AMENDMENT NO. 2 AND WAIVER TO CREDIT AGREEMENT

EXHIBIT 10.1

AMENDMENT NO. 2 AND WAIVER TO CREDIT AGREEMENT

This AMENDMENT NO. 2 AND WAIVER TO CREDIT AGREEMENT dated as of September 30, 2008 (this “Amendment”) to the Credit Agreement dated as of October 17, 2006 and as amended by an Amendment to Credit Agreement dated June 25, 2007 (as further amended, restated, supplemented or modified, from time to time, the “Credit Agreement”), by and among MEDICAL ACTION INDUSTRIES INC., a Delaware corporation (the “Company”), the Lenders party thereto and JPMORGAN CHASE BANK, N.A., a national banking association, as Administrative Agent for the Lenders.

WHEREAS, the Company has requested that the Lenders amend certain provisions of the Credit Agreement, and the Lenders and the Administrative Agent have agreed to amend such provisions of the Credit Agreement, subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows:

a. The definition of the term “Applicable Margin” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to provide as follows:

“ Applicable Margin ” shall mean (a) with respect to an Adjusted Libor Loan, the percentage set forth below under the heading “LIBOR Margin” opposite the applicable ratio, (b) with respect to an Alternate Base Rate Loan, the percentage set forth below under the heading “ABR Margin” opposite the applicable ratio and (c) with respect to calculation of the unused fee described in Section 3.04(a) hereof, the percentage set forth below under the heading “Unused Fee Rate” opposite the applicable ratio.

Notwithstanding the foregoing, during the period commencing on September 30, 2008 and ending on the date of reset of the Applicable Margin in accordance with this paragraph, the ABR Margin shall be 1.00%, the LIBOR Margin shall be 2.75% and the

Unused Fee Rate shall be .40%. The Applicable Margin will be set or reset with respect to each Loan on the date which is five (5) Business Days following the date of receipt by the Administrative Agent of the financial statements referred to in Section 6.03(a) and Section 6.03(b) together with a certificate of the Financial Officer of the Company certifying the Leverage Ratio and setting forth the calculation thereof in detail; provided, however, if any such financial statement and certificate are not received by the Administrative Agent within the time period required pursuant to Section 6.03(a) or Section 6.03(b), as the case may be, the Applicable Margin will be set or reset, unless the rate of interest specified in Section 3.01(c) is in effect, based on a Leverage Ratio of greater than 3.50:1.00 from the date such financial statements and certificate were due until the date which is five (5) Business Days following the receipt by the Administrative Agent of such financial statements and certificate, and provided, further, that the Lenders shall not in any way be deemed to have waived any Default or Event of Default, including without limitation, an Event of Default resulting from the failure of the Company to comply with Section 7.13 of this Agreement, or any rights or remedies hereunder or under any other Loan Document in connection with the foregoing proviso. During the occurrence and continuance of a Default or an Event of Default, no downward adjustment, and only upward adjustments, shall be made to the Applicable Margin.

b. Section 1.01 of the Credit Agreement is hereby amended by inserting the following definition immediately before the definition of the term “Board”:

“ Asset Sale ” means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback, assignment, conveyance, exclusive license (as licensor or sublicensor), transfer or other disposition to, or any exchange of property with, any Person, in one transaction or a series of transactions of all or any part of the Company’s or any of its Subsidiaries’ businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, leased or licensed, including the equity interests of any of the Company’s Subsidiaries, other than (i) inventory (or other assets) sold, leased or licensed out in the ordinary course of business (excluding any such sales, leases or licenses out by operations or divisions discontinued or to be discontinued), (ii) equipment or other assets (including leases or subleases of real property) sold, replaced, abandoned, leased or otherwise disposed of that are obsolete, worn-out, condemned or are no longer used or useful in the business of the Company or any of its Subsidiaries, (iii) dispositions, by means of trade-in, of equipment used in the ordinary course of business, so long as such equipment is replaced, substantially concurrently, by like-kind equipment, or (iv) the use or transfer of cash and cash equivalents in a manner that is not prohibited by the terms of this Agreement.

