<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
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional materials
[ ] Soliciting Material Pursuant to Section 240.14a-11 or Section 240.14a-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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of filing.
(1) Amount previously paid:
----------------------------------------------------------------------------
<PAGE>
(2) Form, schedule or registration statement no.:
----------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE>
MEDICAL ACTION INDUSTRIES INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 17, 1999
-------------------------
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 17, 1999 at the offices of the Company,
150 Motor Parkway, lower level, Hauppauge, New York at 9:00 a.m. (the "Annual
Meeting"), for the following purposes:
1. To elect one director to serve in Class III until the Annual
Meeting of Stockholders in 2002;
2. To consider and act upon the ratification of Grant Thornton
LLP as independent certified public accountants of the Company
for the fiscal year ended March 31, 2000; and
3. 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 21, 1999
shall be entitled to vote at the Annual Meeting.
By Order of the Board of Directors,
Richard G. Satin
Vice President of Operations
and General Counsel
Dated: Hauppauge, New York
July 1, 1999
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 17, 1999
-----------------------
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 Tuesday,
August 17, 1999 at 9:00 a.m., 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 1, 1999.
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 21, 1999, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, the
Company had outstanding 8,595,289 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.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent of Class
of Beneficial Owner Ownership (1) (2) If More than 1.0% (2)
- ------------------- -------------------- ---------------------
Common Stock Common Stock
-------------------- ---------------------
<S> <C> <C>
Paul D. Meringolo 1,141,500 (3)(4)(7) 12.2%
150 Motor Parkway
Hauppauge, New York
Richard G. Satin 412,545 (3) 4.7%
150 Motor Parkway
Hauppauge, New York
Daniel F. Marsh 307,900 (3) 3.5%
150 Motor Parkway
Hauppauge, New York
Eric Liu 183,000 (3) 1.0%
150 Motor Parkway
Hauppauge, New York
Dr. Philip F. Corso 23,000 -
1200 Post Road East
Westport, Connecticut
Dr. Thomas A. Nicosia 12,000 -
1615 Northern Blvd.
Manhasset, New York
Bernard Wengrover 58,000 -
100 Jericho Quadrangle
Jericho, New York
Joseph R. Meringola 1,357,541 (5)(6) 15.8%
12 Jefferson Street
Glen Cove, New York
Directors and Officers
as a Group (7 Persons) 2,137,945 21.3%
- ----------
</TABLE>
(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
<PAGE>
(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 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 27,751 shares, 13,541 shares, 20,448 shares and 11,200
shares acquired by Paul D. Meringolo, Richard G. Satin, Daniel F. Marsh
and Eric Liu, respectively, pursuant to the Medical Action Industries
Inc. 401(K) Retirement Plan as of March 31, 1999.
(4) Includes 4,000 shares owned by Mr. Meringolo's children, as to which he
disclaims beneficial ownership.
(5) Based upon filings made by Joseph R. Meringola with the Securities and
Exchange Commission.
(6) Does not include 500,000 shares that are subject to an option granted
to the Company's Chairman of the Board and President, Paul D.
Meringolo. These options may be exercised on or before October 22, 2007
at $5.00 per share.
(7) Includes the right to acquire 500,000 shares pursuant to an option
granted by Joseph R. Meringola, the Company's former Chairman of the
Board.
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>
Paul D. Meringolo 41 Chairman of the Board (Chief Executive Officer)
And President
Richard G. Satin 44 Vice President of Operations,
General Counsel and Corporate Secretary
Daniel F. Marsh 41 Vice President of Sales and Marketing
Eric Liu 39 Vice President of International Operations
</TABLE>
All of the executive officers of the Company hold office at the
pleasure of the Board of Directors.
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.
Mr. Eric Liu has been employed by the Company for more than the past
five years in various positions relating to the international procurement of raw
materials and the manufacture of certain of the Company's products. Mr. Liu was
appointed Vice President of International Operations on June 1, 1998. Mr. Liu
received a Bachelor of Science degree from The National Taiwan Marine University
and a Master of Science degree in Transportation Management from the State
University of New York.
