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 toss.240.14a-11 orss.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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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MEDICAL ACTION INDUSTRIES INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 15, 2002
---------------------
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 Thursday, August 15, 2002 at the New York
Institute of Technology--de Seversky Conference Center, Northern Boulevard, Old
Westbury, New York 11568 at 10:00 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 2005;
2. To consider and act upon the ratification of Grant Thornton LLP as
independent certified public accountants of the Company for the fiscal
year ending March 31, 2003; and
3. To consider and act upon such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Thursday, June
20, 2002 as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the Annual Meeting and any adjournments or
postponements thereof. All stockholders of the Company are cordially invited to
attend the Annual Meeting in person. However, whether or not you plan to attend,
PLEASE PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED
RETURN ENVELOPE, which requires no postage if mailed in the United States.
Alternatively, you may vote electronically via the Internet or telephone as
described in greater detail in the Proxy Statement. Returning your proxy card
does not deprive you of your right to attend the Annual Meeting and vote your
shares in person.
By Order of the Board of Directors,
Richard G. Satin
Vice President of Operations
and General Counsel
Dated: Hauppauge, New York
June 25, 2002
EVEN THOUGH YOU MAY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE VOTE BY
TELEPHONE OR THE INTERNET, OR COMPLETE AND EXECUTE THE ENCLOSED PROXY CARD AND
MAIL IT PROMPTLY. A RETURN ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES) IS ENCLOSED FOR YOUR CONVENIENCE. TELEPHONE AND INTERNET VOTING
INFORMATION IS PROVIDED ON YOUR PROXY CARD. SHOULD YOU ATTEND THE ANNUAL MEETING
IN PERSON, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
MEDICAL ACTION INDUSTRIES INC.
800 PRIME PLACE
HAUPPAUGE, NEW YORK 11788
--------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 15, 2002
--------------------
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 New York Institute of
Technology--de Seversky Conference Center, Northern Boulevard, Old Westbury, New
York 11568, on Thursday, August 15, 2002 at 10:00 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, 2002.
INSTEAD OF SUBMITTING YOUR PROXY WITH THE PAPER PROXY CARD, YOU MAY BE ABLE
TO VOTE ELECTRONICALLY BY TELEPHONE OR VIA THE INTERNET. IF YOU VOTE BY
TELEPHONE OR INTERNET, IT IS NOT NECESSARY TO RETURN YOUR PROXY CARD. See
"Voting Via the Internet or By Telephone" on page 14 of this Proxy Statement, or
the instructions on the proxy card, for further details. Please note that there
are separate Internet and telephone voting arrangements depending upon whether
your shares are registered in your name or in the name of a broker or bank.
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 Annual 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. Those
voting via the Internet, or by telephone may also revoke their proxy by
attending the Annual Meeting or by voting again, at a later time, via the
Internet, by telephone, or by submitting the proxy in accordance with the
instructions thereon.
VOTING RIGHTS AND VOTES REQUIRED
At the close of business on June 20, 2002, the record date (the "Record
Date") for the determination of stockholders entitled to vote at the Annual
Meeting, the Company had outstanding, approximately 9,501,766 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 the 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. However, 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 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 and are not considered
to be shares "entitled to vote" (other than for quorum purposes). Accordingly,
abstentions will have the same effect as votes against these matters, while
non-votes will not be included in vote totals and will have no effect on the
outcome of these matters.
1
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.
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 OWNERSHIP (1) (2) IF MORE THAN 1.0% (2)
OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
------------------- ------------------------------- ---------------------
Paul D. Meringolo 1,015,567 (3) (4) (5) 10.5%
800 Prime Place
Hauppauge, New York
Richard G. Satin 312,955 (3) 3.2%
800 Prime Place
Hauppauge, New York
Daniel F. Marsh 257,500 (3) 2.7%
800 Prime Place
Hauppauge, New York
Eric Liu 262,500 (3) 2.7%
800 Prime Place
Hauppauge, New York
Dr. Philip F. Corso 50,500 --
475 Algonquin Road
Fairfield, Connecticut
Dr. Thomas A. Nicosia 19,500 --
1615 Northern Boulevard
Manhasset, New York
Bernard Wengrover 53,500 --
100 Jericho Quadrangle
Jericho, New York
Directors and executive officers as a 1,973,022 (2) 19.6%
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 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
2
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 55,048 shares, 24,095 shares, 37,106 shares and 11,106
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, 2002.
