted under the Plan.
4. ELIGIBILITY AND PARTICIPATION
The persons eligible to receive Options shall consist of officers,
directors and other senior executives and management and supervisory personnel
of and consultants to the Company. Subject to the limitations of the Plan, the
Board or the Committee, as the case may be, shall select the person to be
granted Options, determine the number of shares and exercise price subject to
each Option, and determine the time when each Option shall be granted. More than
one Option may be granted to the same person.
5. TERM OF PLAN AND OPTION PERIOD
The terms during which Options may be granted under this Plan shall
commence on October 25, 1989 and expire on October 24, 1999, provided, however,
that if the Plan is not approved by the stockholders of Medical Action all
Options granted hereunder shall become null and void. Subject to the provisions
of the Plan with respect to death, retirement and termination of employment, the
maximum period during which each Option may be exercised may be fixed by the
Board or the Committee, as the case may be, at the time such Option is granted
but shall in no event exceed five (5) years.
6. EXERCISE PRICE
(a) The price at which shares of Common Stock may be purchased upon
exercise of a particular Option shall not be less than eighty-five (85%) of the
fair market value of such shares on date such Option is granted, as determined
by the Board or the Committee, as the case may be.
(b) For purposes of determining the Fair Market Value of a share of Common
Stock on the date of grant, if the Common Stock (i) is then listed on any
national securities exchange, the Fair Market Value shall be the closing price
per share of the Common Stock on such exchange at the close of the trading
session on the date of grant, (ii) is then listed on NASDAQ (but not on any
national securities exchange), the Fair Market Value shall be the closing price
per share of the Common Stock on NASDAQ on the date of grant, or (iii) is then
traded on the over-the-counter market (but not on a national securities exchange
or NASDAQ), the Fair Market Value shall be the average of the closing bid and
asked prices of the Common Stock as reported by the National Quotation Bureau,
Inc. or other entity then publishing bid and asked prices for the Common Stock
for the date of grant, or, if unavailable, then the last trading date on which
bid and asked quotations were published immediately preceding the date of grant.
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<PAGE>
7. EXERCISE OF OPTIONS
(a) Each Option granted under this Plan may be exercised only during the
continuance of the Optionee's employment or service with the Company and only as
to such percentage of the shares covered thereby during such periods as may be
determined at the time of grant by the Board or the Committee, as the case may
be, but if no such percentage is specified, then each Option granted under this
Plan may be exercised as to 50% of the shares covered thereby one year after the
date of grant and as to an additional 50% of the shares covered thereby two
years after the date of grant (so that such Option may be exercised as to 100%
of the shares covered thereby beginning two (2) years after the date of grant),
except in the case of death, retirement or termination of employment or service
as hereinafter provided. Subject to the foregoing limitations and the terms and
conditions of the option certificate, each Option shall be exercisable with
respect to such number of shares and during such periods as shall be fixed by
the Board or the Committee, as the case may be; provided, however, that if the
Board or the Committee grants an Option or Options exercisable in more than one
installment, and if the employment or service of an Optionee holding such Option
is terminated, the Option shall be exercisable as to such number of shares as to
which the Optionee had the right to exercise on the date of termination of
employment services.
(b) No shares of Common Stock shall be delivered pursuant to the exercise
of any Option, in whole or in part, until qualified for delivery under such laws
and regulations as may be deemed by the Board or the Committee, as the case may
be, to be applicable thereto and until payment in full of the exercise price
thereof is received by the Company.
(c) When exercising Options in whole or in part, Optionees may pay the
exercise price in cash, in shares of Common Stock or my means of any other
consideration acceptable to the Board or the Committee. For purposes of valuing
any share of Common Stock used to exercise any Option in whole or in part, such
shares shall be valued as provided in Section 6(b). Shares of Common Stock used
to exercise any Option granted hereunder shall be free and clear of all liens,
pledges, claims, encumbrances and restrictions of any kind or nature whatsoever,
other than restrictions imposed upon such shares pursuant to the provisions of
the Securities Act of 1933, as amended.
