MAXXIM MEDICAL INC, S-3, 1998-02-13

MAXXIM MEDICAL INC
S-3, 1998-02-13
ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1998

REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
MAXXIM MEDICAL, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
TEXAS 76-0291634
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>

10300 49(TH) STREET NORTH
CLEARWATER, FLORIDA 33762
(813) 561-2100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)

KENNETH W. DAVIDSON, PRESIDENT
MAXXIM MEDICAL, INC.
10300 49(TH) STREET NORTH
CLEARWATER, FLORIDA 33762
(813) 561-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

COPIES TO:

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<S> <C>
GREGORY C. YADLEY, ESQUIRE KATHERINE M. SEABORN, ESQUIRE
SHUMAKER, LOOP & KENDRICK, LLP GARDERE & WYNNE, LLP
101 EAST KENNEDY BOULEVARD 1601 ELM STREET
SUITE 2800 SUITE 3000
TAMPA, FLORIDA 33602 DALLAS, TEXAS 75201
(813) 229-7600 (214) 999-3000
</TABLE>

------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------------
CALCULATION OF REGISTRATION FEE

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<S> <C> <C> <C> <C>
------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) OFFERING PRICE (2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value........................ 4,025,000 $24.50 $98,612,500 $29,090.69
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes up to 525,000 shares subject to an over-allotment option granted to
the Underwriters.

(2) Estimated solely for purposes of determining the registration fee. Based
upon the average of the high and low sales prices of the Company's Common
Stock as reported on the New York Stock Exchange Composite Tape on February
10, 1998, pursuant to Rule 457(c).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE> 2

PROSPECTUS

[MAXXIM MEDICAL, INC. LOGO]

COMMON STOCK
All of the shares of Common Stock, $.001 par value per share (the "Common
Stock"), offered hereby (the "Offering") are being issued and sold by Maxxim
Medical, Inc. ("Maxxim" or the "Company"). The Company's Common Stock is traded
on the New York Stock Exchange under the symbol "MAM." On , 1998, the
last reported sale price for the Common Stock was $ per share. See
"Price Range of Common Stock." The Company will use the net proceeds from this
Offering to repay a portion of the debt incurred under the Company's credit
facilities and to expand the Company's glove production capacity. See "Use of
Proceeds."

ANY INVESTMENT IN THE SECURITIES OFFERED HEREIN INVOLVES
A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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<S> <C> <C> <C>
=======================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- -------------------------------------------------------------------------------------------------------
Per Share............................. $ $ $
- -------------------------------------------------------------------------------------------------------
Total (3)............................. $ $ $
=======================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses estimated at $ , which are payable by the
Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of the Common Stock on the same terms and
conditions as set forth above to cover over-allotments, if any (the
"Over-Allotment Option"). If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------------

The shares of Common Stock are offered subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject offers in whole or in part. It is expected that
delivery of the shares of Common Stock will be made on or about , 1998
at the office of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167.
------------------------------

BEAR, STEARNS & CO. INC.

EVEREN SECURITIES, INC.

JEFFERIES & COMPANY, INC.

NATIONSBANC MONTGOMERY SECURITIES LLC

THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3

PRODUCTS MANUFACTURED AND ASSEMBLED BY
MAXXIM MEDICAL, INC.

ART WORK

Picture depicts a surgeon performing a knee operation
on a patient with the aid of a medical assistant
in the surgical suite of a hospital.

Picture depicts the interior Picture depicts a hospital
of the Company's plant in worker lifting a custom
Mississauga, Canada, producing procedure tray off
non-latex examination gloves. the inventory shelf.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING."

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<PAGE> 4

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the following Regional Offices of the Commission: New York Regional Office,
Suite 1300, Seven World Trade Center, New York, New York 10048; and Chicago
Regional Office, Suite 1400, 500 W. Madison Street, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of prescribed rates. Recent materials filed by the Company may be
accessed electronically by means of the Commission's homepage on the Internet at
http://www.sec.gov. The Common Stock is traded on the New York Stock Exchange
("NYSE"). Information filed by the Company with the NYSE may be inspected at the
offices of the NYSE at 20 Broad Street, New York, New York 10003.

The Company has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933 (the "Securities Act"), with
respect to the shares of Common Stock offered hereby (the "Shares"). This
Prospectus constitutes a part of the Registration Statement. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Shares. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

There are hereby incorporated by reference in this Prospectus the following
documents heretofore filed by the Company with the Commission pursuant to the
Exchange Act:

1. The Company's Annual Report on Form 10-K/A for the year ended November 2,
1997.

2. The Company's Proxy Statement, dated March 3, 1997, relating to the Annual
Meeting of Shareholders held on April 3, 1997.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering made hereby shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
or in any other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part
hereof, except as so modified or superseded.

The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference in this Prospectus.
Requests for such copies should be directed to the Corporate Accounting Manager
of the Company, at the Company's principal executive offices, which are located
at 10300 49th Street North, Clearwater, Florida 33762, telephone number: (813)
561-2100.

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PROSPECTUS SUMMARY

The following summary information is qualified in its entirety by, and
should be read in conjunction with the more detailed information and financial
data, including the Financial Statements and notes thereto, included elsewhere
in this Prospectus. Market data used throughout this Prospectus were obtained or
extrapolated from industry publications which the Company believes to be
reliable, but the accuracy thereof is not guaranteed. Unless the context
otherwise requires, the term "Company" when used herein refers to Maxxim
Medical, Inc., a Texas corporation, Maxxim Medical, Inc., a Delaware
corporation, and their direct and indirect subsidiaries, together with any
predecessors, on a consolidated basis. Unless otherwise indicated, all
information in this Prospectus assumes that the Underwriters will not exercise
their Over-Allotment Option.

THE COMPANY

The Company is a major manufacturer and developer of a diversified range of
single-use specialty medical products and is a leading supplier of single-use
custom procedure trays and non-latex surgical and medical examination gloves to
hospitals, clinics and outpatient surgery centers. The Company is the second
largest provider of sterilized custom procedure trays in the United States and
believes that it currently controls approximately 35% of that market, as well as
approximately 61% of the rapidly growing United States acute care market for
non-latex examination gloves. The Company sells over 23,000 products to
approximately 7,000 accounts and has major supply contracts with such national
buying groups as VHA, Inc., University Health System Consortium, Tenet Health
Care Corp., HealthSouth Corporation and Healthcare Purchasing Partners.

Custom procedure trays are sterilized kits containing all of the single-use
products required for a particular surgical or other medical procedure and serve
as a distribution vehicle for the Company's manufactured specialty products.
These trays promote efficiency and productivity for the medical provider by
consolidating into a single sterile package the disposable products used in
specific medical procedures, thereby reducing set-up time and the risk of
product contamination and transmission of infectious disease. Use of custom
procedure trays also helps hospitals and other medical treatment facilities
lower inventory levels and more easily identify costs associated with specific
medical procedures. Non-latex medical examination and surgical gloves
increasingly have become an attractive alternative to traditional latex gloves.
Both the recent concern of healthcare professionals about purported allergic
reactions to latex gloves and growing concerns over the transmission of
infectious disease have increased demand for non-latex medical examination and
surgical gloves. The Company continues to develop new chemical compounds and
manufacturing processes in an effort to maintain its leading market position as
a supplier of non-latex glove products.

The Company has experienced significant growth since its initial public
offering in 1990, principally by successfully integrating five major
acquisitions of specialty medical products and custom procedure tray businesses.
Since fiscal 1989, these acquisitions, combined with internal growth, have
generated a compound annual growth rate of 53.5% in net sales, 42.8% in net
income and 15.2% in fully diluted earnings per share (excluding non-recurring
gains). In July 1996, the Company acquired Sterile Concepts, Inc. ("Sterile
Concepts"). This acquisition increased the Company's custom procedure tray
business by over 200% and has dramatically expanded the Company's vertical
integration opportunities. A goal of the Company's vertical integration strategy
is to change customer preferences from third party products in its custom
procedure trays to Company-manufactured products. Primarily through such
vertical integration, as well as economies of scale resulting from the Company's
acquisitions, the Company's gross margin and operating margin increased from
23.4% and 7.1% in the fourth quarter of fiscal 1996 (the first full fiscal
quarter after the acquisition of Sterile Concepts) to 25.6% and 8.6%,
respectively, in the fourth quarter of fiscal 1997.

INDUSTRY TRENDS

The Company's products compete in the multi-billion dollar market for
specialty medical products. Management believes that demand in the United States
for the Company's single-use medical products has been favorably impacted by the
emphasis on less invasive surgical procedures, outpatient care and the
continuing pressure to improve productivity, contain costs and reduce the
transmission of infectious diseases.

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Demographic trends, such as the aging of the population, have also had a
favorable effect on the demand for the Company's products since older people
generally require more medical care and undergo more surgical procedures.

Management believes that there has been a growing trend by large customers
to concentrate their purchases of medical products with fewer, larger suppliers,
and that recent acquisitions, including Sterile Concepts, have significantly
improved the Company's ability to attract and service such larger customers.
Management believes that this trend will continue to benefit the Company as it
grows and diversifies its product lines.

The growth in the market for gloves, both latex and non-latex, over the
past several years has largely resulted from the increased concerns among
healthcare professionals over protection from the transmission of infectious
diseases, particularly HIV and Hepatitis B. The non-latex segment of the glove
market has grown rapidly principally as a result of reported increases in
allergic reactions to the water soluble proteins in latex and to the chemical
and other additives used in processing latex and manufacturing latex gloves. In
1991, the FDA issued a medical alert warning healthcare professionals about the
increased incidence of allergic reactions to latex medical products by both
medical personnel and patients.

Although the aggregate number of surgical procedures performed in Europe is
approximately equivalent to the number of surgical procedures performed in the
United States, the prevalence of single-use products and custom procedure trays
in Europe is not as great as in the United States. The Company believes that
European healthcare providers will increase their use of disposable products and
custom procedure trays for substantially the same reasons that caused United
States healthcare providers to do so. Certain European countries have
implemented healthcare price controls and have experienced consolidation of
hospitals and shifting of surgical procedures away from hospitals towards
outpatient surgery centers. The Company believes that these developments will
increase the demand among European healthcare providers for the greater
efficiency and productivity associated with the single-use products of the type
it manufactures.

STRATEGY

The Company's goal is to improve profitability and grow its business by
enhancing its position as a leading manufacturer and marketer of single-use
specialty medical products to medical treatment facilities, both domestically
and in Europe. To achieve this goal, the Company intends, both through strategic
acquisitions and internal initiatives, to: (i) increase vertical integration,
(ii) expand glove production, (iii) maximize utilization of existing facilities,
(iv) invest in product development, and (v) increase sales efforts to large
purchasing groups and healthcare provider networks. The Company continually
evaluates possible acquisitions of businesses and product lines and intends to
pursue those acquisitions that promote its strategy, complement its existing
product offerings or increase market share.

Increasing Vertical Integration. In order to enhance its
gross margin, the Company strives to increase the percentage of
Company-manufactured products contained in its custom procedure
trays. At the time of its acquisition in July 1996, Sterile
Concepts used only a small amount of Company-manufactured products
in its custom procedure trays. The Company has focused significant
efforts on persuading customers of Sterile Concepts to accept
Company-manufactured products, which the Company typically can
offer at lower prices, rather than those products manufactured by
third parties. The Company conducts product development efforts
and seeks acquisitions on an ongoing basis to expand the number of
Company-manufactured products that can be included in its custom
procedure trays.

Expanding Glove Production. The Company currently is
experiencing demand for its non-latex examination gloves in excess
of its manufacturing capacity. The Company intends to increase its
internal production capacity through plant expansions over the
next 12 to 18 months. See "Use of Proceeds." The Company also is
testing its ability to convert certain existing product lines to
newer formula products that can be manufactured with greater
efficiency. Additionally, the Company has contracted for the
manufacture of certain of its

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product lines in the Far East, and limited production from these
sources currently is underway.

Increasing Sales Efforts to Purchasing Groups and Provider
Networks. Management believes that the Company must continue to
focus more of its sales efforts on the emerging integrated
healthcare networks. Many hospitals are forming alliances and are
increasingly buying their medical products on a national accounts
basis, which favors suppliers that can bundle multiple products.
The Company intends to place greater emphasis on leveraging the
sales force's existing relationships to sell all of its product
lines.

THE OFFERING

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Common Stock to be offered.................... 3,500,000 shares
Common Stock to be outstanding after the
Offering(1)................................. 13,670,262
Use of Proceeds............................... To repay certain outstanding debt and to
expand glove production capacity.
See "Use of Proceeds."
New York Stock Exchange Symbol................ MAM
</TABLE>

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(1) Excludes 994,020 shares of Common Stock subject to options outstanding as of
February 2, 1998, which are exercisable at a weighted average exercise
price of $11.35 per share.

The Company is a Texas corporation. The address of its principal office is
10300 49th Street North, Clearwater, Florida 33762. Its telephone number is
(813) 561-2100.

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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following summary consolidated financial data, as of and for the five
fiscal years ended November 2, 1997, have been derived from the audited
consolidated financial statements of the Company. The Company's fiscal year ends
on the Sunday nearest the last day of October. The summary consolidated
financial data do not purport to indicate results of operation as of any future
date or for any future period. The information in the table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Prospectus.

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<CAPTION>
FISCAL YEARS ENDED
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NOVEMBER 2, NOVEMBER 3, OCTOBER 29, OCTOBER 30, OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 529,552 $ 399,836 $ 265,726 $ 191,382 $ 129,740
Cost of sales....................... 397,691 294,164 186,495 129,569 85,247
----------- ----------- ----------- ----------- -----------
Gross profit........................ 131,861 105,672 79,231 61,813 44,493
Operating expenses.................. 90,101 77,980 60,329 48,390 35,489
Nonrecurring charges................ -- -- 10,845 -- --
----------- ----------- ----------- ----------- -----------
Income from operations.............. 41,760 27,692 8,057 13,423 9,004
Interest expense.................... (21,620) (13,143) (4,088) (2,059) (1,476)
Other income (expense), net......... 2,226 583 1,014 859 856
----------- ----------- ----------- ----------- -----------
Income before income taxes(1)....... 22,366 15,132 4,983 12,223 8,384
Income taxes........................ 9,485 6,422 2,054 4,538 2,847
Change in accounting for income
taxes............................. -- -- -- 380 --
----------- ----------- ----------- ----------- -----------
Net income.......................... $ 12,881 $ 8,710 $ 2,929 $ 8,065 $ 5,537
========= ========= ======== ======== ========
Primary earnings per share(2)(3).... $ 1.51 $ 1.05 $ 0.36 $ 1.05 $ 0.94
========= ========= ======== ======== ========
Fully diluted earnings per
share(2)(3)....................... $ 1.40 $ 1.01 $ 0.36 $ 1.00 $ 0.91
========= ========= ======== ======== ========
Weighted average shares
outstanding(2).................... 8,534 8,264 8,159 7,326 5,890
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 2, 1997
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED(4)
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BALANCE SHEET DATA:
Working capital.................................................. $ 99,815 $ 99,815
Total assets..................................................... 424,046 444,046
Long-term debt (includes current portion)(5):
Bank debt...................................................... 91,300 30,300
Convertible debentures......................................... 23,352 217
Senior notes................................................... 100,000 100,000
Shareholders' equity............................................. 137,928 241,210
</TABLE>

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(1) Income before income taxes include the following nonrecurring charges and
benefits:

a. A pretax gain in fiscal 1997 of $1.5 million from the sale of equity
securities.

b. Pretax charges in fiscal 1996 of $3.5 million relating to the
acquisition of Sterile Concepts.

c. Pretax charges in fiscal 1995 of $10.8 million related to the
formation of the Company's Case Management division.

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(2) For information concerning calculation of earnings per share, see Note 1 of
Notes to Consolidated Financial Statements.

(3) Fiscal 1994 primary and fully diluted earnings per share exclude a $.05 and
$.04 adjustment, respectively, to reflect the change in accounting for
income taxes.

(4) As adjusted to reflect (i) the pro forma effect of the conversion from
November 3 through December 12, 1997 of $22,983,000 of the Company's 6 3/4%
convertible subordinated debentures due March 1, 2003 (the "Debentures")
into 1,276,732 shares of the Common Stock and Debenture payments of
$152,000, (ii) the sale of 3,500,000 shares of Common Stock offered hereby
at an assumed public offering price of $24.50, and (iii) the application of
the net proceeds from such sale. See "Use of Proceeds."

(5) Excludes capital leases and other long-term obligations of the Company.

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FORWARD-LOOKING STATEMENT

Statements, either written or oral, that are not historical facts and which
express the Company's expectation for the future with respect to financial
performance or operating strategies are "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. These statements are made to provide the public with management's
assessment of the Company's business. Caution must be taken to consider these
statements in light of the following assumptions: products in development will
be introduced successfully and on schedule; the Company will make acquisitions
which contribute to profitability; key distributors will make purchases at the
same level as their sales; demand for the Company's products will follow recent
growth trends; competitors will not introduce new products which will
substantially reduce the Company's market share in its most significant product
lines; and the Company will continue to manufacture high quality products at
competitive costs and maintain or increase product pricing. In the event any of
the above factors do not occur as management anticipates, actual results could
differ materially from the expectations expressed in the forward-looking
statements. Further information relating to factors that could cause actual
results to differ from those anticipated is included but not limited to
information under the heading "Risk Factors," "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Prospectus. The Company disclaims any intention or obligation to update or
revise forward-looking statements, whether as a result of new information,
future events or otherwise.

RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS,
IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, WHEN
EVALUATING AN INVESTMENT IN THE COMMON STOCK.

RISK ASSOCIATED WITH ACQUISITIONS

The Company's growth has largely resulted from acquisitions of other
companies and product lines, and a significant component of the Company's
strategy is to continue to make such acquisitions. The Company is continually
evaluating possible acquisitions of businesses and product lines that complement
or expand the Company's existing business or product lines, and intends to
pursue favorable opportunities as they arise. The evaluation of prospective
acquisitions and the negotiation of acquisition agreements require substantial
expense and management time, and not all potential acquisitions ultimately are
consummated. Further, there can be no assurance that suitable acquisition
candidates will be found or that acquisitions can be consummated on terms
favorable to the Company. In addition, even if the Company is able to complete
such acquisitions, there can be no assurance that the acquired companies or
assets will be successfully integrated into the Company. Any such failure to
successfully integrate future acquisitions may adversely impact operations or
profitability. Acquisitions may be announced or consummated at any time and may
be dilutive to earnings per share on a pro forma basis.

The Company's expansion through acquisitions has placed, and is expected to
continue to place, significant demands on the Company's administrative,
operational and financial personnel and systems. There can be no assurance that
the Company will be able to manage its growth effectively, including the
improvement and implementation of the Company's financial and management
information systems and the recruitment and retention of key employees. The
Company's failure to do so could have a material adverse effect on the Company's
results of operations, including its ability to expand its operations
successfully or to maintain its present level of profitability.

The Company's strategy will require that substantial capital investment and
adequate financing be available to the Company. Capital is needed not only for
acquisitions, but also for the integration of operations and the addition of
equipment and technology. The Company anticipates using bank or other commercial
financing, seller financing and the additional sale of debt or equity securities
to finance possible acquisitions and ongoing operations, which could have an
adverse effect on the value of the shares of Common Stock of the Company. There
can be no assurance that the Company will be able to obtain such financing or
that, if

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available, such financing will be on terms acceptable to the Company's lenders
under its existing credit facility. The terms of the Company's existing credit
facility and the indenture under which the Company's 10 1/2% Senior Subordinated
Notes due 2006 (the "Notes") were issued restrict the Company's ability to
pursue and consummate additional acquisitions. The inability of the Company to
secure adequate financing for future acquisitions would impede future growth.
See Risk Factors -- "Indebtedness."

