<PAGE> 1
SCHEDULE 14A -- AMENDMENT NO. 2
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MAXXIM MEDICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.001 per share (the "Common Stock"), of
Maxxim Medical, Inc. including preferred share purchase rights.
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
15,223,896 shares of Common Stock (includes 1,491,070 shares
underlying options to purchase shares of Common Stock).
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$26.00 per share in cash-out merger plus the difference between $26.00
and the exercise price of each share underlying an option to purchase
shares of Common Stock.
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$373,802,475.00
------------------------------------------------------------------------
(5) Total fee paid:
$74,760
------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$74,760
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 14A
------------------------------------------------------------------------
(3) Filing Party:
Maxxim Medical, Inc.
------------------------------------------------------------------------
(4) Date Filed:
July 26, 1999
------------------------------------------------------------------------
<PAGE> 2
MAXXIM MEDICAL, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
(MAXXIM MEDICAL LOGO)
October 4, 1999
Dear Shareholders:
You are cordially invited to attend a special meeting of shareholders of
Maxxim Medical, Inc., a Texas corporation, to be held on November 3, 1999, at
3:30 p.m., local time, at the Feather Sound Country Club, 2201 Feather Sound
Drive, Clearwater, Florida.
At the special meeting, you will be asked to consider and vote upon a
merger agreement which provides for the merger of Fox Paine Medic Acquisition
Corporation with and into Maxxim. If the merger is completed, Maxxim will become
a privately owned corporation and you will receive $26.00 in cash for each of
your shares of Maxxim common stock.
Your board of directors has determined that the terms of the merger are
advisable, fair to and in the best interests of Maxxim and its shareholders.
ACCORDINGLY, YOUR BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS THAT
MAXXIM SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
Certain officers and directors of Maxxim have interests in the merger that
are different from, or in addition to, their interests as Maxxim shareholders.
These interests are summarized in the section entitled "Special
Factors -- Interests of Certain Persons in the Merger" in the accompanying proxy
statement. These officers and directors, who in the aggregate have the power to
vote approximately 8% of the outstanding Maxxim shares, have agreed to vote
their Maxxim shares for and against approval of the merger agreement in the same
proportions as the other shareholders voting on the proposal and against any
competing or alternative proposals.
We cannot complete the merger unless holders of a majority of the
outstanding shares of Maxxim common stock vote to approve the merger agreement.
Whether or not you plan to be present at the special meeting, please sign and
return your proxy as soon as possible in the enclosed self-addressed envelope so
that your vote will be recorded. Even if you return your proxy card, you may
still attend the special meeting and vote your Maxxim shares in person. Your
vote is very important. If you fail to return the proxy card or vote in person
at the special meeting, it will have the same effect as a vote against the
merger agreement.
The accompanying notice of meeting and proxy statement explain the proposed
merger and provide specific information concerning the special meeting. Please
read these materials carefully.
Sincerely,
/s/ KENNETH W. DAVIDSON
-----------------------------------------
Kenneth W. Davidson,
Chairman of the Board,
President and Chief Executive Officer
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This proxy statement is dated October 4, 1999 and is first being mailed to
shareholders on or about October 5, 1999.
<PAGE> 3
MAXXIM MEDICAL, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 3, 1999
Notice is hereby given that a special meeting of shareholders of Maxxim
Medical, Inc., a Texas corporation, will be held on November 3, 1999, at 3:30
p.m., local time, at the Feather Sound Country Club, 2201 Feather Sound Drive,
Clearwater, Florida, for the following purposes:
To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of June 13, 1999, as amended by Amendment No. 1 to Merger
Agreement, dated as of October 1, 1999, between Fox Paine Medic Acquisition
Corporation and Maxxim, pursuant to which Fox Paine Medic Acquisition
Corporation will be merged with and into Maxxim and each share of Maxxim
common stock, other than a portion of the shares held by certain officers,
directors and significant shareholders, and shares held by dissenting
shareholders, will be converted into the right to receive $26.00 in cash,
without interest.
To consider and act upon such other matters as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
A list of shareholders will be available for inspection by shareholders of
record during business hours at Maxxim Medical, Inc., 10300 49th Street North,
Clearwater, Florida for ten days prior to the date of the meeting and will also
be available at the special meeting.
Only those persons who were holders of record of Maxxim common stock at the
close of business on September 8, 1999, are entitled to notice of, and to vote
at, the special meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Maxxim common stock entitled
to vote at the special meeting. THE BOARD OF DIRECTORS OF MAXXIM, AND THE
SPECIAL COMMITTEE OF FOUR INDEPENDENT DIRECTORS FORMED TO CONSIDER THE MERGER,
HAVE UNANIMOUSLY APPROVED THE MERGER AND RECOMMEND THAT YOU VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT.
Under Texas law, appraisal rights will be available to Maxxim shareholders
who do not vote in favor of the merger agreement. In order to exercise such
appraisal rights, Maxxim shareholders must follow the procedures required by
Texas law, which are summarized under "Appraisal Rights" in the accompanying
proxy statement.
The merger agreement and the merger are explained in the accompanying proxy
statement, which you are urged to read carefully. A copy of the merger agreement
is attached as Appendix A to the proxy statement.
By order of the Board of Directors,
/s/ PETER M. GRAHAM
------------------------------------
Peter M. Graham,
Secretary
Clearwater, Florida
October 4, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
WHO CAN HELP ANSWER YOUR QUESTIONS.......................... 2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... 3
SUMMARY..................................................... 4
The Participants.......................................... 4
Structure of the Transactions............................. 5
The Special Meeting....................................... 6
The Voting Agreements..................................... 6
Recommendation to Shareholders............................ 6
Fairness Opinion.......................................... 7
Terms of the Merger Agreement............................. 7
Accounting Treatment...................................... 8
Merger Financing.......................................... 8
Interests of Certain Persons in the Merger................ 9
Regulatory Approvals...................................... 9
HISTORICAL MARKET INFORMATION............................... 10
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 12
SPECIAL FACTORS............................................. 14
Structure of the Transactions; Transaction Participants... 14
Background of the Merger.................................. 15
Certain Projections....................................... 20
Recommendation of the Special Committee and of the Full
Maxxim Board; Fairness of the Merger................... 21
Opinion of Lazard Freres & Co. LLC........................ 25
Fox Paine's and the Continuing Shareholders' Reasons for
the Merger............................................. 29
Position of the Continuing Shareholders as to the Fairness
of the Merger.......................................... 32
Position of Fox Paine as to the Fairness of the Merger.... 33
Interests of Certain Persons in the Merger................ 35
Certain Effects of the Merger; Conduct of Business After
the Merger............................................. 41
INFORMATION ABOUT THE TRANSACTION PARTICIPANTS.............. 42
Fox Paine Medic Acquisition Corporation and Fox Paine..... 42
The Continuing Shareholders............................... 43
MERGER FINANCING............................................ 44
General................................................... 44
Senior Bank Loans......................................... 45
Senior Subordinated Notes/Senior Subordinated Credit
Facility............................................... 47
Holding Company Notes..................................... 47
Equity Commitment......................................... 48
Financing of the Circon Sale.............................. 48
THE SPECIAL MEETING......................................... 50
General................................................... 50
Record Date and Voting.................................... 50
Required Vote............................................. 50
Proxies; Revocation....................................... 51
Adjournments or Postponements............................. 51
Voting Agreements......................................... 51
Other Matters to be Considered............................ 53
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE MERGER.................................................. 53
Structure and Effective Time.............................. 53
Merger Consideration...................................... 53
Payment Procedures........................................ 53
Treatment of Maxxim Stock Options......................... 54
Retirement/Amendment of Maxxim Notes...................... 54
Directors and Officers.................................... 54
Representations and Warranties............................ 54
Covenants; Conduct of the Business of Maxxim Prior to the
Merger................................................. 55
Prohibition Against Solicitation of Competing
Transactions........................................... 56
Access to Information..................................... 58
Cooperation and Reasonable Efforts to Complete the
Merger................................................. 58
Indemnification and Insurance............................. 58
Conditions to the Merger.................................. 58
Termination............................................... 59
Termination Fees.......................................... 60
Expenses.................................................. 60
Amendment and Waiver...................................... 61
Estimated Fees and Expenses of the Merger................. 61
Amendment to Rights Agreement............................. 61
APPRAISAL RIGHTS............................................ 61
REGULATORY APPROVALS........................................ 64
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND
OTHERS.................................................... 64
FEDERAL INCOME TAX CONSEQUENCES............................. 65
INDEPENDENT AUDITORS........................................ 66
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 66
LEGAL PROCEEDINGS........................................... 66
OTHER MATTERS............................................... 68
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE 2000 ANNUAL
MEETING................................................... 68
WHERE YOU CAN FIND MORE INFORMATION......................... 68
APPENDICES
APPENDIX A -- AGREEMENT AND PLAN OF MERGER AND AMENDMENT NO.
1 TO MERGER AGREEMENT......................... A-1
APPENDIX B -- OPINION OF LAZARD FRERES & CO. LLC............ B-1
APPENDIX C -- ARTICLES 5.11, 5.12 AND 5.13 OF THE TEXAS
BUSINESS CORPORATION ACT...................... C-1
APPENDIX D -- FORMS OF VOTING AGREEMENT AND FIRST AMENDMENT
TO VOTING AGREEMENT........................... D-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to briefly address some
commonly asked questions regarding the merger. It should be read together with
the Summary that follows. These questions and answers may not address all
questions that may be important to you as a Maxxim shareholder. Please refer to
the more detailed information contained elsewhere in this proxy statement, the
appendices to this proxy statement, and the documents referred to or
incorporated by reference in this proxy statement.
Q: WHAT IS THE PROPOSED TRANSACTION?
A: Fox Paine Capital Fund, L.P. and other related private investment funds will
acquire a majority of the shares of Maxxim common stock, a group of 10
current Maxxim shareholders will retain their equity in Maxxim, and all of
Maxxim's other shareholders will receive $26 per share in cash for their
shares of Maxxim common stock, including the associated preferred stock
purchase rights. Separately, Fox Paine and the other funds, along with the 10
continuing shareholders, will acquire Maxxim's Circon subsidiary. The group
of 10 continuing shareholders includes eight members of Maxxim's senior
management team and two other shareholders (one is a non-employee director
and the other is a vice-president and significant shareholder). This group is
referred to throughout this proxy statement as the "Continuing Shareholders"
and their names are listed on pages 14 and 15.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive $26.00 in cash, without interest, for each share of Maxxim
common stock that you own.
Q: WHEN WILL THE MERGER BE COMPLETED? WHEN CAN I EXPECT TO RECEIVE CASH IN
EXCHANGE FOR MY SHARES?
A: We expect to complete the merger early in November 1999, although we cannot
assure you that the actual date will not be later. As soon as the merger is
completed, Maxxim will send you detailed instructions regarding surrendering
your Maxxim shares and receiving your cash payment. PLEASE DO NOT SEND YOUR
SHARE CERTIFICATES NOW.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of the cash by you in exchange for your Maxxim shares will be a
taxable transaction for U.S. federal income tax purposes and may be taxable
under applicable state, local, and other tax laws. To review the tax
consequences to you in greater detail, see pages 65 through 66. Your tax
consequences will depend on your personal situation. You should consult your
tax advisors for a full understanding of the tax consequences of the merger
to you.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the merger agreement, which is the legal
document governing the merger and the related transactions we describe in
this proxy statement.
Q: WHAT DOES THE BOARD OF DIRECTORS OF MAXXIM RECOMMEND?
A: The full Maxxim board believes that the terms of the merger are advisable,
fair to and in the best interests of Maxxim and its shareholders and
unanimously recommends that Maxxim shareholders vote "FOR" approval of the
merger agreement. In addition, because some of the Continuing Shareholders
are directors and executive officers of Maxxim, the Maxxim board established
a special committee consisting of four independent directors to review and
evaluate the proposed merger. None of the members of the special committee
are Continuing Shareholders. The special committee, like the full board,
believes that the terms of the merger are advisable, fair to and in the best
interests of Maxxim and its shareholders and unanimously recommends that
Maxxim shareholders vote "FOR" approval of the merger agreement.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT?
A: The merger agreement must be approved by a majority of the outstanding shares
of Maxxim common stock. If you fail to vote, it will have the same effect as
a vote against the merger agreement. Therefore, it is important that you
return your signed proxy card.
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<PAGE> 7
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: Yes. You have the right to dissent from approval of the merger agreement and,
subject to strict compliance with the requirements and procedures of Texas
law, to receive payment of the "fair value" of your shares of Maxxim common
stock. These rights, as well as the requirements and procedures for
dissenting under Texas law are described on pages 61 through 63 under
"Appraisal Rights." In addition, the full text of the relevant articles of
the Texas Business Corporation Act are reprinted in Appendix C to this proxy
statement.
Q: HOW DO I VOTE?
A: Just indicate on the enclosed proxy card how you want to vote, and then date,
sign and mail it in the enclosed envelope. Please vote as soon as possible to
ensure that your shares are represented at the special shareholders meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your Maxxim shares only if you provide instructions to
your broker on how to vote. You should instruct your broker how to vote your
shares, following the directions your broker provides. If you do not provide
instructions to your broker, your shares will not be voted, which will have
the same effect as a vote against the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You may revoke your proxy by notifying the Secretary of
Maxxim in writing or by submitting a new proxy, in each case, dated after the
date of the proxy being revoked. In addition, your proxy may be revoked by
attending the special meeting and voting in person. However, simply attending
the special meeting will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow the instructions received from
your broker to change your vote.
WHO CAN HELP ANSWER YOUR QUESTIONS:
If you would like additional copies of this document, or if you would like to
ask any questions about the merger, you should contact:
(MACKENZIE PARTNERS, INC. LOGO)
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Collect) or Call Toll Free: (800) 322-2885
2
<PAGE> 8
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement includes and incorporates by reference statements that
are not historical facts. These forward-looking statements are based on our
current plans and expectations relating to analyses of value, expectations for
anticipated growth in the future and future success under various efforts, and,
as such, these forward-looking statements involve uncertainty and risk. The
forward-looking statements are not guarantees of future performance, and actual
results may differ materially from those contemplated by such forward-looking
statements. You are cautioned to consider these statements in light of the
following assumptions: that products in development will be introduced
successfully and on schedule; that we will make acquisitions which contribute to
profitability; that key distributors will make purchases at the same level as
their sales; that demand for our products will follow recent growth trends; that
competitors will not introduce new products which will substantially reduce our
market share in our most significant product lines; that we will continue to
manufacture high-quality products at competitive costs and maintain or increase
product pricing; and that we will become year 2000 compliant without material
expenditures and our key suppliers and customers also will become year 2000
compliant so that our business is not disrupted. In addition, actual results
could differ materially from the forward-looking statements contained in this
proxy statement as a result of the timing of the completion of the merger or the
impact of the merger on operating results, capital resources, profitability, and
cash requirements and liquidity.
In the event any of the above factors do not occur as anticipated, actual
results could differ materially from the expectations expressed in the
forward-looking statements. Except to the extent required under the federal
securities laws, Maxxim does not intend to make publicly available any update or
other revisions to the forward-looking statements to reflect circumstances
arising after the date of the preparation of the forward-looking statements.
3
<PAGE> 9
SUMMARY
This summary highlights material information from this document and may not
contain all of the information that is important to you. It should be read
together with the questions and answers provided on the previous pages. For a
more complete understanding of the merger and the related transactions, and for
a more complete description of the legal terms of the merger, you should read
this proxy statement in its entirety carefully, as well as the additional
documents to which we refer you. See "Where You Can Find More Information" on
page 68.
THE PARTICIPANTS
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, Florida 33762
(727) 561-2100
Maxxim Medical, Inc. is a major, diversified developer, manufacturer and
marketer of specialty medical products for use in acute and alternate care
settings. Our products include custom procedure trays, medical gloves,
endoscopic and laparoscopic systems, as well as electrosurgical and video
systems for general surgery, urology, gynecology, interventional radiology and
critical care. We refer to Maxxim Medical, Inc. as "Maxxim" throughout this
proxy statement. You should also know that references to Maxxim in this proxy
statement include its subsidiaries, unless the context clearly indicates
otherwise.
Fox Paine Medic Acquisition Corporation
c/o Fox Paine & Company, LLC
950 Tower Lane, Suite 1150
Foster City, California 94404
(650) 525-1300
Fox Paine Medic Acquisition Corporation is the entity that will be merged
with Maxxim in the merger. It was formed by Fox Paine Capital Fund, L.P., a
private investment fund, for the purpose of participating in the merger
transactions. We refer to Fox Paine Medic Acquisition Corporation as "Fox Paine
Maxxim" throughout this proxy statement. Fox Paine Maxxim is not expected to
have any significant assets or liabilities, or engage in any business activities
other than those related to completing the merger, and it will cease to exist
after the merger.
Fox Paine Capital Fund, L.P. is a private investment fund managed by Fox
Paine & Company, LLC. Fox Paine & Company, LLC manages investment funds in
excess of $500 million focused on investing equity capital in management-led
acquisitions and company expansion programs and restructurings. Fox Paine was
founded in 1997 by Saul Fox and Dexter Paine. Throughout this proxy statement,
we sometimes refer to Fox Paine Capital Fund, L.P. and Fox Paine Maxxim together
as "Fox Paine."
Fox Paine Capital Fund, L.P. owns all of the equity of Fox Paine Maxxim and
all of the equity of Fox Paine Citron Acquisition Corporation, which is the
company that will buy Maxxim's Circon subsidiary from Maxxim as part of the
merger transactions. We refer to Fox Paine Citron Acquisition Corporation as
"Fox Paine Circon" in this proxy statement.