(4) Includes 9,250 shares owned by Mr. Meringolo's children, as to which he
disclaims beneficial ownership.
(5) Includes the right to acquire an additional 300,000 shares pursuant to an
option granted by the Company's former Chairman of the Board. These
options may be exercised on or before October 22, 2007 at $5.00 per share.
MANAGEMENT
OFFICERS OF THE COMPANY
The Company's executive officers are as follows:
NAME AGE POSITION HELD WITH THE COMPANY
- ------------------- ----- ----------------------------------------------------------------------
Paul D. Meringolo 44 Chairman of the Board (Chief Executive Officer) and President
Richard G. Satin 47 Vice President of Operations, General Counsel and Corporate Secretary
Daniel F. Marsh 44 Vice President of Sales and Marketing
Eric Liu 42 Vice President of International Operations
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 ten 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 ten
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 in June 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
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 is presently a Director of the Company and has been
nominated for election as a Director of the Company until the Annual Meeting of
Stockholders in 2005 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 a
substitute nominee 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.
CLASS I CLASS II CLASS III
(TO SERVE UNTIL THE ANNUAL MEETING OF (TO SERVE UNTIL THE ANNUAL MEETING OF (TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2003) STOCKHOLDERS IN 2004) STOCKHOLDERS IN 2002)
- --------------------------------------- --------------------------------------- --------------------------------------
Dr. Thomas A. Nicosia Bernard Wengrover Dr. Philip F. Corso
Richard G. Satin Paul D. Meringolo
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 twenty years in various executive positions. He also serves
the Company as President (since November 1992), and previously held the position
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 Emeritus.
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 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.
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 A CLASS III DIRECTOR TO HOLD OFFICE UNTIL THE 2005 ANNUAL MEETING OF
STOCKHOLDERS AND UNTIL HIS SUCCESSOR IS ELECTED AND QUALIFIED.
4
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 6 meetings during the fiscal year ended March
31, 2002. All directors attended 75% or more of the aggregate number of
meetings of the Board, except for Dr. Nicosia and Dr. Corso.
The Board of Directors has established the following committees, all of
which consist of the 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 two meetings 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 2002.
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 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 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 Stockholders 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.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Securities and Exchange Commission rules now require the Company to
include in its proxy statement a report from the Audit Committee of the Board of
Directors. The following report concerns the Committee's activities regarding
oversight of the Company's financial reporting and auditing process.
--------------------------
The Audit Committee is comprised solely of independent directors, as
defined in the Marketplace Rules of The NASDAQ Stock Market, and it operates
under a written charter adopted by the Board of Directors. The composition of
the Audit Committee, the attributes of its members and the responsibilities of
the Committee, as reflected in its charter, are intended to be in accordance
with applicable requirements for corporate audit committees. The Committee
reviews and assesses the adequacy of its charter on an annual basis.
The purpose of the Audit Committee is to assist the Board of Directors in
its general oversight of the Company's financial reporting, internal control and
audit functions. Management is responsible for the preparation, presentation and
integrity of the Company's financial statements, accounting and financial
reporting principles, internal controls and procedures designed to ensure
compliance with accounting standards, applicable laws and regulations. Grant
Thornton LLP, the Company's independent auditing firm, is responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards.
5
Except for Mr. Wengrover, the Audit Committee members are not professional
accountants or auditors, and their functions are not intended to duplicate or to
certify the activities of management and the independent auditor, nor can the
Committee certify that the independent auditor is "independent" under applicable
rules. The Committee serves as a board-level oversight role, in which it
provides advice, counsel and direction to management and the auditors on the
basis of the information it receives, discussions with management and the
auditors and the experience of the Committee's members in business, financial
and accounting matters.
Among other matters, the Audit Committee monitors the activities and
performance of the Company's internal and external auditors, including the audit
scope, external audit fees, auditor independence matters and the extent to which
the independent auditor may be retained to perform non-audit services. The Audit
Committee and the Board of Directors have ultimate authority and responsibility
to select, evaluate and, when appropriate, replace the Company's independent
auditor. The Audit Committee also reviews the results of the internal and
external audit work with regard to the adequacy and appropriateness of the
Company's financial, accounting and internal controls. Management and
independent auditor presentations to and discussions with the Audit Committee
also cover various topics and events that may have significant financial impact
or are the subject of discussions between management and the independent
auditor. In addition, the Audit Committee generally oversees the Company's
internal compliance programs.