COMPETITION AND TECHNOLOGICAL CHANGE

The Company's products compete with those of numerous other companies
engaged in the businesses of developing, manufacturing and distributing
specialty medical products. Several of these competitors have more extensive
financial resources, research and development facilities and marketing
organizations than those of the Company. In addition, the Company believes that
the barriers to entry into the custom procedure tray business are fairly low and
it would be reasonably easy for medical products companies currently not in the
custom procedure tray business or others to enter the business. This is because
the business is not very capital or technology intensive to the extent a
supplier of trays does not manufacture specialty medical products. There are
currently many manufacturers that bundle sterile and non-sterile medical
specialty products that may not technically be "custom procedure trays," but
effectively compete with trays or could be bundled with other products so as to
directly compete with the Company's custom procedure trays. In addition,
customers could revert to the in-house preparation of the same components as are
found in a custom procedure tray. There are also numerous companies that supply
medical procedure trays to various niche markets (e.g. dental and eye) that
could, in the Company's view, easily broaden their product lines. In addition,
certain of the Company's specialty medical products compete in markets
characterized in many respects by rapid and significant technological change.
The Company also relies on trade secrets and continuing technological
advancement to maintain its competitive position. It is the practice of the
Company to enter into confidentiality agreements with key employees, consultants
and certain suppliers. There can be no assurance, however, that these measures
will prevent the unauthorized disclosure or use of the Company's trade secrets
and know-how or that others may not independently develop similar trade secrets
or know-how or obtain access to the Company's trade secrets, know-how or
proprietary technology. Although the Company continuously pursues product
research and development efforts, there can be no assurance that technological
change will not render one or more of the Company's present or proposed products
obsolete.

GOVERNMENT REGULATION

The manufacturing and marketing of the Company's products are subject to
regulation by the U.S. Food and Drug Administration (the "FDA") pursuant to the
U.S. Food, Drug and Cosmetic Act and regulations promulgated thereunder
(collectively the "FDA Act") and numerous other federal, state and foreign
governmental authorities. Although the Company has obtained all necessary
clearances for the manufacture and sale of all of the products that the Company
currently produces and sells, any products developed in the future are likely to
require FDA approval before they can be sold in the United States. To date, all
FDA approvals of the Company's products have been obtained under Section 510(k)
of the FDA Act, which provides for FDA marketing approval on an expedited basis
for products that can be shown to be substantially equivalent to devices in
interstate commerce prior to May 1976 (the month and year of enactment of the
FDA Act). The Company anticipates that virtually all of the products currently
being developed will qualify for marketing approval under Section 510(k);
however, if marketing approval for any product cannot be obtained under Section
510(k), alternative approval procedures are likely to be costly and time
consuming and there can be no assurance that the required approvals for
marketing any newly developed products will be obtained. Even if granted, all
products and manufacturing facilities are subject to continual review and
periodic inspections by various governmental authorities, and the discovery of
previously unknown problems with a product, the Company or its facilities may
result in product labeling restrictions, recall or withdrawal of the products
from the market. See "Business -- Government Regulation."

The products manufactured and sold by the Company in Europe are subject to
the European Community regulations for medical devices. The European Community
has a registration process which includes registration of manufacturing
facilities ("ISO certification") and product certification ("CE Mark"), and it

10
<PAGE> 12

has imposed a deadline of June 1998 after which products without a CE Mark may
not be sold in Europe. The Company has obtained ISO certification and CE Mark
certification for its facilities and products in Europe. In North America, the
Company has begun the process of European compliance by completing a
certification plan with a Notified Body (an authorized member of the European
network for Quality System Assessment and Certification) and contracting ISO
certification for its facilities and CE Mark registration for its products which
are exported to the member countries of the European Community. Although the
Company anticipates that it will be in material compliance with the CE Mark
certification requirement by the required date, failure to do so could have a
material adverse effect upon the capital expenditures, earnings and competitive
position of the Company. In addition, Europe has numerous government and local
agencies which have jurisdiction to take actions that could have a material
adverse effect upon the Company's ability to conduct business in Europe.
European governmental and local agencies have enacted or adopted regulations
which concern the discharge of materials into the environment, or otherwise
relating to the protection of the environment, which have not had, and are not
anticipated to have, any material adverse effect upon the capital expenditures,
earnings or competitive position of the Company or any of its subsidiaries.

INDEBTEDNESS

The indenture under which the Company's Notes were issued (the "Indenture")
restricts, among other things, the ability of the Company and its subsidiaries
to incur additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of subsidiaries, apply net proceeds from certain asset sales, merge or
consolidate with any other person, sell, assign, transfer, lease, convey or
otherwise dispose of substantially all of the assets of the Company, enter into
certain transactions with affiliates, or incur indebtedness that is subordinate
in right of payment to any indebtedness that is senior in right of payment (the
"Senior Indebtedness") to the Notes and senior in right of payment to the Notes.
In addition, the Company's existing credit facilities contain provisions
prohibiting the Company from prepaying other indebtedness before Senior
Indebtedness and from paying a dividend on the Common Stock. As a result of
these covenants, the ability of the Company to respond to changing business and
economic conditions and to secure additional financing, if needed, may be
significantly restricted, and the Company may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company. See
"Dividend Policy."

After giving effect to the Offering and the conversion of certain of the
Company's Debentures from November 3 through December 12, 1997, and assuming the
application of approximately $61 million of the net proceeds raised hereby to
the Company's consolidated outstanding debt, the Company will have total
consolidated outstanding debt of approximately $ . The level of the
Company's indebtedness could have important consequences to investors in the
Company's Common Stock offered hereby, including: (i) a significant portion of
the Company's cash flow from operations must be dedicated to debt service and
will not be available for other purposes; (ii) the Company's ability to obtain
additional debt financing in the future for other acquisitions, working capital,
capital expenditures or research and development may be limited; and (iii) the
Company's level of indebtedness could limit its flexibility in reacting to
changes in its industry or economic conditions generally. See "Dividend Policy,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," and Note 3 of Notes to
Consolidated Financial Statements.

DEPENDENCE ON KEY PERSONNEL

The Company believes that its continued success will depend to a
significant extent upon the efforts and abilities of its senior management team,
including Kenneth W. Davidson, its Chairman of the Board, President and Chief
Executive Officer, and its other executive officers. The Company does not carry
key man life insurance on any of executive officers. Mr. Davidson has entered
into an employment agreement with the Company that requires him to serve as
President of the Company on a full-time basis through October 31, 2000. The
Company has not entered into employment agreements with any of its other
executive officers. Failure of the Company to retain Mr. Davidson or other
executive officers, or to attract and retain additional qualified personnel,
could adversely affect the Company's operations.

11
<PAGE> 13

PRODUCT LIABILITY EXPOSURE

The manufacturing and marketing of the Company's products entail risks of
product liability. Although the Company maintains liability insurance in amounts
which it believes to be reasonable and standard in the industry, the amount and
scope of any coverage may be inadequate to fully protect the Company in the
event of a substantial adverse product liability judgment.

Since March 1996, the Company has been served with lawsuits alleging
various adverse reactions to the latex used in certain of the medical gloves
alleged to have been manufactured by the Company or the prior owner of the
assets relating to the Company's glove operations acquired in June 1995. The
Company believes that most of such claims relate to gloves sold or shipped prior
to June 1995, and that it has been indemnified by the prior owner with regard to
such claims. However, the Company is aware that there has been an increasing
number of lawsuits brought against latex glove manufacturers with respect to
such allergic reactions. Because the Company, as well as its competitors, has
continued to manufacture and sell latex gloves, it may be subject to further
claims. The Company is not entitled to indemnification from the prior owner for
gloves sold or shipped after June 1995. Total United States sales of latex
gloves in 1997 was approximately $750 million, of which the Company's sales were
approximately $12 million.

HEALTHCARE REFORM

In recent years, there have been a number of government initiatives to
reduce healthcare costs. Congress and various state legislatures have proposed
changes in law and regulation that could affect a major restructuring of the
healthcare industry. Changes in governmental support of healthcare services, the
methods by which such services are delivered, the prices for such services, or
other legislation or regulations governing such services or mandated benefits
could have a material adverse effect on the Company's results of operations. See
"Business -- Effects of Healthcare Reform."

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions in the Company's Articles of Incorporation and Bylaws
and Texas law may make a change in control of the Company more difficult to
effect, even if a change in control were in the shareholders' interest. Such
provisions include a shareholder rights plan and a provision allowing the Board
of Directors to determine the terms of Preferred Stock which may be issued by
the Company without approval of the holders of the Common Stock, and thereby
enable the Board of Directors to inhibit the ability of the holders of the
Common Stock to effect a change in control of the Company. See "Description of
Capital Stock" and Note 12 of Notes to the Company's Financial Statements.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered hereby, assuming a public offering price of $24.50 per
share, are estimated to be approximately $81 million (approximately $93 million
if the Underwriters exercise their Over-Allotment Option in full) after
deducting underwriting discounts and commissions and estimated offering
expenses.

The Company intends to use approximately $20 million of the net proceeds of
this Offering to expand glove production capacity and the balance, approximately
$61 million (approximately $73 million if the Underwriters exercise their
Over-Allotment Option in full), to repay certain outstanding debt under a term
loan in the original principal amount of $90 million. At November 2, 1997, the
balance of the term loan was approximately $81 million. In addition, the Company
also had approximately $10 million outstanding under a revolving line of credit.
The term loan and revolving line of credit are together referred to as the
"Credit Facilities." The Credit Facilities mature on July 30, 2002, with the
term loan requiring repayment in twenty-four quarterly installments ranging from
$1.5 million to $5.5 million. For fiscal 1997, the weighted average rate of
interest on the revolver and term loan was 7.47%. See Note 3 of Notes to
Consolidated Financial Statements of the Company and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

12
<PAGE> 14

Pending application of the proceeds as described above, the Company intends
to place the net proceeds of this Offering in interest-bearing bank accounts or
invest the proceeds in short-term, interest-bearing securities.

PRICE RANGE OF COMMON STOCK

The following table sets forth the range of the high and low sale prices
for the Common Stock on the New York Stock Exchange for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Year Ending November 1, 1998:
Second Quarter (through February 10, 1998)................................ 24 1/2 22 3/16
First Quarter............................................................. 24 7/8 19 1/2
Year Ending November 2, 1997:
Fourth Quarter............................................................ 26 19 1/2
Third Quarter............................................................. 19 5/16 13 1/4
Second Quarter............................................................ 16 12 5/8
First Quarter............................................................. 15 1/8 12 1/4
Year Ending November 3, 1996:
Fourth Quarter............................................................ 17 1/2 12 3/4
Third Quarter............................................................. 19 15
Second Quarter............................................................ 19 3/4 17 3/8
First Quarter............................................................. 20 1/4 13 3/8
</TABLE>

The closing sale price of the Common Stock on February 10, 1998, as
reported on the New York Stock Exchange, was $24.50 per share. As of February
10, 1998, there were approximately 243 holders of record of the Common Stock, as
shown on the records of the transfer agent and registrar for the Common Stock.

DIVIDEND POLICY

The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to finance the expansion of its business
and, therefore, does not expect to pay any cash dividends in the foreseeable
future. Any determination as to the payment of cash dividends will depend upon
the Company's earnings, general financial condition, capital needs and other
factors deemed pertinent by the Board of Directors, as well as any limitations
imposed by the Credit Facilities. The Credit Facilities and the Indenture under
which the Notes were issued restrict or prohibit the payment of dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

13
<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
November 2, 1997, (i) on an actual basis; (ii) on a pro forma basis to give
effect to conversions from November 3 through December 12, 1997, of $22,983,000
of the Debentures into 1,276,732 shares of the Common Stock and Debenture
payments of $152,000; and (iii) on a pro forma, as adjusted, basis to
additionally give effect to the sale of 3,500,000 million shares of Common Stock
offered hereby (at an assumed public offering price of $24.50 per share and
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company) and the application of the net
proceeds therefrom as described under "Use of Proceeds."

<TABLE>
<CAPTION>
NOVEMBER 2, 1997
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term debt (including current portion)(1):
Revolving credit facility............................. $ 10,300 $ 10,300 $ 10,300
Term loan............................................. 81,000 81,000 20,000
6 3/4% Convertible subordinated debentures............ 23,352 217 217
10 1/2% Senior subordinated notes..................... 100,000 100,000 100,000
-------- -------- --------
Total long-term debt(1)................................. 214,652 191,517 130,517
-------- -------- --------
Shareholders' equity:
Preferred Stock, $1.00 par value, 20,000,000 shares
authorized, none issued or outstanding............. -- -- --
Common Stock, $0.001 par value, 40,000,000 shares
authorized; 8,871,335 shares issued and
outstanding; 10,148,067 shares issued and
outstanding pro forma, and 13,648,067 shares issued
and outstanding pro forma, as adjusted(2).......... 9 10 14
Additional paid-in capital.............................. 103,872 126,153 207,149
Retained earnings....................................... 45,250 45,250 45,250
Subscriptions receivable................................ (5,200) (5,200) (5,200)
Cumulative translation adjustment....................... (6,003) (6,003) (6,003)
-------- -------- --------
Total shareholders' equity............................ 137,928 160,210 241,210
-------- -------- --------
Total capitalization............................... $352,580 $ 351,727 $ 371,727
======== ======== ========
</TABLE>

- ---------------

(1) Excludes capital leases and other long-term obligations of the Company.

(2) Excludes options to purchase Common Stock under the Company's stock plans of
which there were options outstanding as of November 2, 1997 to purchase an
aggregate of 1,016,720 shares at a weighted average exercise price of $11.40
and a weighted average remaining option life of 3.64 years.

14
<PAGE> 16

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data, as of and for the five
fiscal years ended November 2, 1997, have been derived from the audited
consolidated financial statements of the Company. The selected consolidated
financial data do not purport to indicate results of operation as of any future
date or for any future period. The information in the table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------------
NOVEMBER 2, NOVEMBER 3, OCTOBER 29, OCTOBER 30, OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 529,552 $ 399,836 $ 265,726 $ 191,382 $ 129,740
Cost of sales....................... 397,691 294,164 186,495 129,569 85,247
-------- -------- -------- -------- --------
Gross profit........................ 131,861 105,672 79,231 61,813 44,493
Operating expenses.................. 90,101 77,980 60,329 48,390 35,489
Nonrecurring charges................ -- -- 10,845 -- --
-------- -------- -------- -------- --------
Income from operations.............. 41,760 27,692 8,057 13,423 9,004
Interest expense.................... (21,620) (13,143) (4,088) (2,059) (1,476)
Other income (expense), net......... 2,226 583 1,014 859 856
-------- -------- -------- -------- --------
Income before income taxes(1)....... 22,366 15,132 4,983 12,223 8,384
Income taxes........................ 9,485 6,422 2,054 4,538 2,847
Change in accounting for income
taxes............................. -- -- -- 380 --
-------- -------- -------- -------- --------
Net income.......................... $ 12,881 $ 8,710 $ 2,929 $ 8,065 $ 5,537
======== ======== ======== ======== ========
Primary earnings per share(2)(3).... $ 1.51 $ 1.05 $ 0.36 $ 1.05 $ 0.94
======== ======== ======== ======== ========
Fully diluted earnings per
share(2)(3)....................... $ 1.40 $ 1.01 $ 0.36 $ 1.00 $ 0.91
======== ======== ======== ======== ========
Weighted average shares
outstanding(2).................... 8,534 8,264 8,159 7,326 5,890

BALANCE SHEET DATA:
Working capital..................... $ 99,815 $ 122,086 $ 73,286 $ 82,886 $ 52,722
Total assets........................ 424,046 465,347 264,490 165,416 114,040
Long-term debt (includes current
portion)(4):
Bank debt......................... 91,300 128,590 76,987 -- --
Convertible debentures............ 23,352 28,750 28,750 28,750 28,750
Senior notes...................... 100,000 100,000 -- -- --
Shareholders' equity................ 137,928 123,556 116,351 111,470 68,458
</TABLE>

- ---------------

(1) Income before income taxes include the following nonrecurring charges and
benefits:

a. A pre-tax gain in fiscal 1997 of $1.5 million from the sale of equity
securities.

b. Pre-tax charges in fiscal 1996 of $3.5 million relating to the
acquisition of Sterile Concepts.

c. Pre-tax charges in fiscal 1995 of $10.8 million related to the
formation of the Company's Case Management division.

(2) For information concerning calculation of earnings per share, see Note 1 of
Notes to Consolidated Financial Statements.

(3) Fiscal 1994 primary and fully diluted earnings per share exclude a $.05 and
$.04 adjustment, respectively, to reflect the change in accounting for
income taxes.

(4) Excludes capital leases and other long-term obligations of the Company.

15
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company develops, manufactures and distributes a diversified group of
specialty medical products. The Company has grown significantly during the past
five years. Net sales increased from $129,740,000 in 1993 to $529,552,000 in
1997, a compound annual growth rate of 42%. This growth resulted primarily from
acquisitions of established businesses or product lines. Maxxim Medical, Inc., a
Delaware subsidiary of the Company, operates the Company's three divisions: Case
Management, Argon Medical, and Maxxim Medical Europe. Set forth below is a brief
description of the most significant acquisitions made by the Company since 1993.
(See Note 2 of Notes to Consolidated Financial Statements).

STERILE CONCEPTS

In July 1996, the Company acquired the outstanding common stock of Sterile
Concepts through completion of a tender offer. Sterile Concepts assembled,
packaged and distributed sterile custom procedure trays for hospitals,
outpatient surgery centers and medical clinics. As a result of the acquisition,
the Company's Case Management division became the second largest producer of
custom procedure trays in the United States and holds an approximate 35% market
share in this product segment.

GLOVE OPERATIONS

In June 1995, the Company acquired the glove operations of Becton
Dickinson. The gloves, which are sold under such brand names as Tru-Touch(TM),
SensiCare(TM), Tradition(TM), Eudermic(TM), Dextren(TM) and Neolon(TM), include
latex and non-latex surgical and examination versions. Since being acquired, the
North American operations have been included in the Case Management division and
the European operations have been a part of Maxxim Medical Europe. This
acquisition gave the Company a leading worldwide market share in non-latex
medical examination gloves.

MEDICA

In January 1995, the Company purchased Medica B.V., a Netherlands
corporation. Medica's operations included manufacturing, fabricating,
distributing and selling various types of disposable medical supplies in Europe,
principally in The Netherlands and Belgium. Since July 1995, the Medica products
have been sold in Europe through the Maxxim Medical Europe division.

STERILE DESIGN

In July 1993, Maxxim acquired the custom procedure tray operations of
Sterile Design from a division of Johnson & Johnson. As a result of this
acquisition, the Company became the third largest provider of sterile custom
procedure trays in the United States.

The following discussion should be read in conjunction with the
Consolidated Financial Statements and the related notes thereto and other
detailed information appearing elsewhere herein.

16
<PAGE> 18

RESULTS OF OPERATIONS

The following table presents selected financial information for the periods
indicated as a percentage of net sales and sets forth the percentage dollar
increase (decrease) of such items from period to period.

<TABLE>
<CAPTION>
PERCENTAGE CHANGE FROM
FISCAL YEAR ENDED PRIOR PERIOD
----------------------- ------------------------------
1997 1996 1995 1997 VS. 1996 1996 VS. 1995
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales.................................... 100.0% 100.0% 100.0% 32.4% 50.5%
Gross profit................................. 24.9 26.4 29.8 24.8 33.4
Marketing and selling expenses............... 11.8 13.0 15.6 20.9 25.0
General and administrative expenses.......... 5.2 6.5 7.1 5.0 38.6
Nonrecurring charges......................... -- -- 4.1 n/a -100.0
Income from operations....................... 7.9 6.9 3.0 50.8 243.7
Interest expense............................. 4.1 3.3 1.5 64.5 221.5
Other income (expense), net.................. 0.4 0.2 0.4 281.8 -42.5
Income before income taxes................... 4.2 3.8 1.9 47.8 203.7
Income taxes................................. 1.8 1.6 0.8 47.7 212.7
Net income................................... 2.4 2.2 1.1 47.9 197.4
</TABLE>

FISCAL 1997 COMPARED TO 1996

Net Sales -- Net sales for fiscal 1997 were $529,552,000, a 32.4% increase
over the $399,836,000 reported for fiscal 1996. The Case Management division had
sales of $417,594,000 for fiscal 1997 versus sales of $274,611,000 for fiscal
1996. This increase is due to a full year of sales from the Sterile Concepts
acquisition (see Note 2 of Notes to Consolidated Financial Statements). The
Argon division had sales of $61,870,000 in fiscal 1997, 2.7% lower than the
$63,614,000 recorded in fiscal 1996. This decline is attributable to competitive
factors primarily affecting the patient monitoring product line. Maxxim Medical
Europe's fiscal 1997 sales of $50,088,000 were 5.9% lower than the fiscal 1996
sales of $53,272,000 due to foreign exchange rates. Excluding the impact of
foreign currency translation, Maxxim Medical Europe's fiscal 1997 sales were
6.1% higher than fiscal 1996.