Fox Paine may permit institutional investors and funds managed by Fox
Paine, as well as individuals or entities having significant business
relationships with Maxxim and Circon, to purchase a portion of the equity of
Maxxim or Fox Paine Circon that would otherwise be purchased by Fox Paine in the
transactions described in this proxy statement. All other investors are expected
to pay the same price per share for their Maxxim or Fox Paine Circon shares as
Fox Paine does. Members of the special committee of Maxxim's independent
directors formed to, among other things, evaluate the transaction will not be
offered the opportunity to purchase the equity. The participation of any such
additional investors would not result in Fox Paine being the beneficial owner of
less than a majority of the equity interests in either Maxxim or Fox Paine
Circon. See "Merger Financing." Throughout this proxy statement, we refer to Fox
Paine, together with any additional permitted investors described above, if any,
as the "Fox Paine Investors." See "Special Factors -- Fox Paine's
4
<PAGE> 10
and the Continuing Shareholders' Reasons for the Merger" for a description of
Fox Paine's reasons for the merger.
The Continuing Shareholders
Eight members of Maxxim's senior management and two other shareholders (one
is a non-employee director and the other is a vice president and significant
shareholder) are participating in the merger transactions and will be treated
differently from all other Maxxim shareholders. These ten individuals are
referred to throughout this proxy statement as the "Continuing Shareholders,"
and the eight Continuing Shareholders who are members of Maxxim's senior
management are referred to throughout this proxy statement as the "Management
Investors." Kenneth W. Davidson, who is the Chairman of Maxxim's board of
directors and is Maxxim's President and Chief Executive Officer, is both a
Continuing Shareholder and a Management Investor. The other Continuing
Shareholders, including the Management Investors, are listed on pages 14 and 15
under "Special Factors -- Structure of the Transactions; Transaction
Participants." See "Special Factors -- Fox Paine's and the Continuing
Shareholders' Reasons for the Merger" for a description of the Continuing
Shareholders' reasons for the merger.
STRUCTURE OF THE TRANSACTIONS (PAGE 14)
We propose a two-part transaction involving the sale by Maxxim of its
Circon subsidiary to Fox Paine Circon and the merger of Fox Paine Maxxim into
Maxxim, with Maxxim surviving the merger and continuing its businesses
(excluding the Circon business). These transactions will have several important
effects, including:
- The current shareholders of Maxxim, other than the Continuing
Shareholders (and other than shareholders who perfect their appraisal
rights) will receive $26.00 per share in cash for their Maxxim shares
(including the preferred stock purchase rights associated with those
shares), and will no longer have any interest in and will not be
shareholders of Maxxim or Circon.
- Each outstanding option to purchase Maxxim shares (other than certain
options held by Continuing Shareholders) will be canceled in exchange for
a cash payment for each Maxxim share subject to the option equal to the
excess of $26.00 over the per share exercise price of the option. Options
held by the Continuing Shareholders will either be canceled and the cash
proceeds reinvested in Maxxim shares, or canceled without payment and
replaced by options to purchase Fox Paine Circon shares. See "Interests
of Certain Persons in the Merger -- Treatment of Continuing Shares and
Options."
- After the merger, Maxxim and Circon will be separate companies, will be
separately capitalized and will separately pursue their respective
business strategies.
- Immediately after the merger, Maxxim will be owned approximately 87% by
the Fox Paine Investors and approximately 13% by the Continuing
Shareholders, and Circon will be wholly-owned by Fox Paine Circon, which
will be owned approximately 90% by the Fox Paine Investors and
approximately 10% by the Continuing Shareholders (in both cases, before
giving effect to the exercise of any stock options or warrants). After
giving effect to the exercise of warrants and options, the Continuing
Shareholders will own approximately 27.4% of each of Maxxim and Fox Paine
Circon, and Fox Paine will own more than a majority of each company.
- The Maxxim shares will no longer be listed on the New York Stock Exchange
and price quotations with respect to sales of shares in the public market
will no longer be available. The registration of the Maxxim shares under
the Securities Exchange Act of 1934 will be terminated, and Maxxim will
cease filing reports with the SEC.
- After the transactions, it is expected that Maxxim and Circon will
continue to operate their current respective businesses and that each
will be managed by their existing management teams. Fox Paine, which will
be the majority shareholder of both Maxxim and Circon after the
transactions, has no present intention to dispose of its equity
investment in Maxxim or Circon or to cause either Maxxim or
5
<PAGE> 11
Circon to engage in a significant business combination. Maxxim and Circon
each intends to pursue potential acquisitions it considers appropriate at
any time they become available.
THE SPECIAL MEETING (PAGE 50)
The special meeting of Maxxim shareholders will be held on November 3,
1999, at 3:30 p.m., local time, at the Feather Sound Country Club, 2201 Feather
Sound Drive, Clearwater, Florida. At the special meeting, you will be asked to
consider and vote upon a proposal to approve the merger agreement.
Record Date; Voting Power. Only holders of shares of Maxxim common stock
who were holders at the close of business on the record date, September 8, 1999,
are entitled to notice of and to vote at the special meeting. As of that date,
there were 14,276,682 shares of Maxxim common stock issued and outstanding. Each
Maxxim share is entitled to one vote on any matter that may properly come before
the special meeting.
Vote Required. The merger agreement must be approved by a majority of the
outstanding shares of Maxxim common stock. If you fail to vote, it will have the
same effect as a vote against the merger agreement.
Changing Your Vote. You can change your vote at any time before we vote
your proxy at the special meeting in any of three ways. First, you can send a
written notice to the Secretary of Maxxim at the address below stating that you
would like to revoke your proxy. Second, you can complete a new later dated
proxy card and send it to the Secretary of Maxxim, and the new proxy card will
automatically replace any earlier proxy card you returned. Third, you can attend
the special meeting and vote in person. You should send any written notice or
new proxy card to the Secretary of Maxxim at the following address: Maxxim
Medical, Inc., 10300 49th Street North, Clearwater, Florida 33762, Attention:
Corporate Secretary. If you have instructed a broker to vote your shares, you
must follow the instructions received from your broker to change your vote.
THE VOTING AGREEMENTS (PAGE 51)
Fox Paine Maxxim entered into individual voting agreements with each of the
Continuing Shareholders in which the Continuing Shareholders agreed to vote
their shares of Maxxim common stock in favor of the merger agreement and the
merger transactions and against any competing or alternative proposals. In
connection with the settlement of certain litigation relating to the merger
agreement, Fox Paine Maxxim and the Continuing Shareholders have amended their
voting agreements to provide that the Continuing Shareholders will vote their
shares of Maxxim common stock for and against approval of the merger agreement
in the same proportions as the public shareholders (other than the Continuing
Shareholders) voting on the proposal. The voting agreements will remain in
effect as long as the merger agreement is in effect. The Continuing Shareholders
have the power to vote, in the aggregate, approximately 8% of the outstanding
shares of Maxxim common stock. Fox Paine does not have the power to vote any
Maxxim shares at the Maxxim Special Meeting. See "The Special Meeting -- Voting
Agreements."
RECOMMENDATION TO SHAREHOLDERS (PAGE 21)
The full Maxxim board believes that the terms of the merger are advisable,
fair to and in the best interests of Maxxim and its shareholders (other than the
Continuing Shareholders), and unanimously recommends that Maxxim shareholders
vote "FOR" approval of the merger agreement. In addition, because some of the
directors and executive officers of Maxxim are Continuing Shareholders and
therefore may have interests in the merger that differ from those of
shareholders generally, the Maxxim board established a special committee
consisting of four independent directors to review and evaluate the proposed
merger. See the description of the background of the merger under the heading
"Special Factors -- Background of the Merger." None of the members of the
special committee are Continuing Shareholders. The special committee, like the
full board, believes that the terms of the merger are advisable, fair to and in
the best interests of Maxxim and its shareholders (other than the Continuing
Shareholders) and unanimously recommends that Maxxim shareholders vote "FOR"
approval of the merger agreement. You also should refer to the factors that the
special committee and Maxxim board considered in determining whether to approve
the merger agreement on pages 21 through 24 under "Special
Factors -- Recommendation of the Special Committee and of the Full Maxxim Board;
Fairness of the Merger." As discussed in and based upon the
6
<PAGE> 12
factors set forth under "Special Factors -- Position of the Continuing
Shareholders as to the Fairness of the Merger," each of the Continuing
Shareholders believes that the merger, the merger agreement and the merger
transactions are fair to and in the best interests of Maxxim's public
shareholders. This belief should not be construed as a recommendation to Maxxim
Shareholders by the Continuing Shareholders to approve the merger agreement and
the transactions contemplated thereby. Additionally, as discussed in, and based
upon the factors set forth under "Special Factors -- Position of Fox Paine as to
the Fairness of the Merger," Fox Paine and Fox Paine Maxxim also believe that
the merger is fair to Maxxim shareholders (other than the Continuing
Shareholders). This belief should not be construed as a recommendation to Maxxim
Shareholders by either Fox Paine or Fox Paine Maxxim to approve the merger
agreement and the transactions contemplated thereby.
FAIRNESS OPINION (PAGE 25)
Lazard Freres & Co. LLC, which served as financial advisor to the special
committee, has delivered a written opinion to the Maxxim board that, as of June
13, 1999, the $26 per share cash merger consideration was fair from a financial
point of view to Maxxim's public shareholders (other than the Continuing
Shareholders). A copy of Lazard Freres' opinion, which includes a discussion of
the information reviewed, assumptions made and matters considered by Lazard
Freres, is attached to this proxy statement as Appendix B. You should read this
opinion in its entirety, as well as the other information described under
"Special Factors -- Opinion of Lazard Freres & Co. LLC."
TERMS OF THE MERGER AGREEMENT (PAGE 53)
The merger agreement is the legal document that governs the merger
transactions. We have attached the merger agreement as Appendix A to this proxy
statement, and we encourage you to read it carefully.
Conditions to the Merger. The completion of the merger depends on a number
of conditions being met. In addition to customary conditions relating to our
compliance with the merger agreement, these conditions include the following:
- approval of the merger agreement by the holders of a majority of the
outstanding shares of Maxxim common stock;
- absence of any statute, rule, regulation, order or injunction of any
governmental entity or court prohibiting or restricting completion of the
merger;
- closing of the debt tender offer and amendment of Maxxim's outstanding
10 1/2% senior subordinated notes described on page 54 under "The
Merger -- Retirement/Amendment of Maxxim Notes" occurring concurrently
with the completion of the merger;
- closing of the Circon sale described on page 53 under "The
Merger -- Structure and Effective Time" occurring concurrently with the
completion of the merger, unless otherwise requested by Fox Paine Maxxim;
- Maxxim having received an independent solvency opinion;
- Maxxim having received a written opinion from its independent auditor to
the effect that the transactions contemplated in the merger agreement
will receive recapitalization accounting treatment; and
- financing for the merger having been obtained on terms and conditions
satisfactory to Fox Paine Maxxim.
7
<PAGE> 13
Termination of the Merger Agreement. Maxxim and Fox Paine Maxxim can agree
at any time to terminate the merger agreement without completing the merger,
even if Maxxim shareholders have approved it. Also, either Maxxim or Fox Paine
Maxxim can terminate the merger agreement, without the consent of the other, in
various circumstances, including the following:
- if the shareholders of Maxxim fail to approve the merger agreement at the
special meeting;
- if any court or governmental entity issues any final order, decree or
ruling or takes any other final action restraining, enjoining or
otherwise prohibiting the completion of the merger, and such judgment,
injunction, order or decree has become final and nonappealable;
- if the merger has not been completed by December 31, 1999, unless the
party seeking to terminate has caused the failure of completion by
failing to fulfill any of its obligations under the merger agreement; or
- if there has been a material breach of any representation, warranty or
covenant made by the other party, which would cause one of the conditions
to the merger not to be satisfied and which cannot be or has not been
cured within 30 days from the time the breaching party receives notice of
the breach.
In addition, Fox Paine Maxxim may, without the consent of Maxxim, terminate
the merger agreement in various circumstances including the following:
- the Maxxim board withdraws or modifies its recommendation that Maxxim
shareholders vote to approve the merger agreement (or publicly announces
its intention to do so);
- the Maxxim board recommends any proposal for a competing acquisition
transaction;
- any person other than Fox Paine Maxxim and its affiliates becomes the
beneficial owner of 15% or more of Maxxim's common stock; or
- Maxxim breaches the provisions described on page 56 under "The
Merger -- Prohibition Against Solicitation of Competing Transactions."
Maxxim, may, without the consent of Fox Paine Maxxim, terminate the merger
agreement in order to enter into a superior transaction in compliance with the
provisions of the merger agreement described on page 56 under "The
Merger -- Prohibition Against Solicitation of Competing Transactions," but only
in strict compliance with those provisions, including providing Fox Paine Maxxim
with at least five full business days' written notice of termination and paying
to Fox Paine Maxxim a termination fee of $19 million.
ACCOUNTING TREATMENT
We expect that the merger will be treated as a "recapitalization" for
accounting purposes.
MERGER FINANCING (PAGE 44)
It is expected that completion of the merger transactions will require
total funding of approximately $793.0 million, which will be obtained from the
following sources:
- $285.0 million in senior secured credit facilities committed by The Chase
Manhattan Bank, of which $235.0 million is expected to be funded at
closing;
- $150.0 million in new senior subordinated notes to be issued by a
subsidiary of Maxxim in a private placement (or, if the subsidiary is
unable to sell these senior subordinated notes, $150.0 million in senior
subordinated bridge loans committed by The Chase Manhattan Bank);
- $50.0 million in senior unsecured notes to be issued by Maxxim in a
private placement;
- $208.0 million in cash from the sale of Circon Corporation to Fox Paine
Circon immediately before the merger (the financing for this $208 million
is described on page 48 under "Merger Financing -- Financing of the
Circon Sale");
8
<PAGE> 14
- $130.4 million of cash equity provided by the Fox Paine Investors; and
- $19.6 million of existing equity contributed by the Continuing
Shareholders (consisting of $14.9 million of shares of Maxxim common
stock retained in the merger and $4.7 million of new shares of Maxxim
common stock purchased from the proceeds of the cash-out of Maxxim
options in the merger).
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 35)
The Continuing Shareholders have interests in the merger transactions as
employees and/or directors of Maxxim, or as shareholders with a continuing
equity interest in Maxxim and Circon, that are different from, or in addition
to, yours as a Maxxim shareholder. In particular, the Continuing Shareholders
will not receive $26 per share, in cash, for all of their Maxxim shares, and
will remain shareholders of Maxxim and will become shareholders of Fox Paine
Circon. In addition, the Continuing Shareholders have entered into an investor
participation agreement with Fox Paine Maxxim that would provide the Continuing
Shareholders with a number of benefits after the merger. The material benefits,
in addition to continued participation in the ownership of equity and stock
options, are loans to cover the taxes due on the cash received from the
conversion of the shares used to purchase Fox Paine Circon shares, employment
agreements and cash and equity incentive compensation for those Continuing
Shareholders who are members of Maxxim's senior management team, including
participation in a special bonus program established by Maxxim valued at
$3,633,000 in the aggregate and a special bonus program established by Fox Paine
Circon valued at approximately $5,000,000 in the aggregate. These benefits, and
other provisions contained in the investor participation agreement, are
described on pages 35 to 41 under "Special Factors -- Interests of Certain
Persons in the Merger."
When making the determination to approve and recommend approval of the
merger transactions to Maxxim's public shareholders, both the Maxxim board and
the special committee of independent directors appointed to review the proposed
merger were aware of the interests of the Continuing Shareholders and considered
these interests together with the other factors described under "Special
Factors -- Recommendation of the Special Committee and of the Full Maxxim Board;
Fairness of the Merger."
REGULATORY APPROVALS (PAGE 64)
In order to complete the merger, Maxxim and Fox Paine Maxxim were required
to make certain filings with and receive authorizations from the U.S. Federal
Trade Commission and the Antitrust Division of the U.S. Department of Justice
under federal antitrust laws. These filings were made and the authorization has
been received.
9
<PAGE> 15
HISTORICAL MARKET INFORMATION
Maxxim's common stock is traded on the New York Stock Exchange under the
symbol "MAM." The following table sets forth the high and low sale prices on the
New York Stock Exchange for the Maxxim shares for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- --------
<S> <C> <C>
FISCAL YEAR ENDED NOVEMBER 2, 1997:
First Quarter............................................. 15 1/8 12 1/4
Second Quarter............................................ 16 12 5/8
Third Quarter............................................. 19 5/16 13 1/4
Fourth Quarter............................................ 26 19 1/2
FISCAL YEAR ENDED NOVEMBER 1, 1998:
First Quarter............................................. 24 15/16 19 1/2
Second Quarter............................................ 28 15/16 22 1/8
Third Quarter............................................. 29 3/8 22 7/8
Fourth Quarter............................................ 26 15/16 16 1/8
FISCAL YEAR ENDING OCTOBER 31, 1999:
First Quarter............................................. 30 5/8 24 7/16
Second Quarter............................................ 27 15/16 15 1/2
Third Quarter............................................. 23 13/16 14 15/16
Fourth Quarter (through October 1, 1999).................. 24 11/16 23 6/16
</TABLE>
As of September 8, 1999, there were 220 holders of record of Maxxim's
common stock. Maxxim estimates that there are approximately 4,820 beneficial
holders of Maxxim's common stock.
Maxxim has never paid cash dividends on its common stock. Maxxim's present
credit facility prohibits payments of dividends. In addition, under the terms of
the merger agreement, Maxxim is not permitted to declare or pay dividends on the
common stock during the term of the agreement.
On June 11, 1999, the last full trading day prior to the announcement of
the execution of the merger agreement, the last reported sales price of Maxxim
shares on the NYSE was $19.875 per share. On October 1, 1999, the last reported
sales price of the shares was $23.69 per share. Shareholders are urged to obtain
a current market quotation for the shares.
In March 1998, Maxxim completed a public offering of 4,025,000 shares of
its common stock at a price to the public of $24.00 per share, including 525,000
shares pursuant to the underwriters' exercise of the overallotment option. After
deducting offering costs and commissions, Maxxim received net proceeds of
approximately $91,418,000.