The Committee has reviewed and discussed the consolidated financial
statements with management and the independent auditor, management represented
to the Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
independent auditor represented that its presentations included the matters
required to be discussed with the independent auditor by Statement on Auditing
Standards No. 61, as amended, "Communication with Audit Committees."
The Company's independent auditor also provided the Committee with the
written disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Committee discussed
with the independent auditor that firm's independence.
Following the Committee's discussions with management and the independent
auditor, the Committee recommended that the Board of Directors include the
audited consolidated financial statements in the Company's annual report on Form
10-K for the year ended March 31, 2002.
The Audit Committee
Bernard Wengrover
Dr. Philip F. Corso
Dr. Thomas A. Nicosia
6
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, 2000, 2001 and 2002.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL
POSITION (1) YEAR SALARY ($) BONUS ($) COMP. ($) (2)
- ------------------------------ -------- ------------ ----------- ---------------
Paul D. Meringolo 2002 351,467 83,500 --
Chairman of the Board 2001 315,389 95,000 --
and CEO 2000 256,413 50,000 --
Richard G. Satin 2002 199,711 80,500 --
Vice President of Operations 2001 184,442 91,500 --
and General Counsel 2000 155,746 50,000 --
Daniel F. Marsh 2002 206,475 89,500 --
Vice President of Sales and 2001 194,442 95,000 --
Marketing 2000 165,862 50,000 --
Eric Liu 2002 179,712 58,100 --
Vice President of 2001 164,423 50,000 --
International 2000 128,538 20,000 --
LONG-TERM COMPENSATION AWARDS
---------------------------------------------------------------------
ALL OTHER
NAME AND PRINCIPAL RESTRICTED STOCK LTIP COMPENSATION
POSITION (1) AWARDS ($) (3) OPTIONS (#) (4) PAYMENTS ($) (5) ($) (6) (7)
- ------------------------------ ------------------ ----------------- ------------------ -------------
Paul D. Meringolo -- 20,000 -- 22,255
Chairman of the Board -- 20,000 -- 33,418
and CEO -- 15,000 -- 33,570
Richard G. Satin -- 20,000 -- 15,998
Vice President of Operations -- 20,000 -- 21,912
and General Counsel -- 15,000 -- 22,376
Daniel F. Marsh -- 20,000 -- 11,625
Vice President of Sales and -- 20,000 -- 17,249
Marketing -- 15,000 -- 19,135
Eric Liu -- 20,000 -- 2,816
Vice President of -- 20,000 -- 2,106
International -- 15,000 -- 1,710
- ---------------
(1) Includes Chairman of the Board and CEO 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, 2002, together with the value of those
shares is as follows: Mr. Paul D. Meringolo -- 99,500 shares/$1,291,510;
Mr. Richard G. Satin -- 62,000 shares/$804,600 and Mr. Daniel F. Marsh --
47,000 shares/$610,060. Except for the bonus shares granted to Mr. Marsh
in fiscal 1997 and 1998 and Mr. Satin in fiscal 1998, which vested in two
equal annual installments commencing on the first anniversary of the date
of issuance, the shares of restricted stock vested 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.
(4) 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.
(5) For fiscal 2002, 2001, and 2000, 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.
Meringolo and Change of Control Agreements with Messrs. Paul D.
Meringolo, Richard G. Satin and Daniel F. 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 non-business 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.
7
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, 2002:
INDIVIDUAL GRANTS
POTENTIAL REALIZED VALUE
AT ASSUMED
ANNUAL RATES OF STOCK
PRICE
% OF TOTAL APPRECIATION FOR OPTION
OPTIONS OPTIONS GRANTED RANGE OF TERM (2)
GRANTED TO EMPLOYEES IN EXERCISE PRICES -----------------------
NAME (SHARES) FISCAL 2002 ($/SHARE) 5%($) 10%($)
- ------------------- ---------- ----------------- ---------------- ---------- ----------
Paul D. Meringolo 20,000 8% $ 4.00 $22,103 $48,841
Richard G. Satin 20,000 8% $ 4.00 $22,103 $48,841
Daniel F. Marsh 20,000 8% $ 4.00 $22,103 $48,841
Eric Liu 20,000 8% $ 4.00 $22,103 $48,841
- ----------------
(1) All of the options in the above table were non-statutory stock options
awarded under the 1989 Non-Qualified Stock Option Plan and 1994 Stock
Incentive Plan. The stock options were granted to Messrs. Paul D.