Gross Profit -- The Company's gross profit was $131,861,000 for fiscal
1997, a 24.8% increase over the $105,672,000 reported for fiscal 1996. The gross
profit margin declined to 24.9% in fiscal 1997 from 26.4% in fiscal 1996
primarily due to the acquisition of Sterile Concepts (which had a gross margin
of 19.1% in fiscal 1996). However, gross margins have improved each quarter
since the acquisition from 23.4% in the fourth quarter of fiscal 1996 to 25.6%
in the fourth quarter of fiscal 1997.

Operating Expenses -- Marketing and selling expenses increased from
$51,781,000 in fiscal 1996 to $62,603,000 in fiscal 1997; however, as a
percentage of net sales, these expenses dropped from 13.0% to 11.8% in the same
periods. General and administrative expenses increased from $26,199,000 in
fiscal 1996 to $27,498,000 in fiscal 1997; but once again, as a percentage of
net sales, these expenses dropped from 6.5% to 5.2% for the respective periods.
The Company estimates that operating expenses for fiscal 1996 included
approximately $1,640,000 of one-time expenses as a result of the acquisition of
Sterile Concepts. The reduction of expense rates resulted from the leveraging of
the Sterile Concepts operations with the existing operations of the Company.

Income from Operations -- Income from operations increased 50.8% to
$41,760,000 in fiscal 1997, from $27,692,000 in fiscal 1996. Excluding the
one-time expenses in fiscal 1996 mentioned above, income from operations
increased from $29,332,000, or 7.3% of net sales in fiscal 1996 to $41,760,000,
or 7.9% of net sales in fiscal 1997.

Interest Expense -- The Company's interest expense increased to $21,620,000
in fiscal 1997 from $13,143,000 in fiscal 1996. The increase in interest expense
is the direct result of the increase in outstanding debt incurred to finance the
acquisition of Sterile Concepts.

17
<PAGE> 19

Income Taxes -- Maxxim's effective income tax rate was 42.4% in both fiscal
1997 and fiscal 1996. The Company's effective tax rate is higher than the
statutory rate as a result of nondeductible amortization expenses resulting from
goodwill recorded in past acquisitions.

Net Income -- As a result of the foregoing, fiscal 1997 net income was
$12,881,000 as compared to fiscal 1996 net income of $8,710,000. Fully diluted
earnings per share were $1.40 and $1.01 for fiscal years 1997 and 1996
respectively.

FISCAL 1996 COMPARED TO 1995

Net Sales -- Net sales for fiscal 1996 were $399,836,000, a 50.5% increase
over the $265,726,000 reported for fiscal 1995. The Case Management division had
sales of $274,611,000 for fiscal 1996 versus sales of $168,295,000 for fiscal
1995. This increase is primarily due to a full year of sales for the Glove
operations (acquired in June 1995) and three months of sales from the Sterile
Concepts acquisition (see Note 2 of Notes to Consolidated Financial Statements).
The Argon division had sales of $63,614,000 in fiscal 1996, 15.7% higher than
the $54,991,000 recorded in fiscal 1995. Sales increased in almost all product
lines with the largest increase coming from pressure monitoring kits, a product
line which was expanded in February of 1995. Maxxim Medical Europe's fiscal 1996
sales of $53,272,000 were 125.3% higher than the $23,649,000 recorded for fiscal
1995. This increase is attributable to the European operations of the Glove
Operation which was acquired in June 1995. The Henley Healthcare division was
sold in April 1996 and had sales of $8,339,000 for fiscal 1996 versus a full
year sales figure of $18,791,000 for fiscal 1995.

Gross Profit -- The Company's gross profit was $105,672,000 for fiscal
1996, a 33.4% increase over the $79,231,000 reported for fiscal 1995. The gross
profit margin declined to 26.4% in fiscal 1996 from 29.8% in fiscal 1995
primarily due to the acquisition of Sterile Concepts (which had a gross margin
of 19.1% in fiscal 1996) and continued pricing pressure on procedure trays for
most of the year.

Operating Expenses -- Marketing and selling expenses increased from
$41,430,000 in fiscal 1995 to $51,781,000 in fiscal 1996, however, as a
percentage of net sales these expenses dropped from 15.6% to 13.0% in the same
periods. General and administrative expenses increased from $18,899,000 in
fiscal 1995 to $26,199,000 in fiscal 1996, but once again, as a percentage of
net sales, these expenses dropped from 7.1% to 6.5% for the respective periods.
The Company estimates that operating expenses for fiscal 1996 included
approximately $1,640,000 of one-time expenses as a result of the acquisition of
Sterile Concepts.

Income from Operations -- Income from operations increased to $27,692,000
in fiscal 1996, from $8,057,000 in fiscal 1995. Excluding the nonrecurring
charge in fiscal 1995 and the one-time expenses in fiscal 1996 mentioned above,
income from operations increased from $18,902,000 or 7.1% of net sales in fiscal
1995 to approximately $29,332,000 or 7.3% of net sales in fiscal 1996.

Interest Expense -- The Company's interest expense increased to $13,143,000
in fiscal 1996 from $4,088,000 in fiscal 1995. The increase in interest expense
is the direct result of the new debt facilities created to finance the
acquisition of Sterile Concepts. Interest expense for fiscal 1996 also includes
nonrecurring financing fees of approximately $1,900,000 related to bridge
financing established in connection with the Sterile Concepts acquisition.

Income Taxes -- Maxxim's effective income tax rate was 42.4% in fiscal 1996
and 41.2% in fiscal 1995. The Company's effective tax rate is higher than the
statutory rate as a result of increased nondeductible amortization expenses
resulting from goodwill recorded from past acquisitions.

Net Income -- As a result of the foregoing, fiscal 1996 net income was
$8,710,000 as compared to fiscal 1995 net income of $2,929,000. Fully diluted
earnings per share were $1.01 and $.36 for fiscal years 1996 and 1995
respectively.

LIQUIDITY AND CAPITAL RESOURCES

At November 2, 1997, the Company had cash and cash equivalents of
$3,130,000, working capital of $99,815,000, long-term liabilities of
$211,410,000 and shareholders equity of $137,928,000. Cash flow from

18
<PAGE> 20

operations was $49,577,000 in fiscal 1997 versus $357,000 in fiscal 1996. Cash
flow from operations was favorably impacted by a reduction in operations working
capital of $16,394,000 primarily resulting from improved management of accounts
receivable and inventory.

In the first quarter of Fiscal 1997, the Company received $3,130,000 from
the sale of its marketable equity securities. A resulting one-time gain of
$1,510,000 was included in other income in fiscal 1997.

During fiscal 1997, the Company repaid $37,290,000 of bank debt resulting
in a term loan balance of $81,000,000 and a revolver balance of $10,300,000 at
fiscal year end. As a result of debt repayments, the Company had $64,700,000 of
available credit under its revolver facility on November 2, 1997, and received a
37.5 basis point reduction in its borrowing rate during the fourth quarter due
to improved financial ratios.

On October 3, 1997, the Company called for redemption $10,000,000 in
principal amount of its $28,750,000 debentures effective as of November 4, 1997.
As of November 2, 1997 $5,398,000 of the debentures had converted into common
stock and debt issuance costs of $166,000 related to these converted debentures
were written off to additional paid-in capital in fiscal 1997. On November 12,
1997, the Company called for the redemption of the remaining outstanding
principal amount of the Debentures effective as of December 12, 1997 (see Note 3
of Notes to Consolidated Financial Statements).

On May 23, 1997 the Company issued 400,000 shares of common stock pursuant
to a Senior Management Stock Purchase Plan at $13.00 per share, the closing
stock price on April 30, 1997. The stock was issued in exchange for an aggregate
of $5.2 million in notes due May 23, 2000 from the participants. These notes
have been recorded as subscriptions receivable and are included in the equity
section of the balance sheet (See Note 11 of Notes to Consolidated Financial
Statements).

The Company is in the process of remediating certain software for the
impact of Year 2000 issues on its computer systems and applications. However,
management believes that such remediation effort will not have a significant
impact on the financial results or prospects of the Company.

The Company believes that its present cash balances, together with
internally generated cash flows and borrowings under its Credit Facilities, will
be sufficient to meet its future working capital requirements. The Company
intends to pursue strategic acquisitions which promote its growth strategy or
complement its present product offerings and increase market share. The Company
anticipates using bank or other commercial financing, seller financing and
additional sale of debt or equity securities to finance any such possible
acquisitions.

INFLATION

The Company believes inflation has not had a material effect on its results
of operations for the past three years. Historically, the Company believes it
has been able to minimize the effect of inflation by increasing the selling
prices of its products, improving its manufacturing efficiency and increasing
its employee productivity.

FOREIGN CURRENCY

The Company's results of operations and the value of its foreign assets are
affected by fluctuations in foreign currency exchange rates. The impact of
changes in exchange rates on results of operations has been minimal since a
majority of the Company's exports are contracted in the Company's functional
currencies. The Company cannot determine the impact of the adoption of the EURO
in January 1999 on its financial statements or operations. Foreign currency
transaction gains and losses are included in the Consolidated Statements of
Operations.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding the impact of new accounting pronouncements on the
results of operations, financial position or cash flows is set forth in Note 1
of Notes to Consolidated Financial Statements under the caption "New Accounting
Pronouncements."

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BUSINESS

The Company has experienced significant growth since its initial public
offering in 1990, principally by successfully integrating five major
acquisitions of specialty medical products and custom procedure tray businesses.
Since fiscal 1989, these acquisitions, combined with internal growth, have
generated a compound annual growth rate of 53.5% in net sales, 42.8% in net
income and 15.2% in fully diluted earnings per share (excluding non-recurring
gains). In July 1996, the Company acquired Sterile Concepts. This acquisition
increased the Company's custom procedure tray business by over 200% and has
dramatically expanded the Company's vertical integration opportunities. A goal
of the Company's vertical integration strategy is to change customer preferences
from third party products in its custom procedure trays to Company-manufactured
products. Primarily through such vertical integration, as well as economies of
scale resulting from the Company's acquisitions, the Company's gross margin and
operating margin increased from 23.4% and 7.1% in the fourth quarter of fiscal
1996 (the first full fiscal quarter after the acquisition of Sterile Concepts)
to 25.6% and 8.6%, respectively, in the fourth quarter of fiscal 1997.

The Company operates three divisions: Case Management, Argon Medical and
Maxxim Medical Europe. The Company's Case Management division manufactures,
assembles and sells custom procedure trays for a wide variety of operating room
and other medical procedures, complete lines of surgical gloves and medical
examination gloves, infection control apparel for operating room personnel and
patient draping systems. The Argon Medical division manufactures and markets
guidewires, needles, introducers, catheters, manifolds, transducers, high
pressure syringes and certain other single-use medical and surgical specialty
products, which are used in the Company's procedure trays or are sold
separately. This division also assembles and markets procedure trays for use
primarily in cardiology and radiology procedures. The Company's third division,
Maxxim Medical Europe, serves as the Company's European manufacturer and
distributor of Company products.

INDUSTRY TRENDS

Management believes that demand for products manufactured and distributed
by the Company has been favorably impacted by the emphasis on less invasive
surgical procedures, outpatient care and the continuing pressure to improve
productivity, contain costs and reduce the transmission of infectious diseases.
Demographic trends, such as the aging of the population, have also had a
favorable effect on the demand for the

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Company's products since older people generally require more medical care and
undergo more surgical procedures.

The Company believes that there is an increased emphasis on less invasive
procedures because such procedures generally involve reduced patient trauma and
shorter recovery time. Improvements in medical technology and enhanced awareness
on the part of the public and healthcare professionals of the lower costs and
other benefits of less invasive procedures have resulted in significant
increases in such procedures in recent years. Many of the Company's products are
specifically designed for less invasive procedures. Rising healthcare costs,
ease of set-up and decreased turn-around times, and the shortage of nursing and
other healthcare professionals have also created a need for medical products
that improve healthcare professional productivity and have been principal
factors in the trend towards use of single-use medical products and procedure
trays instead of reusable products. Unlike reusable products, single-use
products such as the Company's specialty medical products do not require costly,
labor intensive laundering, disinfecting or reassembling processes. The risks of
transmission of infectious diseases such as HIV, hepatitis and tuberculosis, and
related concerns about occupational safety of healthcare professionals, have
also contributed to an increased demand for sterile, single-use products.

Management also believes that there has been a growing trend by large
customers to concentrate their purchases of medical products with fewer, larger
suppliers, and that recent acquisitions, including Sterile Concepts, have
significantly improved its ability to attract and service such larger customers.
Management believes that this trend will continue to benefit the Company as it
grows and diversifies its product lines.

Although the aggregate number of surgical procedures performed in Europe is
approximately equivalent to the number of surgical procedures performed in the
United States, the prevalence of single-use products and custom procedure trays
in Europe is not as great as in the United States. The Company believes that
European healthcare providers will increase their use of disposable products and
custom procedure trays for substantially the same reasons that caused United
States healthcare providers to do so. Certain European countries have
implemented healthcare price controls and experienced consolidation of hospitals
and shifting of surgical procedures away from hospitals towards outpatient
surgery centers. The Company believes that these developments will increase the
demand among European healthcare providers for the greater efficiency and
productivity associated with the single-use products of the type it
manufactures.

The growth in the market for gloves, both latex and non-latex, over the
past several years has largely resulted from the increased concerns among
healthcare professionals over protection from the transmission of infectious
diseases, particularly HIV and Hepatitis B. In 1987, the Centers for Disease
Control issued recommendations that anyone coming into contact with bodily
fluids should use "universal precautions," including wearing gloves.
Additionally, since 1991 Occupational Safety and Health Administration ("OSHA")
regulations have required that protective gloves be worn when it can be
reasonably anticipated that an employee will have contact with blood, saliva or
other potentially infectious substances.

The non-latex segment of the glove market, has grown rapidly principally as
a result of reported increases in allergic reactions to the water soluble
proteins in latex and to the chemical and other additives used in processing
latex and manufacturing latex gloves. In 1991, the FDA issued a medical alert
warning healthcare professionals about the increased incidences of allergic
reactions to latex medical products by both medical personnel and patients.
Additionally, OSHA regulations require glove liners, powderless gloves, or other
similar alternatives be readily accessible to those employees who are allergic
to gloves normally provided. The United States market for non-latex gloves was
approximately $111.5 million in 1997.

STRATEGY

The Company's goal is to improve profitability and grow its business by
enhancing its position as a leading manufacturer and marketer of single-use
specialty medical products to medical treatment facilities, domestically and in
Europe. To achieve this goal, the Company intends, both through strategic
acquisitions and internal initiatives, to: (i) increase vertical integration,
(ii) expand glove production, (iii) maximize utilization of existing facilities,
(iv) invest in product development, and (v) increase sales efforts to large
purchasing groups and healthcare provider networks. The Company continually
evaluates possible acquisitions

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<PAGE> 23

of businesses and product lines and intends to pursue those acquisitions that
promote its strategy or complement its existing product offerings or increase
market share.

Increasing Vertical Integration. In order to enhance its
gross margin, the Company strives to increase the percentage of
Company-manufactured products contained in its custom procedure
trays. At the time of its acquisition in July 1996, Sterile
Concepts used only a small amount of Company products in its
custom procedure trays. The Company has focused significant
efforts on persuading customers of Sterile Concepts to accept
Company-manufactured products, which the Company typically can
offer at lower prices, rather than those manufactured by third
parties. The Company conducts product development efforts and
seeks acquisitions on an ongoing basis to expand the number of
Company-manufactured products that can be incorporated into its
custom procedure trays.

Maximizing Utilization of Existing Facilities. The Company
intends to continue to improve utilization of its manufacturing
facilities through plant consolidations, new product introductions
and the acquisition of additional product lines. Execution of the
Company's vertical integration strategy also improves plant
utilization by increasing the production volumes of many of the
principal products the Company manufactures. In fiscal 1997, the
Company closed one manufacturing facility, and is evaluating all
other facilities to maximize their utilization. The Company
currently is evaluating whether it can utilize its own facilities
to manufacture sub-assemblies currently provided by outside
sources. By adding shifts (except in glove plants, which currently
operate almost continuously at full capacity) the Company can
expand capacity in its current manufacturing and assembly
facilities to produce most of its specialty medical products
without significantly increasing capital expenditures.

Investing in Product Development. The Company continually
conducts research and development of new products and enhancements
to existing products. In particular, product improvement and line
extension have been and are expected to continue to be important
sources of revenue, primarily for the Argon division and the glove
operations. Research and development in glove operations focus on
improving the feel and durability of the Company's non-latex
gloves and in enhancing manufacturing efficiency. The Argon
division is currently developing two new types of catheters in
order to capitalize on customer preferences.

Increasing Sales Efforts to Purchasing Groups and Provider
Networks. Management believes that the Company must continue to
focus more of its sales efforts on the emerging integrated
healthcare networks. Many hospitals are forming alliances and are
increasingly buying their medical products on a national accounts
basis, which favors suppliers that can bundle multiple products.
The Company intends to place greater emphasis on leveraging its
sales force's existing relationships to sell all of its product
lines.

Management believes that the international market for single-use medical
products is in the early stage of development. In fiscal 1997, approximately
10.8% of the Company's net sales were derived from international sales and
exports. The Company established a beachhead in Europe in January 1995 through
the acquisition of Medica and then expanded its presence with a glove operations
acquisition in June 1995. These operations specialize in the manufacture and
sale of single-use medical products for hospital operating rooms and constitute
the Company's Maxxim Medical Europe division.

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<PAGE> 24

An important part of the Company's strategy has been to add or expand
product lines through acquisitions, enabling the Company to develop its primary
business of manufacturing and distributing single-use specialty medical
products, which are sold individually and as components of the Company's custom
procedure trays. The Company believes that the acquisition of Sterile Concepts
has helped it further this strategy. With Sterile Concepts, the Company
increased its custom tray business by over 200%, providing greater direct
customer contact while increasing the Company's distribution of its disposable
medical products. Additionally, through the Sterile Concepts acquisition, the
Company obtained plants in Virginia and California that have expanded its
geographical manufacturing coverage of domestic markets. The Company intends to
continue to pursue those acquisitions of businesses and product lines that
promote its strategy and complement its existing product offerings or increase
market share, and to continue its internal product development and enhancement
efforts in order to increase the number of products that can be sold directly or
included in its custom procedure trays.

OPERATING DIVISIONS

Case Management Division. The Case Management division manufactures,
assembles and sells custom procedure trays, complete lines of surgical gloves
and non-latex medical examination gloves, infection control apparel for
operating room personnel and patient draping systems. The Company formed this
division in the third fiscal quarter of 1995. Case Management products are
marketed principally through its sales force consisting of approximately 105
account managers throughout the United States and Canada. Division sales were
$417,594,000 in fiscal 1997, or 78.8% of the Company's net sales.

