<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 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)
RICHARD G. SATIN, ESQ.
VICE PRESIDENT & GENERAL COUNSEL
Payment of filing fee (Check the appropriate box):
[X] $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).
[ ] 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:
- -------------------------------------------------------------------------------
[ ] 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>
MEDICAL ACTION INDUSTRIES INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 13, 1997
-------------------------
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 13, 1997 at the offices
of the Company, 150 Motor Parkway, lower level, Hauppauge, New York at 2:00
p.m. (the "Annual Meeting"), for the following purposes:
1. To elect two directors to serve in Class I until the
Annual Meeting of Stockholders in 2000;
2. To consider and act upon a proposal to amend the
Company's 1994 Stock Incentive Plan, as more fully described in the
accompanying Proxy Statement;
3. To consider and act upon the ratification of Ernst &
Young LLP as independent public auditors of the Company for the
fiscal year ending March 31, 1998; and
4. 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 24, 1997
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 2, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WE DO
HOPE THAT YOU WILL ATTEND, BUT IF YOU DO NOT INTEND TO BE PRESENT IN
PERSON, PLEASE MARK, SIGN AND RETURN THE ACCOMPANYING PROXY PROMPTLY.
A STAMPED REPLY ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
MEDICAL ACTION INDUSTRIES INC.
150 Motor Parkway
Hauppauge, New York 11788
------------------------
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
to be held August 13, 1997
-----------------------
This Proxy Statement is furnished to stockholders of MEDICAL ACTION
INDUSTRIES INC., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held at the executive offices of the
Company, 150 Motor Parkway, lower level, Hauppauge, New York 11788, on
Wednesday, August 13, 1997 at 2:00 o'clock in the afternoon, New York time,
including any adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting. This Proxy Statement and the accompanying proxy
are first being sent or given to stockholders on or about July 2, 1997.
A stockholder who returns the accompanying proxy may revoke it at any
time before it is voted by giving notice in writing to the Company, by granting
a subsequent proxy or by appearing in person and voting at the meeting. Any
stockholder attending the meeting and entitled to vote may vote in person
whether or not said stockholder has previously submitted a proxy. Where no
instructions are indicated, proxies will be voted for the nominees for
Directors set forth herein and in favor of the other proposals described
herein.
Voting Rights and Votes Required
At the close of business on June 24, 1997, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, the
Company had outstanding 8,239,664 shares of its Common Stock, par value $.001
per share ("Common Stock"). The holders of such Common Stock are entitled to
one vote for each share held on such record date.
Directors will be elected by a plurality of the votes cast by the
holders of the shares of Common Stock voting in person or by proxy at the
Annual Meeting. Thus, abstentions will have no effect on the vote for election
of Directors. Approval of any other matters to come before the Annual Meeting
will require the affirmative vote of the holders of a majority of the shares of
Common Stock of the Company present in person or by proxy at the Annual
Meeting. Broker non-votes, which occur when a broker or other nominee holding
shares for a beneficial owner does not vote on a proposal because the
beneficial owner has not checked one of the boxes on the proxy card, are not
considered to be shares "entitled to vote" (other than for quorum purposes),
will not be included in vote totals and will have no effect on the outcome of
any matters to be voted upon at the Annual Meeting.
Management is not aware at the date hereof of any matter to be
presented at the Annual Meeting other than the election of directors and the
other proposals described in the attached Notice of Annual Meeting of
Stockholders. If any other matter is properly presented, the persons named in
the proxy will vote thereon according to their best judgment.
The expense of soliciting proxies for the Annual Meeting, including
the cost of preparing, assembling and mailing the notice, proxy and Proxy
Statement, will be paid by the Company. The solicitation will be made by use of
the mails, through brokers and banking institutions, and by officers and
regular employees of the Company. Proxies may be solicited by personal
interview, mail, telephone or facsimile transmission.
1
<PAGE>
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement and, if given
or made, such information or representation must not be relied upon as having
been authorized by the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the record date certain
information with regard to beneficial ownership of the Company's Common Stock
by each beneficial owner of five percent or more of the Company's Common Stock
known by management; each Director; each executive officer of the Company; and
all executive officers and Directors of the Company as a group. For a
description of the method used to determine such beneficial ownership, see
footnote (2) to the following table.