In May 1997, pursuant to Maxxim's Senior Management Stock Purchase Plan,
the Management Investors purchased at $13.00 per share (the closing sale price
of the common stock on the New York Stock Exchange on April 30, 1997) the shares
set forth opposite their names in the table below:
<TABLE>
<CAPTION>
NAME SHARES PURCHASED
- ---- ----------------
<S> <C>
Kenneth W. Davidson......................................... 100,000 shares
Peter M. Graham............................................. 50,000 shares
Jack F. Cahill.............................................. 44,000 shares
David L. Lamont............................................. 39,000 shares
Alan S. Blazei.............................................. 39,000 shares
Henry T. DeHart III......................................... 39,000 shares
Joseph D. Dailey............................................ 28,000 shares
Suzanne R. Garon............................................ 7,000 shares
</TABLE>
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<PAGE> 16
Since the beginning of fiscal 1997, certain of the Continuing Investors
have made the following additional purchases of Maxxim shares, all of which were
pursuant to stock option exercises, except for those marked with an "*":
<TABLE>
<CAPTION>
NAME DATE SHARES PURCHASED PRICE
- ---- ---- ---------------- -----
<S> <C> <C> <C>
Kenneth W. Davidson................................. 8/31/98 5,000 $13.39
Kenneth W. Davidson................................. 10/27/97 3,000 12.96
Peter M. Graham..................................... 10/23/98 4,000 13.39
Peter M. Graham..................................... 10/31/97 3,000 12.96
Alan S. Blazei...................................... 7/20/98 3,000 13.39
Alan S. Blazei...................................... 9/19/97 3,000 12.96
David L. Lamont..................................... 8/31/98 3,000 13.39
David L. Lamont..................................... 10/27/97 3,000 12.96
Jack F. Cahill...................................... 7/28/98 800 15.40
Jack F. Cahill...................................... 7/28/98 1,800 10.73
Joseph D. Dailey.................................... 10/8/98 1,000 13.39
Ernest J. Henley, Ph.D.............................. 6/12/98 8,000 11.48
Ernest J. Henley, Ph.D.............................. 6/12/98 3,000 10.73
Ernest J. Henley, Ph.D.............................. 10/30/97 3,000 12.96
Ernest J. Henley, Ph.D.............................. 10/30/97 3,000 15.40
Ernest J. Henley, Ph.D*............................. 7/7/97 2,000 19.25
Davis C. Henley*.................................... 3/4/99 5,000 17.25
</TABLE>
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<PAGE> 17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Our selected historical consolidated financial information for the five
fiscal years 1998, 1997, 1996, 1995 and 1994 set forth below has been derived
from our audited consolidated financial statements. The financial information
for the nine-month periods ended August 1, 1999 and August 2, 1998, has been
derived from unaudited consolidated financial statements. The unaudited
financial statements reflect all adjustments (consisting of normal recurring
adjustments) which are necessary for a fair presentation of such information.
Results for the nine-month periods are not necessarily indicative of results for
the full year. The financial data should be read in conjunction with the
financial statements and related notes that have been filed with the Securities
and Exchange Commission. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED ---------------------
---------------------------------------------------- AUGUST 1, AUGUST 2,
1998 1997 1996 1995 1994 1999 1998
-------- -------- -------- -------- -------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $522,516 $529,522 $399,836 $265,726 $191,382 $485,367 $389,018
Cost of sales................................ 381,638 397,691 294,164 186,495 129,569 324,327 285,891
-------- -------- -------- -------- -------- -------- --------
Gross profit................................. 140,878 131,861 105,672 79,231 61,813 161,040 103,127
Operating expenses........................... 94,410 90,101 77,980 60,329 48,390 109,947 69,125
Nonrecurring charges and transition
expenses (1)............................... -- -- -- 10,845 -- 3,371 --
-------- -------- -------- -------- -------- -------- --------
Income from operations....................... 46,468 41,760 27,692 8,057 13,423 47,722 34,002
Interest expense, net........................ (13,420) (22,145) (13,143) (4,088) (2,059) (19,940) (10,382)
Other income, net............................ 1,042 2,751 583 1,014 859 299 514
-------- -------- -------- -------- -------- -------- --------
Income before income taxes (2)............... 34,090 22,366 15,132 4,983 12,223 28,081 24,134
Income taxes................................. 14,454 9,485 6,422 2,054 4,538 12,228 10,220
Changes in accounting for income taxes....... -- -- -- -- 380 -- --
-------- -------- -------- -------- -------- -------- --------
Net income................................... $ 19,636 $ 12,881 $ 8,710 $ 2,929 $ 8,065 $ 15,853 $ 13,914
======== ======== ======== ======== ======== ======== ========
Basic earnings per share (3)(4).............. $ 1.55 $ 1.55 $ 1.08 $ 0.36 $ 1.10 $ 1.11 $ 1.15
======== ======== ======== ======== ======== ======== ========
Diluted earnings per share (3)(4)............ $ 1.50 $ 1.42 $ 1.02 $ 0.36 $ 1.05 $ 1.09 $ 1.11
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital.............................. $108,918 $ 99,815 $122,086 $ 73,286 $ 82,886 $141,554 $ 99,317
Total assets................................. 468,051 424,046 465,347 264,490 165,416 754,806 440,241
Long-term liabilities (includes current
portion):
Capital leases and other................... 7,883 6,433 10,586 2,421 1,684 8,770 10,882
Bank debt.................................. 13,800 91,300 128,590 76,987 -- 254,700 --
Convertible debentures..................... -- 23,352 28,750 28,750 28,750 -- --
Senior notes............................... 100,000 100,000 100,000 -- -- 100,000 100,000
Shareholders' equity......................... 272,909 137,928 123,556 116,351 111,470 284,413 262,679
Book value per share, diluted................ $ 20.79 $ 14.03 $ 12.53 $ 11.81 $ 12.43 $ 19.48 $ 20.77
PERFORMANCE MEASUREMENT:
Revenue growth (decline)..................... (1.3)% 32.4% 50.5% 38.8% 47.5% 24.8% (2.3)%
Pre-tax income as a % of total revenue....... 6.5 4.2 3.8 1.9 6.4 5.8 6.2
Effective income tax rate.................... 42.4 42.4 42.4 41.2 37.1 43.5 42.3
Net income as a % of total revenue........... 3.8 2.4 2.2 1.1 4.2 3.3 3.6
Return on average shareholders' equity....... 9.6 9.8 7.3 2.6 9.0 5.7 6.9
Total debt as a % of debt plus equity........ 30.8 61.6 68.4 48.2 21.4 56.1 29.7
Working capital ratio........................ 2.7x 2.3x 2.4x 2.4x 4.5x 2.2x 2.6x
</TABLE>
12
<PAGE> 18
- ---------------
(1) Nonrecurring charges and transition expenses includes the following:
a. Expenses for the nine-month period ended August 1, 1999, related to
Maxxim's sales force restructuring and the acquisition and integration
of Circon.
b. Fiscal 1995 expenses related to the formation of Maxxim's Case
Management division.
(2) Income before income taxes includes 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 Maxxim's Case Management division.
(3) For information concerning calculation of earnings per share, see Note 1 of
the Notes to Consolidated Financial Statements contained in Maxxim's Annual
Report on Form 10-K for the fiscal year ended November 1, 1998, as amended
June 16, 1999, incorporated by reference in this proxy statement. Maxxim has
restated all previous earnings per share data to comply with Statement of
Financial Accounting Standards No. 128, "Earnings per Share."
(4) Fiscal 1994 basic and diluted earnings per share exclude $.05 and $.04
adjustments respectively, to reflect the change in accounting for income
taxes.
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<PAGE> 19
SPECIAL FACTORS
STRUCTURE OF THE TRANSACTIONS; TRANSACTION PARTICIPANTS
We propose a two-part transaction involving the sale by Maxxim of its
Circon Corporation subsidiary to Fox Paine Circon, an affiliate of Fox Paine,
and the merger of Fox Paine Maxxim into Maxxim, with Maxxim surviving this
merger and continuing its businesses (other than Circon's businesses). These
transactions will have several important effects, including:
- The current shareholders of Maxxim, other than the Continuing
Shareholders (and other than shareholders who perfect appraisal rights)
will receive $26 per share in cash for their Maxxim shares (and the
associated preferred stock purchase rights) and will no longer have any
interest in and will not be shareholders of Maxxim or Circon.
- Each outstanding option to purchase Maxxim shares (other than certain
options held by Continuing Shareholders) will be canceled in exchange for
a cash payment for each Maxxim share subject to the option equal to the
excess of $26.00 over the per share exercise price of the option. Options
held by the Continuing Shareholders will either be canceled and the
after-tax cash proceeds reinvested in Maxxim shares, or canceled without
payment and replaced by options to purchase Fox Paine Circon shares. See
"-- Interests of Certain Persons in the Merger -- Treatment of Continuing
Shares and Options."
- After the merger, Maxxim and Circon will be separate companies, will be
capitalized separately, and will pursue separately their respective
business strategies.
- Immediately after the merger, Maxxim will be owned approximately 87% by
the Fox Paine Investors and approximately 13% by the Continuing
Shareholders described below, and Circon will be wholly-owned by Fox
Paine Circon, which will be owned approximately 90% by the Fox Paine
Investors and approximately 10% by the Continuing Shareholders (in both
cases, before giving effect to the exercise of any stock options or
warrants). After giving effect to the exercise of warrants and options,
the Continuing Shareholders will own approximately 27.4% of each of
Maxxim and Fox Paine Circon, and Fox Paine will own more than a majority
of each company.
- The Maxxim shares will no longer be listed on the New York Stock Exchange
and price quotations with respect to sales of Maxxim shares in the public
market will no longer be available. The registration of the Maxxim shares
under the Securities Exchange Act of 1934 will be terminated, and Maxxim
will cease filing reports with the SEC.
Eight members of Maxxim's senior management and two other shareholders (one
is a non-employee director of Maxxim and the other is a vice president and
significant shareholder) are participating in the merger transactions together
with Fox Paine and will be treated differently than the rest of Maxxim's
shareholders. These 10 individuals are referred to throughout this proxy
statement as the "Continuing Shareholders," and the eight Continuing
Shareholders who are members of Maxxim's senior management are referred to
throughout this proxy statement as the "Management Investors." None of the
Continuing Shareholders served as a member of the special committee of
independent directors formed, among other things, to evaluate the transaction.
The members of the special committee were Maxxim directors Donald R. DePriest,
Martin Grabois, Richard O. Martin and Henk R. Wafelman. The following table
lists the
14
<PAGE> 20
Continuing Shareholders and their current occupations. Those noted with an "*"
are also Management Investors.
<TABLE>
<CAPTION>
NAME CURRENT OCCUPATION
---- ------------------
<S> <C>
Kenneth W. Davidson*... Chairman of the Board, President and Chief Executive Officer
of Maxxim
Peter M. Graham*....... Senior Executive Vice President, Chief Operating Officer and
Secretary of Maxxim
David L. Lamont*....... Executive Vice President, Research and Development of Maxxim
Alan S. Blazei*........ Executive Vice President, Controller and Treasurer of Maxxim
Henry T. DeHart III*... Executive Vice President, Manufacturing Operations of Maxxim
Joseph D. Dailey*...... Executive Vice President, Information Services of Maxxim
Jack F. Cahill*........ Executive Vice President, Sales and Marketing of Maxxim
Suzanne R. Garon*...... Executive Vice President, Human Resources of Maxxim
Ernest J. Henley,
Ph.D................. Director of Maxxim; Professor of Chemical Engineering at the
University of Houston
Davis C. Henley (1).... Vice President of Maxxim
</TABLE>
- ---------------
(1) Davis C. Henley is the son of Ernest J. Henley.
For additional details on the terms and structure of the merger and the
merger transactions, please see page 53 under "The Merger -- Structure and
Effective Time," for additional detail on the Continuing Shareholders and their
participation in the merger transactions, please see pages 35 through 41 under
"Special Factors -- Interests of Certain Persons in the Merger" and for
additional details on Fox Paine and its participation in the merger
transactions, please see pages 42 through 44 under "Information about the
Transaction Participants -- Fox Paine Medic Acquisition Corporation and Fox
Paine."
BACKGROUND OF THE MERGER
From time to time beginning in the spring of 1997, Fox Paine has been in
contact with members of Maxxim's senior management to discuss Fox Paine's
interest in pursuing some form of acquisition of or significant investment in
Maxxim, and to engage in preliminary due diligence. Saul A. Fox, Chief Executive
Officer of Fox Paine, first indicated to Kenneth W. Davidson, Chairman,
President and Chief Executive Officer of Maxxim, his interest in a possible
transaction in the spring of 1997. In the course of these discussions, Fox Paine
made proposals to Maxxim to engage in such transactions. None of these
discussions resulted in formal negotiations or contemplated a price per share in
excess of the $26 per share price of the merger.
Between July 1997 and August 1998, the Maxxim board discussed among
themselves various alternatives for maximizing shareholder value, including a
management-led leveraged buyout transaction, a self-tender offer for a portion
of the outstanding shares, a sale of Maxxim, a special dividend and a sale of
parts of Maxxim; however, these discussions did not result in any formal
negotiations with a third party and no other proposals were received during this
period from any third party.
In August 1998, Fox Paine renewed its interest in some form of business
combination with Maxxim and forwarded a letter to Mr. Davidson indicating its
interest in acquiring the stock of Maxxim at a price of $24.25, with Maxxim's
senior management retaining an equity interest in Maxxim, and requesting an
exclusive period to perform due diligence. Mr. Davidson presented the proposal
to Maxxim's board on September 8, 1998, and after careful consideration the
board instructed Mr. Davidson to continue discussions with Fox Paine and to
determine if a higher price was available. On September 11, 1998, the board met
again to receive an update on the status of the discussions with Fox Paine. Mr.
Davidson advised the board that Fox Paine had increased its proposal to $25.00
per share and renewed its request for a short exclusivity period. The board
determined not to execute any agreement at that time, but directed Mr. Davidson
to continue his discussions with Fox Paine. Thereafter, Maxxim's senior
management met with Fox Paine and certain of its potential financing sources,
15
<PAGE> 21
the parties exchanged financial information and senior executives of the
respective companies met to discuss the general terms of the proposal.
Negotiations ceased in late September, because, at that time, Maxxim's stock
price had risen above Fox Paine's proposed purchase price.
From October 1998 through February 1999, executives of Fox Paine
periodically contacted members of Maxxim's senior management to discuss Fox
Paine's continuing interest in pursuing some form of acquisition transaction or
significant investment in Maxxim. None of these discussions resulted in formal
negotiations or contemplated a price per share in excess of the $26 per share
price of the merger.
In early March, Mr. Paine advised Mr. Davidson of Fox Paine's continuing
interest in an acquisition of or a significant investment in Maxxim. Mr. Paine
indicated that Fox Paine would be interested in retaining senior management and
having them retain an equity interest in Maxxim and was prepared to commence a
due diligence investigation of Maxxim and to engage in substantive discussions
with Maxxim regarding such a potential transaction immediately. On March 5,
1999, at a Maxxim board meeting, Mr. Davidson advised the Maxxim board of the
interest expressed by Mr. Paine. At the meeting, various alternatives for
maximizing shareholder value were discussed among the board members, including a
potential transaction with Fox Paine, a management-led leveraged buyout
transaction, a self-tender offer for a portion of the outstanding shares, a sale
of Maxxim, a special dividend and a sale of parts of Maxxim. The board elected
to defer any action for one week. In a letter dated March 10, 1999, Fox Paine
proposed the acquisition of Maxxim for $25.00 per share in a recapitalization
transaction, provided that Fox Paine be given a 30 day exclusive negotiating
period. The Maxxim board met on March 12, 1999 to discuss the proposal. After
careful consideration, and with Mr. Davidson abstaining, the board unanimously
directed Mr. Davidson to execute the letter, provided that the exclusivity
period be shortened to 14 days, to permit Fox Paine to conduct due diligence in
support of a proposal to acquire the stock of Maxxim at $25.00 per share.
Shortly thereafter, Fox Paine and its financing sources began their due
diligence investigation.
In late March 1999, upon completion of Fox Paine's initial due diligence,
Mr. Paine advised Mr. Davidson that Fox Paine was prepared to negotiate a
transaction in which Maxxim's public shareholders would receive $24 per share in
cash. After consultation with the Maxxim board, Mr. Davidson told Mr. Paine that
Maxxim would not consider any offer of less than $25 per share. On April 8,
1999, Fox Paine revised its proposal, and proposed to acquire Maxxim in a
recapitalization transaction in which Maxxim's public shareholders would receive
$25 per share, in cash, and members of Maxxim's senior management team and
certain directors would participate with a continuing interest in Maxxim. Fox
Paine requested that Maxxim agree to negotiate with Fox Paine on an exclusive
basis and agree not to solicit, negotiate, encourage or otherwise discuss a
change in control transaction with any other person prior to April 30, 1999. Fox
Paine's proposal also required that Maxxim agree to reimburse Fox Paine for up
to $800,000 in expenses and, in the event that on or before April 30, 1999, Fox
Paine were to reaffirm its willingness to engage in the $25 per share
transaction, but Maxxim would not agree to such a transaction and later were to
agree to a change in control transaction with a third party at any time before
April 30, 2000, to pay Fox Paine a fee of $2 million.
On April 9, 1999, the Maxxim board formed a special committee composed of
four non-interested directors to review and consider Fox Paine's proposal. The
four members of the special committee were: Donald R. DePriest, Martin Grabois,
Richard O. Martin and Henk R. Wafelman. The Maxxim board formed the special
committee at this time because prior to the formation of the special committee,
Fox Paine had only been permitted to conduct due diligence. The directors, none
of whom was a member of the management team except Mr. Davidson, believed that a
special committee would not be necessary until such time as Fox Paine's due
diligence was substantially complete and the parties were prepared to negotiate
the terms of the definitive agreement between Fox Paine and Maxxim. The members
of the special committee, along with all other directors (other than Mr.
Davidson, who abstained) authorized Maxxim to agree to the exclusivity, fee and
expense arrangements requested by Fox Paine. The parties then executed a letter
reflecting these arrangements. Thereafter, and through the end of April, Fox
Paine continued its due diligence of Maxxim.
The special committee then engaged Lazard Freres & Co. LLC as its financial
advisor and also engaged Preston Gates & Ellis LLP as its legal counsel. During
the week of April 19, 1999, immediately following this engagement, Lazard Freres
and Preston Gates conducted due diligence.