Meringolo, Richard G. Satin, Daniel F. Marsh and Eric Liu on April 6, 2001
and will be exercisable to the extent of 50% one year from the date of
grant and 100% two years from date of grant. The stock options were
granted at the closing price of the Company's Common Stock as reported in
the Wall Street Journal on the date of grant.
(2) The dollar amounts under the 5% and 10% columns in the table are the
result of calculations required by the Securities and Exchange Commission
(the "SEC") and therefore are not intended to forecast possible future
appreciation of the stock price of the Company. Although permitted by the
SEC's rules, the Company did not use an alternate formula for grant date
valuation because the Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors. No gain on the stock options awarded to the named
executives or other employees is possible without appreciation in the
price of the Company's Common Stock, which will benefit all stockholders.
The real value of the options in this table depends upon the actual
performance of the Company's Common Stock during the applicable period.
AGGREGATE FISCAL YEAR-END OPTION VALUE TABLE: The following table sets
forth, with respect to the named executives, information concerning the exercise
of options during the last fiscal year and unexercised options held as of March
31, 2002:
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY
AT YEAR END 2002 OPTIONS AT YEAR END 2002
------------------------------- ------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ------------- ---------------- ------------- --------------- ------------- --------------
Paul D. Meringolo 75,000 $950,250 115,000 30,000 $1,130,125 $279,400
Richard G. Satin 50,000 $633,500 115,000 30,000 $1,130,125 $279,400
Daniel F. Marsh 50,000 $758,690 115,000 30,000 $1,130,125 $279,400
Eric Liu 67,500 $144,325 125,000 30,000 $1,233,675 $279,400
- ----------------
(1) The value realized is the spread between the fair market value of the
underlying shares on the date of exercise and the exercise price.
(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.
8
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.
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, 2002, 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 it's past
grants of stock options and restricted stock awards have successfully focused
the Company's senior management on building profitability and stockholder value.
9
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, 2005. For the fiscal year ended March 31, 2002, 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 fiscal year ended March 31, 2002 as reflected in
the Summary Compensation table on page 7.
The Compensation Committee
Bernard Wengrover
Dr. Philip F. Corso
Dr. Thomas A. Nicosia
10
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 Standard & Poor Healthcare (Medical Products and
Supplies) Industry for the period of five years commencing April 1, 1997 and
ending March 31, 2002.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MEDICAL ACTION INDUSTRIES, INC., THE S&P 500 INDEX
AND THE S&P HEALTHCARE SUPPLIES INDEX
[GRAPHIC OMITTED]
The line graph assumes that $100 was invested on March 31, 1997 in the
Company's Common Stock, the Standard & Poor 500 Stock Index and Standard & Poor
Health Care (Medical Products & Supplies) Index and that all dividends were
reinvested.
EMPLOYMENT AGREEMENT
In February, 1993, the Company entered into an Employment Agreement with
Mr. Paul D. Meringolo. The Agreement, as amended, presently covers the five year
period ending March 31, 2005 and provides for a salary at an annual rate of
$250,000, 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
11
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 2002,
options were granted under the Plan to purchase 204,500 shares of Common Stock,
of which options to purchase 70,000 shares were to the named executives, at an
exercise price of $4.00 per share.
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 1994 Stock Incentive Plan (the "Incentive Plan"), which expires August
10, 2009, was approved by the stockholders in August 1994 and amended in August
1998 and August 2001 and covers 1,350,000 shares of the Company's Common Stock.
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 granting of incentive stock options, shares of restricted
stock and non-qualified stock options. 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. During fiscal
2002, options were granted under the Incentive Plan to purchase 60,000 shares of
Common Stock, of which options to purchase 10,000 shares were to the named
executives, at an exercise price of $4.00 per share.
The Incentive Plan is administered by a committee of Directors. 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 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 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. 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.
12
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 6% 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, 2002, contributions under the
Retirement Plan for Messrs. Meringolo, Satin, Marsh and Liu were approximately
$1,750, $2,340, $2,434 and $2,432, respectively, and $8,956 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.