Amount and Nature Percent of Class
Name and Address of Beneficial If More than 1.0%
of Beneficial Owner Ownership (1) (2) (2)
- ------------------- ----------------- -----------------
Common Stock Common Stock
----------------- -----------------
Joseph R. Meringola 1,807,541(3) 21.8%
150 Motor Parkway
Hauppauge, New York
Paul D. Meringola 454,000(4)(5)(6) 5.4%
150 Motor Parkway
Hauppauge, New York
Richard G. Satin 257,045(4)(5) 3.0%
150 Motor Parkway
Hauppauge, New York
Daniel F. Marsh 191,500(4) 2.3%
150 Motor Parkway
Hauppauge, New York
Dr. Philip F. Corso 18,000 --
1200 Post Road East
Westport, Connecticut
Dr. Thomas A. Nicosia 7,000 --
1615 Northern Blvd.
Manhasset, New York
Bernard Wengrover 50,000
1000 Woodbury Road
Woodbury, New York
Directors and Officers 2,785,086(8) 31.8%
as a Group (7 Persons)
- -------------
(1) Unless otherwise indicated, the stockholders identified in this table
have sole voting and investment power with respect to the shares
beneficially owned by them.
(2) Each named person and all executive officers and Directors as a group
are deemed to be the beneficial owners of securities that may be
acquired within 60 days through the exercise of options. Accordingly,
the
(Footnotes continued on next page)
2
<PAGE>
(Footnotes continued from previous page)
number of shares and percentage set forth opposite each
stockholder's name in the above table include the shares of Common
Stock issuable upon exercise of presently exercisable stock options
under the Company's stock option plans, both with respect to the
number of shares of Common Stock deemed to be beneficially owned and
the adjusted percentage of outstanding Common Stock resulting from
such right of exercise. However, the shares of Common Stock so
issuable upon such exercise by any such stockholder are not included
in calculating the number of shares or percentage of Common Stock
beneficially owned by any other stockholder.
(3) Does not include 100,000 shares that are subject to an option granted
to the Company's Chairman of the Board and which were partially
assigned to certain executive officers. These options may be exercised
on or before September 12, 2001 at $1.75 per share.
(4) Includes the right to acquire 56,000 shares, 22,000 shares and 22,000
shares, respectively, by Paul D. Meringola, Richard G. Satin and
Daniel F. Marsh pursuant to an option granted by the Company's
Chairman of the Board.
(5) Does not include 3,885 shares and 4,530 shares acquired by Paul D.
Meringola and Richard G. Satin pursuant to the Medical Action
Industries Inc. 401(K) Retirement Plan.
(6) Includes 4,000 shares owned by Mr. Meringola's children, as to which
he disclaims beneficial ownership.
MANAGEMENT
Officers of the Company
The Company's executive officers are as follows:
Name Age Position Held with the Company
- ---- --- ------------------------------
Joseph R. Meringola 54 Chairman of the Board (Chief
Executive Officer)
Paul D. Meringola 39 President (Chief Operating
Officer)
Richard G. Satin 42 Vice President - Operations,
General Counsel and Corporate
Secretary
Daniel F. Marsh 39 Vice President - Sales and
Marketing
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 F. 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.
3
<PAGE>
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board of
Directors shall consist of between three and eleven members, as determined from
time to time by the Board, divided into three classes as nearly equal in number
as possible. The size of the Board has currently been set at six. The two
directors named below in Class I, 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 2000 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.
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 1999)
- --------------------- --------------------- ---------------------
Dr. Thomas A. Nicosia Bernard Wengrover Joseph R. Meringola
Richard G. Satin Paul D. Meringola Dr. Philip F. Corso
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 an Assistant Clinical Professor of Surgery. In
addition, Dr. Corso is Senior Attending and Emeritus 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. He is the Director of the Aesthetic Center for Plastic
Surgery in Westport, Connecticut and is a member of numerous national and
international plastic surgery societies.
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
4
<PAGE>
with North Shore University Hospital in Manhasset, New York and is President of
the Medical Staff of St. Francis Hospital in Roslyn, 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 & Wengrover, LLP. Mr. Wengrover was the Company's independent auditor
from 1977 until March 31, 1989.
The Board of Directors of the Company recommends a vote FOR Richard G.
Satin and Dr. Thomas A. Nicosia as Class I Directors to hold office until the
2000 Annual Meeting of Stockholders and until their successors are elected and
qualified.
Meetings of the Board of Directors and Committees of the Board of
Directors
The Board of Directors held five meetings during the fiscal year ended
March 31, 1997. Except for Dr. Nicosia, all directors attended 75% or more of
the aggregate number of meetings of the Board and its committees, on which they
serve.
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 executive officers of the
Company and the Chief Executive Officer. The Compensation Committee met one
time during fiscal year 1997.