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Following the formation of the special committee, Fox Paine delivered a
proposed merger agreement to the special committee's financial and legal
advisors. The terms of the merger agreement proposed by Fox Paine included a "no
solicitation" covenant which would prohibit Maxxim from, among other things,
engaging in discussions with any person with respect to any competing
transaction unless the Maxxim board determined that failure to take such action
would constitute a breach of fiduciary duty. The terms of the proposed merger
agreement further provided that if the merger agreement were terminated for
certain reasons, including by Maxxim to accept a superior offer, Maxxim would
pay to Fox Paine a termination fee of $25 million and reimburse its expenses.
Fox Paine advised the special committee that it would not participate in any
auction process.
On April 26, 1999, executives of Fox Paine, together with its legal
counsel, met with Lazard Freres and Preston Gates to discuss the price,
structure and proposed financing of the proposed transaction and to discuss
financial information relating to Maxxim and to the proposed financing.
On the evening of April 27, 1999, the special committee met with its
financial and legal advisors to receive a preliminary report from Lazard Freres
regarding its analysis of Maxxim and the proposed purchase price of $25 per
share and the terms of the proposed merger. On the following morning, the
special committee again met with its financial and legal advisors and determined
that it would be in the best interests of the shareholders of Maxxim to explore
whether unaffiliated third parties had an interest in the possible acquisition
of Maxxim. The special committee also determined that it was not advisable to
negotiate the proposed merger agreement with Fox Paine until such time as more
information was available regarding the price which unaffiliated third parties
might be willing to pay to acquire Maxxim.
The recommendations of the special committee were communicated to the
Maxxim board on April 28, 1999, and on the basis of that recommendation, the
Maxxim board decided to allow the Fox Paine proposal to expire and the special
committee was disbanded. The Maxxim board determined to further explore with
Lazard Freres Maxxim's options for maximizing shareholder value. Fox Paine
indicated that while it remained interested in negotiating the purchase of
Maxxim, it was not willing to participate in an auction process.
At a meeting held on May 3, 1999, the Maxxim board reviewed various
alternatives for maximizing shareholder value, including a management-led
leveraged buyout transaction, a self-tender offer for a portion of the
outstanding shares, a sale of Maxxim, a special dividend and a sale of parts of
Maxxim. The Maxxim board did not request, nor did Lazard Freres provide, an
opinion regarding the various alternatives. The Maxxim board then authorized
Lazard Freres to initiate a confidential limited auction process to determine
the interest of unaffiliated third parties in an acquisition of Maxxim.
Beginning on May 7, 1999, Lazard Freres contacted ten unaffiliated third
parties regarding their interest, if any, in considering a possible acquisition
of Maxxim. Eight of the parties contacted were potential strategic buyers and
the other two were potential financial buyers other than Fox Paine. The eight
strategic buyers were chosen based on Lazard Freres' and management's review of
the potentially interested parties including (i) potential strategic fit with
Maxxim and (ii) competitive issues such as whether discussions with any
potentially interested party might result in a competitor receiving
competitively sensitive information or otherwise present other potential
significant issues. The two financial buyers were chosen based on Lazard Freres'
knowledge of, discussions with and recent transaction experience of these two
firms in the healthcare sector.
Of the ten parties contacted by Lazard Freres, five expressed an interest
in receiving information concerning Maxxim and engaging in further discussions.
Four of the parties executed confidentiality agreements and were sent
information concerning Maxxim, including certain financial projections described
on page 20 under "-- Certain Projections" that were based upon projections that
had been developed by Maxxim and its advisors in connection with its acquisition
of Circon and subsequently updated, and which were provided to Fox Paine and
Lazard Freres. Only two initial responses, both from potential financial buyers,
were received by the May 26, 1999 deadline set for indications of interest. The
ranges of these indications of interest were $23.00 to $26.00 and $25.00 to
$27.50 per share. Each indication of interest provided that the making of a firm
offer, and the price of any such offer, was subject to various conditions,
including due diligence, financing and the establishment of appropriate
management incentive programs, as
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well as the negotiation of definitive agreements if a firm offer was made. Three
strategic buyers indicated that they would have been interested in acquiring
parts of Maxxim, but none of these strategic buyers were interested in
purchasing Maxxim as a whole due to a lack of strategic fit across business
lines.
On May 28, 1999, Lazard Freres reviewed the results of the process with the
Maxxim board. Following the discussion, the Maxxim board decided to re-establish
the special committee (composed of the same individuals as previously) with the
authority to negotiate a possible sale of Maxxim with Fox Paine or any other
potential buyer. On June 2, 1999, the special committee engaged Wolf, Block,
Schorr and Solis-Cohen LLP to serve as its legal counsel and Lazard Freres'
retention was continued.
On June 3, 1999, at a telephonic meeting of the special committee, the
members of the special committee reviewed the results of the process which had
been conducted by Lazard Freres and the history of the prior discussions with
Fox Paine. The special committee did not request, nor did Lazard Freres provide,
a recommendation as to the per share amount that Maxxim shareholders should
receive in a sale of Maxxim. The special committee believed that, in comparison
with the indications of interest received, the Fox Paine proposal could be
negotiated and consummated in a rapid time frame, thus exposing Maxxim to
minimal market and business risk. The special committee considered the facts
that (i) no strategic buyer had submitted an indication of interest for all of
Maxxim, (ii) the sale of pieces of Maxxim was likely to be an extremely time
consuming process which would cause disruption to the operation of the business
and have an adverse effect on financial performance and there was no indication
that such a sale would be superior to a sale of Maxxim as a going concern, and
(iii) there was no assurance that either of the financial buyers who had
expressed an interest in Maxxim would make a definitive offer, that any such
offer would be superior to Fox Paine's, or that any such offer could be
consummated. The special committee compared the foregoing facts with the facts
that Fox Paine and its debt financing sources had completed their due diligence
review (which was not the case with the other potential financial buyers) and
were in a position to proceed to negotiate a definitive agreement rapidly, and
that Fox Paine had stated that it would not participate in an auction process.
Based upon such considerations, the special committee determined that it would
be advisable to contact Fox Paine to inform them that the special committee was
prepared, for a short period of time, to negotiate the terms of a
recapitalization transaction with Fox Paine without further engaging in a formal
auction process or negotiating with other parties, provided that the purchase
price must be improved beyond the $25.00 which previously had been offered, the
termination fee must be significantly reduced and the merger agreement must
include an acceptable "fiduciary out" provision regarding competing
transactions. On June 4, Lazard Freres contacted Fox Paine and advised them of
the special committee's decision and discussed the parameters of a potential
transaction. Subsequently, a proposed merger agreement was delivered to Fox
Paine and its legal advisors by the special committee's advisors.
Negotiations between Fox Paine and its advisors and the advisors to the
special committee concerning the price, structure and other terms of the merger
agreement continued from June 6 through June 12. Also during this period, Fox
Paine negotiated the terms of the investor participation agreement and related
term sheet with the Continuing Shareholders.
On June 6, 1999, Fox Paine stated that it was not prepared to increase the
purchase price beyond $25.00 per share with the proposed two-step tender offer
and merger structure, but that Fox Paine would increase the price to $25.50 per
share if the transaction did not entail a bridge financing and the related
expense, for example through the use of a one-step merger structure.
On June 7, 1999, Fox Paine's legal advisors provided a draft merger
agreement which incorporated the one-step merger proposal, included the same "no
solicitation" covenant that had been included in Fox Paine's April draft merger
agreement and provided for a $22.5 million termination fee, plus expenses.
On June 8, 1999, the special committee held a meeting with its financial
and legal advisors to discuss the terms of the Fox Paine counter proposal. The
special committee concluded that it was not prepared to approve an offer at that
point in time of less than $26.00 per share. The special committee instructed
Wolf Block and Lazard Freres to meet with Fox Paine and its advisors to
determine whether it would be possible to agree upon the terms of a fully
financed transaction which (i) provided shareholders with at least $26.00 per
share in cash,
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(ii) provided firm financing commitments, with bridge financing if necessary,
(iii) provided for a lower termination fee and (iv) would not preclude third
parties from making a bid for Maxxim.
On June 9, 1999, Lazard Freres and Wolf Block met with Fox Paine and its
legal advisor to negotiate the terms of the merger agreement. Following the
meeting, Lazard Freres and Wolf Block advised the members of the special
committee that several issues were not resolved, including issues relating to
the conditionality of Fox Paine's financing commitments and the magnitude of the
termination fee, but that there had been significant progress on many of the
issues that were of the greatest concern to the special committee, including
those identified in clauses (i) through (iv) of the preceding paragraph. Lazard
Freres and Wolf Block also advised the special committee that Fox Paine had
stated that it would be prepared to pay $26 per share subject to resolution of
any remaining issues, but that it would not be willing to enter into a
transaction that provided Fox Paine with a break-up fee (and expense
reimbursement) of less than $1.25 per share. The members of the special
committee directed Wolf Block and Lazard Freres to continue to negotiate the
terms of the merger agreement, including the terms of Fox Paine's financing
commitments. The special committee emphasized to its advisors the importance of
a fully financed proposal which, in the committee's view, should include bridge
financing and have as few contingencies as reasonably practicable.
From June 10, 1999 through June 13, 1999, Lazard Freres and Wolf Block
continued to negotiate a merger agreement with Fox Paine and its
representatives, including price, financing terms, termination fees and terms of
the non-solicitation provisions.
On June 13, 1999, the special committee held a meeting with its financial
and legal advisors to consider the form of merger agreement and related terms
which had been negotiated with Fox Paine. At this meeting, Wolf Block reviewed
with the special committee the terms and conditions of the proposed merger
agreement and Fox Paine's financing commitments, as well as other legal issues
relating to the proposed merger. Lazard Freres made a detailed financial
presentation and delivered to the special committee its opinion that, as of June
13, 1999, the $26 per share cash merger consideration was fair, from a financial
point of view, to Maxxim's public shareholders (other than the Continuing
Shareholders).
The members of the special committee discussed the terms of the proposed
merger agreement in detail and concluded, based upon the negotiations to date
(including statements by Fox Paine that it would not pay more than $26 per
share), that the $26 per share price was the highest price that Fox Paine would
be willing to pay, the terms of the "no-solicitation" covenant permitted Maxxim
to negotiate with a party who made an unsolicited proposal for a competing
acquisition transaction under acceptable circumstances, and Fox Paine's
financing commitments were sufficiently firm. The special committee also
reviewed the terms and effects of the voting agreements and the investor
participation agreement and considered the participation of the Continuing
Shareholders in the proposed merger generally. After considerable discussion,
the special committee unanimously determined that the terms of the merger are
advisable, fair to and in the best interests of Maxxim's public shareholders
(other than the Continuing Shareholders), recommended that the Maxxim board
approve the merger agreement and the transactions contemplated thereby and
determined that the Maxxim board should recommend that the shareholders of
Maxxim approve the merger agreement.
The special committee meeting was followed immediately by a meeting of the
full Maxxim board to consider the merger agreement. The special committee, with
its legal and financial advisors participating, reported to the Maxxim board on
its review of the merger agreement and the related financing commitments and the
special committee's recommendation of the proposed transaction as advisable,
fair to and in the best interests of Maxxim's public shareholders (other than
the Continuing Shareholders). Wolf Block and Lazard Freres repeated their
presentations, and Lazard Freres delivered its opinion to the Maxxim board that,
as of June 13, 1999, the $26 per share cash merger consideration was fair, from
a financial point of view, to Maxxim's public shareholders (other than the
Continuing Shareholders). After receiving the recommendation of the special
committee, the Maxxim board unanimously determined that the terms of the merger
agreement are advisable, fair to and in the best interests of the shareholders
of Maxxim (other than the Continuing Shareholders), approved the merger
agreement and the transactions contemplated thereby and recommended that
Maxxim's shareholders approve the merger agreement. Following the meeting of the
Maxxim board, Fox
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Paine Maxxim and Maxxim executed the merger agreement, and Fox Paine Maxxim and
the Continuing Shareholders executed the investor participation agreement and
the voting agreements.
Subsequent to the public announcement of the merger agreement, none of the
parties which previously had submitted an indication of interest, including the
party that indicated an interest in a potential bid as high as $27.50, has
contacted Maxxim or Lazard Freres in connection with a possible transaction
involving Maxxim.
CERTAIN PROJECTIONS
Maxxim does not as a matter of course make public projections as to its
future performance or earnings. However, in connection with the discussions
concerning the proposed merger, Maxxim furnished to Fox Paine, and in connection
with the Maxxim board's solicitation of indications of interest in May of 1999,
Maxxim furnished to certain interested parties, projections as to Maxxim's
future financial performance.
The distributed projections included projections of revenues, earnings
before interest, taxes, depreciation and amortization ("EBITDA") and net income
for Maxxim on a consolidated basis of $740.4 million, $118.2 million and $30.9
million, respectively, in fiscal year 2000; $775.0 million, $123.5 million and
$36.5 million, respectively, in fiscal year 2001; $811.3 million, $128.9 million
and $41.3 million, respectively, in fiscal year 2002; and $849.3 million, $134.6
million and $46.5 million, respectively, in fiscal year 2003. Maxxim had also
provided pro forma forecasts of revenues, EBITDA and net income for fiscal year
1999, which it lowered since signing the merger agreement to $655.6 million,
$101.0 million, and $21.8 million, respectively, based on Maxxim's fiscal year
to date performance through August 1, 1999. In late 1998, in connection with
Maxxim's acquisition of Circon, Maxxim and its financial advisors had prepared
certain other projections of Maxxim's future financial performance, which were
shared with Fox Paine. These projections, which were later updated to the
distributed projections described above, indicated revenues, EBITDA and net
income that were 4.4% to 5.4%, 0.6% to 1.6% and 0.3% to 2.6% higher,
respectively, than indicated in the distributed projections for the 2000 -- 2003
period.
When results for the second quarter of fiscal 1999 became available during
the first week of June, before the execution of the merger agreement, based on
those results Maxxim lowered its revenue projections for the 2000 -- 2003 period
by approximately .9% for each year, its EBITDA projections for the 2000 -- 2003
period by between 3.4% and 3.6% per year and its net earnings projections for
the 2000 -- 2003 period by between 3.6% and 8.5% per year, in each case from the
distributed projections.
During the course of its evaluation of the proposed transaction, Fox Paine
indicated to Maxxim and its management that in developing its own projections,
Fox Paine assumed that revenues would be .8% to 1.1% lower than indicated in the
distributed projections for each year in the 2000 -- 2003 period, and that
EBITDA would be 2.1% to 3.1% higher each year than indicated in the distributed
projections for each year in the 2000 -- 2003 period.
Important Information About the Projections. The projections referred to
above were not prepared with a view to public disclosure, and are included in
this proxy statement only because such information was made available to Fox
Paine and to certain interested parties. The projections were not prepared with
a view to compliance with published guidelines of the SEC or the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or forecasts. Neither Maxxim's independent auditors, nor any other
independent accountants, have compiled, examined, or performed any procedures
with respect to the projections. While presented with numeric specificity, the
projections reflect numerous assumptions made by Maxxim's management with
respect to industry performance, general business, economic, market and
financial conditions and other matters, including assumed interest expense and
effective tax rates consistent with historical levels for Maxxim, all of which
are difficult to predict, many of which are beyond Maxxim's control and none of
which were subject to approval by Fox Paine or any of the interested parties who
received them. Accordingly, there can be no assurance that the assumptions made
in preparing the projections will prove accurate, and actual results may be
materially greater or less than those contained in the projections. The
inclusion of the projections herein should not be regarded as an indication that
Maxxim, any recipient of the projections, or their respective affiliates or
representatives considered or consider the projections to be a
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reliable prediction of future events, and the projections should not be relied
upon as such. Except to the extent required under the federal securities laws,
Maxxim does not intend to make publicly available any update or other revisions
to the projections to reflect circumstances existing after the date of the
preparation of the forecasts. See "Cautionary Statement Concerning
Forward-Looking Information."
RECOMMENDATION OF THE SPECIAL COMMITTEE AND OF THE FULL MAXXIM BOARD; FAIRNESS
OF THE MERGER
Recommendation of the Special Committee and the Full Maxxim Board
The special committee has unanimously recommended that the Maxxim board
approve the merger agreement and the transactions contemplated thereby. Both the
special committee and the full Maxxim board have unanimously determined that the
terms of the merger are advisable, fair to and in the best interests of Maxxim's
public shareholders (other than the Continuing Shareholders) and determined that
the Maxxim board should recommend that the Maxxim shareholders approve the
merger agreement.
In recommending approval of the merger agreement, the special committee
considered a number of factors, including:
- The results of operations, financial condition, assets, liabilities,
business strategy and prospects of Maxxim and the nature of the industry
in which Maxxim competes. The members of the special committee also held
discussions with members of Maxxim's management regarding its business,
conditions and prospects and reviewed the projections discussed above.
Based upon its consideration of the operations and prospects of Maxxim,
the special committee concluded that it might take a considerable period
of time before the trading price of Maxxim shares would equal the $26 per
share offered, if ever. The special committee believes that these
conclusions based upon its analysis of the financial condition and
prospects of Maxxim supported the special committee's fairness
determination.
- The opinion of Lazard Freres, dated June 13, 1999, that, as of that date,
the $26 per share cash consideration to be paid in the merger is fair
from a financial point of view to Maxxim's public shareholders (other
than the Continuing Shareholders). The special committee also considered
Lazard Freres' presentation to the special committee and the results of
its solicitation of indications of interest. The special committee
expressly adopted the conclusions of Lazard Freres in its determination
that the merger is fair to Maxxim's public shareholders (other than the
Continuing Shareholders). In its review of the analyses performed by
Lazard Freres, the special committee did not weigh each of the separate
analyses prepared by Lazard Freres separately, but rather considered them
taken as a whole. The special committee believes that the Lazard Freres'
oral presentation and its oral and written opinion supported the special
committee's fairness determination.