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 five. The director
named below in Class III, who is presently a director of the Company, has been
nominated for election as a director of the Company until the Annual Meeting of
Stockholders in 2002 or until his successor is chosen and qualified. Shares
represented by executed proxies in the form enclosed will be voted, unless
otherwise indicated, for the election as director of the aforesaid nominee,
unless he 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 nominee 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 2000) Stockholders in 2001) Stockholders in 1999)
--------------------- --------------------- ---------------------
<S> <C> <C>
Dr. Thomas A. Nicosia Bernard Wengrover Dr. Philip F. Corso
Richard G. Satin Paul D. Meringolo
</TABLE>
Biographical Information
The following information is submitted concerning each member of the
Board of Directors.
Paul D. Meringolo, a director and Chairman of the Board and Chief
Executive Officer of the Company since October, 1997, has been employed by the
Company for more than the past fifteen years in various executive positions. He
also serves the Company as President (since November, 1992), and previously held
the positions of Vice President of 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 of Operations. Mr. Satin, a practicing attorney in the State of New
York for more than the past fifteen 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 ten years. Dr.
Nicosia is a fellow of the American College of Cardiology and is affiliated with
North Shore University Hospital in Manhasset, New York and is the former
President of the Medical Staff of St. Francis Hospital in Roslyn, New York.
4
<PAGE>
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. 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 Dr. Philip
F. Corso as Class III Director to hold office until the 2002 Annual Meeting of
Stockholders and until his successor is elected and qualified.
Meetings of the Board Of Directors and Committees of the Board Of Directors
The Board of Directors held four meetings during the fiscal year ended
March 31, 1999. All directors attended 75% or more of the aggregate number of
meetings of the Board and, except for Dr. Nicosia, the 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 1999.
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, officers and employees. The Committee held five 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 counseling concerning strategic planning and financial and business matters.
Mr. Wengrover is currently paid $24,000 per year for his services under this
agreement.
Stock Options. In August 1996, stockholders approved the 1996
Non-Employee Directors Stock Option Plan, under which all Directors who are not
also employees of the Company will be automatically granted each year at the
Annual Meeting of Shareholders options to purchase 2,500 shares at the fair
market value of the Company's Common Stock on the date of grant. All options are
exercisable from the date of grant.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of the Company's Chief Executive Officer ("CEO") and each
of the Company's most highly compensated executive officers (referred to
collectively with the CEO as the "named executives") during the years ended
March 31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
Awards
----------------------
LTIP All Other
Name and Principal Fiscal Other Annual Restricted Stock Payments Compensation
Position(1) Year Salary($) Bonus($) Comp.($)(3) Awards($)(4) Options(#)(5) ($)(6) ($)(7)(8)
- ------------------ ------ --------- -------- ------------ ---------------- ------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul D. Meringolo 1999 $229,337 40,000 -- -- 65,000 -- $ 20,835
Chairman of the 1998 216,506 -- -- -- 25,000 -- 16,884
Board and CEO(1) 1997 181,808 -- -- -- 160,000 -- 8,117
Richard G. Satin 1999 $145,000 50,000 -- -- 65,000 -- 11,621
Vice President of 1998 145,000 37,500 -- 25,450 25,000 -- 9,882
Operations and 1997 145,000 -- -- -- 85,000 -- 7,164
General Counsel
Daniel F. Marsh 1999 $154,000 50,000 -- -- 65,000 -- 8,973
Vice President of 1998 154,000 37,500 -- 20,900 100,000 -- 7,603
Sales and 1997 154,000 -- -- 23,750 60,000 -- 2,752
Marketing
Eric Liu 1999 $110,000 20,000 -- -- 65,000 -- 1,380
Vice President of
International(2)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes Chairman of the Board and CEO and the other most highly compensated
executive officers as measured by salary and bonus. Paul D. Meringolo, the
Company's President and Chief Operating Officer, was elected by the Board of
Directors to the additional posts of Chairman and CEO in October 1997.