Case Management Division Product Lines

Custom Procedure Trays -- The Company assembles and markets custom
procedure trays for use in a variety of medical and surgical procedures. Custom
procedure trays are assembled with single-use products selected by the operating
room personnel performing a certain medical or surgical procedure. Among the
types of single-use medical or surgical products typically included in the
custom procedure trays are surgical gowns, surgical drapes, electrosurgical
accessories, instruments, needles, gloves, syringes, tubing, sponges, towels and
gauze. The Company's ValuQuote system allows account managers to meet customers
on-site to design cost-effective custom procedure tray configurations in
accordance with individual customer specifications, from a selection of over
9,000 component parts, which are manufactured either by the Company or third
party vendors. The computer-aided design of custom procedure tray prototypes
helps to ensure that client product and sequencing needs are met. Assembly of
custom procedure trays is then performed in facilities located in Temecula,
California, Clearwater, Florida, and Richmond, Virginia. The Company's Encompass
program bundles the customer's choice of sterile and nonsterile procedure-based
products and then converts into an efficient disposal system after use.

Drapes & Gowns -- The Company manufactures a complete line of single-use,
non-woven infection control apparel for operating room personnel and patient
draping systems. These products offer a wide range of features such as patented
fluid collection pouches to minimize the risk of transmission of infectious
agents or other waste during medical procedures. The drapings are utilized in
various general and specialty surgical procedures, as components of custom
procedure trays (including those assembled and distributed by the Company), in a
sterile pack, or as a single product. The Company has modified the design of
many of its products and has developed new products to accommodate new medical
advances. The Company manufactures its non-woven products at its facilities
located in Columbus, Mississippi and La Romana in the Dominican Republic.

Gloves -- The Case Management division also manufactures and distributes a
complete line of surgical and non-latex medical examination gloves. The gloves,
which are sold under brand names such as Tru-Touch(TM), SensiCare(TM),
Tradition(TM), Eudermic(TM), Sentura(TM) and Neolon(TM), are manufactured from
latex, synthetic rubber and various non-latex materials. The Company's non-latex
medical examination gloves currently hold an estimated 61% share of the United
States acute care market. The Company believes that its non-latex medical
examination gloves provide a viable alternative to traditional latex medical
examination gloves, and the recent concern of healthcare professionals about
purported allergic reactions to latex medical

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<PAGE> 25

examination gloves has increased demand for the Company's non-latex medical
examination and surgical gloves, particularly for the Company's SensiCare(TM),
Tru-Touch(TM) and Neolon(TM) gloves. The Company continues to research and
develop new compounds to improve its non-latex products. The Case Management
gloves, together with the drape and gown products, allow the Company to provide
healthcare personnel with infection control apparel from head to foot. The
gloves are manufactured at the Company's facilities in Honea Path, South
Carolina, Los Gatos, California, Mississauga, Canada, and Aalst/Erembodegem,
Belgium. The highly mechanized, non-labor intensive facilities in California,
Canada and Belgium are currently producing non-latex medical examination gloves
continuously at full capacity.

Other Products -- The Company also manufactures a variety of single-use
medical bowls and containers as well as a line of electrosurgery accessory
products which are primarily sold through inclusion in procedure trays.

Argon Medical Division. The Argon Medical division manufactures single-use
specialty vascular access and pressure monitoring products and assembles
procedure trays for the cardiology and interventional radiology markets. The
Division's specialty medical products include single-use guidewires, needles,
introducers, catheters, manifolds, transducers and high pressure syringes. Its
products are either utilized in the Company's procedure trays or are sold
separately. The specialty medical products manufactured by Argon Medical include
technologically advanced products which have been developed by the Division's
technical staff. Argon Medical division products are marketed principally
through its sales force of approximately 40 direct sales persons. The Argon
Medical division manufactures or assembles the medical specialty products and
procedure trays at the Company's plant in Athens, Texas. Division sales for
fiscal 1997 amounted to $61,870,000, or 11.7% of Company net sales.

Maxxim Medical Europe Division. The Company's European acquisitions were
combined to form Maxxim Medical Europe in the third fiscal quarter of 1995. This
division serves as the Company's European distributor of Case Management, Argon
and Medica products. Medica products consist of various self-manufactured and
assembled single-use hospital supply products and custom procedure kits for
transfusion, infusion and patient monitoring. The European market for single-use
items and custom procedure trays is in a very early stage of development. The
Company was provided with a small base of custom procedure tray sales to build
upon when the European operations of Sterile Concepts were acquired and combined
with Maxxim Medical Europe. Maxxim Medical Europe products are marketed
principally through its sales force of approximately 21 direct sales persons in
the Netherlands and Belgium. Dealers and independent sales representatives are
utilized throughout the rest of Europe. The Company manufactures or assembles
the Medica products at the Company's plants in the Netherlands and gloves are
manufactured in Belgium. Division sales for fiscal 1997 amounted to $50,088,000,
or 9.5% of the Company's net sales.

CUSTOMERS

The Company's products are typically purchased pursuant to purchase orders
or supply agreements in which the purchaser specifies whether such products are
to be supplied through a national distributor or directly by the Company. The
Company derives its revenues principally through its supply agreements with
hospitals and outpatient surgery centers. In response to the trend within the
hospital industry toward requiring suppliers to provide reduced order turnaround
time and more frequent deliveries to a greater number of locations within a
hospital, the Company distributes to certain customers pursuant to agreements
with national and regional distributors. Under these agreements, the customers
remain under contract with the Company. The Company records sales upon the
shipment of inventory to the distributor, at which time title passes to the
distributor. Pricing to its ultimate customer under these supply agreements is
usually established for the contract period which will typically be from one to
three years. The Company views its ultimate customers as the medical
professionals who use its products, rather than the distributors.

No individual customer or affiliated group of customer accounts accounted
for more than five percent of the Company's net sales in any of the past three
fiscal years. Nevertheless, the Company estimates that in fiscal 1997, 1996 and
1995 a substantial portion of its products are actually sold to Owens & Minor,
Inc. ("Owens & Minor"), a diversified distribution company. Although Owens &
Minor may be deemed in a

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<PAGE> 26

technical sense to be a major purchaser of the Company's products, Owens & Minor
typically serves as a distributor under a purchase order or supply agreement
between the customer and the Company and does not purchase for its own account.
The Company, therefore, does not believe it is appropriate to categorize Owens &
Minor as an actual customer.

PRODUCT DEVELOPMENT, PATENTS AND TRADEMARK

The Company continually conducts research and development of new products
utilizing a team approach that involves its engineering, manufacturing and
marketing resources. Although the Company has developed a number of its own
products, most of its research and development efforts have historically been
directed towards product improvement and enhancement of previously developed or
acquired products. Company research and development expenses were approximately
$5,158,000, $5,124,000, and $3,777,000 in fiscal 1997, 1996 and 1995,
respectively.

The Company actively pursues a policy of seeking patent protection both in
the U.S. and abroad for its proprietary technology. There can be no assurance
that the Company's patents will not be invalidated or that any issued patent
will provide protection that has commercial significance. Litigation may be
necessary to protect the Company's patent position. Such litigation may be
costly and time consuming, and there can be no assurance that the Company will
be successful in such litigation. Since no single patent covers product sales
that constituted 5% or more of net sales of the Company in fiscal 1997, the
Company does not believe that the invalidation of any patents owned by or
licensed to the Company would have a material adverse effect on it or its
business prospects. While the protection of patents is important to the
Company's business, management does not believe any one patent is essential to
the success of the Company.

The Company also relies on trade secrets and continuing technological
advancement to maintain its competitive position. It is the practice of the
Company to enter into confidentiality agreements with key employees, consultants
and certain suppliers. There can be no assurance, however, that these measures
will prevent the unauthorized disclosure or use of the Company's trade secrets
and know-how or that others may not independently develop similar trade secrets
or know-how or obtain access to the Company's trade secrets, know-how or
proprietary technology.

Maxxim Medical is a registered trademark of the Company. Argon(TM), Argon
BiCath(TM), Argo-Bagz(TM), Boundary(TM), Bovie(TM), Cool Zone(TM), Dextren(TM),
Dextren Clear(TM), Dextren PF(TM), EnCompass(TM), Eudermic(TM), Jawz(TM),
Medica(TM), Neolon(TM), Procedure Based Case Management(TM), SensiCare(TM),
SensiCare PF(TM), SmartCart(TM), Sterile Design(TM), Sterile Concepts(TM),
Tradition(TM), Tru-Touch(TM) and ValuQuote(TM) are proprietary common law
trademarks of the Company.

DISTRIBUTION AND MARKETING

Management believes that its approach to marketing supports the desires of
its customers to identify with individual account managers who are supported by
product specialists. The Company believes that maintenance of these product
specialists enables it to provide better customer service and to maintain
specialized expertise in each product line. The Company account managers
typically attempt to establish and maintain direct contact with operating room
personnel or other medical professionals that directly utilize the Company's
custom procedure trays and specialty products. As medical product purchases are
typically made on a centralized basis by hospital purchasing departments, and
increasingly by healthcare networks, account managers must also maintain
relationships with purchasing department personnel. The Company has
approximately 145 account managers representing its products in Canada and the
United States.

The Company has distribution centers in nineteen states throughout the
country and in Ontario, Canada. Customers may choose to have products delivered
directly from one of these distribution centers or the regional or national
distributor of their choice.

In Europe, the Company utilizes a contract warehousing and logistics
company to deliver products to its customers and distributors. The Company's
products are primarily warehoused at facilities in the Netherlands

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<PAGE> 27

and Belgium which are linked to Maxxim Medical Europe's computer system at its
headquarters in 's-Hertogenbosch, the Netherlands.

MANUFACTURING AND ENGINEERING

The Company's products are manufactured and/or assembled from a variety of
component parts and materials, all of which are expected to continue to be
readily available at reasonable costs from a variety of manufacturers and
suppliers. Most of the medical and surgical specialty products included in the
Company's custom procedure trays are purchased from other domestic or foreign
manufacturers. The Company's glove manufacturing facilities are highly
mechanized, unlike most of the Company's other operations which are labor
intensive. For products other than gloves, the Company's remaining manufacturing
operations currently operate using one or two shifts per day, so the Company has
capacity to produce additional product by adding additional shifts. The three
exam glove manufacturing facilities operate almost continuously at full
capacity.

COMPETITION

In general, the Company's products compete with the products of numerous
major companies in the business of developing, manufacturing, distributing and
marketing medical specialty products. Some of these competitors have greater
financial or other resources than the Company. The Company believes that the
principal competitive factors in each of its markets are product features and
benefits, customer service and pricing. The Company does not typically provide
the least expensive products available in the markets in which it competes.
Instead, the Company emphasizes overall value through a combination of
competitive pricing, product quality and customer service.

The Company's Argon Medical and Case Management divisions each compete with
numerous major companies, including among others, Allegiance Corporation, Baxter
Healthcare Corp. and Johnson & Johnson and divisions or subsidiaries thereof.
Maxxim Medical Europe's primary competition includes the European divisions of
these same companies as well as locally based competitors such as Schneider
Worldwide and the Molnlycke division of Tamro.

EFFECTS OF HEALTHCARE REFORM

The recent government focus on healthcare reform and on the escalating cost
of medical care has increased pressures on all participants in the healthcare
industry to reduce the costs of products and services. The Company does not
believe that the continuation of these trends will have a significant effect on
the Company's results of operations or financial condition; however the Company
believes that healthcare legislation may have some beneficial effect on its
business by increasing the availability of healthcare, emphasizing less invasive
surgery and increasing the need for efficiency of healthcare personnel.

GOVERNMENT REGULATION

Domestic. Most of the products being developed, manufactured and sold by
the Company (and products likely to be researched, developed or marketed in the
future) are subject to regulation as medical devices by the Food and Drug
Administration ("FDA"). The FDA regulates the development, production,
distribution and promotion of medical devices in the U.S. Various states in
which the Company's products are being sold or may be sold in the future may
impose additional regulatory requirements.

Pursuant to the Food Drug & Cosmetic Act ("FDCA"), a medical device is
ultimately classified as either a Class I, Class II or Class III device. Class I
devices are subject only to general controls that are applicable to all devices.
Such controls include regulations regarding FDA inspections of facilities, "Good
Manufacturing Practices," labeling, maintenance of records and filings with the
FDA. Class II devices must meet general performance standards established by the
FDA. Class III devices require the most stringent pre-market approval by the FDA
before they can be marketed and must adhere to such standards once on the
market. Such pre-market approval can involve extensive testing to prove safety
and efficacy of the devices. Most of the Company's products are Class II
devices. FDA marketing approval of these devices is obtained under Section
510(k) of the FDCA, which provides for FDA approval on an expedited basis for
products that

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<PAGE> 28

can be shown to be substantially equivalent to devices in commerce prior to May
1976 (the month and year of enactment of the FDCA). Most of the Company's
remaining products are Class I devices. Recent passage of the FDA Modernization
Act of 1997 may lessen some of the burden of reporting and scrutiny on several
Class I and certain Class II devices. The Company is actively involved with the
Medical Device Manufacturing Association ("MDMA"), a Washington, D.C. based
industry lobbying group. The MDMA is currently providing input on the
implementation of several aspects of this new legislation.

At present, most of the Company's products and manufacturing facilities are
subject to pervasive and continuing regulation by the FDA. All phases of the
manufacturing and distribution process are governed by FDA regulation. Products
must be produced in registered establishments and be manufactured in accordance
with "Good Manufacturing Practices," as such term is defined under the FDCA. In
addition, all such devices must be periodically listed with the FDA. Labeling
and promotional activities are subject to scrutiny by the FDA and, in certain
instances, by the Federal Trade Commission. The export of devices is also
subject to regulation in certain instances.

The mandatory Medical Device Reporting ("MDR") regulation obligates the
Company to provide information to the FDA on injuries alleged to have been
associated with the use of a product or in connection with certain product
failures which could cause injury. If as a result of FDA inspections, MDR
reports or other information, the FDA believes that the Company is not in
compliance with the law, the FDA can institute proceedings to detain or seize
products, enjoin future violations, impose product labeling restrictions or
enforce product recalls or withdrawals from the market.

In addition to the foregoing, numerous other federal, state and local
agencies, such as environmental, fire hazard control, working condition and
other similar regulators, have jurisdiction to take actions that could have a
material adverse effect upon the Company's ability to do business. Compliance
with federal, state and local provisions that have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, including in particular the
stringent regulation of the use of ethylene oxide in the sterilization process,
have not had, and are not anticipated to have, any material effect upon the
capital expenditures, earnings or competitive position of the Company or any of
its subsidiaries.

International. The products manufactured and sold by the Company in Europe
are subject to the European Community regulations for medical devices. The
European Community has a registration process which includes registration of
manufacturing facilities ("ISO certification") and product certification ("CE
Mark"). The ISO certification requires that there be functioning quality systems
at each facility, and following an acceptable certification inspection, the
facility receives an ISO certification number. The CE Mark certification applies
to the products or product types which meet the European requirements for those
products. Following CE Mark certification, the CE symbol is printed on the
product label to show the customer that the product complies with the
requirements of the European market. The European Community has imposed a
deadline of June 1998, after which products without a CE Mark may not be sold in
Europe.

The Company has obtained ISO certification and CE Mark certification for
its facilities and products in Europe. In North America, the Company has begun
the process of European compliance by completing a certification plan with a
Notified Body (an authorized member of the European Network for Quality System
Assessment and Certification) and contracting ISO certification and CE Mark
registration for those facilities and products which are exported to European
markets. All facilities which produce products for export to European markets
have received ISO certification. The Company anticipates that it will be in
material compliance with the CE Mark certification requirement by the required
date.

Similar to the domestic regulatory bodies, Europe has numerous government
and local agencies which have jurisdiction to take actions that could have a
material adverse effect upon the Company's ability to conduct business in
Europe. European governmental and local agencies have enacted or adopted
regulations which concern the discharge of materials into the environment, or
otherwise relating to the protection of the environment, which have not had, and
are not anticipated to have, any material effect upon the capital expenditures,
earnings or competitive position of the Company or any of its subsidiaries.

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ENVIRONMENTAL

The Company is subject to a variety of environmental laws, rules and
regulations, as are other companies in the same or similar business. The Company
believes that it is in substantial compliance with such laws, rules and
regulations; however, these laws, rules and regulations change from time to
time, and such changes may affect the ongoing business and operations of the
Company. From time to time, the Company has received, and in the future may
receive, requests from environmental regulatory authorities to provide
information or to conduct investigative or remediation activities with respect
to its facilities. None of these requests, if made, is expected by management to
have a material adverse effect on the Company's business.

EMPLOYEES

At November 2, 1997, the Company had approximately 2,815 full-time domestic
employees and 1,143 foreign employees. None of the Company's U.S. based
employees is represented by a union. Management believes that its relations with
its employees are satisfactory.

PROPERTIES

The Company's principal executive and administrative offices are located in
Clearwater, Florida. The following table sets forth information with respect to
the Company's principal facilities. Each of the facilities in the table may
include office, product development, manufacturing and/or warehouse space.
Several of the facilities may also serve as regional distribution centers.

<TABLE>
<CAPTION>
OWNED OR LEASED BUILDING AREA
LOCATION PRINCIPAL DIVISION FACILITY (SQUARE FEET)
- -------------------------------------- --------------------- --------------- -------------
<S> <C> <C> <C>
Clearwater, Florida................... Headquarters Owned 21,000
Athens, Texas......................... Argon Owned 186,700
Decatur, Alabama...................... Case Management Leased 70,000
Los Gatos, California................. Case Management Owned 79,000
Temecula, California.................. Case Management Leased 178,000
Mississauga, Ontario, Canada.......... Case Management Owned 170,000
La Romana, Dominican Republic......... Case Management Leased 69,000
Clearwater, Florida................... Case Management Owned 189,500
Columbus, Mississippi................. Case Management Owned 135,000
Honea Path, South Carolina............ Case Management Owned 89,000
Sugar Land, Texas..................... Case Management Owned 40,000
Richmond, Virginia.................... Case Management Leased 205,000
Aalst/Erembodegem, Belgium............ Maxxim Medical Europe Owned 150,700
Ommen, the Netherlands................ Maxxim Medical Europe Owned 27,600
's-Hertogenbosch, the Netherlands..... Maxxim Medical Europe Leased 34,000
</TABLE>

The Company has distribution centers in nineteen states throughout the
country and also owns, operates or contracts for the use of various other minor
facilities.

Management believes that the Company's facilities, whether leased or owned,
are adequate to meet its current needs and should continue to be adequate for
the foreseeable future.

LEGAL PROCEEDINGS

28
<PAGE> 30

increasing number of lawsuits brought against latex glove manufacturers with
respect to such allergic reactions.Because the Company, as well as its
competitors, has continued to manufacture and sell latex gloves, it may be
subject to further claims. The Company is not entitled to indemnification from
the prior owner for gloves sold or shipped after June 1995. Total United States
sales of latex gloves in 1997 was approximately $750 million, of which the
Company's sales were approximately $12 million.

The Company has been named as a defendant in various lawsuits arising in
the ordinary course of business. Management believes that the ultimate
resolution of such litigation will not have a material adverse impact on the
Company's results of operations or financial position.

29
<PAGE> 31

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names and ages of the Directors and
executive officers of the Company and the positions they hold with the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ------------------------------------------------------
<S> <C> <C>
Kenneth W. Davidson........... 51 Chairman of the Board, President and Chief Executive
Officer
Peter M. Graham............... 51 Executive Vice President, Chief Operating Officer and
Secretary
David L. Lamont............... 51 Vice President, Group Vice President
Henry T. DeHart............... 51 Vice President, Executive Vice President Operations,
Case Management
Jack F. Cahill................ 48 Vice President, Executive Vice President Sales and
Marketing, Case Management
Alan S. Blazei................ 42 Vice President, Controller and Treasurer
Joseph D. Dailey.............. 49 Vice President, Information Services
Suzanne R. Garon.............. 45 Vice President, Human Resources
Rob W. Beek................... 53 Vice President, Managing Director, Maxxim Medical
Europe
Donald R. DePriest............ 58 Director
Peter G. Dorflinger........... 46 Director
Martin Grabois, M.D........... 58 Director
Ernest J. Henley, Ph.D........ 71 Director
Richard O. Martin, Ph.D....... 58 Director
Henk R. Wafelman, Ing......... 67 Director
</TABLE>

Kenneth W. Davidson has served as a Director of the Company since 1982, and
as Chairman of the Board of Directors, Chief Executive Officer and President of
the Company since November 1, 1986. Mr. Davidson is also a director of Henley
Healthcare, Inc., a manufacturer of products used in physical therapy, and of
Encore Orthopedics, Inc., a designer and manufacturer of implantable orthopedic
devices. He is a member of the Company's Compensation and Nominating Committees.