c. Section 1.01 of the Credit Agreement is hereby amended by inserting the following definition immediately before the definition of “Business Day”:

“ Brentwood Property ” shall mean the premises located at 500 Expressway Drive South, Brentwood, New York.

d. Section 1.01 of the Credit Agreement is hereby amended by inserting the following definition immediately before the definition of “Commercial Letter of Credit”:

“ Collateral Mortgage ” shall mean a Mortgage and Security Agreement by Town of Islip Industrial Development Agency in favor of the Administrative Agent with respect to the Brentwood Premises, in form and substance satisfactory to the Administrative Agent and the Lenders.

e. Section 1.01 of the Credit Agreement is hereby amended by inserting the following definitions immediately before the definition of the term “Default”:

“ Consolidated Working Capital ” at any date, the excess of Consolidated Current Assets on such date less Consolidated Current Liabilities on such date.

“ Consolidated Current Assets ” at any date, all amounts (other than cash and cash equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a balance sheet of the Company.

“ Consolidated Current Liabilities ” at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) but excluding (a) the current portion of any Indebtedness, and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Loans or Swingline Loans to the extent otherwise included therein.

f. The definition of “Excess Cash Flow” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to provide as follows:

“ Excess Cash Flow ” for the fiscal year, the excess, if any, of (a) the sum, without duplication, of (i) Net Income for such fiscal, (ii) the amount of all non-cash charges (including depreciation and amortization charges) deducted in arriving at such Net Income, (iii) decreases in Consolidated Working Capital for such fiscal year, over (b) the sum, without duplication, of (i) the aggregate amount of all regularly scheduled principal payments of Indebtedness consisting of borrowed money made during such fiscal year, and (ii) increases in Consolidated Working Capital for such fiscal year.

g. The definition of the term “Fixed Charge Coverage Ratio” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to provide as follows:

“ Fixed Charge Coverage Ratio ” shall mean the ratio of (1) EBITDA to (2) the sum of (a) the current portion of Total Debt, plus (b) interest expense plus (c) cash dividends and distributions plus (d) stock repurchases. Each of the foregoing categories shall be measured on a Consolidated basis for the Company and its Subsidiaries and shall be calculated in accordance with Generally Accepted Accounting Principles consistently applied and shall be calculated (without duplication) for the four fiscal quarters then most recently ended, except for the current portion of Total Debt, which shall each be calculated for the next succeeding four fiscal quarters.

h. Section 1.01 of the Credit Agreement is hereby amended by inserting the following definition before the definition of the term “Net Income”:

“ Net Asset Sale Proceeds ” means, with respect to any Asset Sale, an amount equal to: (i) cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by the Company or any of its Subsidiaries from such Asset Sale (net of purchase price adjustments reasonably expected to be payable in connection therewith; provided that to the extent such purchase price adjustment is determined to be not payable or is

otherwise not paid within 180 days of such Asset Sale (other than as result of a dispute with respect to such purchase price adjustment which is subject to a resolution procedure set forth in the applicable transaction documents), such proceeds shall constitute Net Asset Sale Proceeds), minus (ii) any bona fide costs incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Sale and any transfer, documentary or other taxes payable by seller in connection therewith, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale and (c) a reasonable reserve for any payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by the Company or any of its Subsidiaries in connection with such Asset Sale including pension and other post-employment benefit liabilities and liabilities related to environmental matters and liabilities under indemnification obligations associated with such Asset Sale, and (d) brokerage fees, accountants’ fees, investment banking fees, legal fees, costs and expenses, survey costs, title insurance premiums and other customary fees actually incurred in connection with such Asset Sale.

i. The definition of the term “Security Documents” is hereby amended and restated in