- The relationship of the $26 per share cash consideration to the current
market price and the market prices for Maxxim common stock during the
previous three years. The special committee considered the fact that the
common stock had traded at prices as high as $30 5/8 per share and as low
as $12 5/8 per share during the three year period prior to the public
announcement of the merger agreement. The special committee also
considered the fact that the $26 per share cash consideration represents
a premium of approximately 30.8% over the per share closing price of
Maxxim shares on June 11, 1999, the last trading day prior to the public
announcement of the merger agreement. In addition, the special committee
considered the fact that the volume weighted average trading prices of
the Maxxim shares over the 30, 60, 90, 180, 270 and 360 days prior to the
public announcement of the merger agreement were $16.37, $16.60, $16.90,
$20.12, $21.06 and $21.98, respectively. (The volume weighted average
trading price of the Maxxim shares over the three-year period prior to
the public announcement of the merger agreement was $21.27). The special
committee did not consider as significant the premium (36.1%) by which
the $26 per share cash consideration exceeded Maxxim's book value per
share of $19.11 at May 2, 1999, and the special committee did not attempt
to assess the liquidation value of Maxxim, since, based on the special
committee's familiarity with Maxxim's business, the special committee did
not believe that these would yield the type of premium that was proposed
by the $26 proposal to purchase Maxxim as a going concern. The special
committee believes that the significant premium which the $26 per share
cash consideration offers to recent trading prices of the shares,
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coupled with the special committee's conclusion as discussed above that
it might take a considerable period of time before the trading price of
Maxxim's shares would equal the $26 per share offered, if ever, supported
the special committee's fairness determination.
- The fact that Lazard Freres, in its solicitation of indications of
interest, did not receive any indication of interest from any strategic
buyer that had an interest in acquiring all of Maxxim. Since strategic
buyers often are able to offer a higher price for a company than a
financial buyer due to synergies or other strategic benefits, the special
committee believes that the absence of such a strategic buyer supported
the special committee's fairness determination.
- The special committee's belief that the risk and disruption to Maxxim and
its operations due to the process involved with a sale of its parts was
greater than the potential benefit, if any, to its shareholders. In its
consideration of this factor, the special committee considered that
interest in the various parts of Maxxim was limited, and that the
disruption caused by any effort to sell off parts of Maxxim could have
had a negative effect on the value of the other parts or of Maxxim as a
whole. The special committee believed that the decision to seek a sale of
Maxxim only as a whole enabled Maxxim to obtain a premium for the public
shareholders without bearing the risks and uncertainties that could
accompany a sale of the parts.
- The special committee's belief that it was in the best interests of
Maxxim and its shareholders to enter into a transaction that could be
consummated rapidly, thus exposing Maxxim to minimal market and business
risk, and that, in comparison with the parties from whom indications of
interest were received, Fox Paine and its financing sources were in a
position to complete a transaction in a rapid time frame. The special
committee believes that these factors supported the special committee's
fairness determination.
- The statements of representatives of Fox Paine that Fox Paine would not
participate in an auction of Maxxim. The special committee believed that
the inability to conduct an auction in which Fox Paine would participate
to have both positive and negative implications for its fairness
determination. The negative implication was that if Fox Paine had been
willing to participate in an auction, Maxxim might have had an
opportunity to receive a higher bid. However, the special committee
believed that the fact that Lazard Freres, in its solicitation of
indications of interest, did not receive any indication of interest from
any strategic buyer with an interest in acquiring all of Maxxim
mitigated, in part, this negative factor. The positive implication was
that Fox Paine had indicated that it was prepared to pay $26 per share
and could complete the transaction in a short time frame, while not
precluding Maxxim from responding to proposals for superior transactions
that might arise even after a merger agreement had been signed.
- The fact that approval of the merger agreement requires the affirmative
vote of a majority of the outstanding Maxxim shares entitled to vote
thereon and that, under Texas law, Maxxim shareholders have the right to
an appraisal of the value of their shares in connection with the merger.
The special committee considered this to be a positive factor in its
determination that the merger is fair to the public shareholders (other
than the Continuing Shareholders). The special committee considered the
fact that the obligation of Maxxim to consummate the merger is not
conditioned upon the favorable vote of a majority of the public
shareholders (other than the Continuing Shareholders). The special
committee believed this to be a negative factor in its fairness
determination but felt this was mitigated by the fact that the Continuing
Shareholders owned, in the aggregate, only approximately 8% of the
outstanding Maxxim shares. The special committee is aware that, in
connection with the settlement of certain litigation relating to the
merger agreement, Fox Paine Maxxim and the Continuing Shareholders have
amended their voting agreements to provide that the Continuing
Shareholders will vote their shares of Maxxim common stock for and
against approval of the merger agreement in the same proportions as the
public shareholders (other than the Continuing Shareholders) voting on
the proposals. In view of this amendment, approval of the merger
agreement is effectively conditioned upon the affirmative vote of a
majority of the public shareholders of Maxxim (other than the
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Continuing Shareholders) voting on the proposal. The special committee
believes that this factor supports its fairness determination.
- The fact that the consideration to be received in the merger is payable
in cash, thereby eliminating any uncertainties in valuing the
consideration to be received by Maxxim's public shareholders. The special
committee believes that this factor supported the special committee's
fairness determination.
- The likelihood of the completion of the merger in light of the fact that
commitments have been received by Fox Paine Maxxim and Fox Paine Circon
for the funds necessary to complete the merger transactions. The special
committee believes that this factor supported the special committee's
fairness determination.
- The arm's-length negotiations between the special committee and Fox Paine
and their respective representatives, including that the negotiations
resulted in:
-- an increase in the per share cash price to be received by Maxxim's
public shareholders;
-- a reduction in the termination fee payable by Maxxim in the event the
merger agreement is terminated as a result of a competing
transaction;
-- a limitation in the number of events resulting in the payment of the
termination fee or reimbursement of Fox Paine Maxxim's expenses;
-- Maxxim having the right to engage in negotiations with, and supply
information to, a person who makes an unsolicited proposal for a
competing acquisition transaction that could reasonably be expected
to lead to a superior transaction (see page 56 under "The
Merger -- Prohibition Against Solicitation of Competing
Transactions"); and
-- significant changes in the financing commitments to limit the nature
of the conditions to such financing and to eliminate the liability of
Maxxim with respect to such financing if the merger is not completed.
- In view of the fact that these factors significantly benefited the public
shareholders and ensured that the Maxxim board could consider a proposal
for a superior transaction without a breach of the merger agreement
following its execution, the special committee believes that these
factors supported the special committee's fairness determination.
- The nature of the financing commitments received by Fox Paine with
respect to the merger, including the identity of the institutions
providing such commitments, their knowledge of Maxxim and their proven
experience in consummating transactions such as the merger and the
conditions to the obligations of such institutions to fund such
commitment, as well as the fact that completion of the merger will not be
dependent on the ability of Fox Paine, Fox Paine Maxxim or Fox Paine
Circon to raise funds through the high yield debt or other securities
markets and the special committee's belief as to the strength of the
financing commitments. The special committee believes that these factors
supported the special committee's fairness determination.
- The terms and effects of the voting agreements and the investor
participation agreement described on pages 35 through 41 under
"-- Interests of Certain Persons in the Merger," and the participation of
the Continuing Shareholders in the proposed merger generally. The special
committee considered these potential conflicts of interest but believed
that such conflicts were mitigated by the establishment of the special
committee to make an independent determination as to the fairness of the
merger and to negotiate the terms of the merger agreement with
representatives of Fox Paine.
The foregoing discussion of the information and factors considered by the
special committee includes all of the material factors considered by the special
committee in reaching its conclusions and recommendations but is not meant to be
exhaustive. In view of the variety of factors considered in its reaching its
determination, the special committee did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusions and recommendations. In addition,
individual members of the special committee may have given different weights to
different factors.
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The Maxxim board consists of seven directors, a majority of whom served on
the special committee. At the June 13, 1999 meeting of the Maxxim board, the
special committee, with its legal and financial advisors participating, reported
to the other members of the Maxxim board on its review of the merger agreement
and the related financing commitments and the factors taken into account by the
special committee in reaching its determination that the proposed transaction is
advisable, fair to and in the best interests of Maxxim's public shareholders
(other than the Continuing Shareholders). Accordingly, the same factors
considered by the special committee were taken into account by the Maxxim board.
In addition, the Maxxim board considered the conclusions and recommendations of
the special committee and believes that these factors supported the Maxxim
board's fairness determination. Furthermore, the Maxxim board considered the
fact that the $26 per share cash consideration and the terms and conditions of
the merger agreement were the result of arm's-length negotiations among the
special committee and Fox Paine and their respective advisors. The Maxxim board
believes that this factor supports the Maxxim board's fairness determination.
Fairness of the Merger
The Maxxim board, including the members of the special committee, also
believes that the merger is procedurally fair because, among other things:
- The special committee consisted of four non-employee, independent
directors appointed to represent the interests of Maxxim's public
shareholders.
- The members of the special committee are not Continuing Shareholders.
- The special committee retained and received advice from independent
financial advisors and legal counsel.
- The $26 per share cash consideration and the other terms and conditions
of the merger agreement resulted from active arm's-length bargaining
between the special committee and its representatives, on the one hand,
and Fox Paine and its representatives, on the other hand.
It follows from each of the foregoing factors that neither the members of
the special committee nor the special committee's advisors, who are the parties
that negotiated the terms and conditions of the merger agreement with Fox Paine,
had a financial interest in the merger that could present them with actual or
potential conflicts of interest. The Maxxim board believes that each of these
factors supported its fairness determination.
The special committee, through its advisors, solicited indications of
interest from potential interested parties unaffiliated with Maxxim and none of
the indications of interest received from the unaffiliated parties approached
provided the combination of price and degree of certainty that Maxxim believed
could be achieved with Fox Paine. As discussed above, the Maxxim board believes
this factor supported its fairness determination.
Under Texas law and Maxxim's articles of incorporation, a plan of merger
requires the affirmative vote of the holders of a majority of all outstanding
shares entitled to vote thereon in order to be adopted. Further, pursuant to the
amended voting agreements between Fox Paine Maxxim and the Continuing
Shareholders, the Continuing Shareholders will vote their shares of Maxxim
common stock for and against the approval of the merger agreement in the same
proportions as the public shareholders (other than the Continuing Shareholders)
voting on the proposal, effectively conditioning approval of the merger
agreement on the affirmative vote of a majority of the public shareholders
(other than the Continuing Shareholders) voting on the proposal. As discussed
above, the Maxxim board believes this factor supports its fairness
determination.
The members of the Maxxim board, including the members of the special
committee, evaluated Fox Paine's proposal and the merger in light of their
knowledge of the business, financial condition and prospects of Maxxim, and
based upon the advice of financial and legal advisors to the special committee.
In light of the number and variety of factors that the Maxxim board considered
in connection with their evaluation of the merger, the Maxxim board did not find
it practicable to assign relative weight to any of the foregoing factors.
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<PAGE> 30
OPINION OF LAZARD FRERES & CO. LLC
Under a letter agreement, dated April 19, 1999, and amended June 11, 1999,
the special committee appointed by the Maxxim board retained Lazard Freres & Co.
LLC to act as its financial advisor for the merger. As part of this engagement,
the special committee requested that Lazard Freres evaluate the fairness, from a
financial point of view, of the price to be paid in the merger to the public
shareholders of Maxxim, which was determined on the basis of arm's-length
negotiations between the special committee and Fox Paine. On June 13, 1999,
Lazard Freres delivered to the special committee and the board of directors its
oral opinion that, as of that date, the $26.00 per share cash consideration was
fair from a financial point of view to Maxxim's public shareholders (other than
the Continuing Shareholders). Lazard Freres later confirmed its oral opinion by
delivering a written opinion dated June 13, 1999, which stated the
considerations and assumptions upon which its opinion was based.
THE FULL TEXT OF THE OPINION DATED JUNE 13, 1999, WHICH EXPLAINS THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
SCOPE OF THE REVIEW UNDERTAKEN BY LAZARD FRERES IN RENDERING ITS OPINION, IS
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT. LAZARD FRERES' WRITTEN OPINION
IS DIRECTED TO THE MAXXIM BOARD AND ONLY ADDRESSES THE FAIRNESS OF THE $26.00
PER SHARE AMOUNT FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION.
LAZARD FRERES' WRITTEN OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MAXXIM SHAREHOLDER AS TO HOW TO
VOTE AT THE SPECIAL MEETING. THE FOLLOWING IS ONLY A SUMMARY OF THE LAZARD
FRERES OPINION. SHAREHOLDERS ARE URGED TO READ THE ENTIRE OPINION.
In arriving at its opinion, Lazard Freres, among other things:
- reviewed the financial terms and conditions of the draft merger
agreement, dated June 10, 1999;
- analyzed historical business and financial information relating to
Maxxim;
- reviewed financial forecasts referred to on page 20 under "-- Certain
Projections" and other data provided to Lazard Freres relating to Maxxim;
- held discussions with members of Maxxim's senior management regarding the
businesses, prospects and strategic objectives of Maxxim;
- reviewed public information of other companies in lines of businesses
that Lazard Freres believed were generally comparable to the business of
Maxxim;
- reviewed the financial terms of business combinations involving companies
in lines of businesses that Lazard Freres believed were generally
comparable to the business of Maxxim;
- reviewed the historical stock prices and trading volumes of Maxxim common
stock; and
- conducted other financial studies, analyses and investigations that
Lazard Freres believed were appropriate.
Lazard Freres assumed and relied upon, without independent verification,
the accuracy and completeness of all information publicly available or reviewed
by or discussed with Lazard Freres. Lazard Freres did not independently value or
appraise the assets or liabilities of Maxxim and did not assume any
responsibility for matters concerning the solvency of or issues relating to
solvency concerning Maxxim. Lazard Freres also relied upon the advice of
management of Maxxim that the financial forecasts and other information that
were provided to or discussed with Lazard Freres were reasonably prepared based
on the best currently available estimates and judgments of Maxxim management as
to the future financial performance of Maxxim.
Lazard Freres also assumed, with Maxxim's consent, that the merger would be
completed according to the terms of the merger agreement, without waiver of any
condition contained in that agreement, and that the merger will be accounted for
as a recapitalization. In addition, Lazard Freres assumed (1) obtaining the
necessary regulatory approvals for the merger will not have an adverse effect on
Maxxim and (2) there were no material changes to the merger agreement as
executed from the draft reviewed by Lazard Freres.
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<PAGE> 31
The following is a brief summary of the material financial analyses
performed by Lazard Freres in preparing its opinion:
Comparable Publicly Traded Companies Analysis.
Lazard Freres reviewed and compared the actual and estimated financial,
operating and stock market information of certain companies in lines of business
believed to be generally comparable to those of Maxxim in the health care
industry. These companies included Arrow International, Inc., CONMED Corp.,
Dexter Corp., Mentor Corp., Owens & Minor, Inc. and Safeskin Corp.
Specifically, Lazard Freres analyzed the respective multiples of the
enterprise value of these companies to their earnings before interest, taxes,
depreciation and amortization and earnings before interest and taxes for the
last twelve months and for projected fiscal years 1999 and 2000, and multiples
of the equity value of these companies to their net income for the last twelve
months and for projected fiscal years 1999 and 2000. Their analysis indicated
the following:
MULTIPLES OF EBITDA
<TABLE>
<CAPTION>
HIGH LOW MEDIAN MAXXIM
---- --- ------ ------
<S> <C> <C> <C> <C>
2000E..................................................... 8.3x 5.2x 6.6x 6.6x
---- --- ------ ------
1999E..................................................... 8.8x 6.2x 7.4x 7.1x
---- --- ------ ------
Last Twelve Months........................................ 10.0x 6.0x 9.0x 7.8x
---- --- ------ ------
</TABLE>
MULTIPLES OF EBIT
<TABLE>
<CAPTION>
HIGH LOW MEDIAN MAXXIM
----- ---- ------ ------
<S> <C> <C> <C> <C>
2000E.................................................... 10.7x 6.3x 8.0x 9.4x
----- ---- ----- -----
1999E.................................................... 11.6x 7.6x 9.0x 10.4x
----- ---- ----- -----
Last Twelve Months....................................... 14.8x 8.5x 11.9x 11.2x
----- ---- ----- -----
</TABLE>
MULTIPLES OF NET INCOME
<TABLE>
<CAPTION>
HIGH LOW MEDIAN MAXXIM
---- ---- ------ ------
<S> <C> <C> <C> <C>
2000E..................................................... 15.0x 10.8x 11.7x 13.0x
---- ---- ---- ----
1999E..................................................... 18.0x 12.8x 15.3x 16.2x
---- ---- ---- ----
Last Twelve Months........................................ 19.8x 14.0x 15.7x 21.2x
---- ---- ---- ----
</TABLE>
Lazard Freres then derived a range of implied per share equity values for Maxxim
by applying the multiples of the comparable companies listed above to
corresponding data for Maxxim prepared by Maxxim's management. Lazard Freres
then narrowed those ranges by focusing on the medians of the high and low
implied per share equity value ranges, which Lazard Freres determined was an
appropriate measure for this analysis. The resulting implied per share equity
value range was $17.45 to $33.16. As the per share merger consideration of
$26.00 fell within this range, Lazard Freres concluded that this analysis
supported its fairness determination.
Selected Precedent Transaction Analysis.
Lazard Freres reviewed selected publicly available financial and stock
market information of 15 transactions involving the acquisition of medical
supply and device companies with a product mix, growth and margin
characteristics comparable to those of Maxxim, including: The Carlyle Group/EMPI
Inc. (1999), Chase Capital/Donjoy (1999), Kimberly-Clark Corp./Ballard Medical
Products (1999), Maxxim Medical, Inc./Circon Corp. (1998), Cardinal Health
Inc./Allegiance Corp. (1998), Maxxim Medical, Inc./Winfield Medical, Inc.
(1998), Freeman Spogli & Co./Hudson Respiratory Care, Inc. (1998), Tyco
International Ltd./Sherwood-Davis & Geck (1997), Conmed Corp./Linvatec Corp.
(1997), Kimberly-Clark Corp./Tecnol Medical Products, Inc.(1997), Fremont
Partners/Kinetic Concepts, Inc. (1997), McKesson Corp./General Medical, Inc.
(1997), Maxxim Medical, Inc./Sterile Concepts Holdings, Inc. (1996),
26
<PAGE> 32
Maxxim Medical, Inc./Medical Glove Division of Becton Dickinson (1995), and Tyco
International Ltd./Kendall International, Inc. (1994).