Peter M. Graham has served as Executive Vice President and Chief Operating
Officer since January 1986, and was elected Secretary in July 1997. Mr. Graham
also served as Treasurer from April 1986 through June 1997.

David L. Lamont has served as Vice President since March 1988 and Group
Vice President since July 1993. From January 1992 to July 1993, Mr. Lamont was
President, Argon Medical division.

Henry T. DeHart has served as Vice President since November 1993. Since
June 1995, he has served as Executive Vice President Operations, Case
Management. From December 1992 through July 1995, he served as President of
Boundary Healthcare division. Prior to that time he was Chief Operating Officer
of Boundary Healthcare Products Corp. for more than five years.

Jack F. Cahill has served as Vice President since May 1995. Since June
1995, he has served as Executive Vice President Sales and Marketing, Case
Management. From May 1994 through June 1995, he served as President of the
Sterile Design division. From July 1993 to May 1994, he served as Executive Vice
President, Sterile Design. For over five years prior to July 1993, he worked for
Johnson & Johnson Medical, Inc. serving in various capacities, the latest of
which being Business Director.

30
<PAGE> 32

Alan S. Blazei has served as Vice President and Controller since December
1990. In July 1997, Mr. Blazei was elected Treasurer of the Company.

Joseph D. Dailey has served as Vice President, Information Services since
August 1994. Previously, he had served as Director of Information Services since
January 1991.

Suzanne R. Garon has served as Vice President since January 1997.
Previously, she had served as Vice President Human Resources, Case Management
since August 1995. From July 1993 to August 1995, Ms. Garon served as Manager of
Human Resources, Sterile Design. From April 1980 to July 1993, Ms. Garon
provided human resource management to Johnson & Johnson Medical, Inc.

Rob W. Beek has served as Vice President, Managing Director, Maxxim Medical
Europe since January 1997. Prior to that time he was Managing Director of Medica
B.V., a Netherlands corporation acquired by the Company in January 1995, for
more than five years.

Donald R. DePriest was elected as a Director, effective December 1992,
pursuant to the terms of the agreement between the Company and Boundary
Healthcare Products Corp. ("Boundary") under which the Company acquired
Boundary. Since July 1987, Mr. DePriest has been the President of MedCom
Development Corporation, the General Partner of MCT Investors, L.P., a limited
partnership engaged in the business of venture capital investing. Mr. DePriest
was the principal shareholder and President of Boundary from July 1987 until it
was acquired by the Company. Mr. DePriest is also Chairman of the Board of
American Telecasting, Inc. He is a member of the Company's Compensation
Committee.

Peter G. Dorflinger has served as a Director of the Company since 1986 and
as Secretary from 1992 to 1997. From June 1990 until October 1996, Mr.
Dorflinger served as Group Vice President and General Counsel of Sulzer Medica
USA, Inc., a subsidiary of Sulzer Medica Ltd., a Swiss medical device
manufacturer. From January 1997 through January 1998, Mr. Dorflinger was Vice
President and General Counsel of Advanced Medical Instruments, Inc., a
manufacturer of medical monitoring equipment. From September 1997 to January
1998, Mr. Dorflinger also served as President of GlasTech, Inc., a manufacturer
of dental products. Since January 24, 1998, Mr. Dorflinger has been President
and Chief Operating Officer of Physicians Resource Group, Inc., a physicians
practice management company. Mr. Dorflinger is also a director of Benchmark
Electronics, Inc. He is a member of the Company's Nominating Committee.

Martin Grabois, M.D. has served as a Director of the Company since February
1991. Dr. Grabois has been a Professor and Chairman of the Department of
Physical Medicine and Rehabilitation at Baylor College of Medicine in Houston,
Texas since 1978. Since 1978, he has also served as the Senior Attending and
Medical Director in the Department of Physical Medicine at the Methodist
Hospital, Houston, Texas, Consultant Physiatrist to the Texas Institute for
Rehabilitation and Research, Houston, Texas, and the Physician-in-Chief for the
Physical Medicine and Rehabilitation Services of Harris County Hospital
District, Houston, Texas. In 1994, Dr. Grabois was elected President of the
Academy of Physical Rehabilitation. He is a member of the Company's Audit
Committee.

Ernest J. Henley, Ph.D. has served as a Director of the Company since 1976,
and served as a consultant to the Company from that date until May 1996. Dr.
Henley's principal employment for more than the past five years has been as a
Professor of Chemical Engineering at the University of Houston. Dr. Henley is
also a consultant and director of Henley Healthcare, Inc. He is a member of the
Company's Nominating Committee.

Richard O. Martin, Ph.D. has served as a Director of the Company since
November 1989. Dr. Martin served from April 1, 1991 until February 3, 1997, as
President and Chief Executive Officer, and since February 3, 1997, as Chairman
and Chief Executive Officer, of Physio-Control International Corp., a
manufacturer of cardiac defibrillators and monitoring equipment. Prior to that
time and since November 1989, Dr. Martin was a Vice President of Sulzer Medica
Ltd. Dr. Martin is also a director of Sea Med Corporation, which engages in
contract engineering and manufacturing for medical and other industries, and of
Encore Orthopedics, Inc. He is a member of the Company's Compensation Committee.

31
<PAGE> 33

Henk R. Wafelman, Ing. has served as a Director of the Company since 1987.
Since 1990, Mr. Wafelman has been the executive chairman of the Dutch Society of
Enterprises in Medical Technology; a Netherlands based technology society, and
holds the position of Chairman of an advisory committee for standardization of
medical aids. For more than five years prior to that time, Mr. Wafelman was the
President of N.V. Enraf Nonius Delft Holland, a major Dutch instrument company
and a leading manufacturer of physical therapy products. He is a member of the
Company's Audit Committee.

32
<PAGE> 34

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of February 2, 1998, information as to
the beneficial ownership of the Company's Common Stock by (i) each person known
to the Company as having beneficial ownership of more than 5% of the Company's
outstanding Common Stock, (ii) each Director of the Company, (iii) each
executive officer of the Company who qualifies as a "named executive officer" as
defined in Item 402(a)(3) of Regulation S-K under the Exchange Act, and (iv) all
of the Directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------
BENEFICIAL OWNER(1) NUMBER PERCENT
- ------------------------------------------------------------------- ---------- -------
<S> <C> <C>
Wellington Management Co., L.L.P.
75 State Street
Boston, Massachusetts 02109...................................... 664,000(2) 6.5%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401................................... 595,179(3) 5.9%
Peter G. Dorflinger................................................ 464,936(4) 4.6%
Ernest J. Henley, Ph.D............................................. 345,349(5) 3.4%
Kenneth W. Davidson................................................ 338,368(6) 3.3%
Peter M. Graham.................................................... 151,100(7) 1.5%
David L. Lamont.................................................... 115,486(8) 1.1%
Henry T. DeHart III................................................ 65,500(9) *
Jack F. Cahill..................................................... 64,600(10) *
Martin Grabois, M.D................................................ 17,000(11) *
Richard O. Martin, Ph.D............................................ 16,000(12) *
Henk R. Wafelman, Ing.............................................. 13,000(13) *
Donald R. DePriest................................................. 11,000(14) *
All executive officers and Directors as a group (15 persons)....... 1,760,109(15) 16.6%
</TABLE>

- ---------------

* Less than 1%

(1) The address for all executive officers and Directors is 10300 49th Street
North, Clearwater, Florida 33762.

(2) According to the Amendment No. 2 to Schedule 13-G filed by it on February
10, 1998, Wellington Management Company, L.L.P., a registered investment
adviser, shares voting power over 363,500 shares, and shares dispositive
power over 664,000 shares, of Company stock owned by its clients.

(3) According to the Amendment No. 4 to Schedule 13-G filed by it on February
10, 1998, Dimensional Funds Advisors Inc. ("Dimensional"), a registered
investment advisor, has sole voting power over 392,500 shares, and has sole
dispositive power over 595,179 shares, of Company stock owned by its
clients. Further, persons who are officers of Dimensional Fund Advisors
Inc. also serve as officers of DFA Investment Dimensions Group Inc. (the
"Fund") and the DFA Investment Trust Company (the "Trust"), each a
registered open-end investment company. In their capacities as officers of
such entities, these persons vote 70,179 additional shares which are owned
by the Fund and 132,500 shares which are owned by the Trust.

(4) Includes 6,100 shares held of record and 458,836 shares purchasable under
options exercisable within 60 days after February 2, 1998. Mr. Dorflinger
is the former Vice President and General Counsel of Sulzer Intermedics,
Inc. ("Intermedics"), a subsidiary of Sulzer Medica Ltd., and holds a fully
exercisable option to purchase all of the 447,836 shares held of record by
Intermedics.

(5) Includes 334,349 shares owned of record by Dr. Henley and 11,000 shares
purchasable under options exercisable within 60 days after February 2,
1998. Excludes 305,185 shares beneficially owned by Davis C. Henley, and
168,616 shares owned by Alan J. Henley, sons of Dr. Henley, as to which
shares Dr. Henley disclaims beneficial ownership.

33
<PAGE> 35

(6) Includes 236,368 shares owned of record by Mr. Davidson and 102,000 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(7) Includes 70,500 shares owned of record by Mr. Graham and 80,600 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(8) Includes 54,286 shares owned of record by Mr. Lamont and 61,200 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(9) Includes 39,900 shares owned of record by Mr. DeHart and 25,600 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(10) Includes 44,000 shares owned of record by Mr. Cahill and 20,600 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(11) Includes 6,000 shares held of record by Dr. Grabois and 11,000 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(12) Includes 5,000 shares held of record by Dr. Martin and 11,000 shares
purchasable under options exercisable within 60 days after February 2,
1998.

(13) All shares owned of record.

(14) Represents shares purchasable under options exercisable within 60 days
after February 2, 1998.

(15) Includes 447,836 shares held of record by Intermedics, described in
footnote 4 above. Includes 410,420 shares purchasable under options issued
to various directors and executive officers of the Company that are
exercisable within 60 days after February 2, 1998, including those
described in footnotes 4 through 14 above. Does not include options
issuable under the 1998 Non-Employee Directors' Stock Option Plan.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company is comprised of 60,000,000
shares, consisting of (i) 20,000,000 shares of a class designated as preferred
stock, $1.00 par value per share (the "Preferred Stock"), and (ii) 40,000,000
shares of Common Stock. Of the authorized shares of Common Stock, 8,871,335
actual shares were issued and outstanding as of November 2, 1997, and 10,148,067
shares were issued and outstanding on a pro forma basis to give effect to the
conversion from November 3 through December 12, 1997 of $22,983,000 of
Debentures into 1,276,732 shares of Common Stock. No shares of Preferred Stock
were outstanding as of February 2, 1998. Employee stock options exercisable for
an aggregate of 480,964 shares of Common Stock were outstanding as of such date.

COMMON STOCK

Holders of shares of Common Stock are entitled to share ratably in such
dividends as may be declared by the Board of Directors and paid by the Company
out of funds legally available therefor, subject to prior rights of outstanding
shares of any Preferred Stock and certain restrictions under agreements
governing the company's indebtedness. The Company's Credit Facilities and the
Indenture under which its Notes were issued restrict or prohibit payment of
dividends. See "Risk Factors -- Indebtedness," "Price Range of Common Stock,"
and "Dividend Policy." In the event of any dissolution, liquidation or winding
up of the Company, holders of shares of Common Stock are entitled to share
ratably in assets remaining after payment of all liabilities and liquidation
preferences, if any.

Except as otherwise required by law, the holders of Common Stock are
entitled to one vote per share on all matters voted on by shareholders,
including the election of Directors. Directors are elected by a plurality of the
votes cast, and a majority of the shares of Common Stock represented in person
or by proxy can take action on all other matter presented to them. Holders of
shares of Common Stock have no preemptive, cumulative voting, subscription,
redemption or conversion rights. The currently outstanding shares of Common
Stock are fully paid and nonassessable, and the shares of Common Stock to be
outstanding upon

34
<PAGE> 36

completion of the Offering will be fully paid and nonassessable. The rights,
preferences and privileges of holders of Common Stock are subject to the rights
of any series of Preferred Stock that the Company may issue in the future.

PREFERRED STOCK

The Company is authorized to issue 20,000,000 shares of Preferred Stock.
The Board of Directors of the Company, in its sole discretion, may designate and
issue one or more series of Preferred Stock from the authorized and unissued
shares of Preferred Stock. Subject to limitations imposed by law or the
Company's articles of incorporation, the Board of Directors is empowered to
determine the designation of an the number of shares constituting a series of
Preferred Stock, the dividend rate thereon, the terms and conditions of any
voting and conversion rights for the series, the amounts payable on the series
upon redemption or upon the redemption or purchase of shares of any series, and
the preferences and relative rights among the series of Preferred Stock. Such
rights, preferences, privileges and limitations could adversely affect the
rights of holders of Common Stock. In addition, the Board of Directors of the
Company, subject to its fiduciary duties, may issue shares of Preferred Stock in
order to deter a takeover attempt. On September 3, 1997, the Board of Directors
authorized 40,000 shares of Series A Participating Preferred Stock in connection
with the adoption of a shareholder rights plan. See "Risk Factors -- Certain
Anti-Takeover Provisions."

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement among the
Company, Bear, Stearns & Co. Inc., EVEREN Securities, Inc., Jefferies & Company,
Inc. and NationsBanc Montgomery Securities LLC as the Representatives of the
Underwriters, each of the Underwriters named below has severally agreed to
purchase from the Company, and the Company has agreed to sell to the
Underwriters, the respective number of shares of Common Stock set forth opposite
its name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------- ---------
<S> <C>
Bear, Stearns & Co. Inc......................................
EVEREN Securities, Inc.......................................
Jefferies & Company, Inc.....................................
NationsBanc Montgomery Securities LLC........................
---------
Total......................................................
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to approval of
certain legal matters by counsel and to certain other conditions precedent. If
any of the shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares of Common Stock (other than shares
of Common Stock covered by the Over-Allotment Option described below) must be so
purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of $ per
share of Common Stock to certain other dealers who are members of the National
Association of Securities Dealers, Inc. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is listed on
the New York Stock Exchange.

The Underwriters have been granted a 30-day over-allotment option to
purchase from the Company up to 525,000 additional shares of Common Stock at the
public offering price less the underwriting discount. If the Underwriters
exercise such Over-Allotment Option, then each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof as the

35
<PAGE> 37

number of shares of Common Stock to be purchased by it as shown in the above
table bears to the 3,500,000 shares of Common Stock offered hereby. The
Underwriters may exercise such option only to cover Over-Allotments made in
connection with the sale of the shares of Common Stock offered hereby.

The officers and Directors of the Company and certain holders of the Common
Stock have agreed not to offer, sell, transfer, assign or otherwise dispose of
any shares of Common Stock owned by them for a period of 90 days after the date
of the final Prospectus relating to the Offering without the prior written
consent of Bear, Stearns & Co. Inc. These restrictions will be applicable to any
shares acquired by any of those persons in the Offering or otherwise during such
90 day lockup period.

The Company has agreed that it will not issue, sell or grant options to
purchase or otherwise dispose of any shares of its Common Stock or securities
convertible into or exchangeable for its Common Stock except with respect to
future affiliations (subject to certain conditions) for a period of 90 days
after the date of the final prospectus relating to the Offering without the
prior written consent of Bear, Stearns & Co. Inc.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and controlling persons, if any, against certain civil liabilities,
including liabilities under the Securities Act, or will contribute to payments
that the Underwriters or any such controlling persons may be required to make in
respect thereof.

In order to facilitate the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Common Stock during and after the Offering in accordance with
Rule 104 of Regulation M under the Exchange Act. Specifically, the Underwriters
may over-allot or otherwise create a short position in the Common Stock for
their own account by selling more shares of Common Stock than have been sold to
them by the Company. The Underwriters may elect to cover any such short position
by purchasing shares of Common stock in the open market or by exercising the
over-allotment option granted to the Underwriters. In addition, such persons may
stabilize or maintain the price of the Common Stock by bidding for or purchasing
shares of Common Stock in the open market and may impose penalty bids, under
which selling concessions allowed to syndicate members or other broker-dealers
participating in the Offering are reclaimed if shares of Common Stock previously
distributed in the Offering are repurchased in connection with stabilizing
transactions or otherwise. The effect of these transactions may be to stabilize
or maintain the market price of the Common Stock at a level above that which
might otherwise prevail in the open market. The imposition of a penalty bid may
also affect the price of the Common stock to the extent that it discourages
resales thereof. No representation is made as to the magnitude or effect of any
such stabilization or other transactions. Such transactions may be effected on
the New York Stock Exchange and, if commenced, may be discontinued at any time.

LEGAL OPINION

Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for the Company by Shumaker, Loop &
Kendrick, LLP, Tampa, Florida, and for the Underwriters by Gardere & Wynne, LLP,
Dallas, Texas.

EXPERTS

The consolidated financial statements of the Company as of November 2, 1997
and November 3, 1996, and for each of the fiscal years ended November 2, 1997,
November 3, 1996, and October 29, 1995, have been included and incorporated by
reference herein and in the Registration Statement in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere and incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.