(d) No Optionee, or legal representative, legatee, or distributee of an
Optionee, shall be deemed to be a holder of any shares subject to any Option
granted hereunder unless and until the certificate or certificates therefor have
been issued and delivered.
8. NON-TRANSFERABILITY OF OPTIONS
An Option granted under the Plan may not be transferred except by will or
the laws of descent and distribution, and during the lifetime of the person who
whom granted, may be exercised only by such person.
9. DEATH, RETIREMENT AND TERMINATION OF EMPLOYMENT
Any Option, the period of which has not theretofore expired, shall
terminate at the time of death of the person to whom granted or at the time of
retirement or termination for any reason of such person's employment or service
with the Company, and no share of Common Stock may thereafter be delivered
pursuant to such Option, except that:
(a) upon retirement or termination of employment or service (other
than by death, disability, voluntary termination or termination for cause),
an Optionee may within two (2) months after the date of such retirement or
termination, purchase all or part of the shares with respect to which such
Optionee is entitled to exercise such Option, in accordance with the
provisions of Section 7 hereof, but in no event after the
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<PAGE>
expiration of the term of the Option ('cause' for purposes of this Plan
shall mean (i) willful disregard of duties, (ii) habitual absence from
employment or service, (iii) intoxication, or (iv) dishonesty);
(b) upon the 'disability' of any Optionee, the Optionee may within six
(6) months after the date of such termination of employment, but in no
event after the expiration of the term of the Option, purchase all or part
of the shares with respect to which such Optionee is entitled to exercise
such Option, in accordance with the provisions of Section 7 hereof. For
purposes of the Plan, the term 'disability' shall mean a physical or mental
disability as defined in Section 105 of the Internal Revenue Code of 1986,
as amended; and
(c) upon the death of any Optionee while in active employment or
service, the person or persons to whom such Optionee's rights under the
Option are transferred by will or the law of descent and distribution may,
within six (6) months after the date of such Optionee's death, but in no
event after the expiration of the term of the Option, purchase all or any
part of the shares with respect to which the Option was exercisable on the
date of death in accordance with the provisions of Section 7 hereof.
10. AMENDMENTS AND DISCONTINUANCE
The Board may amend, suspend, or discontinue the Plan, but may not, without
the prior approval of Medical Action's stockholders, make any amendments that
would (i) make any material change in the class of eligible persons as defined
in the Plan, (ii) increase the total number of shares for which Options may be
granted under the Plan, (iii) extend the term of the Plan or the maximum option
period, (iv) decrease the minimum option price, or (v) permit adjustments in the
number and option price of shares granted under the Plan except as permitted by
the provisions of Paragraph (c) of Section 3 above.
B-4
<PAGE>
MEDICAL ACTION INDUSTRIES INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Paul D. Meringola and Richard G. Satin, or
either of them with full power of substitution, proxies to vote at the Annual
Meeting of Stockholders of Medical Action Industries Inc. (the 'Company') to be
held on August 14, 1996 at 3:00 p.m., local time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of the Company held or owned by the undersigned as
directed below, and in their discretion upon such other matters as may come
before the meeting.
/x/ Please mark your votes as in this example.
1. Election of Directors:
FOR / / WITHHELD / /
FOR, EXCEPT VOTE WITHHELD FOR THE FOLLOWING NOMINEE(S): ____________________
NOMINEES: Joseph R. Meringola, Dr. Philip F. Corso
2. Approval of a proposal to amend the Company's 1989 Non-Qualified Stock
Option Plan
FOR / / AGAINST / / ABSTAIN / /
(To be Signed on Reverse Side)
<PAGE>
3. Approval of a proposal to adopt the 1996 Non-Employee Directors Stock
Option Plan
FOR / / AGAINST / / ABSTAIN / /
4. Approval of the ratification of Ernst & Young as independent public
auditors of the Company for the fiscal year ending March 31, 1997.
FOR / / AGAINST / / ABSTAIN / /
Date ____________________________
Signature _______________________
Signature _______________________
NOTE: Please sign as name appears
hereon. Joint owners should each
sign. When signing as attorney,
executor, administrator or
guardian, please give full title
as such.