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.
Directors' Compensation
Directors' Fees. Non-employee Directors are currently paid $500 for
each board meeting they attend. In addition, the Company has entered into a
consulting agreement with Bernard Wengrover for the purpose of obtaining advice
and counselling concerning strategic planning and financial and business
matters. Mr. Wengrover is currently paid $24,000 per year for his services
under this agreement.
Stock Options. In August 1996, stockholders approved the 1996
Non-Employee Directors Stock Option Plan, under which all Directors who are not
also employees of the Company will be automatically granted each year at the
Annual Meeting of Shareholders options to purchase 2,500 shares at the fair
market value of the Company's Common Stock on the date of grant. The first
grant of options will be made commencing with this Annual Meeting of
Stockholders. The options will be exercisable in two equal installments during
the first and second year from the date of grant.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of the Company's Chief Executive Officer and each of the
Company's most highly compensated executive officers (referred to collectively
with the Chief Executive Officer as the "named executives") during the years
ended March 31, 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ---------------------------------------------------------
Awards(3)
---------------------------------------------------------
LTIP All Other
Name and Principal Fiscal Other Annual Restricted Stock Payments Compensation
Position(1) Year Salary($) Bonus($) Comp.($)(2) Awards($)(3) Options(#) ($) ($)(6)(7)
- ------------------ ------ --------- -------- ------------ ---------------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph R. Meringola 1997 $208,000 $ -- $ -- -- $-- $ 6,510
Chairman of the 1996 208,000 -- -- -- -- 5,959
Board and CEO 1995 208,000 -- -- -- -- 4,497
Paul D. Meringola 1997 $181,808 -- -- 160,000 -- 8,117
President and Chief 1996 174,933 -- -- 90,000 -- 10,357
Operating Officer 1995 172,593 -- 13,281 -- -- 7,105
Richard G. Satin 1997 $145,000 -- -- 85,000 -- 7,164
Vice President - 1996 128,000 -- -- 90,000 -- 5,048
Operations and 1995 127,692 -- 12,750 -- -- 5,036
General Counsel
Daniel F. Marsh 1997 $154,000 -- 23,750 60,000 -- 2,752
Vice President - 1996 140,000 -- -- 90,000 -- 867
Sales and 1995 139,666 -- 12,750 -- -- 1,811
Marketing
</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) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the last year, (b) payment of
above-market preferential earnings on deferred compensation, (c)
payments of earnings with respect to long-term incentive plans prior
to settlements or maturation, (d) tax payment reimbursements, or (e)
preferential discounts on stock.
(3) 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, 1997, together with the
value of those shares is as follows: Mr. Joseph R. Meringola - 50,000
shares/$134,500; Mr. Paul D. Meringola - 99,500 shares/$267,655;
Richard G. Satin - 52,000 shares/$139,880 and Daniel F. Marsh - 37,000
shares/$99,530. Except for the bonus shares granted to Mr. Marsh in
fiscal 1997, which vest in two equal annual installments commencing on
the first anniversary of the date of issuance, 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.
(Footnotes continued on next page)
6
<PAGE>
(Footnotes continued from previous page)
(4) Includes shares subject to options granted to Messrs. Paul D.
Meringola, Richard G. Satin and Daniel F. Marsh under the Company's
1994 Stock Incentive Plan and 1989 Non-Qualified Stock Option Plan.
(5) For 1997, 1996 and 1995, the Company had no long-term incentive plans
in existence. Accordingly, there were no payments or awards under any
long-term incentive plan.
(6) 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".
(7) 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.
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, 1997:
<TABLE>
<CAPTION>
Individual Grants
--------------------------
% of Total Potential Realized Value at Assumed
Options Range of Annual Rates of Stock Price
Options Granted to Exercise Appreciation for Option Term (2)
Granted Employees in Prices -----------------------------------
Name (Shares) Fiscal 1997 ($/share) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph R. Meringola -- -- -- -- --
Paul D. Meringola 160,000 31% $1.69-2.375 80,536 177,964
Richard G. Satin 85,000 17% $1.69-2.375 44,205 97,682
Daniel F. Marsh 60,000 12% $1.69-2.375 32,532 71,888
</TABLE>
- ---------------------
(1) All of the options in the above table were non-statutory stock options
awarded under the Company's 1994 Stock Incentive Plan and 1989
Non-Qualified Stock Option Plan. The stock options granted to Messrs.