Specifically, Lazard Freres analyzed the respective multiples of the
transaction values for these transactions to the last twelve months' earnings
before interest, taxes, depreciation and amortization and earnings before
interest and taxes for the seller in these transactions, and multiples of the
equity value for these transactions to the last twelve months' net income for
the seller in these transactions. Lazard Freres' analysis indicated the
following:
PRECEDENT TRANSACTION MULTIPLES
<TABLE>
<CAPTION>
HIGH LOW MEDIAN MAXXIM
----- ----- ------ ------
<S> <C> <C> <C> <C>
Last Twelve Months' EBITDA.............................. 10.7x 7.2x 9.2x 7.8x
----- ----- ----- -----
Last Twelve Months' EBIT................................ 14.6x 8.6x 11.0x 11.2x
----- ----- ----- -----
Last Twelve Months' Net Income.......................... 25.3x 14.4x 18.2x 21.2x
----- ----- ----- -----
</TABLE>
Lazard Freres then derived a range of implied per share equity values for Maxxim
by applying the multiples from the precedent transactions listed above to
corresponding data for Maxxim prepared by Maxxim's management. Lazard Freres
then narrowed those ranges by focusing on the medians of the high and low
implied per share equity value ranges, which Lazard Freres determined was an
appropriate measure for this analysis. The resulting implied per share equity
value range was $18.02 to $42.03. As the per share merger consideration of $26
fell within this range, Lazard Freres concluded that this analysis supported its
fairness determination.
Premiums Paid Analysis.
Lazard Freres reviewed the publicly available information concerning
premiums paid in eight of the selected transactions listed above, in seven
selected healthcare leveraged buyout transactions and in 12 selected leveraged
buyout transactions since 1998. Lazard Freres analyzed the information on these
transactions using two criteria. The first criteria was the purchase price as a
percentage of the 52-week high trading price and the second was the purchase
price as a percentage premium to the one-month-prior trading price. Based on
Maxxim's 52-week high trading price of $30.63, the implied equity value per
share ranged from $24.02 to $34.76. Based on Maxxim's one-month-prior trading
price of $16.00, the implied equity value per share ranged from $17.38 to
$26.79. As the per share merger consideration of $26 fell within these ranges,
Lazard Freres concluded that this analysis supported its fairness determination.
Discounted Cash Flow Analysis.
Lazard Freres performed a discounted cash flow analysis of the projected
free cash flow of Maxxim for the fiscal years ended October 31, 1999, through
November 2, 2003, based on projections provided to Lazard Freres by management
of Maxxim. A discounted cash flow analysis is generally used to ascribe a
present value to an anticipated future stream of cash flow, based upon
assumptions relating to, among other things, prevailing market conditions,
including costs of capital. As part of its analysis, Lazard Freres assumed,
among other things, discount rates of 10%-12%, based on a comparable company
weighted average cost of capital of 11%, and terminal multiples of earnings
before interest, taxes, depreciation or amortization of 6.5x to 8.5x. Using the
same discount rate range, Lazard Freres also analyzed the effects of perpetual
growth of Maxxim's unlevered free cash flow, based on perpetual growth rates of
3%-5%. The following sets forth the results of Lazard Freres' analysis:
DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
RANGE DISCOUNT RATE EQUITY VALUE
--------- ------------- -------------
<S> <C> <C> <C>
Terminal Value.................................. 6.5x-8.5x 10%-12% $24.07-$35.15
--------- ------- -------------
Perpetual Growth................................ 3%-5% 10%-12% $22.73-$35.17
--------- ------- -------------
</TABLE>
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<PAGE> 33
As the per share merger consideration of $26 fell within both ranges, Lazard
Freres concluded that this analysis supported its fairness determination.
Leveraged Buyout Analysis.
Lazard Freres prepared an analysis as to the consideration a leveraged
buyout purchaser might be willing to pay to acquire Maxxim. This analysis was
based upon the then-current economic market conditions and projections provided
by management of Maxxim. Lazard Freres assumed a capital structure and a
financing rate scenario consistent with the financing commitments under the
proposed capital structure. Assuming internal rates of return to equity
investors of approximately 24% to 30%, the per share consideration a leveraged
buyout purchaser might be willing to pay for Maxxim ranged from approximately
$23 to $26. As the per share merger consideration of $26 is at the top of this
range, Lazard Freres concluded that this analysis supported its fairness
determination.
Leveraged Buyout Transactions Comparables.
Lazard Freres reviewed selected publicly available financial and stock
market information of 11 selected leveraged buyout transactions involving the
acquisition of comparable companies in the healthcare industry with growth and
margin characteristics determined to be comparable to those of Maxxim,
including: The Carlyle Group/EMPI Inc. (1999), Chase Capital/Donjoy (1999),
Welsh, Carson, Anderson, Stowe et. al./ Concentra Managed Care (1999), Welsh,
Carson, Anderson, Stowe et. al./MedCath (1998), Madison Dearborn Partners et.
al./Team Health Group (1999), Freeman Spogli & Co./Management Hudson Respiratory
Corp. Inc. (1998), Bruckmann Rosser Sherrill & Co./MEDIQ Inc. (1998), Thomas H.
Lee Co./ Fisher Scientific International, Inc. (1997), Fremont Partners et.
al./Kinetic Concepts, Inc. (1997), Apollo Management L.P./SMT Health Services
Inc. (1997), and River Medical Acquisition Corp. (DLJ)/Ivac Corporation (Eli
Lilly) (1994).
Specifically, Lazard Freres analyzed the respective multiples of the
transaction values for these transactions to the last twelve months' earnings
before interest, taxes, depreciation and amortization and earnings before
interest and taxes for the seller in these transactions, and multiples of the
equity value for these transactions to the last twelve months' net income for
the seller in these transactions. Lazard Freres' analysis indicated the
following:
LEVERAGED BUYOUT TRANSACTION MULTIPLES
<TABLE>
<CAPTION>
HIGH LOW MEDIAN MAXXIM
---- ---- ------ ------
<S> <C> <C> <C> <C>
Last Twelve Months' EBITDA.................................. 9.5x 7.2x 8.6x 7.8x
---- ---- ---- ----
Last Twelve Months' EBIT.................................... 13.5x 8.6x 11.8x 11.2x
---- ---- ---- ----
Last Twelve Months' Net Income.............................. 23.4x 14.4x 18.7x 21.2x
---- ---- ---- ----
</TABLE>
Lazard Freres then derived a range of implied per share equity values for
Maxxim by applying the multiples from the leveraged buyout transactions listed
above to corresponding data for Maxxim prepared by management. Lazard Freres
then narrowed those ranges by focusing on the medians of the high and low
implied per share equity value ranges, which Lazard Freres determined was an
appropriate measure for this analysis. The resulting implied per share equity
value range was $18.02 to $36.81. As the per share merger consideration of $26
fell within this range, Lazard Freres concluded that this analysis supported its
fairness determination.
Lazard Freres performed a variety of financial and comparative analyses
solely for the purpose of providing its opinion to the Maxxim board that the $26
per share amount is fair from a financial point of view. The summary of these
analyses is not a complete description of the analyses performed by Lazard
Freres. Preparing a fairness opinion is a complex analytic process and is not
readily susceptible to partial analysis or summary description. Lazard Freres
believes that its analyses must be considered as a whole. Selecting portions of
its analyses and factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying the analyses
and its opinion.
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<PAGE> 34
In its analyses, Lazard Freres made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Maxxim.
The estimates contained in these analyses and the valuation ranges resulting
from any particular analysis do not necessarily indicate actual values or
predict future results or values, which may be significantly more or less
favorable than those suggested by these analyses. In addition, analyses relating
to the value of the businesses are not appraisals and do not reflect the prices
at which the businesses may actually be sold or the prices at which their
securities may trade. As a result, these analyses and estimates are inherently
subject to substantial uncertainty.
Lazard Freres' opinion and financial analyses were not the only factors
considered by the Maxxim board in its evaluation of the merger and should not be
viewed as determinative of the views of the Maxxim board or Maxxim's management.
Lazard Freres has consented to the inclusion of and references to its opinion in
this proxy statement.
Under the terms of Lazard Freres' engagement, Maxxim has agreed to pay
Lazard Freres an advisory fee of $4.5 million, which the special committee
believes is reasonable for the services provided in connection with the merger.
A substantial portion of this fee will not be paid unless and until the merger
is completed. Maxxim has agreed to reimburse Lazard Freres for travel and other
out-of-pocket expenses incurred in performing its services, including the fees
and expenses of its legal counsel, and to indemnify Lazard Freres and related
persons against liabilities, including liabilities under the federal securities
laws, arising out of Lazard Freres' engagement.
Lazard Freres is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for real estate, corporate and other purposes. Lazard
Freres was selected to act as investment banker to the special committee because
of its expertise and its reputation in investment banking and mergers and
acquisitions.
FOX PAINE'S AND THE CONTINUING SHAREHOLDERS' REASONS FOR THE MERGER
The Continuing Shareholders' purpose in engaging in the merger is to retain
an investment in each of Maxxim and Circon as private companies and for the
Management Investors to continue as executive management of both companies. The
Continuing Shareholders believe that as private companies Maxxim and Circon will
have a greater operating flexibility to focus on enhancing value by emphasizing
growth (both internally and through acquisitions) and operating cash flow
without the constraint of the public market's emphasis on quarterly earnings.
The Continuing Shareholders believe that the public markets tend to focus on
quarterly earnings reports, while the owners of private companies are less
sensitive to quarter-to-quarter results and are able to focus more on long term
strategies. While the Continuing Shareholders believe that there will be
significant opportunities associated with their continued participation in
Maxxim and Circon, there are also substantial risks that such opportunities may
not be realized. Such risks include risks associated with holding equity of
privately held companies as opposed to public companies (which translates into a
lack of liquidity in the investment), risks associated with the level of debt of
each of Maxxim and Circon following the transactions (which is being increased
and will require that a significant portion of the cash generated by Maxxim and
Circon in the future be used to pay for principal and interest, decreasing the
cash available to operate their businesses) and risks associated with the
operations of these businesses (which operate in very competitive environments).
While the other shareholders will receive a significant premium in cash over the
pre-announcement market price of their Maxxim shares, the value of the
Continuing Shareholders' ongoing investment remains at risk and may decrease, or
be lost in whole in the future, especially in light of the risks discussed
above.
The Continuing Shareholders regard the merger as an attractive investment
opportunity because they believe that the substantial increase in the debt to
equity ratio of each of Maxxim and Circon after the merger, although importing
greater investment risks, will create the potential for increased investment
returns and for the further reasons discussed below.
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<PAGE> 35
Fox Paine's reason and purpose for engaging in the merger is to enable Fox
Paine to make an investment in, and obtain a controlling interest in Maxxim and
Circon and to enable existing Maxxim shareholders (other than the Continuing
Shareholders) to realize a premium on their Maxxim shares. Fox Paine Maxxim was
formed by Fox Paine for the purposes of engaging in the merger and the other
transactions described in this proxy statement. Fox Paine Maxxim elected to
proceed with the merger for the same purposes that motivated Fox Paine.
The acquisition of Maxxim has been structured as a merger with Maxxim
continuing as the surviving corporation and the Continuing Shareholders
retaining an interest in Maxxim in order to (1) effect a recapitalization of
Maxxim for accounting purposes and (2) preserve the corporate identity of Maxxim
and its existing contractual arrangements with third parties.
Following completion of the merger, and as described in this proxy
statement, Maxxim and Circon will be separately financed companies under common
ownership. Fox Paine and the Continuing Shareholders presently intend that the
businesses of Maxxim and Circon will be conducted substantially as they have
been conducted historically. Fox Paine and the Continuing Shareholders are
continuing to evaluate each of Maxxim's and Circon's business, assets,
practices, operations, properties, corporate structure, capitalization and
personnel and will seek to cause changes as they deem appropriate. Fox Paine has
no present intention to dispose of its equity investment in Maxxim or Fox Paine
Circon or to cause either Maxxim or Circon to engage in a significant business
combination. Maxxim and Circon each intend to pursue potential acquisitions it
considers appropriate at any time they become available.
Fox Paine and the Continuing Shareholders have chosen to engage in the
merger because they believe both Maxxim and Circon are leaders in their
industries, with strengths that Fox Paine and the Continuing Shareholders
believe will provide a foundation to further enhance growth, profitability and
their respective industry positions.
Maxxim sells approximately 23,000 products to approximately 7,000 customers
through its worldwide sales force of approximately 156 representatives. Maxxim
believes that it is the second leading supplier of sterile custom procedure
trays in the United States, with, according to industry sources, approximately
29% of sales of such products in 1998, and the leading supplier of non-latex
medical examination gloves to acute care facilities in the United States, with
approximately 35% of sales of such products for the three months ended March 31,
1999. Maxxim's worldwide sales of sterile custom procedure trays and gloves for
medical examination and surgery represented approximately 77.6% of its total net
sales (without Circon) for the twelve months ended August 1, 1999. Maxxim
believes its leading sales positions result from Maxxim's strong reputation for
high-quality products, nationwide service and distribution capabilities, broad
product offerings, sophisticated supply-management systems and superior customer
service, all of which, Maxxim believes, make doing business with Maxxim
attractive to the buying groups that negotiate major supply arrangements for
specialty medical products such as Maxxim's, the buying group-member hospitals
and surgery centers that purchase and use such products under buying group
master contracts, and independent hospitals and surgery centers. Buying groups
are groups of hospitals and surgery centers that coordinate their purchasing and
supply requirements on a regional or national basis in order to obtain price
concessions and contain costs. Maxxim has stated that it has entered into more
than 210 different supply contracts with a large number of buying groups,
including six of the largest, such as Consorta, Inc., Tenet Healthcare
Corporation, Premier Research Worldwide Ltd. and Novation, LLC. Maxxim has
stated that, in order to enhance its relationships with its end use customers,
Maxxim has created and implemented process innovations that provide significant
value to its customers, including its DataStat(TM) software system (which helps
customers measure efficiency and cost by tracking component use, surgery time
and other data by procedure), its ValuQuote(TM) software system (which allows
Maxxim's account managers to search Maxxim's component database for
cost-effective components that meet the product and sequencing needs of each
customer) and its EnCompass(SM) Integrated Product Packaging system (which is an
innovative system that packages most of the single-use sterile and non-sterile
components used in a surgical procedure together with the sterile custom
procedure tray into a single modular container).
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<PAGE> 36
Maxxim also believes that it has significant expertise in the manufacture
of non-latex medical examination gloves and in the assembly and supply
management processes that are important to the sale of sterile procedure trays.
Maxxim has stated that its most technologically advanced non-latex custom gloves
are manufactured using a combination of trade secrets and patented formulations
and manufacturing processes that Maxxim believes provide it with technological
and performance advantages over its competitors in these product areas. Maxxim
has invested over $36 million since the beginning of fiscal 1998 to increase its
manufacturing capacity in the expanding non-latex glove market from 2.2 billion
to 3.5 billion gloves per year. Similarly, Maxxim believes that it has developed
the physical and technological infrastructure -- including systems for ordering
and tracking components, coordinating information received for customers, and
reducing turn-around and delivery times -- that is necessary to compete
effectively in the growing sterile custom procedure tray business on a
nationwide basis.
After the merger, Fox Paine and the Continuing Shareholders intend to
leverage Maxxim's strengths in order to (1) increase the number of buying groups
with which it does business, (2) increase the number of Maxxim's products
approved by each buying group for purchase by its member hospitals and surgery
centers and (3) increase the sales of approved products to the hospitals and
surgery centers in each buying group. It is also expected that Maxxim will use
the expertise it has gained in the U.S. to increase its penetration in the
European market, which Maxxim believes is growing in response to increased
demand in Europe for single-use specialty medical products that improve
productivity, help contain healthcare costs and reduce the transmission of
infectious disease. Because Maxxim's profitability is strongly affected by
Maxxim's ability to vertically integrate the products it manufactures into its
sterile custom procedure trays, it is expected that Maxxim will pursue an
aggressive marketing effort designed to encourage hospitals and surgery centers
to select Maxxim-manufactured products when selecting components for inclusion
in sterile custom procedure trays. Maxxim has stated that for the quarter ended
August 1, 1999, it manufactured approximately 15.6% (by estimated wholesale cost
to third parties) of the items contained in its custom procedure trays, and
Maxxim believes that it is capable of manufacturing as much as 30% of the
components included in its sterile custom procedure trays. Finally, it is
expected that Maxxim will seek to grow both through internal product development
and by acquiring companies and products that expand or complement its existing
product groups, increase vertical integration or enlarge its customer base.
Circon -- which designs, manufactures, markets and services medical
endoscopy systems used by doctors for diagnosis and minimally invasive
surgery -- is a leader in its field, with strengths that Fox Paine and the
Continuing Shareholders believe will provide a foundation to further enhance
growth, profitability and its position in its industry. Circon believes that it
has the largest direct endoscopic sales force in the U.S. of 143 sales
representatives and has stated that it uses this sales force to sell
approximately 6,000 products to approximately 15,000 accounts. Circon believes
it is the largest United States based endoscopy company and holds the leading
sales position in endoscopic systems for urology and is one of the leaders in
endoscopic systems for gynecology. Circon also believes that it is among the
most technologically sophisticated manufacturers in this industry, and many of
its products incorporate technology developed and patented internally by Circon.
Circon believes that another of its strengths is its ability to manufacture
entire endoscope systems. Circon is a vertically integrated designer and
manufacturer of the optics, electronics, instruments and plastics used to create
the endoscope, miniature color video camera, optics, light source and
fiber-optic cable that compose endoscope systems. Circon believes that its broad
product line, combined with its ability to manufacture and service entire
endoscopic systems gives it a competitive advantage with the hospitals, surgery
centers, clinics and doctors who purchase and use these systems.