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, 2003. Fees for the last fiscal year were annual audit and
related services of $61,500, and all other non-audit services of $59,208. Other
non-audit services consisted of tax related services of $37,250 and acquisition
related services of $21,958. 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.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" SUCH
RATIFICATION.
13
CERTAIN TRANSACTIONS
From time to time, the Company has made loans to certain of the named
executives. As of March 31, 2002 the aggregate balance of such loans due from
Mr. Meringolo was $545,938, $394,332 for Mr. Satin, $427,630 for Mr. Marsh and
$125,675 for Mr. Liu. Certain loans, which relate to the exercise of stock
options, aggregating approximately $1,009,000, bear interest at 7% and are due
June 2004. The balance of the indebtedness is evidenced by interest free demand
notes and included in the Summary Compensation Table. In addition, Messrs.
Meringolo, Satin, Marsh and Liu have pledged to the Company, shares of Medical
Action Common Stock as further security for the repayment of such indebtedness.
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 2002 that the reporting persons
filed on a timely basis the reports required by Section 16(a) of the Securities
Act of 1934.
VOTING VIA THE INTERNET OR BY TELEPHONE
Please note that there are separate Internet and telephone voting
arrangements depending upon whether your Shares are registered in your name or
in the name of a bank or broker. Stockholders voting via the Internet should
understand that there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone companies, that must
be borne by such Stockholder utilizing such services.
SHARES REGISTERED DIRECTLY IN THE NAME OF THE STOCKHOLDER
Stockholders with shares of Common Stock registered directly with the
Company's transfer agent, American Stock Transfer & Trust Company ("AmStock"),
may vote telephonically by calling 1-800-PROXIES (1-800-776-9437) on a touch
tone telephone, or via the Internet at AmStock's voting site on the World Wide
Web (www.voteproxy.com). A Control Number located on the proxy card will be
utilized to verify your identity, allow you to vote your shares of Common Stock,
and confirm that your voting instructions have been properly recorded.
SHARES REGISTERED IN THE NAME OF A BROKERAGE FIRM OR BANK
A number of brokerage firms and banks are participating in a program that
also offers telephone and Internet voting options. This program is likely
different from the program provided by AmStock for the Company's shares of
Common Stock registered in the name of the stockholder. If your shares are held
in an account at a brokerage firm or bank which participates in an electronic
voting program, you may vote those shares telephonically or via the Internet by
following the instructions provided on your proxy card.
14
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, 2003 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
June 25, 2002
15
ANNUAL MEETING OF STOCKHOLDERS OF
MEDICAL ACTION INDUSTRIES INC.
AUGUST 15, 2002
CO. #_______________ ACCT. #_____________
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY INTERNET
- -------------------
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
---------------------
YOUR CONTROL NUMBER IS ---------------------------->
---------------------
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
Please mark your
[X] votes as in this
example
NOMINEE:
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF [ ] [ ] Dr. Philip F. Corso 2. Approval of the ratification [ ] [ ] [ ]
DIRECTOR of Grant Thornton LLP as
(Proposal 1) independent public auditors
of the Company for the
FOR, EXCEPT vote withheld from the following fiscal year ending
nominee March 31, 2003.
(Proposal 2)
- -------------------------------
3. In their discretion, such other business as may properly
come before this meeting.
The shares represented by this Proxy will be voted as specified.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF
THE SPECIFIED NOMINEE AND THE APPROVAL OF THE RATIFICATION OF
GRANT THORNTON LLP AS INDEPENDENT PUBLIC AUDITORS FOR THE FISCAL
YEAR ENDING MARCH 31, 2003. THIS PROXY CARD MUST BE PROPERLY
COMPLETED, SIGNED, DATED AND RETURNED IN ORDER TO HAVE YOUR
SHARES VOTED.
PLEASE NOTE ANY CHANGE OF ADDRESS.
SIGNATURE_____________________________ DATE_______________ SIGNATURE__________________ DATE_______________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS ABOVE. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, ETC., INDICATE TITLE. IF THE SIGNER IS A CORPORATION, SIGN IN THE CORPORATE NAME BY A DULY AUTHORIZED OFFICER.
PROXY
MEDICAL ACTION INDUSTRIES INC.
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 Thursday, August 15, 2002 at 10:00 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 be come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(TO BE SIGNED ON REVERSE SIDE)