Paul D. Meringola, Richard G. Satin and Daniel F. Marsh were granted
between June 5, 1996 and February 4, 1997 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. Paul D.
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.
7
<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, 1997:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Value of Unexercised In-the-
Number of Unexercised Money Options at Year End
Options at Year End 1997 1997(1)
Shares -------------------------- --------------------------
Acquired on Value
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Meringola -- -- -- -- -- --
Paul D. Meringola -- -- 120,000 205,000 $126,650 $194,838
Richard G. Satin -- -- 120,000 130,000 $126,650 $124,775
Daniel Marsh -- -- 135,000 105,000 $140,713 $ 99,838
</TABLE>
- ------
(1) Values are calculated by subtracting the exercise price from the fair
market value of the Company's Common Stock as of fiscal year end.
The following table sets forth information concerning repricings of
options held by the named officers of the Company during the last ten completed
fiscal years:
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at Remaining at
Options/SARs Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date* Amended (#) Amendment($) Amendment($) Price($) Amendment
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul D. Meringola 7/24/96 75,000 $1.75 $2.50 $1.75 3 months
25,000 1.75 3.25 1.75 13 months
50,000 1.75 2.00 1.75 23 months
Richard G. Satin 7/24/96 25,000 $1.75 $2.50 $1.75 3 months
50,000 1.75 4.125 1.75 18 months
25,000 1.75 2.00 1.75 23 months
Daniel F. Marsh 7/24/96 75,000 $1.75 $3.00 $1.75 9 months
15,000 1.75 2.00 1.75 23 months
</TABLE>
- ---------------------
* Effective July 24, 1996, the above referenced options to purchase
shares of Common Stock granted between October 31, 1991 and September
3, 1993 at exercise prices ranging from $2.00 to $4.125 per share were
repriced to purchase shares at an exercise price of $1.75 per share.
None of the original options granted were cancelled, only the exercise
price was adjusted to reflect the closing market price for the
Company's Common Stock on the date prior to the repricing. The purpose
of the repricing was to motivate the executive officers to achieve the
Company's performance criteria and other key goals, including price
per share, net income and return on equity. In addition, this provided
the executive officers with the opportunity to build substantial
ownership interest in the Company.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The report of the Compensation Committee and the stock performance
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
except as to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
Under rules established by the Securities and Exchange Commission
("SEC"), the Company is required to provide certain data and information in
regard to the compensation and benefits provided to the Company's Chief
Executive Officer and other executive officers of the Company. In fulfillment
of this requirement, the Compensation Committee, at the direction of the Board
of Directors, has prepared the following report for inclusion in this proxy
statement.
Compensation Policies
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 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
9
<PAGE>
Committee considers other managerial goals stated as objectively as possible.
For the fiscal year ended March 31, 1997, 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 takes 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. Any 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 1997 as reflected in the Summary Compensation table on
page 6.
The Compensation Committee
Bernard Wengrover
Dr. Philip Corso
Dr. Thomas Nicosia
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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, 1992 and ending March 31, 1997.
The Peer Group Index is comprised of the following publicly traded
companies, all of whom are contained within the Standard Industry Code 3841:
Acme UTD Corp. Meridian Medical Technology Inc.
Alliance Imaging Inc. Personal Diagnostics Inc.
Allied Healthcare Protocol Systems Inc.
Products Inc. Quest Medical Inc.
Graham Field Health Products
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG MEDICAL ACTION INDUSTRIES INC., THE S & P 500 INDEX
AND A PEER GROUP
(GRAPH)
MEDICAL ACTION INDUSTRIES INC. PEER GROUP S & P 500
------------------------------ ---------- ---------
3/92 100 100 100
3/93 91 65 116
3/94 55 77 117
3/95 26 78 135
3/96 45 100 179
3/97 65 96 214
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.
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The line graph assumes that $100 was invested on April 1, 1992 in each
of the companies' common stock, the Standard & Poor 500 Stock Index and the
Peer Group Index and that all dividends were reinvested.
Employment Agreement
In February, 1993, the Company entered into an Employment Agreement
with Paul D. Meringola. The Agreement, as amended, presently covers the five
year period ending March 31, 2002 and provides for a salary at an annual rate
of $195,000, 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.
APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1994 STOCK INCENTIVE
PLAN
The Company's 1994 Stock Incentive Plan (the "Incentive Plan") was
approved by the stockholders in August 1994. The Incentive Plan increases the
Company's flexibility in structuring equity-based incentive compensation by
broadening the types of incentive awards that may be made. The Board of
Directors believes that a flexible plan is needed to fashion equity-based
incentives consistent with the Company's philosophy of linking executive
compensation to total stockholder returns and the long-term financial
performance of the Company. A maximum of 500,000 shares of Common Stock may be
issued under the Incentive Plan. As of June 15, 1997, no shares remain
available for issuance under the Incentive Plan. The shares available for
issuance under the Incentive Plan will be increased to the extent any stock
options expire or terminate unexercised. No options or restricted stock may be
granted under the Plan after May, 2004.
The Incentive Plan is administered by a committee of Directors (the
"Committee"), each of whom must be "disinterested" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934. As a practical matter,
Directors who are employees of the Company will not be eligible to serve as
members of the Committee. The Committee determines 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, subject to the
limitations described below and as set forth in the Incentive Plan. The terms
and conditions of each award are set forth in a written agreement with a
participant or a written program established by the Committee. All officers and
key employees of the Company and its affiliates are eligible to participate in
the Incentive Plan.
The number of shares of Common Stock reserved under the Incentive Plan
is subject to adjustment in the event of stock dividends, stock splits,
recapitalization and similar events.
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. Once an
option is granted, the exercise price may not be reduced and an option may not
be exchanged for a new option with a lower exercise price. No incentive stock
option may be granted on or after the tenth anniversary of the date the
Incentive Plan was approved by the Board of Directors.
The Committee shall determine whether stock option awards shall be
settled in cash or in shares of Common Stock valued at fair market value on the
date of payment. The Committee also shall be authorized to accelerate the
vesting, exercisability and settlement of awards and to permit the exercise
price of an option to be paid in cash or by the delivery or withholding of
shares.
The Board of Directors may amend or terminate the Incentive Plan
without the approval of the stockholders, but may condition any amendment on
stockholder approval if the Board believes it is necessary or advisable to
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<PAGE>
comply with any applicable tax or regulatory requirement. No termination or
amendment of the Incentive Plan without the consent of the holder of an award
shall adversely affect the rights of that participant.
The Committee may provide with respect to any award that, in the event
of a Change of Control of the Company (as defined in the Incentive Plan), the
award shall be cashed out in an amount based on the fair market value of the
Common Stock without regard to the exercisability of the award or any other
conditions or restrictions.
Federal Income Tax Consequences. A participant will not recognize
income upon the grant of an option or at any time prior to the exercise of the
option. At the time the participant exercises a non-qualified option, he or she
will recognize compensation taxable as ordinary income in an amount equal to
the excess of the fair market value of the Common Stock on the date the option
is exercised over the price paid for the Common Stock, and the Company will
then be entitled to a corresponding deduction.
A participant who exercises an incentive stock option will not be
taxed at the time he or she exercises his or her option or a portion thereof.
Instead, he or she will be taxed at the time he or she sells the Common Stock
purchased pursuant to the option. The participant will be taxed on the excess
of the amount for which he or she sells the stock over the price he or she had
paid for the stock. If the participant does not sell the stock prior to two
years from the date of grant of the option and one year from the date the stock
is transferred to him or her, the gain will be capital gain and the Company
will not get a corresponding deduction. If the participant sells the stock at a
gain prior to that time, the difference between the amount the participant paid
for the stock and the lesser of the fair market value on the date of exercise
or the amount for which the stock is sold, will be taxed as ordinary income and
the Company will be entitled to a corresponding deduction. If the participant
sells the stock for less than the amount he or she paid for the stock prior to
the one or two year periods indicated, no amount will be taxed as ordinary
income and the loss will be taxed as a capital loss. Exercise of an incentive
option may subject a participant to, or increase a participant's liability for,
the federal alternative minimum income tax.
A participant will not be taxed upon the grant of a stock award if
such award is not transferable by the participant or is subject to a
"substantial risk of forfeiture", as defined in the Internal Revenue Code.
However, when the shares of Common Stock that are subject to the stock award
are transferable by the participant and are no longer subject to a substantial
risk of forfeiture, the participant will recognize compensation taxable as
ordinary income in an amount equal to the fair market value of the stock
subject to the stock award, less any amount paid for such stock, and the
Company will then be entitled to a corresponding deduction.
The Incentive Plan is not qualified under Section 401(a) of the
Internal Revenue Code of 1986.