36
<PAGE> 38

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheets as of November 2, 1997 and November 3, 1996.............. F-2
Consolidated Statements of Operations for each of the three fiscal years ended
November 2, 1997, November 3, 1996 and October 29, 1995............................ F-3
Consolidated Statements of Shareholders' Equity for each of the three fiscal years
ended November 2, 1997, November 3, 1996 and October 29, 1995...................... F-4
Consolidated Statements of Cash Flows for each of the three fiscal years ended
November 2, 1997, November 3, 1996 and October 29, 1995............................ F-5
Notes to Consolidated Financial Statements........................................... F-6
Independent Auditors' Report......................................................... F-20
</TABLE>

F-1
<PAGE> 39

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF NOVEMBER 2, 1997 AND NOVEMBER 3, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 3,130 $ 5,950
Accounts receivable, net of allowances of $3,181 and $3,901,
respectively........................................................ 77,209 86,207
Inventory, net......................................................... 83,184 95,087
Prepaid expenses, deferred taxes and other............................. 11,000 15,386
-------- --------
Total current assets........................................... 174,523 202,630
Property and equipment................................................... 122,938 123,077
Less: accumulated depreciation......................................... (31,384) (24,562)
-------- --------
91,554 98,515
Goodwill and other intangibles, net of accumulated amortization of
$14,982 and $7,664, respectively....................................... 150,234 156,046
Other assets, net........................................................ 7,735 8,156
-------- --------
Total assets................................................... $424,046 $465,347
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................................... $ 12,750 $ 7,500
Accounts payable....................................................... 32,194 39,915
Accrued liabilities.................................................... 26,631 28,133
Other short-term obligations........................................... 3,133 4,996
-------- --------
Total current liabilities...................................... 74,708 80,544
Long-term debt, net of current maturities................................ 78,550 121,090
10 1/2% Senior subordinated notes........................................ 100,000 100,000
6 3/4% Convertible subordinated debentures............................... 23,352 28,750
Other long-term obligations, net of current maturities................... 3,300 5,590
Deferred taxes........................................................... 6,208 5,817
-------- --------
Total liabilities.............................................. 286,118 341,791
Commitments and contingencies
Shareholders' equity
Preferred Stock, $1.00 par, 20,000,000 shares authorized, none issued
or outstanding...................................................... -- --
Common Stock, $.001 par value, 40,000,000 shares authorized, 8,871,355
and 8,128,827 shares issued and outstanding, respectively........... 9 8
Additional paid-in capital............................................. 103,872 92,445
Unrealized gain on investments -- net of tax........................... -- 259
Retained earnings...................................................... 45,250 32,369
Subscriptions receivable............................................... (5,200) --
Cumulative translation adjustment...................................... (6,003) (1,525)
-------- --------
Total shareholders' equity..................................... 137,928 123,556
-------- --------
Total liabilities and shareholders' equity..................... $424,046 $465,347
======== ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-2
<PAGE> 40

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED NOVEMBER 2, 1997, NOVEMBER 3, 1996 AND OCTOBER 29, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales...................................................... $529,552 $399,836 $265,726
Cost of sales.................................................. 397,691 294,164 186,495
-------- -------- --------
Gross profit................................................... 131,861 105,672 79,231
-------- -------- --------
Operating expenses
Marketing and selling........................................ 62,603 51,781 41,430
General and administrative................................... 27,498 26,199 18,899
Nonrecurring charges......................................... -- -- 10,845
-------- -------- --------
90,101 77,980 71,174
-------- -------- --------
Income from operations......................................... 41,760 27,692 8,057
Interest expense............................................... (21,620) (13,143) (4,088)
Other income (expense), net.................................... 2,226 583 1,014
-------- -------- --------
Income before income taxes..................................... 22,366 15,132 4,983
Income taxes................................................... 9,485 6,422 2,054
-------- -------- --------
Net income..................................................... $ 12,881 $ 8,710 $ 2,929
======== ======== ========
Primary earnings per share..................................... $ 1.51 $ 1.05 $ 0.36
======== ======== ========
Fully diluted earnings per share............................... $ 1.40 $ 1.01 $ 0.36
======== ======== ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-3
<PAGE> 41

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE UNREALIZED
------------------ PAID-IN RETAINED SUBSCRIPTIONS TRANSLATION GAIN ON
SHARES PAR VALUE CAPITAL EARNINGS RECEIVABLE ADJUSTMENTS INVESTMENTS TOTAL
------ --------- ---------- -------- ------------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at October 31,
1994..................... 8,022 $ 8 $ 90,732 $20,730 $ -- $ -- $ -- $111,470
Stock issued in connection
with acquisition (see
note 2).................. 25 -- 360 -- -- -- -- 360
Stock option
compensation............. -- -- 244 -- -- -- -- 244
Stock options exercised,
including federal income
tax benefit of $130...... 41 -- 341 -- -- -- -- 341
Net income................. -- -- -- 2,929 -- -- -- 2,929
Translation adjustment..... -- -- -- -- -- 1,007 -- 1,007
------ -- ---------- -------- ------------- ----------- ----------- --------
Balances at October 31,
1995..................... 8,088 8 91,677 23,659 -- 1,007 -- 116,351
Stock option
compensation............. -- -- 311 -- -- -- -- 311
Stock options exercised,
including federal income
tax benefit of $123...... 41 -- 417 -- -- -- -- 417
Payment received on officer
loan..................... -- -- 40 -- -- -- -- 40
Unrealized gain on
investment
securities -- net of tax
(see note 1)............. -- -- -- -- -- -- 259 259
Net income................. -- -- -- 8,710 -- -- -- 8,710
Translation adjustment..... -- -- -- -- -- (2,532) -- (2,532)
------ -- ---------- -------- ------------- ----------- ----------- --------
Balances at November 3,
1996..................... 8,129 8 92,445 32,369 -- (1,525) 259 123,556
Senior management stock
purchase (see note 11)... 400 1 5,199 -- (5,200) -- -- --
Officer loan, net of
payment received......... -- -- (11) -- -- -- -- (11)
Stock option
compensation............. -- -- 471 -- -- -- -- 471
Stock options exercised,
including federal income
tax benefit of $122...... 43 -- 536 -- -- -- -- 536
Realized gain on sale of
investment
securities -- net of tax
(see note 1)............. -- -- -- -- -- -- (259) (259)
Conversion of convertible
debentures (see note
3)....................... 299 -- 5,232 -- -- -- -- 5,232
Net income................. -- -- -- 12,881 -- -- -- 12,881
Translation adjustment..... -- -- -- -- -- (4,478) -- (4,478)
------ -- ---------- -------- ------------- ----------- ----------- --------
Balances at November 2,
1997..................... 8,871 $ 9 $103,872 $45,250 $(5,200) $(6,003) $ -- $137,928
====== ========== ========= ======== ============ =========== ========== ========
</TABLE>

See accompanying notes to Consolidated Financial Statements.

F-4
<PAGE> 42

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED NOVEMBER 2, 1997, NOVEMBER 3, 1996, AND OCTOBER 29, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................................ $ 12,881 $ 8,710 $ 2,929
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)........................................... 3,846 3,352 (1,251)
Depreciation and amortization................................................... 17,495 14,968 9,233
Compensation expense for outstanding stock options.............................. 471 311 244
Gain on sale of investment in equity securities................................. (1,510) -- --
Nonrecurring write off of intangibles and estimated restructuring reserve....... -- -- 9,380
Changes in current assets and liabilities, net of effects of asset acquisitions
and dispositions and business combinations:
Decrease (increase) in accounts receivable, net................................. 8,694 (8,793) (14,618)
Decrease (increase) in inventory, net........................................... 11,073 (9,447) (7,288)
Increase in prepaid expenses and other.......................................... (619) (2,248) (291)
Increase in accounts payable.................................................... 23 10,299 3,030
(Decrease) increase in accrued liabilities...................................... (2,777) (16,795) 2,934
-------- --------- ---------
Net cash provided by operating activities........................................... 49,577 357 4,302
-------- --------- ---------
Cash flows from investing activities:
Proceeds from building sale....................................................... 500 -- --
Proceeds from (investment in) available-for-sale securities....................... 3,130 (1,620) --
Proceeds from the sale of Henley assets........................................... -- 6,000 --
Purchase of Sterile Concepts, net of cash acquired................................ -- (118,676) --
Purchase of Medica................................................................ -- -- (11,000)
Purchase of Bovie electrosurgery product line..................................... -- -- (2,600)
Purchase of Property and equipment, Inventory and Other Assets, Net of Stock
Issued Valued at $360........................................................... -- -- (1,500)
Purchase of Glove Operations...................................................... -- -- (70,605)
Purchase of property, equipment and other assets, net of asset acquisitions and
business combinations........................................................... (6,829) (10,625) (21,174)
-------- --------- ---------
Net cash used in investing activities............................................... (3,199) (124,921) (106,879)
-------- --------- ---------
Cash flows from financing activities:
Payments on long-term borrowings.................................................. (37,290) (180,629) (20,852)
Increase in long-term borrowing................................................... -- 228,647 94,206
(Decrease) increase in other obligations.......................................... (4,153) 8,165 894
Net proceeds from the issuance of 10 1/2% Notes................................... -- 97,000 --
Payments on Sterile Concepts debt................................................. -- (34,247) --
(Decrease) increase in negative book cash balance................................. (7,893) 6,091 1,163
Other, net........................................................................ 529 457 371
-------- --------- ---------
Net cash (used in) provided by financing activities................................. (48,807) 125,484 75,782
-------- --------- ---------
Effect of foreign currency translation adjustment................................... (391) (44) --
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents................................ (2,820) 876 (26,795)
Cash and cash equivalents at beginning of year...................................... 5,950 5,074 31,869
-------- --------- ---------
Cash and cash equivalents at end of year............................................ $ 3,130 $ 5,950 $ 5,074
======== ========= =========
Supplemental cash flow disclosure:
Interest paid during the year..................................................... $ 21,643 $ 9,090 $ 3,161
Income taxes paid during the year................................................. 6,147 5,336 3,100
Noncash investing and financing activities
Conversion of 6 3/4% Convertible Subordinated Debentures........................ $ 5,232 $ -- $ --
Subscriptions receivable from senior management for stock purchase.............. 5,200 -- --
Note received on building sale.................................................. 300 -- --
Convertible note received from sale of Henley assets............................ -- 7,000 --
Unrealized gain on investment................................................... -- 259 --
</TABLE>

See accompanying notes to Consolidated Financial Statements

F-5
<PAGE> 43

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Maxxim Medical, Inc., ("Maxxim"), a Texas corporation, and its subsidiaries
(collectively, "the Company") develops, manufactures, and markets specialty
medical products.

BASIS OF PRESENTATION

Certain reclassifications have been made to the fiscal 1996 and fiscal 1995
consolidated financial statements to conform with the fiscal 1997 presentation.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Maxxim and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

CASH EQUIVALENTS AND FINANCIAL INSTRUMENTS

Cash equivalents consist of highly liquid investments purchased with
original maturities of three months or less.

MARKETABLE SECURITIES

The Company considered its marketable securities available-for-sale as
defined in Statement of Financial Accounting Standards No. 115. In adjusting the
Company's investments to fair value, an unrealized gain of $259,000, net of tax,
was recognized at November 3, 1996. This unrealized gain is presented in the
equity section of the Consolidated Balance Sheet. In the first quarter of fiscal
1997, the Company recorded a realized gain from the sale of these marketable
equity securities in the amount of $1,510,000 which is reflected in other income
in the Consolidated Statements of Operations.

CONCENTRATION OF CREDIT RISK

Trade receivables have a concentration of credit risk in the hospital and
healthcare sectors. The Company performs continuing credit evaluations of its
customers and generally does not require collateral; however, in certain
circumstances, the Company may require letters of credit from its customers.
Historically, the Company has not experienced significant losses related to
receivables from individual customers or groups of customers in any geographic
area.

INVENTORY

Inventory is priced at the lower of cost or market. In determining market
value, allowances for excess and obsolete items are provided. Cost is determined
using the average cost method.

Inventory as of November 2, 1997 and November 3, 1996, included the
following:

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials...................................................... $36,613 $40,718
Work in Progress................................................... 7,227 8,744
Finished Goods..................................................... 43,393 50,231
Reserve............................................................ (4,049) (4,606)
------- -------
$83,184 $95,087
======= =======
</TABLE>

F-6
<PAGE> 44

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

The costs of ordinary maintenance and repairs are expensed, while renewals
and betterments are capitalized. Depreciation on property and equipment is
computed for financial reporting purposes using the straight-line method over
the estimated useful lives of the assets. As of November 2, 1997 and November 3,
1996, property and equipment included the following:

<TABLE>
<CAPTION>
USEFUL LIFE 1997 1996
----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Land.................................................. $ 15,610 $ 9,490
Buildings and improvements............................ 5-25 years 40,240 45,522
Machinery and equipment............................... 2-10 years 64,370 64,699
Furniture and fixtures................................ 3-5 years 2,718 3,366
Accumulated depreciation.............................. (31,384) (24,562)
-------- --------
$ 91,554 $ 98,515
======== ========
</TABLE>

In fiscal 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of" (SFAS 121). SFAS
121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by comparison of the carrying amount of
an asset to future net cash flows (undiscounted and without interest charges)
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. The adoption
of SFAS 121 did not have a material impact on the Company's consolidated
financial statements.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

GOODWILL AND INTANGIBLES

Goodwill represents the excess of the aggregate price paid by the Company
in business combinations accounted for as purchases over the fair market value
of the tangible and identifiable intangible net assets acquired. Goodwill is
being amortized on a straight-line basis from 10 to 40 years. Other intangible
assets are being amortized on a straight-line basis for periods ranging from 3
to 15 years. The Company assesses the recoverability of intangible assets by
determining whether amortization of the asset balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of asset impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The Company believes that no
impairment of goodwill exists.

REVENUE RECOGNITION

The Company recognizes revenue upon shipment to customers, pursuant to
customer orders. The Company grants rebates to certain of its customers. These
sales and related receivables are recorded net of the expected rebate.

F-7
<PAGE> 45

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RESEARCH AND DEVELOPMENT EXPENSES

The Company is continually conducting research and developing new products
utilizing a team approach that involves its engineering, manufacturing and
marketing resources. Although the Company has developed a number of its own
products, most of its research and development efforts have historically been
directed towards product improvement and enhancement of previously developed or
acquired products. Company research and development expenses were approximately
$5,158,000, $5,124,000, and $3,777,000 in fiscal 1997, 1996 and 1995,
respectively.

EARNINGS PER SHARE

Earnings per share is based on the weighted average number of common shares
and common stock equivalents outstanding for each year. For purposes of this
calculation, outstanding stock options are considered common stock equivalents
using the treasury stock method. The weighted average number of shares utilized
in the primary earnings per share calculation was 8,534,000, 8,264,000, and
8,159,000 for fiscal 1997, 1996, and 1995, respectively. On a fully diluted
basis, both net income and shares outstanding are adjusted to assume the
conversion of the convertible subordinated debentures from the date of issue.
The weighted average number of shares utilized in the fully diluted earnings per
share calculation was 9,947,000, 9,861,000 and 8,159,000 for fiscal 1997, 1996
and 1995, respectively, and interest savings, net of tax, was $1,024,000 in
fiscal 1997 and $1,261,000 in both fiscal 1996 and 1995. Assuming the
convertible debentures were converted at the beginning of fiscal 1997, primary
earnings per share would have approximated fully diluted earnings per share.

STOCK BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 allows a company to adopt a new fair value
based method of accounting for its stock based compensation plans, or to
continue to follow the intrinsic method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock to Employees."

The Company has elected to continue to follow APB Opinion No. 25. If the
Company had adopted SFAS 123 the Company's net income and earnings per share for
years ended November 2, 1997 and November 3, 1996 would have been impacted as
discussed in Note 9.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

52 WEEK FISCAL YEAR

Commencing in fiscal year 1994, the Company implemented a fiscal year which
ends on the Sunday nearest to the end of the month of October.

TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS

Assets and liabilities of foreign subsidiaries have been translated into
United States dollars at the applicable rates of exchange in effect at the end
of the period reported. Revenues and expenses have been translated at the
applicable weighted average rates of exchange in effect during the period
reported.

F-8
<PAGE> 46

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Translation adjustments are reflected as a separate component of shareholders'
equity. Any transaction gains and losses are included in net income.

NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS 128). This statement established standards for computing and presenting
earnings per share ("EPS"), replacing the presentation of currently required
primary EPS and fully diluted EPS with a presentation of basic EPS and diluted
EPS. In accordance with SFAS 128, basic EPS excludes the effect of potentially
dilutive securities, such as options and convertible securities, while diluted
EPS reflects the potential dilution that would have occurred if securities or
other contracts to issue common stock had been exercised, converted, or resulted
in the issuance of common stock. SFAS 128 is effective for financial statements
issued for both interim and annual periods ending after December 15, 1997, and
earlier application is not permitted. When adopted in the Company's first
quarter of fiscal 1998, the Company will be required to restate its EPS data for
all prior periods presented. The Company has not completed its implementation
study, but believes that under SFAS 128, diluted EPS will approximate currently
presented fully diluted EPS, and that basic EPS will be different from primary
EPS because no dilutive effects will be included in the computation of basic
EPS.

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosure About Segments of an Enterprise and Related Information"
(SFAS 131)which is effective for the Company's fiscal year ending in 1999. This
statement establishes standards for reporting segment information in annual and
interim financial statements. It also establishes standards for related
disclosure of products and services, geographical areas and major customers.
Under SFAS 131, reporting segments are determined consistent with the way
management organizes and evaluates financial information internally for making
operating decisions and assessing performance. The Company has not determined
the impact of adoption of SFAS 131 on its consolidated financial statements.

(2) BUSINESS COMBINATIONS, SIGNIFICANT ASSET ACQUISITIONS AND DISPOSITIONS

ASSET ACQUISITIONS

On June 30, 1995, the Company entered into various agreements of Purchase
and Sale of Assets with Becton Dickinson and Company and affiliates to purchase,
for approximately $70,600,000 in cash, after various post-closing adjustments,
assets pertaining to the worldwide glove business of Becton Dickinson ("Glove
Operation"). The assets acquired consist primarily of inventory, equipment,
manufacturing facilities in Honea Path, South Carolina, Los Gatos, California,
Mississauga, Ontario, Canada and Erembodegem, Belgium, and certain intangible
assets. The Company financed the purchase price and ancillary working capital
with borrowings from its principal bank lender under an amended credit facility.
The transaction was accounted for as an asset purchase with the purchase price
and direct acquisition costs allocated based on the fair value of assets
acquired and liabilities assumed. No goodwill was recorded in connection with
this transaction.

On June 1, 1995, the Company acquired the Bovie line of electrosurgical
products from MDT Corporation. The purchase price was approximately $2,600,000,
subject to certain inventory and other adjustments. The Bovie product lines
include electrosurgical generators and related disposable products and supplies.
The transaction was accounted for as an asset purchase with the purchase price
and direct acquisition costs allocated based on the fair value of assets
acquired and liabilities assumed. Goodwill of approximately $1,300,000 was
recorded in connection with this transaction. The Company used funds on hand to
finance the purchase.

F-9
<PAGE> 47

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

BUSINESS COMBINATIONS

On July 30, 1996, the Company successfully completed a tender offer (the
"Tender Offer") for Sterile Concepts. As of completion of a merger of Sterile
Concepts and Maxxim in September of 1996, all of the outstanding stock of
Sterile Concepts was purchased for approximately $110,500,000, excluding
acquisition costs of approximately $8,600,000 paid in fiscal 1996 and $465,000
of cash acquired with the acquisition. The Company also refinanced existing
Maxxim debt of approximately $72,700,000 contemporaneously with and repaid
approximately $34,200,000 of Sterile Concepts debt shortly after the
consummation of the Tender Offer. Funding to complete the acquisition and debt
repayment was derived from approximately $121,000,000 of borrowings under a
$165,000,000 amended credit facility with its primary lender and the net
proceeds of $97,000,000 from the offering of $100,000,000 of 10 1/2% Senior
Subordinated Notes (See Note 3). The assets acquired in the Sterile Concepts
acquisition consist primarily of accounts receivable, inventory, furniture and
equipment and leased assembly and other facilities in Richmond, Virginia,
Temecula, California and Minnetonka, Minnesota. Sterile Concepts assembled,
packaged and sterilized custom procedure trays for hospitals, outpatient surgery
centers and medical clinics. In the fourth quarter of fiscal 1996, Sterile
Concepts was integrated into the already existing custom procedure tray assembly
and packaging operations of the Case Management division. The acquisition was
accounted for by the purchase method of accounting and approximately
$116,000,000 of goodwill was recorded with the transaction. One time costs of
$3,500,000 relating to the acquisition were recorded in the fourth fiscal
quarter of fiscal 1996.

Effective January 1, 1995, the Company purchased all of the issued and
outstanding common stock of Medica B.V., a Netherlands corporation and certain
assets of S.A. DPC N.V., a Belgian corporation (collectively, "Medica"). The
assets acquired in the Medica acquisition consisted primarily of receivables,
inventory, furniture and equipment, the disposable medical supplies
manufacturing facility situated on a tract of land located in Ommen, the
Netherlands, and certain intangible assets. Such assets were used by Medica in
connection with its business of manufacturing, fabricating, distributing and
selling various types of disposable medical supplies, principally in the
Netherlands and Belgium. The purchase price of Medica and the execution of a
non-competition agreement by the seller, Internatio-Meuller N.V., a Netherlands
corporation, consisted of $11,000,000 in cash. The acquisition has been
accounted for as a purchase with the purchase price and direct acquisition costs
allocated based on fair value of assets acquired and liabilities assumed.
Goodwill of approximately $5,600,000 was recorded in connection with this
transaction.

ASSET DISPOSITIONS

Effective May 1, 1996, the Company sold certain assets related to the
Henley Healthcare division operations to Lasermedics, Inc. of Missouri City,
Texas for approximately $13,000,000, which consisted of approximately $6,000,000
in cash and a $7,000,000 convertible note. The assets, which were sold at net
book value, consisted primarily of receivables, inventory, furniture and
equipment, two manufacturing facilities located in Sugar Land and Belton, Texas,
and intangible assets related to the Henley product lines. The assets were used
by the Henley division to manufacture and sell various types of products for the
physical medicine, rehabilitation and pain management markets.