(2) Mr. Liu was elected by the Board of Directors to the position of Vice
President of International Operations on June 1, 1998.
(3) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the last year, (b) payment of
above-market preferential earnings on deferred compensation, (c) payments of
earnings with respect to long-term incentive plans prior to settlements or
maturation, (d) tax payment reimbursements, or (e) preferential discounts on
stock.
(4) Represents the dollar value of restricted shares granted during the year in
question, calculated by multiplying the closing market price of the Company's
Common Stock on the date of grant by the number of shares awarded. The aggregate
number of shares of restricted stock held by each named executive as of March
31, 1999, together with the value of those shares is as follows: Mr. Paul D.
Meringolo - 99,500 shares/$ 273,625 ; Richard G. Satin - 62,000 shares/$170,500
and Daniel F. Marsh - 47,000 shares/$129,250. Except for the bonus shares
granted to Mr. Marsh in fiscal 1997 and 1998 and Mr. Satin in fiscal 1998, 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.
(5) Includes shares subject to options granted to Messrs. Paul D. Meringolo,
Richard G. Satin, Daniel F. Marsh and Eric Liu under the Company's 1994 Stock
Incentive Plan and 1989 Non-Qualified Stock Option Plan.
(6) For 1999, 1998 and 1997, the Company had no long-term incentive plans in
existence. Accordingly, there were no payments or awards under any long-term
incentive plan.
(7) The Company has entered into an Employment Agreement with Mr. Paul D.
Meringolo and Change of Control Agreements with Messrs. Paul D. Meringolo, Satin
and Marsh that may result in payments to each of them upon a change of control
of the
6
<PAGE>
Company. These arrangements are described under "Management-Employment
Agreement" and "Change of Control Arrangements".
(8) 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, interest-free loans and reimbursement of certain medical
expenses which are payable to Mr. Paul D. Meringolo 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, 1999:
<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 1999 ($/share) 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul D. Meringolo 65,000 15% $2.63 - $3.375 $57,522 $127,108
Richard G. Satin 65,000 15% $2.63 - $3.375 57,522 127,108
Daniel F. Marsh 65,000 15% $2.63 - $3.375 57,522 127,108
Eric Liu 65,000 15% $2.63 - $3.375 57,522 127,108
</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 were granted to Messrs. Paul D. Meringolo,
Richard G. Satin, Daniel F. Marsh and Eric Liu between May 1, 1998 and February
1, 1999 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 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.
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, 1999:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
Value Of Unexercised
Number of Shares Underlying In-the-Money
Unexercised Options at Year End 1999 Options at Year 1999(2)
Shares ------------------------------------ ----------------------------
Acquired on Value
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul D. Meringolo 50,000 $37,500 262,500 77,500 $266,800 $ 1,800
Richard G. Satin 25,000 $18,750 187,500 77,500 $192,050 $ 1,800
Daniel F. Marsh 15,000 $11,250 200,000 115,500 $190,300 $ 26,550
Eric Liu 10,000 $12,500 115,000 82,500 $ 86,300 $ 1,800
</TABLE>
- ----------------
7
<PAGE>
(1) The value realized is the spread between the fair market value of the
underlying shares on the date of exercise.
(2) These values are calculated by subtracting the exercise price from the fair
market value of the Company's Common Stock as of fiscal year end.
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 CEO 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.
8
<PAGE>
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, 1999, incentive compensation was
awarded to Messrs. Satin, Marsh and Liu as a result of the Company attaining
specific levels of revenue and pre-tax income.
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 CEO 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
The Compensation Committee meets without the CEO present to evaluate
his performance. When Paul D. Meringolo was elected to the additional posts of
Chairman and CEO, his base salary remained the same, as he is being compensated
pursuant to an employment agreement which presently covers the five year period
ending March 31, 2002. For the fiscal year ended March 31, 1999, Mr. Meringolo
was awarded incentive compensation, which together with his salary is
consistent with the guidelines used for all of the Company's executive officers.
The Committee has concluded that Mr. Paul D. Meringolo's performance
warrants the compensation for 1999 as reflected in the Summary Compensation
table on page 6.