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/share
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 or issuance and June
1, 1997:
1994 INCENTIVE PLAN BENEFITS
Name Dollar Value # of Options/Shares
- ---- ------------ -------------------
Executive Officer
Group $347,225 230,000
Non-Executive
Director Group -- --
Non-Executive
Officer Employee Group -- --
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Voting Required for Adoption of Proposed Amendment to the 1994
Stock Incentive 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
1994 Stock Incentive Plan.
1989 Non-Qualified Stock Option Plan
The Company's 1989 Non-Qualified Stock Option Plan (the "Plan") was
approved by the stockholders in October, 1990 and amended in September, 1992
and August, 1996, and covers 1,500,000 shares of the Company's common stock.
The Plan, which expires in 2004, permits the granting of non-qualified stock
options. All officers and key employees of the Company and its affiliates are
eligible to participate in the Plan. The Plan is administered by the Stock
Option Committee, who determine the persons to whom, and the times at which,
options will be granted. 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. During fiscal 1997, options were granted
under the Plan to purchase 303,250 shares of common stock, 100,000 of which
were to named executives, at exercise prices ranging between $1.69 and $2.375.
All of the options granted during fiscal 1997 were at 100% of the fair market
value at the date of grant.
1996 Non-Employee Director Stock Option Plan
The Company's 1996 Non-Employee Director Stock Option Plan (the
"Director Plan") was approved by the stockholders in August, 1996 and covers
100,000 shares of the Company's common stock. Under the terms of the Directors
Plan, each non-employee director of the Company will be granted each year an
option to purchase 2,500 shares of the Company's common stock. The
authorization for which grants under the Directors Plan will expire after the
annual meeting in 2006. The Company believes that the 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 Directors Plan will enhance the Company's ability to attract, retain
and suitably reward directors of exceptional ability, upon whose leadership and
management skills the Company's future rests in large part. The first grant of
options will be made under the Directors Plan commencing with this Annual
Meeting of stockholders.
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.
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
14
<PAGE>
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, 1997, contributions under
the Retirement Plan for Messrs. Joseph R. Meringola, Paul D.
Meringola, Richard G. Satin and Daniel F. Marsh were approximately
$2,375, $2,186, $2,348 and $2,412, respectively, and $9,321 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.
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.
The Company has also entered into a similar agreement with one of its
senior managers.
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, 1998. 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.
CERTAIN TRANSACTIONS
During fiscal 1997, the Company's President, Paul D. Meringola,
borrowed an aggregate of $100,000. This indebtedness is evidenced by an
interest free demand note.
15
<PAGE>
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 1997 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.
Stockholder proposals with respect to the Company's next Annual
Meeting of Stockholders must be received by the Company no later than April 1,
1998 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 2, 1997
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<PAGE>
Exhibit "A"
PROPOSED AMENDMENT TO THE MEDICAL ACTION INDUSTRIES INC.
1994 STOCK INCENTIVE PLAN
The Medical Action Industries Inc. 1994 Stock Incentive Plan
(the "Incentive Plan") is hereby amended as follows:
1. Section 2.1 is hereby amended and restated in its
entirety as follows:
"Subject to adjustment in accordance with Section 5.2,
850,000 shares of Stock (the "Maximum Plan Shares") are
hereby reserved exclusively for issuance pursuant to Stock
Incentives. At no time shall the Company have outstanding
Stock Incentives subject to Section 16 of the Exchange Act
and shares of Stock issued in respect of Stock Incentives in
excess of the Maximum Plan shares; for this purpose, the
outstanding Stock Incentives and shares of Stock issued in
respect of Stock Incentives shall be computed in accordance
with Rule 16b-3(a)(1) as promulgated under the Exchange Act.
To the extent permitted by Rule 16b-3(a)(1) as promulgated
under the Exchange Act, the shares of Stock attributable to
the nonvested, unpaid, unexercised, unconverted or otherwise
unsettled portion of any Stock Incentive that is forfeited or
cancelled or expires or terminates for any reason without
becoming vested, paid, exercised, converted or otherwise
settled in full shall again be available for purposes of the
Plan."
2. Effective Date. The effective date of this Amendment to
the Incentive Plan shall be June 3, 1997.
A-1
<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 13, 1997 at 2:00 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 FOR WITHHELD NOMINEES: Dr. Thomas A. Nicosia
Directors [ ] [ ] Richard G. Satin
For, except vote withheld
for the following nominee(s):
-----------------------------
2. Approval of a proposal to amend FOR AGAINST ABSTAIN
the Company's 1994 Stock Incentive [ ] [ ] [ ]
Plan
(To be Signed on Reverse Side)
<PAGE>
3. Approval of the ratification of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent [ ] [ ] [ ]
public auditors of the Company
for the fiscal year ending
March 31, 1998.
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.