After the merger, Fox Paine and the Continuing Shareholders intend to
leverage Circon's technology, manufacturing and sales capabilities to capitalize
on the trend toward minimally invasive surgery and away from open surgery. It is
expected that Circon will continue to pursue its strategy of seeking to provide
all of the endoscopy requirements of MIS surgeons in the primary specialties of
urology, gynecology and laparoscopy. It is also expected that Circon will seek
to add accessory products to these core products in order to offer products
beyond the current core specialties of urology, gynecology, and laparoscopy to
reach other medical specialties such as arthroscopy, colonoscopy, gastroscopy
and cardiology. Circon believes that this broad product line strategy will
enhance Circon's ability to satisfy its customers' needs and will position
Circon to
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<PAGE> 37
increase its business with the buying groups that are moving towards "one stop
shopping" for each clinical specialty. In addition to expanding its product
offering, it is expected that Circon will seek to continue to improve its
manufacturing and sales efficiency in order to increase profitability.
POSITION OF THE CONTINUING SHAREHOLDERS AS TO THE FAIRNESS OF THE MERGER
None of the Continuing Shareholders participated in the deliberations of
the special committee regarding, or received advice from the special committee's
financial advisor as to, the merger. Each of the Continuing Shareholders has,
however, considered the analyses and findings of the special committee and the
Maxxim board (described in detail under "-- Recommendation of the Special
Committee and of the Full Maxxim Board; Fairness of the Merger"), as well as the
opinion of Lazard Freres (described in detail under "-- Opinion of Lazard Freres
& Co. LLC"), with respect to the fairness of the merger to the public
shareholders of Maxxim.
In particular, the Continuing Shareholders considered
- The recent market prices for Maxxim shares including the fact that the
$26 per share cash consideration represents
-- a 30.8% premium over the closing price on June 11, 1999, the last
trading day prior to the public announcement of the merger agreement,
and
-- a 53.8% premium over the volume weighted average trading price of the
Maxxim shares over the ninety days prior to the public announcement
of the merger agreement.
The Continuing Shareholders considered this to be a positive factor in
their determination that the merger is fair to the public shareholders
(other than the Continuing Shareholders).
- That the $26 per share cash consideration and the terms and conditions of
the merger agreement were the result of arm's length negotiations among
the special committee and Fox Paine and their respective advisers
described on pages 15 through 20 under "-- Background of the Merger,"
which arm's length negotiations resulted in:
-- an increase in the per share cash price to be received by Maxxim's
public shareholders; a reduction in the termination fee payable by
Maxxim in the event the merger agreement is terminated as a result of
a competing transaction; a limitation in the number of events
resulting in the payment of the termination fee or reimbursement of
Fox Paine Maxxim's expenses; and
-- Maxxim having the right to engage in negotiations with and supply
information to a person who makes an unsolicited proposal for a
competing acquisition transaction that could reasonably be expected
to lead to a superior transaction (see page 56 under "The
Merger -- Prohibition Against Solicitation of Competing
Transactions").
In view of the fact that these factors significantly benefited the public
shareholders and ensured that the Maxxim board could consider a proposal
for a superior transaction without a breach of the merger agreement
following its execution, the Continuing Shareholders believe that these
factors support their fairness determination.
- That:
-- the special committee consisted of four non-employee, independent
directors appointed to represent the interests of Maxxim's public
shareholders;
-- none of the members of the special committee were Continuing
Shareholders; and
-- the special committee retained and received advice from independent
financial advisors and legal counsel.
The Continuing Shareholders believe that these factors support their
fairness determination.
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<PAGE> 38
- That the special committee and the full Maxxim board unanimously
recommended approval of the merger agreement. The Continuing Shareholders
believe that this factor supports their fairness determination.
- That the affirmative vote of a majority of the outstanding Maxxim shares
entitled to vote thereon is required to approve the merger agreement and
that under Texas law Maxxim shareholders have the right to dissent from
the merger and demand an appraisal of the value of their shares. The
Continuing Shareholders believe this factor supports their determination
of fairness.
- The fact that, in connection with the settlement of certain litigation
relating to the merger agreement, Fox Paine Maxxim and the Continuing
Shareholders have amended their voting agreements to provide that the
Continuing Shareholders will vote their shares of Maxxim common stock for
and against approval of the merger agreement in the same proportions as
the public shareholders (other than the Continuing Shareholders) voting
on the proposal. In view of this amendment, the consummation of the
merger is effectively conditioned upon the affirmative vote of a majority
of the public shareholders (other than the Continuing Shareholders)
voting on the proposal. The Continuing Shareholders believe that this
factor supports their determination of fairness.
The Continuing Shareholders did not consider as significant the premium
(36.1%) by which the $26 per share cash consideration exceeded Maxxim's book
value per share of $19.11 at May 2, 1999, and the Continuing Shareholders did
not attempt to assess the liquidation value of Maxxim, since, based on the
Continuing Shareholders' familiarity with Maxxim's business, the Continuing
Shareholders did not believe that these would yield the type of premium that was
proposed by the $26 proposal to purchase Maxxim as a going concern.
As of the date of this proxy statement, each of the Continuing Shareholders
believes that the factors considered provide a reasonable basis for their belief
that the merger, the merger agreement and the merger transactions are fair to
and in the best interests of Maxxim's public shareholders. This belief should
not be construed as a recommendation to the public shareholders of Maxxim by the
Continuing Shareholders to vote to approve the merger agreement. The Continuing
Shareholders (except in the case of Messrs. Davidson and Henley for their
recommendation in their capacity as members of the board of directors of Maxxim)
make no recommendation as to how the Maxxim public shareholders should vote
their shares. The Continuing Shareholders (other than Messrs. Davidson and
Henley in their capacity as members of the board of directors of Maxxim) have
not undertaken any formal evaluation of the fairness of the merger to the Maxxim
public shareholders, and they have not assigned specific relative weights to the
factors considered by them. Each of the Continuing Shareholders has entered into
a voting agreement with Fox Paine Maxxim, pursuant to which, among other things,
he or she has agreed to vote all of his or her Maxxim shares for and against
approval of the merger agreement in the same proportions as the public
shareholders (other than the Continuing Shareholders) voting on the proposal and
against any competing transaction. See "The Special Meeting -- Voting
Agreements."
POSITION OF FOX PAINE AS TO THE FAIRNESS OF THE MERGER
Fox Paine did not participate in the deliberations of the special committee
or the full Maxxim board regarding, or receive advice from Maxxim's legal or
financial advisors as to, the fairness of the merger to Maxxim shareholders. As
a result, Fox Paine and Fox Paine Maxxim are not in a position to specifically
adopt the conclusions of the special committee or the full Maxxim board.
However, based upon their own knowledge and analysis of available information
regarding Maxxim, as well as discussions with members of Maxxim senior
management regarding the factors considered by the special committee and the
full Maxxim board discussed in this proxy statement on page 21 under "--
Recommendation of the Special Committee and of the Full Maxxim Board; Fairness
of the Merger," Fox Paine and Fox Paine Maxxim also believe that the merger is
fair to Maxxim shareholders (other than the Continuing Shareholders). In
addition, the results of the due diligence investigation conducted by Fox Paine
and its legal and financial advisors, which included discussions with members of
Maxxim senior management regarding Maxxim's business, including the projections
discussed on page 20 under "-- Certain Projections," visits to Maxxim's
facilities and analysis of comparable
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<PAGE> 39
companies in the industry, confirmed Fox Paine's belief that the merger is fair
to Maxxim shareholders (other than the Continuing Shareholders).
In particular, Fox Paine and Fox Paine Maxxim considered
- The recent market prices for Maxxim shares including the fact that the
$26 per share cash consideration represents
-- a 30.8% premium over the closing price on June 11, 1999, the last
trading day prior to the public announcement of the merger
agreement, and
-- a 53.8% premium over the volume weighted average trading price of
the Maxxim shares over the ninety days prior to the public
announcement of the merger agreement.
Fox Paine and Fox Paine Maxxim considered this to a positive factor in
their determination that the merger is fair to Maxxim shareholders (other
than the Continuing Shareholders).
- That the $26 per share cash consideration and the terms and conditions of
the merger agreement were the result of arm's length negotiations among
the special committee and Fox Paine and their respective advisers
described on pages 15 through 20 under "-- Background of the Merger,"
which arm's length negotiations resulted in:
-- an increase in the per share cash price to be received by Maxxim's
public shareholders; a reduction in the termination fee payable by
Maxxim in the event the merger agreement is terminated as a result
of a competing transaction; a limitation in the number of events
resulting in the payment of the termination fee or reimbursement of
Fox Paine Maxxim's expenses; and
-- Maxxim having the right to engage in negotiations with and supply
information to a person who makes an unsolicited proposal for a
competing acquisition transaction that could reasonable be expected
to lead to a superior transaction (see page 56 under "The
Merger -- Prohibition Against Solicitation of Competing
Transactions").
In view of the fact that these factors significantly benefited the public
shareholders and ensured that the Maxxim board could consider a proposal
for a superior transaction without a breach of the merger agreement
following its execution, Fox Paine and Fox Paine Maxxim believe that these
factors support their fairness determination.
- That:
-- the special committee consisted of four non-employee, independent
directors appointed to represent the interests of Maxxim's public
shareholders;
-- none of the members of the special committee were Continuing
Shareholders; and
-- the special committee retained and received advice from independent
financial advisors and legal counsel.
Fox Paine and Fox Paine Maxxim believe that these factors support their
fairness determination.
- That the special committee and the full Maxxim board unanimously
recommended approval of the merger agreement. Fox Paine and Fox Paine
Maxxim believe that this factor supports their fairness determination.
- That the affirmative vote of a majority of the outstanding Maxxim shares
entitled to vote thereon is required by the merger agreement and that
under Texas law Maxxim shareholders have the right to dissent from the
merger and demand an appraisal of the value of their shares. Fox Paine
and Fox Paine Maxxim believe this factor supports their determination of
fairness.
- The fact that, in connection with the settlement of certain litigation
relating to the merger agreement, Fox Paine Maxxim and the Continuing
Shareholders have amended their voting agreements to provide that the
Continuing Shareholders will vote their shares of Maxxim common stock for
and against
34
<PAGE> 40
approval of the merger agreement in the same proportions as the public
shareholders (other than the Continuing Shareholders) voting on the
proposal. In view of this amendment, the consummation of the merger is
effectively conditioned upon the affirmative vote of a majority of the
public shareholders (other than the Continuing Shareholders) voting on
the proposal. Fox Paine and Fox Paine Maxxim believe that this factor
supports their determination of fairness.
Fox Paine and Fox Paine Maxxim did not consider as significant the premium
(36.1%) by which the $26 per share cash consideration exceeded Maxxim's book
value per share of $19.11 at May 2, 1999, and Fox Paine and Fox Paine Maxxim did
not attempt to assess the liquidation value of Maxxim, since, based on Fox
Paine's and Fox Paine Maxxim's familiarity with Maxxim's business, Fox Paine and
Fox Paine Maxxim did not believe that these would yield the type of premium that
was proposed by the $26 proposal to purchase Maxxim as a going concern.
Fox Paine and Fox Paine Maxxim believe the factors considered provide a
reasonable basis for their belief that the merger is fair to Maxxim shareholders
(other than the Continuing Shareholders). This belief should not, however, be
construed as a recommendation to Maxxim shareholders by either Fox Paine or Fox
Paine Maxxim to approve the merger agreement and the transactions contemplated
thereby. Neither Fox Paine nor Fox Paine Maxxim makes any recommendation as to
how the Maxxim shareholders should vote their shares. Neither Fox Paine or Fox
Paine Maxxim has undertaken any formal evaluation of the fairness of the merger
to the Maxxim shareholders, nor have they assigned specific relative weights to
the factors considered by them.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
- -- CONTINUING SHAREHOLDERS
The Continuing Shareholders have interests in the merger transactions as
employees and/or directors of Maxxim, or as shareholders with a continuing
equity interest in Maxxim and Circon, that are different from, or in addition
to, yours as a Maxxim shareholder. In particular, the Continuing Shareholders
will not receive $26 per share, in cash, for all of their Maxxim shares, and
will remain shareholders of Maxxim and will become shareholders of Fox Paine
Circon. In addition, the Continuing Shareholders have entered into an investor
participation agreement with Fox Paine Maxxim that would have the effects and
would provide the Continuing Shareholders with the benefits described below.
When making the determination to approve and recommend approval of the merger
transactions to Maxxim's public shareholders, both the Maxxim board and the
special committee of independent directors appointed to review the merger were
aware of the interests of the Continuing Shareholders and the terms and effects
of the investor participation agreement and considered these interests, effects
and terms together with the other factors described under "Special Factors --
Recommendation of the Special Committee and of the Full Maxxim Board; Fairness
of the Merger."
The Investor Participation Agreement -- General
In connection with the merger agreement, Fox Paine Maxxim entered into an
investor participation agreement with the Continuing Shareholders pursuant to
which each Continuing Shareholder agreed to be bound by all of the terms and
conditions set forth in a term sheet relating to the retention by the Continuing
Shareholders of their equity interest in Maxxim, the purchase by the Continuing
Shareholders of equity interests in Fox Paine Circon at the time of the Circon
sale, and the terms for employment, compensation and equity incentive
compensation for the Management Investors. It is expected that the term sheet
will be replaced by one or more full agreements before the completion of the
merger. Until then, the term sheet is binding. The key provisions of the term
sheet are described in the next few sections.
Treatment of Continuing Shares and Options
Stock Rollover. The Continuing Shareholders currently collectively own
1,125,402 shares of Maxxim common stock. In the merger, these shares will be
treated as follows:
- 198,084 shares (all but 2,150 of which are owned by Ernest J. Henley or
Davis C. Henley) will be converted into $26 per share in cash;
35
<PAGE> 41
- 571,331 shares will be retained by the Continuing Shareholders in the
merger (and not converted into cash), and will continue to represent an
ownership interest in Maxxim; and
- 355,987 shares will be converted into $26 per share in cash, with the
gross proceeds (approximately $9.26 million) immediately being reinvested
in shares of Fox Paine Circon, which is the company that will purchase
Circon in the Circon sale described on page 53.
The Continuing Shareholders will receive loans from Maxxim in an amount
sufficient to cover the taxes due on the cash received from the conversion of
the 355,987 shares used to purchase Fox Paine Circon shares. There will be no
cash interest payments on tax loans. Instead, interest will be imputed and the
Management Investors will receive gross-up payments in respect of the taxes due
on that imputed interest. These tax loans will be mandatorily repayable from the
after-tax proceeds of future sales of Fox Paine Circon shares.
In May 1997, Maxxim issued 400,000 shares of its common stock at a price of
$13 per share to members of Maxxim's senior management, including the Management
Investors, under a senior management stock purchase plan (see "Historical Market
Information"). These shares were issued in exchange for non-interest bearing,
full recourse promissory notes due May 23, 2000. The aggregate outstanding
principal amount owed by the Management Investors under these notes is
approximately $4,498,000. The promissory notes will remain outstanding after the
merger, and will be extended until the tenth anniversary of the completion of
the merger. However, promissory notes from any employee who is not a Management
Investor will be mandatorily repaid by the employee with the proceeds of any
cash received by the employee from the cash out of his or her Maxxim stock
options in the merger, and the Management Investors will be required to prepay
the promissory notes with the after-tax proceeds of any sales of Maxxim or Fox
Paine Circon stock or options made after the completion of the merger. The
management promissory notes will not accelerate upon the termination of
employment of each Continuing Shareholder. The notes will be appropriately
divided (or new notes created) to reflect the fact that some of each Management
Investor's Maxxim shares that were subject to the notes will have been exchanged
for Fox Paine Circon shares in the merger. In addition, the senior management
stock purchase plan will be amended to remove the existing provision that
requires the holder to forfeit to Maxxim 50% of the profit from the sale of
Maxxim shares that are subject to the notes.
The following table indicates the number of shares in Maxxim and Fox Paine
Circon that will be held by each of the Continuing Shareholders and the Fox
Paine Investors immediately after the merger and the percentage ownership in
Maxxim and Fox Paine Circon represented by those shares:
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP OF NUMBER OF PERCENTAGE CASH RECEIVED FOR
NUMBER OF MAXXIM MAXXIM FOX PAINE OWNERSHIP OF FOX MAXXIM SHARES IN THE
SHARES AFTER THE AFTER CIRCON SHARES PAINE CIRCON MERGER AND REINVESTED
NAME MERGER THE MERGER AFTER THE MERGER(1) AFTER THE MERGER IN FOX PAINE CIRCON
- ---- ---------------- ------------ ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Kenneth W. Davidson... 198,209 3.4% 92,659 2.7% $2,409,134
Peter M. Graham....... 80,958 1.4 27,064 .8 703,664
David L. Lamont....... 64,364 1.1 21,978 .6 571,428
Henry T. DeHart III... 39,464 .7 15,317 .4 398,242
Jack F. Cahill........ 42,604 .7 16,891 .5 439,166
Alan S. Blazei........ 49,973 .9 14,972 .4 389,272
Joseph D. Dailey...... 26,126 .5 10,864 .3 282,464
Suzanne R. Garon...... 5,397 .1 2,687 .1 69,862
Ernest J. Henley,
Ph.D................ 154,028 2.7 95,972 2.8 2,495,272
Davis C. Henley....... 92,417 1.6 57,583 1.7 1,497,158
Fox Paine Investors... 5,015,385 86.9 3,125,000 89.8 N/A
</TABLE>
- ---------------
(1) Excludes 76,923 shares of Fox Paine Circon to be issued to Maxxim as a
result of the sale of Circon by Maxxim to Fox Paine Circon.
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<PAGE> 42
Option Rollover. The Management Investors collectively own options to
acquire 1,084,200 shares of Maxxim common stock at a weighted average exercise
price of $13.97 per share. Upon the completion of the merger, vested or unvested
options on 667,988 shares will be canceled in exchange for a cash payment equal
to the difference between $26.00 and the exercise price per share under the
relevant option. The Management Investors will use the after-tax proceeds of
this cash-out to purchase 182,209 new Maxxim shares at $26.00 per share, and
will be granted 485,779 new options to acquire Maxxim common stock, which equals
the number of shares subject to the cashed-out options (667,988) minus the
number of newly issued shares (182,209). The new options will have an exercise
price of $26.00 per share. The remaining 416,212 options held by the Management
Investors will be canceled, and the Management Investors will receive new
options to acquire 416,212 shares of Fox Paine Circon common stock at a price of
$26.00 per share. These options will be fully vested, permit cashless exercise
with previously owned shares, and have no built-in gain. On October 1, 1999, the
Board of Directors authorized the extension until November 30, 1999, of the
exercise period of 24,720 outstanding options granted under the 1992 Stock
Option Plan. These options would have otherwise expired on November 1, 1999. The
Continuing Shareholders hold options under this plan as follows: Mr. Davidson
holds 5,000 options, Mr. Graham holds 4,000 options, Messrs. Blazei, DeHart and
Lamont each hold 3,000 options, Mr. Dailey holds 1,000 options and Mr. Cahill
holds 200 options. The remaining outstanding options under this plan are held by
Maxxim employees other than the Continuing Shareholders.