The Compensation Committee
Bernard Wengrover
Dr. Philip F. Corso
Dr. Thomas A. Nicosia
9
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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, Standard & Poor Healthcare (Medical Products
and Supplies) Industry and a Peer Group Index for the period of five years
commencing April 1, 1994 and ending March 31, 1999.
The Peer Group Index is comprised of the following publicly traded
companies, all of whom are contained within the Standard Industry Code 3841:
Acme United Corp Meridian Medical Technology Inc.
Alliance Imaging Inc. Personal Diagnostics Inc.
Allied Healthcare Products, Inc. Protocol Systems, Inc.
Graham Field Health Products
Research Data Group Peer Group Total Return Worksheet
Medical Action Inds Inc (MDCI)
Cumulative Total Return
-------------------------------------
3/94 3/95 3/96 3/97 3/98 3/99
Medical Action Industries Inc. 100 47 83 119 172 122
Peer Group 100 97 112 114 125 54
S&P 500 100 116 153 183 271 321
S&P Health Care (Medical Products
& Supplies) 100 146 217 238 344 452
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, 1994 in each
of the companies' common stock, the Standard & Poor 500 Stock Index, Standard &
Poor Health Care (Medical Products & Supplies) 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. Meringolo. 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. Meringolo
has the option, exercisable within six months of becoming aware of such event,
to terminate his Employment Agreement. Upon such termination, Mr. Meringolo 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.
1989 NON-QUALIFIED STOCK OPTION PLAN
The 1989 Non-Qualified Stock Option Plan (the "Plan"), which expires
October 24, 2009, was approved by the stockholders in October 1990 and amended
in September 1992, August 1996 and August 1998 and covers 2,150,000 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, but may not exceed five (5) years and
ten (10) years for options granted after August 1998. During fiscal 1999,
options were granted under the Plan to purchase 184,000 shares of Common Stock,
none of which were to the named executives, at exercise prices ranging between
$2.63 and $3.875.
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 and key individuals 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.
Subject to the terms of the Plan, the Board of Directors or the Stock
Option Committee may determine and designate those employees, consultants and
Directors who are to be granted stock options under the Plan and the number of
shares to be subject to such options and, as hereinafter described, the nature
and terms of the options to be granted. The Board of Directors or the Stock
Option Committee shall also, subject to the express provisions of the Plan, have
authority to interpret the Plan and to prescribe, amend, and rescind the rules
and regulations relating to the 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 850,000
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. During fiscal 1999, options were
granted under the Incentive Plan to purchase 260,000 shares of Common Stock, all
of which were to named executives, at exercise prices ranging from $2.63 to
$3.375 per share.
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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 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 benefiting 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.
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 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, 1999, contributions under the
Retirement Plan for Messrs. Meringolo, Satin, Marsh and Liu were approximately
$1,750, $2,161, $2,294 and $1,156, respectively, and $7,361 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. Meringolo, 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.
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RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders approve the
appointment of Grant Thornton LLP as the Company's independent certified public
accountants to examine the financial statements of the Company for the fiscal
year ending March 31, 2000. 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 1999 the Company made additional loans to its CEO, Paul
D. Meringolo and Vice President of Operations, Richard G. Satin and Vice
President of Sales and Marketing, Daniel F. Marsh. As of March 31, 1999 the
aggregate balance of such loans due from Mr. Meringolo was $258,238, $142,463
for Mr. Satin and $83,755 for Mr. Marsh. This indebtedness is evidenced by
interest free demand notes and included in the Summary Compensation Table.
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 1999 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, 2000 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 of Operations
and General Counsel
Dated: Hauppauge, New York
July 1, 1999
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MEDICAL ACTION INDUSTRIES INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Paul D. Meringolo 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 17, 1999 at 9:00 a.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 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):
---------------------------------------------------
NOMINEE: Dr. Philip F. Corso
2. Approval of the ratification of Grant Thornton LLP as independent
public auditors of the Company for the fiscal year ending March 31,
2000.
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.