SUMMARY PRO FORMA RESULTS

The following unaudited pro forma summary results of operations assume the
acquisition of Sterile Concepts occurred on October 31, 1994. The summary
results of operations also give effect to the acquisition by the Company of the
Glove Operations, the divestiture by the Company of the Henley Healthcare
division and the acquisitions by Sterile Concepts of Associated Medical Products
and Medical Design Concepts, as if

F-10
<PAGE> 48

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the acquisitions and the divestiture occurred on October 31, 1994. The following
results of operations are presented (in thousands, except per share amounts):

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revenues......................................................... $534,635 $502,349
Net income....................................................... 5,865 1,480
Primary earnings per share....................................... $ .71 $ .18
</TABLE>

The adjustments to the accounts include (a) the additional amortization
expense associated with debt financing costs, (b) the additional amortization
expense associated with goodwill acquired, (c) a federal income tax adjustment,
(d) the additional interest expense incurred to make the acquisitions, at the
beginning of the Company's fiscal year and (e) the elimination of salaries,
benefits and related costs of redundant personnel in the combined operations.

The pro forma information does not purport to be indicative of results of
operations or financial position which would have occurred had the acquisitions
or divestiture been consummated on the date indicated, or which may be expected
to occur in the future by reason of such acquisition or divestiture.

(3) DEBT AND OTHER LONG-TERM OBLIGATIONS

LONG-TERM DEBT

The following summarizes the Company's long-term debt at November 2, 1997
and November 3, 1996:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit....................................... $ 10,300 $ 40,090
Term loan...................................................... 81,000 88,500
Less -- Current maturities..................................... (12,750) (7,500)
-------- --------
$ 78,550 $121,090
======== ========
</TABLE>

CREDIT FACILITY

On July 30, 1996, the Company entered into a Second Amended and Restated
Credit Agreement ("Credit Agreement") with several lending institutions. This
new Credit Agreement replaced the Company's previous credit facility. The Credit
Agreement provided for a term loan of $90,000,000 and a $75,000,000 revolving
line of credit. At closing, the term loan was fully drawn and approximately
$31,000,000 of the revolver was used in conjunction with proceeds from the
10 1/2% Senior Subordinated Notes to finance the Sterile Concepts acquisition
(See Note 2). Both loans mature on July 30, 2002, with the term loan requiring
repayment in twenty four quarterly installments ranging from $1,500,000 to
$5,500,000, commencing October 31, 1996. Both loans bear interest, payable
quarterly on the Interest Period as defined in the Credit Agreement. The
interest rate is prime or, for LIBOR advances, the LIBOR rate, plus a margin
ranging from 1.0% to 2.0%, indexed according to a defined financial ratio. For
fiscal 1997, the weighted average rate of interest on the revolver and term loan
was 7.47%. At November 2, 1997, the unused portion of the revolver was
approximately $64,700,000. The credit facilities are unsecured and require the
Company to maintain certain customary financial and operating ratios. The
Company's present credit facility prohibits payment of dividends.

10 1/2% SENIOR SUBORDINATED NOTES

In July 1996, the Company issued $100,000,000 of 10 1/2% Senior
Subordinated Notes ("Notes"). The Notes mature on August 1, 2006, unless
previously redeemed by the Company. Interest on the Notes is payable
semi-annually on February 1 and August 1, commencing on February 1, 1997.

F-11
<PAGE> 49

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The notes will not be redeemable at the Company's option prior to August 1,
2001. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------------------------------------------------- ----------
<S> <C>
August 1, 2001................................................. 105.25%
August 1, 2002................................................. 103.50%
August 1, 2003................................................. 101.75%
August 1, 2004 and thereafter.................................. 100.00%
</TABLE>

Net proceeds from the offering of approximately $97,000,000 were used in
conjunction with proceeds from the new credit facility to finance the Sterile
Concepts acquisition (See Note 2).

6 3/4% CONVERTIBLE SUBORDINATED DEBENTURES

In March 1993, the Company issued $28,750,000 of 6 3/4% Convertible
Subordinated Debentures (the "Debentures") due March 1, 2003. The Debentures are
convertible at the option of the holder into Common Stock at a conversion price
of $18 per share and pay interest every six months commencing September 1, 1993,
through maturity on March 1, 2003.

On October 3, 1997, the Company called for the redemption of $10,000,000,
in principal amount, of the Debentures effective as of November 4, 1997 (the
"First Redemption Date"). On the First Redemption Date, the redemption price of
104.17% of the principal amount, or $1,041.70 plus accrued interest of $11.81
per $1,000 face amount of the Debentures was paid to the holders of Debentures
called for redemption who had not exercised their right to convert their
Debentures into Common Stock. As of November 2, 1997, $5,398,000 of the
debentures had converted into 299,882 shares of the Common Stock and debt
issuance costs of $166,000 related to these converted debentures were written
off to additional paid-in capital in fiscal 1997 and are reflected in the
accompanying financial statements.

On November 12, 1997, the Company called for the redemption of the
remaining outstanding Debentures effective as of December 12, 1997 (the "Second
Redemption Date"). On the Second Redemption Date, the redemption price of
104.17% of the principal amount, or $1,041.70 plus accrued interest of $18.94
per $1,000 face amount of the Debentures was paid to the holders who had not
exercised their right to convert their Debentures into Common Stock. Subsequent
to November 2, 1997, $22,983,000 of the Debentures were converted into 1,276,732
shares of the Common Stock. As of the Second Redemption Date, $217,000 in
principal amount remains due and payable. Holders may surrender their
certificates for payment within two years of the respective redemption dates
after which the funds revert back to the Company.

OTHER DEBT OBLIGATIONS

The following summarizes the Company's other debt obligations at November
2, 1997 and November 3, 1996:

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Other debt obligations......................................... $ 6,433 $10,586
Less -- Current maturities..................................... (3,133) (4,996)
------- -------
$ 3,300 $ 5,590
======= =======
</TABLE>

F-12
<PAGE> 50

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other debt obligations consist primarily of capital leases and other
contractual obligations of the Company.

FUTURE MINIMUM PRINCIPAL PAYMENTS

Future minimum principal payments on long-term debt and other obligations
(adjusted for the $22,983,000 of Debentures converted subsequent to November 2,
1997) are as follows:

<TABLE>
<CAPTION>
FISCAL YEARS (IN THOUSANDS)
-----------------------------------------------------------------------
<S> <C>
1998................................................................... $ 15,883
1999................................................................... 18,329
2000................................................................... 18,191
2001................................................................... 18,802
2002................................................................... 26,800
Thereafter............................................................. 100,097
--------------
$198,102
===========
</TABLE>

(4) FINANCIAL INSTRUMENTS

During the first quarter of fiscal 1996, the Company entered into an
interest rate swap agreement with its primary lender in order to reduce the
impact of changes in variable interest rates on consolidated results of
operations and future cash outflows for interest. The agreement converts a
portion of the non-indexed part of the interest rate of the Credit Agreement
facilities to a fixed rate of 5.4%. At November 2, 1997, the notional amount of
the swap was $43,125,000 and expires on March 31, 2000. In fiscal 1997, the
Company's financial position and results of operations were not materially
impacted by the swap agreement.

The Company uses an interest rate swap to manage the interest risk
associated with its borrowings and to manage the Company's allocation of fixed
and variable rate debt. The Company accounts for its interest rate swap on the
accrual method, whereby the net receivable or payable is recognized on a
periodic basis and included as a component of interest expense. The Company does
not trade in derivative securities.

The estimated fair value of cash and cash equivalents, accounts receivable,
and accounts payable, approximate their carrying amount. The estimated fair
values and carrying amounts of long-term borrowings and the interest rate swap
were as follows:

<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
---------------- ---------- ---------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Swap agreement, paying fixed..... $ -- $ 310 $ -- $ 488
Long-term debt................... (221,085) (230,559) (267,926) (272,364)
</TABLE>

Fair values were determined from quoted market prices or discounted cash
flows.

F-13
<PAGE> 51

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) COMMITMENTS AND CONTINGENCIES

LEASES

The Company is obligated under various operating leases. Rent expense under
these operating leases for fiscal years 1997, 1996 and 1995 were approximately
$3,519,000, $1,215,000 and $1,164,000, respectively. Minimum future rental
payments are as follows:

<TABLE>
<CAPTION>
FISCAL YEARS (IN THOUSANDS)
-----------------------------------------------------------------------
<S> <C>
1998................................................................... $ 2,765
1999................................................................... 2,517
2000................................................................... 1,203
2001................................................................... 1,214
2002................................................................... 1,026
Thereafter............................................................. 3,444
--------------
$ 12,169
===========
</TABLE>

CLAIMS AND LITIGATION

On May 9, 1994, an out of court settlement was reached between the Company
and Futurmed Intervention, Inc., a Texas corporation, ("Futurmed"), Angiomed
Aktengesellschaft, a German corporation ("Angiomed") and a number of individual
defendants. Pursuant to the terms of the agreement, Futurmed will pay the
Company $4,150,000, which is guaranteed by Angiomed. The defendants also agreed
to certain covenants regarding supply of certain products, non-competition and
other matters. Of the settlement amount, $1,150,000, was paid to the Company by
Futurmed at the time of the settlement with $3,000,000 to be paid in five equal
annual installments of $600,000 which began June 1, 1995 and will continue
through June 1, 1999. The remaining $1,200,000 of future payments are secured by
an irrevocable letter of credit in favor of the Company. The proceeds received
at settlement were used to offset legal expenses incurred and to establish a
reserve for defective, excess and obsolete inventory previously purchased from
Angiomed. Installment proceeds are being recorded as non-operating income.

Since March 1996, the Company has been served with various lawsuits
alleging various adverse reactions to the latex used in certain of the medical
gloves alleged to have been manufactured by the Company or the prior owner of
the assets relating to the Company's Glove Operations acquired in June 1995. The
Company believes that most of such claims relate to gloves sold or shipped prior
to June 1995, and that it has been indemnified by the prior owner with regard to
such claims. The Company is aware that there have been an increasing number of
lawsuits brought against latex glove manufacturers with respect to such allergic
reactions. The Company, like its competitors, has continued to manufacture and
sell latex gloves and, therefore, may be subject to further claims surrounding
the manufacture of these latex gloves.

In the ordinary course of business, the Company has been named in various
other lawsuits. While the final resolution of any matter may have an impact on
the Company's consolidated financial results for a particular reporting period,
management believes, based on consultation with counsel, that the ultimate
resolution of these matters and the matters specifically discussed above will
not have a material adverse impact on the Company's financial position or
results of operations.

PRODUCT LIABILITY

The Company currently has product liability insurance which it believes to
be adequate for its business. The Company's existing policy expires October 31,
1998.

F-14
<PAGE> 52

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) INCOME TAXES

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current domestic............................................ $3,784 $1,050 $ 1,882
Current foreign............................................. 1,855 2,020 1,423
------ ------ -------
$5,639 $3,070 $ 3,305
------ ------ -------
Deferred domestic........................................... $3,724 $2,693 $(1,251)
Deferred foreign............................................ 122 659 --
------ ------ -------
$3,846 $3,352 $(1,251)
------ ------ -------
Total............................................. $9,485 $6,422 $ 2,054
====== ====== =======
</TABLE>

Income tax expense differed from the amounts computed by applying the
statutory U.S. federal income tax rate as a result of the following:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate.................................................... 35% 35% 35%
Amortization of goodwill.......................................... 4 4 6
State taxes, net of federal benefit............................... 2 2 2
Tax-exempt interest income........................................ -- -- (1)
Surtax exemption.................................................. -- -- (1)
Other, net........................................................ 1 1 --
---- ---- ----
Effective rate.................................................... 42% 42% 41%
==== ==== ====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at November 2,
1997 and November 3, 1996 are presented below:

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current deferred:
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts...................................................... $ 1,257 $ 2,125
Inventory, principally due to reserve for obsolescence and
costs inventoried for tax purposes............................ 3,369 4,603
Net operating loss carryforwards................................. 84 2,390
Accruals and provisions not currently deductible................. 4,160 4,315
------- -------
8,870 13,433
Deferred tax liabilities:
Tax over book depreciation....................................... (179) (792)
Other............................................................ -- (495)
------- -------
Net current deferred tax asset................................... $ 8,691 $12,146
======= =======
</TABLE>

F-15
<PAGE> 53

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Noncurrent deferred:
Deferred tax assets:
Net operating loss carryforwards................................. $ 506 $ 534
Deferred tax liabilities:
Book over tax amortization....................................... (5,933) (3,798)
Differences between book and tax basis of property and
equipment..................................................... (781) (2,553)
------- -------
Net noncurrent deferred tax liability............................ $(6,208) $(5,817)
======= =======
</TABLE>

There is no valuation allowance as of the fiscal year ended November 2,
1997. It is the opinion of management that future operations will more likely
than not generate taxable income to realize the deferred tax assets.

At November 2, 1997, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $1,573,000 which are available to
offset future federal taxable income, if any, through 2009.

(7) ACCRUED LIABILITIES

Accrued liabilities as of November 2, 1997 and November 3, 1996 are as
follows:

<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Health insurance and benefit accrual............................... $ 8,471 $ 5,554
Accrued taxes payable.............................................. 3,831 4,951
Fees payable to hospital buying groups............................. 1,941 502
Accrued payroll and commissions.................................... 2,751 4,760
Accrued interest payable........................................... 3,349 3,627
Other.............................................................. 6,288 8,739
------- -------
$26,631 $28,133
======= =======
</TABLE>

(8) GOODWILL AND INTANGIBLES

Goodwill and intangibles, net of accumulated amortization, as of November
2, 1997 and November 3, 1996 are as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Goodwill......................................................... $128,782 $131,161
Patents.......................................................... 13,336 14,787
Debt offering costs.............................................. 3,381 4,006
Non-compete agreements........................................... 3,048 3,985
Other intangibles................................................ 1,687 2,107
-------- --------
$150,234 $156,046
======== ========
</TABLE>

F-16
<PAGE> 54

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) STOCK OPTION AGREEMENTS

Commencing with November 1, 1989, it has been the practice of the Board of
Directors on or around November 1 of each year to grant stock options to certain
employees of the Company. The Company has also granted options to its
non-employee Directors from time to time. The shares purchasable by employees
under such stock option agreements (subject to continued employment with the
Company) vest over five years. The shares purchasable by non-employee Directors
under such stock option agreements (subject to continued director service to the
Company) vest over a period of one to three years. Set forth below is certain
information regarding such issuances, exercises and cancellations of options in
each of the indicated fiscal years:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
SHARES PRICE
--------- ----------------
<S> <C> <C>
Balance at October 30, 1994............................... 205,000 $11.11
Fiscal 1995:
Granted................................................. 426,000 10.73
Exercised............................................... (41,000) 6.64
Cancelled............................................... (8,700) 12.81
---------
Balance at October 29, 1995............................... 581,300 11.22
Fiscal 1996:
Granted................................................. 275,000 11.48
Exercised............................................... (41,180) 7.06
Cancelled............................................... (21,420) 12.06
---------
Balance at November 3, 1996............................... 793,700 11.40
Fiscal 1997:
Granted................................................. 294,800 11.48
Exercised............................................... (43,000) 12.99
Cancelled............................................... (28,780) 11.68
---------
Balance at November 2, 1997............................... 1,016,720 11.40
========
</TABLE>

The 1,016,720 options outstanding as of November 2, 1997 had exercise
prices ranging between $10.73 and $15.40, a weighted average exercise price of
$11.40 and a weighted average remaining contract life of 3.64 years. At November
2, 1997, options to purchase 501,020 shares, were exercisable with exercise
prices ranging between $10.73 and 15.40, and a weighted average exercise price
of $11.49.

The Company has elected to continue to follow APB Opinion No. 25; however,
if the Company adopted SFAS 123, the Company's net income and earnings per share
for the years ended November 2, 1997, and November 3, 1996 would have been
reduced as follows:

<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
AS REPORTED PROFORMA AS REPORTED PROFORMA
----------- -------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income................................. $12,881 $ 12,638 $ 8,710 $8,663
Primary earnings per share................. 1.51 1.48 1.05 1.05
Fully diluted earnings per share........... 1.40 1.37 1.01 1.01
</TABLE>

The weighted average fair value of options granted in 1997 and 1996 was
$6.59 and $7.10, respectively. The fair value of each option was determined
using the Black-Scholes option valuation model. The key input variables used in
valuing the options were as follows: average risk-free interest rate based on
5-year Treasury bonds, stock price volatility of 36% and estimated option term
ranging from 4 to 6 years. The Company has no

F-17
<PAGE> 55

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

present plans to pay dividends on its Common Stock. The effects of applying SFAS
123 as calculated above may not be representative of the effects on reported net
income for future years.

(10) SAVINGS PLAN

The Company has a 401(k) savings plan which permits participants to
contribute up to 15 percent of their base compensation (as defined) each year.
The Company will match at least 25 percent of a participant's contribution up to
a maximum of 6 percent of gross pay. The Company's matching percentage may be
adjusted as Company profitability dictates. Employer contributions were
$801,000, $606,000 and $559,000 for the 1997, 1996 and 1995 plan years,
respectively.

(11) MANAGEMENT STOCK PURCHASE PLAN

On May 23, 1997, the Company issued 400,000 shares of Common Stock pursuant
to a Senior Management Stock Purchase Plan at $13.00 per share, the closing
stock price on April 30, 1997. The stock was issued in exchange for an aggregate
of $5,200,000 in non-interest bearing, full recourse promissory notes due May
23, 2000 from the participating managers. These notes have been recorded as
subscriptions receivable and are included in the shareholders' equity section of
the Consolidated Balance Sheet. Payment of these notes also is secured by the
pledge of the 400,000 shares of Common Stock. Net compensation costs associated
with these shares is not significant.

(12) SHAREHOLDER RIGHTS PLAN

On July 10, 1997, the Board of Directors of the Company declared a dividend
of one right to purchase Preferred Stock ("Right") for each outstanding share of
the Common Stock to shareholders of record at the close of business on September
15, 1997 (the "Record Date").

The Rights will have certain anti-takeover effects. The Rights are designed
to protect and maximize the value of the outstanding equity interests in the
Company in the event of an unsolicited attempt by an acquiror to take over the
Company in a manner or on terms not approved by the Board of Directors. The
Rights will cause substantial dilution to any person or group that attempts to
acquire the Company without the approval of the Company's Board of Directors. As
a result, the overall effect of the Rights may be to render more difficult or
discourage any attempt to acquire the Company, even if such acquisition may be
favorable to the interests of the Company's shareholders. Because the Board of
Directors can redeem the Rights or approve a Permitted Offer, the Rights should
not interfere with a merger or other business combination approved by the Board
of Directors of the Company.

The description and terms of the Rights are set forth in a Rights Agreement
dated as of July 10, 1997, as it may from time to time be supplemented or
amended (the "Rights Agreement"), between the Company and Harris Trust and
Savings Bank, as Rights Agent.

(13) NONRECURRING CHARGES

In the third quarter of fiscal 1995, the Company made a decision to form
its Case Management division by combining the Boundary and Sterile Design
divisions with the newly acquired Glove Operations and Bovie product line. As a
result of this decision, the Company incurred approximately $10,800,000
(pre-tax) nonrecurring charges comprised primarily of restructuring expenses
(approximately $1,300,000), facility consolidation expenses (approximately
$2,200,000) and non-cash asset write-downs (approximately $7,300,000).

F-18
<PAGE> 56

MAXXIM MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 2, 1997
Net Sales......................................... $133,401 $136,042 $128,654 $131,455
Gross Profit...................................... 32,236 33,439 32,489 33,697
Net Income........................................ 3,459 2,717 3,192 3,513
Primary earnings per share........................ 0.42 0.33 0.37 0.39
Fully diluted earnings per share.................. 0.38 0.31 0.34 0.37
YEAR ENDED NOVEMBER 3, 1996
Net Sales......................................... $ 86,600 $ 90,859 $ 84,128 $138,249
Gross Profit...................................... 25,285 25,592 22,397 32,398
Net Income........................................ 2,726 2,951 2,952 81
Primary earnings per share........................ 0.33 0.35 0.36 0.01
Fully diluted earnings per share.................. 0.31 0.33 0.33 0.01
</TABLE>

F-19
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Maxxim Medical, Inc.:

We have audited the consolidated financial statements of Maxxim Medical,
Inc. and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Maxxim
Medical, Inc. and subsidiaries as of November 2, 1997, and November 3, 1996, and
the results of their operations and their cash flows for the years ended
November 2, 1997, November 3, 1996 and October 29, 1995, in conformity with
generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Houston, Texas
December 23, 1997

F-20
<PAGE> 58

======================================================

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE
DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Available Information.................. 3
Incorporation of Certain Documents
by Reference......................... 3
Prospectus Summary..................... 4
Forward Looking Statement.............. 9
Risk Factors........................... 9
Use of Proceeds........................ 12
Price Range of Common Stock............ 13
Dividend Policy........................ 13
Capitalization......................... 14
Selected Consolidated Financial Data... 15
Management's Discussion and
Analysis of Financial Condition and
Results of Operations................ 16
Business............................... 20
Management............................. 30
Security Ownership of Certain
Beneficial Owners and Management..... 33
Description of Capital Stock........... 34
Underwriting........................... 35
Legal Opinion.......................... 36
Experts................................ 36
Index to Financial Statements.......... F-1
</TABLE>

======================================================
======================================================

(MAXXIM MEDICAL, INC. LOGO)

COMMON STOCK

-----------------------
PROSPECTUS
-----------------------
BEAR, STEARNS & CO. INC.
EVEREN SECURITIES, INC.
JEFFERIES & COMPANY, INC.
NATIONSBANC MONTGOMERY
SECURITIES LLC
, 1998

======================================================
<PAGE> 59

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
SEC Registration Fees.......................................................... $
NYSE Registration Fees.........................................................
NASD Fees......................................................................
Legal Fees.....................................................................
Auditors' Fees.................................................................
Transfer Agent Fees............................................................
Printing and Engraving Expenses................................................
Miscellaneous..................................................................
---------
Total........................................................................ $
=========
</TABLE>

All of the above items are estimated except the SEC, NYSE, NASD and Blue
Sky Registration Fees.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Article 1302-7.06 of the Texas Miscellaneous Corporation Laws Act,
the articles of incorporation of a Texas corporation may provide that a director
of that corporation shall not be liable, or shall be liable only to the extent
provided in the articles of incorporation, to the corporation or its
shareholders for monetary damages for acts or omissions in the director's
capacity as a director, except that the articles of incorporation cannot provide
for the elimination or limitation of liability of a director to the extent that
the director is found liable for (i) a breach of the director's duty of loyalty
to the corporation or its shareholders, (ii) acts or omissions not in good faith
that constitute a breach of duty of the director to the corporation or an act or
omission that involves intentional misconduct or a knowing violation of the law,
(iii) any transaction from which the director received an improper personal
benefit, or (iv) an act or omission for which the liability of a director is
expressly provided by an applicable statute. Article XI of the Company's
Restated Articles of Incorporation sets forth specific provisions for limitation
of director liability which are substantially identical to the provisions of
Article 1302 -- 7.06 described above and further states that a director of the
Company will not be liable to the Company or its shareholders for monetary
damages to the fullest extent permitted by any provision of the statutes of
Texas that limits the liability of a director.

In addition, Article 2.02-1 of the Texas Business Corporation Act
authorizes a Texas corporation to indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding, including
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative because the person is or
was a director. The indemnification is permitted only if it is determined that
the person (1) conducted himself in good faith; (2) reasonably believed (a) in
the case of conduct in his official capacity as a director of the corporation,
that his conduct was in the corporation's best interests; and (b) in all other
cases, that his conduct was at least not opposed to the corporation's best
interests; and (3) in the case of any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. A person may be indemnified under
Article 2.02-1 against judgments, penalties (including excise and similar
taxes), fines, settlements, and reasonable expenses actually incurred by the
person (including court costs and attorneys' fees), but if the person is found
liable to the corporation or is found liable on the basis that personal benefit
was improperly received by him, the indemnification is limited to reasonable
expenses actually incurred and may not be made in respect of any proceeding in
which the person has been found liable for willful or intentional misconduct in
the performance of his duty to the corporation. A corporation is obligated under
Article 2.02-1 to indemnify a director or officer against reasonable expenses
incurred by him in connection with a proceeding in which he is named defendant
or respondent because he is or was a director or officer if he has been wholly
successful, on the merits or otherwise, in the defense of the proceeding. Under
Article 2.02-1 a corporation may (i) indemnify and advance expenses to an
officer, employee, agent or other person who are or were serving at the request
of the corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another entity to the same

II-1
<PAGE> 60

extent that it may indemnify and advance expenses to directors, (ii) indemnify
and advance expenses to directors and such other persons to such further extent,
consistent with law, as may be provided in the corporation's articles of
incorporation, bylaws, action of its board of directors, or contract or as
permitted by common law and (iii) purchase and maintain insurance or another
arrangement on behalf of directors, officers, employees, or agents of the
Company against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, including liabilities
against which the Company cannot indemnify its directors and officers. The
Bylaws of the Company set forth specific provisions for indemnification of
directors, officers, agents and other persons which are substantially identical
to the provisions of Article 2.02-1 described above. The Company maintains
directors and officers insurance in the amount of $3,000,000, with a $150,000
deductible, that will be effective through November 1, 1998.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
1.1* -- Form of Underwriting Agreement.
3.1 -- Restated Articles of Incorporation of the Company -- Exhibit
No. 3.1 to the Registration Statement on Form S-1 of
Registrant, Registration No. 33-32630, filed with the
Commission on December 19, 1989 and incorporated herein by
reference.
3.2 -- Articles of Amendment to Articles of
Incorporation -- Exhibit No. 3.1(b) to the Registration
statement on Form S-1 of Registrant, Registration No.
33-57800, filed with the Commission on February 2, 1993 and
incorporated herein by reference.
3.3 -- Articles of Amendment to the Articles of Incorporation filed
with the Office of the Secretary of State of Texas on April
26, 1996.
3.4 -- Statement of Resolution Establishing Series of Shares filed
with the Office of the Secretary of State of Texas on
September 3, 1997.
3.5 -- Bylaws of the Registrant -- Exhibit No. 3.2 to the
Registration Statement on Form S-1 of Registrant,
Registration No. 33-32630, filed with the Commission on
December 19, 1989 and incorporated herein by reference.
3.6 -- Certificate and Agreement of Merger and Articles of Merger
with attached Plan and Agreement of a Merger of the
Registrant and Henley Holding Company -- Exhibit No. 3.3 to
the Registration Statement on Form S-1 of Registrant,
Registration No. 33-32630, filed with the Commission on
December 19, 1989 and incorporated herein by reference.
4.1 -- Specimen Common Stock Certificate -- Exhibit No. 4.1 to the
Registration Statement on Form S-1 of Registrant,
Registration No. 33-57800, filed with the Commission on
February 2, 1993 and incorporated herein by reference.
4.2 -- Indenture dated March 18, 1993 between the Registrant and
Trustee, for 6 3/4% Convertible Subordinated Debentures due
2003 -- Exhibit No. 4.2 to the Registration Statement on
Form S-1 of Registrant, Registration No. 33-57800, filed
with the Commission on February 2, 1993 and incorporated
herein by reference.
4.3 -- Specimen Debenture -- Exhibit No. 4.3 to the Registration
Statement on Form S-1 of Registrant, Registration No.
33-57800, filed with the Commission on February 2, 1993 and
incorporated herein by reference.
4.4 -- Indenture dated July 30, 1996, by and among Maxxim, as
Issuer, Maxxim-Delaware, Purchaser, Fabritek La Romana,
Inc., Maxxim Medical Canada Limited, Medica B.V. and Medica
Inc., Maxxim Medical Canada Limited, Medica B.V. and Medica
Hospital Supplies, N.V., as Guarantors and First Union
National Bank of North Carolina, as Trustee -- Exhibit No. 4
to the Form 8-K of Registrant, filed with the Commission on
August 14, 1996 and incorporated herein by reference.
</TABLE>

II-2
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
4.5 -- Rights Agreement dated as of July 10, 1997 between Maxxim
Medical, Inc. and Harris Trust and Savings Bank, as Rights
Agent -- Exhibit 1 to the Form 8-A of the Registrant filed
with the Commission on July 11, 1997 and incorporated herein
by reference.
5.1* -- Opinion, including consent, of Shumaker, Loop & Kendrick,
LLP, counsel to the Company, as to the legality of the
securities being registered.
23.1* -- Consent of KPMG Peat Marwick LLP.
23.2* -- Consent of Shumaker, Loop & Kendrick, LLP (included in their
opinion filed as Exhibit 5.1).
24.1 -- Powers of Attorney. A power of attorney, pursuant to which
amendments to this Registration Statement may be filed, is
included in the signature pages contained in Part II.
</TABLE>

- ---------------

* To be filed by amendment.

II-3
<PAGE> 62

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 63

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Clearwater, State of Florida on February 13, 1998.

MAXXIM MEDICAL, INC.

By: /s/ KENNETH W. DAVIDSON
------------------------------------
Kenneth W. Davidson
Chairman of the Board,
President and Chief Executive
Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Kenneth W. Davidson and Peter M. Graham, and each of them, his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents may lawfully do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 13, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KENNETH W. DAVIDSON Chairman of the Board, President and Chief Executive
- --------------------------------------------- Officer (principal executive officer)
Kenneth W. Davidson

/s/ PETER M. GRAHAM Executive Vice President, Secretary and Chief
- --------------------------------------------- Operating Officer (principal financial officer)
Peter M. Graham

/s/ ALAN S. BLAZEI Vice President -- Controller and Treasurer
- --------------------------------------------- (principal accounting officer)
Alan S. Blazei

/s/ ERNEST J. HENLEY, PH.D. Director
- ---------------------------------------------
Ernest J. Henley, Ph.D.

/s/ PETER G. DORFLINGER Director
- ---------------------------------------------
Peter G. Dorflinger

/s/ MARTIN GRABOIS M.D. Director
- ---------------------------------------------
Martin Grabois M.D.
</TABLE>

II-5
<PAGE> 64

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- -------------------------------------------------------------------
<C> <S>

/s/ RICHARD O. MARTIN, PH.D. Director
- ---------------------------------------------
Richard O. Martin, Ph.D.

/s/ HENK R. WAFELMAN, ING. Director
- ---------------------------------------------
Henk R. Wafelman, Ing.

/s/ DONALD R. DEPRIEST Director
- ---------------------------------------------
Donald R. DePriest
</TABLE>

II-6
<PAGE> 65

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGES
- ------- ----------------------------------------------------------------------- -------------
<S> <C> <C> <C>
1.1* -- Form of Underwriting Agreement.
3.1 -- Restated Articles of Incorporation of the Company -- Exhibit No. 3.1 to
the Registration Statement on Form S-1 of Registrant, Registration No.
33-32630, filed with the Commission on December 19, 1989 and
incorporated herein by reference.
3.2 -- Articles of Amendment to Articles of Incorporation -- Exhibit No.
3.1(b) to the Registration statement on Form S-1 of Registrant,
Registration No. 33-57800, filed with the Commission on February 2,
1993 and incorporated herein by reference.
3.3 -- Articles of Amendment to the Articles of Incorporation filed with the
Office of the Secretary of State of Texas on April 26, 1996.
3.4 -- Statement of Resolution Establishing Series of Shares filed with the
Office of the Secretary of State of Texas on September 3, 1997.
3.5 -- Bylaws of the Registrant -- Exhibit No. 3.2 to the Registration
Statement on Form S-1 of Registrant, Registration No. 33-32630, filed
with the Commission on December 19, 1989 and incorporated herein by
reference.
3.6 -- Certificate and Agreement of Merger and Articles of Merger with
attached Plan and Agreement of a Merger of the Registrant and Henley
Holding Company -- Exhibit No. 3.3 to the Registration Statement on
Form S-1 of Registrant, Registration No. 33-32630, filed with the
Commission on December 19, 1989 and incorporated herein by reference.
4.1 -- Specimen Common Stock Certificate -- Exhibit No. 4.1 to the
Registration Statement on Form S-1 of Registrant, Registration No.
33-57800, filed with the Commission on February 2, 1993 and
incorporated herein by reference.
4.2 -- Indenture dated March 18, 1993 between the Registrant and Trustee, for
6 3/4% Convertible Subordinated Debentures due 2003 -- Exhibit No. 4.2
to the Registration Statement on Form S-1 of Registrant, Registration
No. 33-57800, filed with the Commission on February 2, 1993 and
incorporated herein by reference.
4.3 -- Specimen Debenture -- Exhibit No. 4.3 to the Registration Statement on
Form S-1 of Registrant, Registration No. 33-57800, filed with the
Commission on February 2, 1993 and incorporated herein by reference.
4.4 -- Indenture dated July 30, 1996, by and among Maxxim, as Issuer,
Maxxim-Delaware, Purchaser, Fabritek La Romana, Inc., Maxxim Medical
Canada Limited, Medica B.V. and Medica Inc., Maxxim Medical Canada
Limited, Medica B.V. and Medica Hospital Supplies, N.V., as Guarantors
and First Union National Bank of North Carolina, as Trustee -- Exhibit
No. 4 to the Form 8-K of Registrant, filed with the Commission on
August 14, 1996 and incorporated herein by reference.
4.5 -- Rights Agreement dated as of July 10, 1997 between Maxxim Medical, Inc.
and Harris Trust and Savings Bank, as Rights Agent -- Exhibit 1 to the
Form 8-A of the Registrant filed with the Commission on July 11, 1997
and incorporated herein by reference.
5.1* -- Opinion, including consent, of Shumaker, Loop & Kendrick, LLP, counsel
to the Company, as to the legality of the securities being registered.
</TABLE>

II-7
<PAGE> 66

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGES
- --------- ----------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
23.1* -- Consent of KPMG Peat Marwick LLP.
23.2* -- Consent of Shumaker, Loop & Kendrick, LLP (included in their opinion filed as Exhibit
5.1).
24.1 -- Powers of Attorney. A power of attorney, pursuant to which amendments to this
Registration Statement may be filed, is included in the signature pages contained in Part
II.
</TABLE>

- ---------------

* To be filed by amendment.

II-8

<PAGE> 1

EXHIBIT 3.3

ARTICLES OF AMENDMENT

ARTICLES OF INCORPORATION

MAXXIM MEDICAL, INC.

*****

PURSUANT to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation (the "Corporation") adopted the
following Articles of Amendment to its Articles of Incorporation:

ARTICLE ONE

The name of the Corporation is Maxxim Medical, Inc.

ARTICLE TWO

The following amendment to the Articles of Incorporation was adopted by the
shareholders of the Corporation on March 15, 1996:

SECTION 1 OF ARTICLE IV of the Articles of Incorporation of the Corporation
is amended in its entirety so that, as amended, SECTION 1 of ARTICLE IV
shall be and read as follows:

"ARTICLE IV
Capital Stock

Section 1. Authorized Shares. The total number of shares of stock
which the Corporation shall have authority to issue is 50,000,000
divided into classes as follows: (i) 10,000,000 shares of Preferred
Stock, $1.00 par value each (hereinafter referred to as "Preferred
Stock"), and (ii) 40,000,000 shares of Common Stock, $0.001 par
value each (hereinafter referred to as "Common Stock")."

ARTICLE THREE

The number of shares of the Corporation outstanding at the time of such
adoption was 8,069,847 shares of common stock, $0.001 par value per share
("Common Stock"), and the number of shares entitled to vote thereon was
8,069,847 shares of Common Stock.

<PAGE> 2
ARTICLE FOUR

The number of shares of Common Stock voted for such amendment was
7,004,397; and the number of shares of Common Stock voting against such
amendment was 215,776.

ARTICLE FIVE

This amendment does not provide for a reclassification or exchange of
issued shares of the Corporation's capital stock.

ARTICLE SIX

This amendment effects no change in the amount of stated capital of the
Corporation.

DATED: March 15, 1996.

MAXXIM MEDICAL, INC.

By: /s/ Kenneth Davidson
---------------------------------
Kenneth Davidson, Chairman of the Board
President and Chief Executive Officer

<PAGE> 1
EXHIBIT 3.4

STATEMENT OF RESOLUTION

ESTABLISHING SERIES OF SHARES

Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof.

1. The name of the corporation is Maxxim Medical, Inc. (the
"Corporation").

2. That pursuant to the authority conferred upon the Board of Directors
by the Articles of Incorporation of the said Corporation, the said Board of
Directors on July 10, 1997 adopted the following resolution establishing and
designating a series of shares and fixing and determining the preferences,
limitations and relative rights thereof:

"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred Stock, $1.00 par value per
share, of the Corporation, to be designated "Series A Participating Preferred
Stock," initially consisting of 40,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A Participating
Preferred Stock are not stated and expressed in the Articles of Incorporation,
does hereby fix and herein state and express such designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions thereof, as follows (all terms used herein which
are defined in the Articles of Incorporation shall be deemed to have the
meanings provided therein):

Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preferred Stock," $1.00 par value per
share, and the number of shares constituting such series shall be 40,000.

Section 2. Dividends and Distributions.

(A) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in
<PAGE> 2
cash on the last day of September, December, March and June in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Participating Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to, subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Participating Preferred Stock. In the event
the Corporation shall at any time after July 10, 1997 (the "Rights Dividend
Declaration Date") (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A Participating Preferred
Stock were entitled immediately prior to such event under the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).

(C) Dividends shall begin to accrue on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and

-2-
<PAGE> 3
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

Section 3. Voting Right. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at any time
after the Right Dividend Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders of
shares of Series A Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Preferred Stock and the holders of shares
of Common Stock shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.

(C) Except as required by law, holders of Series A Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions.

(A) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith
it shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 2 hereof.

(B) Whenever quarterly dividends or other dividends or

-3-
<PAGE> 4
distributions payable on the Series A Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not

(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participant Preferred Stock;

(ii) declare or pay dividends on, or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;

(iv) purchase or otherwise acquire for consideration any shares
of Series A Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.

(C) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.

Section 5. Reacquired Shares. Any shares of Series A
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled promptly

-4-
<PAGE> 5
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.

Section 6. Liquidation, Dissolution or Winding Up.

(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Participating Preferred
Stock unless, prior thereto, the holders of shares of Series A Participating
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Series A Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalization with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Participating Preferred Stock and Common Stock,
respectively, holders of Series A Participating Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.

(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.

(C) In the event the Corporation shall at any time after the
Rights Dividend Declaration Date (i) declare any dividend on

-5-
<PAGE> 6
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case the shares of Series A Participating Preferred Stock shall at the
same time be similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time
after the Rights Dividend Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.

Section 9. Ranking. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.

Section 10. Amendment. The Articles of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Participating Preferred Stock, voting separately as a class.

Section 11. Fractional Shares. Series A Participating

-6-
<PAGE> 7
Preferred Stock may be issued in fractions of a share which shall entitle the
holder in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Participating Preferred Stock.

RESOLVED FURTHER, that the President and the Secretary or any
Assistant Secretary of this Corporation be, and they hereby are, authorized and
directed to prepare and file (or cause to be prepared and filed) a Statement of
Resolution Establishing Series of Shares in accordance with the foregoing
resolution and the provisions of Texas law and to take such actions as they may
deem necessary or appropriate to carry out the intent of the foregoing
resolution."

Dated August 29, 1997.

MAXXIM MEDICAL, INC.

By: /s/ Kenneth W. Davidson
--------------------------------
Kenneth W. Davidson, President

/s/
--------------------------------
Secretary

STATE OF TEXAS
COUNTY OF HARRIS

Before me, a notary public, on this day personally appeared Kenneth W.
Davidson, known to me to be the person whose name is subscribed to the
foregoing document and, being by me first duly sworn, declared that the
statements therein contained are true and correct.

Given under my hand and seal of office this 29th day of August, A.D.,
1997.

/s/ Grace K. Shephard
-------------------------------
(Printed or stamped name)
Notary Public, State of Texas
My commission expires: July 16,
1998

-7-