The following table indicates, for each Management Investor, the number of
options currently held, the number of Maxxim options (which will have a $26.00
exercise price) to be held after the merger, and the number of Fox Paine Circon
options (which will have a $26.00 exercise price) to be held after the merger.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF NUMBER OF FOX PAINE
MAXXIM OPTIONS MAXXIM OPTIONS CIRCON OPTIONS
NAME CURRENTLY HELD AFTER THE MERGER AFTER THE MERGER
- ---- -------------- ---------------- ----------------
<S> <C> <C> <C>
Kenneth W. Davidson................................ 290,000 129,172 111,328
Peter M. Graham.................................... 213,000 93,710 81,768
David L. Lamont.................................... 166,000 73,182 63,726
Henry T. DeHart III................................ 98,000 45,498 37,621
Jack F. Cahill..................................... 101,400 46,979 38,926
Alan S. Blazei..................................... 151,000 67,088 57,967
Joseph D. Dailey................................... 55,000 25,196 21,114
Suzanne R. Garon................................... 9,800 4,954 3,762
</TABLE>
New Management Equity Incentive Plans.
As of the completion of the merger, Maxxim and Fox Paine Circon each will
provide a new management equity incentive plan that will grant the Management
Investors options to purchase up to a total of 10% of the common equity of
Maxxim and of Fox Paine Circon at an exercise price of $26.00. The new incentive
plans will generally provide for a ten-year option term, and will allow cashless
exercise of the options. The options will be split evenly into two pools:
- a pool of performance-based options that will vest in 20% increments
after each fiscal year from 1999 through 2003 if previously agreed upon
annual targets for EBITDA (earnings before interest, taxes, depreciation
and amortization) for Maxxim and Fox Paine Circon for such fiscal year
are met; and
- a pool of time-based options that vest in 20% increments on each of the
first through fifth anniversaries of the merger.
Maxxim and Fox Paine Circon performance-based options that do not vest as
scheduled because an EBIDTA target is not achieved will vest either in the next
fiscal year in which the EBITDA target is achieved
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<PAGE> 43
or upon Fox Paine's realization of an internal rate of return of at least 30% on
its investment in Maxxim or Fox Paine Circon, as applicable, or else on the
ninth anniversary of the merger.
Any stock options granted under the new incentive plans that remain
unvested as of the date of a Management Investor's termination of employment
with Maxxim or Fox Paine Circon for any reason will be forfeited on the date of
termination. However, any stock options that are vested at the time of
termination may be exercised for one year following the termination of
employment, after which they will be forfeited.
Options granted under the new equity incentive plans will be granted to
individual Management Investors based upon the recommendation of Mr. Davidson to
the compensation committee of the Maxxim board.
Special Bonus Program.
In connection with the merger, Maxxim will establish a key executive
special bonus program, valued at approximately $3,663,000, for the benefit of
the Management Investors. The bonus payments for all of the participants, other
than Mr. Graham and Mr. Blazei, will be payable on the completion of the merger.
A portion of Mr. Graham's and Mr. Blazei's bonus will be payable on the
completion of the merger with the remaining portion paid based on the
achievement of performance goals following the merger.
In addition, the bonus program provides that the unpaid portion of Mr.
Graham's and Mr. Blazei's bonus will be forfeited if their employment is
terminated either by Maxxim for cause or by Messrs. Graham or Blazei without
good reason. If, however, Mr. Graham's or Mr. Blazei's employment is terminated
by Maxxim without cause or by Messrs. Graham or Blazei for good reason, or upon
their disability or death, the unpaid portion of their respective bonuses will
become payable in accordance with the agreed upon schedule and conditions.
In addition, it is expected that Fox Paine Circon will establish a bonus
pool of approximately $5.0 million in the aggregate for the benefit of the
Management Investors. Bonuses will be paid over a number of years to be
determined and will be related to the value of the Fox Paine Circon equity.
Employment and Severance Agreements.
Although currently employed by Maxxim, the Management Investors (other than
Mr. Davidson) do not have written employment agreements with Maxxim, although
each is a party to an Executive Continuity Agreement with Maxxim which provides
him or her with certain benefits in the event of his or her termination upon a
change of control of Maxxim. Effective upon the completion of the merger, each
Management Investor (including Mr. Davidson, whose current employment agreement
will be terminated) will enter into an employment agreement with Maxxim and each
of the Executive Continuity Agreements will be terminated without any
termination benefits being paid under it. The following is a summary of the
material terms of such employment agreements.
The employment period under the new employment agreements will commence
upon the completion of the merger and will terminate on the fifth anniversary of
the merger, with additional one year renewal options. Pursuant to the new
employment agreements, each executive will continue in the position and with the
duties and responsibilities as in effect prior to the completion of the merger,
subject to reassignment from time to time by Mr. Davidson, in the case of all
executives other than Mr. Davidson. The new employment agreements will provide
that each executive will receive an annual base salary equal to his or her
current annual base salary and an annual performance bonus opportunity equal to
a percentage of his or her annual base salary. The annual base salary and bonus
opportunity percentage for Mr. Davidson is $350,000 and 90%, respectively, and
will be less for the other executives. In addition, during the employment
period, each executive will be entitled to participate in compensation and
benefit plans on terms and conditions no less favorable in the aggregate than
those in effect prior to the merger.
Pursuant to the new employment agreements, upon the termination of an
executive's employment by Maxxim, other than for cause, or by the executive for
good reason, the executive will be entitled to a cash payment equal to a
multiple of the sum of the executive's annual base salary and the most recent
annual bonus earned by the executive, as well as continued participation in
Maxxim's benefit plans for a number of years
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<PAGE> 44
equal to that executive's multiple. Mr. Davidson's multiple will be three, so
that he will be entitled to receive a payment of three times the sum of his
annual base salary and most recent annual bonus, as well as continued
participation in Maxxim's benefit plans for a period of three years. The
compensation, multiple and length of continuing participation will be less for
the other executives.
Under the new employment agreements, Maxxim is required to provide term
life insurance with death benefits equal to two times the sum of the executive's
then current base salary and annual bonus opportunity. Should the executive
become disabled, Maxxim is required to pay the executive's then current base
salary and bonus opportunity for a period of 24 months.
The new employment agreements will provide that if any amounts payable to
the executive in connection with a change in control (other than the merger
transactions) would be subject to the excise tax under section 4999 of the U.S.
tax code, an additional payment will be made so that after the payment of all
income and excise taxes the executive will be in the same after-tax position as
if no excise tax under section 4999 had been imposed. In addition, the
employment agreements with Messrs. Davidson, Graham and Blazei will provide for
a similar additional payment in the event any amounts payable to these
individuals in connection with the merger transactions would be subject to
excise tax under Section 4999 of the U.S. tax code.
Pursuant to the new employment agreements, each executive will also agree
to non-competition and non-solicitation restrictions during the employment
period and thereafter for the number of years equal to the executive's multiple.
Shareholder Rights Relative to the Fox Paine Investors and to Each Other
After the merger, the Continuing Shareholders, together with the Fox Paine
Investors, will own all of the equity of Maxxim and Fox Paine Circon.
Accordingly, the Continuing Shareholders and Fox Paine have entered into an
Investor Participation Agreement creating various rights and obligations between
them. These provisions are described below. While these provisions are currently
enforceable, it is anticipated that, at the time of the merger, the Continuing
Shareholders and the Fox Paine Investors will enter into shareholders agreements
(one for Maxxim and another for Fox Paine Circon) that will also include these
provisions. It is further anticipated that the shareholder agreements will
permit the Fox Paine Investors and the Continuing Shareholders to transfer or
sell their shares in some circumstances and that anyone who becomes a
shareholder of Maxxim or Fox Paine Circon as a result of a permitted transfer or
sale will be required to sign the shareholders agreements and be bound in the
same way as the person who transferred or sold the shares to the new
shareholder. Unless otherwise indicated, the following items apply equally to
the Fox Paine Investors' and the Continuing Shareholders' participation in
Maxxim and Fox Paine Circon.
Tag-Along Rights. If, at any time before an initial public offering of
stock, a Fox Paine Investor or a Continuing Shareholder accepts an offer from a
third party to sell any or all of its shares, each of the other shareholders
will be able to participate in the offer on a proportionate basis, at the same
price and on the same terms.
Drag-Along Rights. If, at any time before an initial public offering of
stock, Fox Paine sells at least 50% of its shares in a bona fide arm's length
transaction or series of related transactions, Fox Paine may require the
Continuing Shareholders to sell a proportionate number of their shares in the
same transaction at the same price and on the same terms (with appropriate
adjustments for warrants or options).
Registration Rights. After an initial public offering, the Continuing
Shareholders will collectively have the right, which can only be used once with
respect to Fox Paine Circon and twice with respect to Maxxim, to demand that Fox
Paine Circon or Maxxim, as the case may be, register their shares for sale under
the Securities Act of 1933, as amended. Fox Paine will have the same right,
which it will be permitted to use up to five times for each of Maxxim or Fox
Paine Circon, as the case may be. In addition, the Continuing Shareholders and
the Fox Paine Investors will all have customary and full "piggyback"
registration rights on registrations initiated by a Fox Paine Investor or
another Continuing Shareholder. If the underwriters request a reduction in the
number of shares to be sold in any registered offering, the number of shares
offered by the Fox Paine Investors and any participating Continuing Shareholders
will be cut back proportionally based on
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<PAGE> 45
the number of shares owned by each person, regardless of who initiated the
registration. Expenses related to all demand registrations and piggyback
registrations will be borne by the issuer. Other customary registration rights
provisions will apply, including holdbacks, indemnification, and contribution
provisions. If the Fox Paine Investors are permitted to include any of their
shares in an initial public offering, the Continuing Shareholders will be
entitled to participate proportionately as well.
Right of First Offer. Before an initial public offering, if the Fox Paine
Investors propose to sell or transfer any of their shares, the Fox Paine
Investors will first be required to offer to sell the shares to the Continuing
Shareholders at a minimum price suggested by the selling Fox Paine Investors. If
the Continuing Shareholders elect not to purchase all of the offered shares, the
Fox Paine Investors will have the right to sell the shares to any other party as
long as the sale price is equal to or above the minimum price offered to the
Continuing Shareholders. Before an initial public offering, the Fox Paine
Investors will have a reciprocal right to receive a first offer on any sales or
transfers by the Continuing Shareholders. These right of first offer provisions
do not apply to transfers to customary permitted transferees (such as affiliates
of the Fox Paine Investors or family members of the Continuing Shareholders).
Liquidity upon Death or Disability and Some Terminations. The Management
Investors will have the right to sell all of their Fox Paine Circon shares back
to Fox Paine Circon, at fair market value, upon their death or disability or the
voluntary termination of their employment by the Management Investors for good
reason, or their involuntary termination without cause. In addition, the
Management Investors will have the right to sell any Maxxim shares that are
acquired upon the exercise of stock options (provided that the shares have been
held for at least six months) back to Maxxim at fair market value, upon death or
disability or termination of employment by the Management Investors for good
reason or by Maxxim without cause.
The Management Investors' liquidity rights will end upon completion of an
initial public offering of Maxxim or Fox Paine Circon shares, as applicable,
and, in any event, are subject to Maxxim's and Fox Paine Circon's available cash
flow, debt restrictions, and any legal restrictions on distributions of cash,
particularly under debt and loan agreements (including those described on pages
44 to 49 under "Merger Financing"). If payments related to these rights are not
made immediately, the payments will remain a continuing obligation of the
relevant company and will be made, with interest, before the payment of any
dividends or distributions to other shareholders.
Call Rights. Before an initial public offering of Fox Paine Circon shares,
Fox Paine Circon will have the right to purchase its shares back from any
Management Investor at fair market value if the investor's employment is
terminated by Maxxim or Fox Paine Circon for cause or by the Management Investor
voluntarily and without good reason.
Board of Directors.
Maxxim and Fox Paine Circon will have separate boards of directors after
the merger. Each board of directors initially will consist of (1) Kenneth W.
Davidson, as Chairman, (2) Ernest J. Henley, (3) one other member to be
appointed by the Continuing Shareholders and (4) four members designated by Fox
Paine. The members of the special committee are not being considered for
membership on either the Maxxim or Fox Paine Circon board of directors after the
merger. The shareholder agreement will not limit Fox Paine's right to add
additional directors. So long as Mr. Davidson is the chief executive officer or
chairman of the board of directors, Mr. Davidson will have the right to
designate all three representatives of the Continuing Shareholders. Thereafter,
the representatives of the Continuing Shareholders will be elected by plurality
vote of shares held by the Continuing Shareholders. Fox Paine's and the
Continuing Shareholders' right to designate directors will terminate upon an
initial public offering or a significant reduction in ownership percentage by
either group.
Indemnification of Directors and Officers.
Under the merger agreement, the indemnification and exculpation provisions
of Maxxim's articles of incorporation and bylaws as in effect at the time of the
completion of the merger will, to the extent they relate to matters arising
before the completion of the merger, remain in force after the merger. In
addition, Fox
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Paine Maxxim has agreed that, for a period of six years after the completion of
the merger, it will cause Maxxim to maintain in effect the current policies of
directors' and officers' liability insurance maintained by Maxxim with respect
to matters arising on or before the completion of the merger. Fox Paine Maxxim
is only required to cause Maxxim to obtain as much comparable insurance as is
available at an annual premium of 150% of Maxxim's current annual premium. In
addition, the investor participation agreement provides that Maxxim and Fox
Paine Circon will each adopt customary mandatory indemnification and expense
advancement policies for its respective officers.
Management and Advisory Services Provided by Fox Paine.
In connection with the merger, Maxxim will enter into a management services
agreement with an affiliate of Fox Paine pursuant to which such affiliate will
provide certain financial and strategic consulting and advisory services to
Maxxim and Fox Paine Circon. In exchange for these services, the Fox Paine
affiliate will receive an initial annual fee of approximately $760,000 from
Maxxim and approximately $280,000 from Fox Paine Circon. In addition, at or
following the completion of the merger, it is expected that Maxxim and Fox Paine
Circon will pay to such affiliate aggregate transaction fees of approximately
$15.5 million, plus reimbursement of its expenses.
- -- SPECIAL COMMITTEE
Because some of the directors are Continuing Shareholders in the merger
transactions, the Maxxim board appointed a special committee of four independent
directors to evaluate the proposed transactions. None of the members of the
special committee are Continuing Shareholders or employees of Maxxim, nor do any
of them have interests in the merger different from the interests of Maxxim
shareholders generally. Their Maxxim shares and options will be cashed out like
those of the Maxxim shareholders that are not Continuing Shareholders.
The members of the special committee have not received any special
compensation for their services on the committee. Members of the special
committee, however, will be entitled to certain indemnification rights and to
directors' and officers' liability insurance that will be continued by Maxxim
following the merger as described above for the current and former officers and
directors of Maxxim. The Maxxim board and the special committee believe that the
foregoing arrangements do not affect the special committee's independence or
impartiality.
CERTAIN EFFECTS OF THE MERGER; CONDUCT OF BUSINESS AFTER THE MERGER
After the merger, Maxxim and Circon will be separate companies, will be
capitalized separately and will pursue separately their respective business
strategies. Immediately after the merger, Maxxim will be owned approximately 87%
by the Fox Paine Investors and approximately 13% by the Continuing Shareholders,
and Circon will be wholly-owned by Fox Paine Circon which will be owned
approximately 90% by the Fox Paine Investors and approximately 10% by the
Continuing Shareholders (in both cases, before giving effect to the exercise of
any stock options or warrants). After giving effect to the exercise of warrants
and options, the Continuing Shareholders will own approximately 27.4% of each of
Maxxim and Fox Paine Circon, and Fox Paine will own more than a majority of each
company. The current Maxxim shareholders, other than the Continuing
Shareholders, will no longer have any interest in, and will not be shareholders
of either Maxxim or Fox Paine Circon. Maxxim and Fox Paine Circon will have
separate boards of directors after the merger. Each board of directors initially
will consist of (1) Kenneth W. Davidson, as Chairman, (2) Ernest J. Henley, (3)
one other member to be appointed by the Continuing Shareholders, and (4) four
members designated by Fox Paine. See page 35 under "Special Factors -- Interests
of Certain Persons in the Merger" for additional details.
It is currently expected that the Management Investors, who are the current
executive officers of Maxxim, will continue to be the executive officers of both
Maxxim and Fox Paine Circon after the merger. These persons will receive the
employment, compensation, and cash and equity incentives described under
"Special Factors -- Interests of Certain Persons in the Merger."
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The separation of Maxxim and Circon is intended to enable Maxxim and Circon
to retain the benefits of the original acquisition of Circon, while allowing
each company to optimize its respective capital structure in response to future
changes or occurrences in the business and financial environments in which it
operates.
Following the merger, Maxxim intends to delist the Maxxim shares from the
New York Stock Exchange, and the registration of the Maxxim shares under the
Securities Exchange Act of 1934 will be terminated. It is anticipated that there
will be no active trading market for Maxxim or Fox Paine Circon shares unless
and until Maxxim or Fox Paine Circon determines at a future date to conduct an
initial public offering of its shares.
Fox Paine and the Continuing Shareholders are continuing to evaluate each
of Maxxim's and Circon's business, assets, practices, operations, properties,
corporate structure, capitalization and personnel and will seek to cause changes
as they deem appropriate. However, Fox Paine has no present intention to dispose
of its equity investment in either Maxxim or Fox Paine Circon or to cause either
Maxxim or Fox Paine Circon to engage in a significant business combination.
Maxxim and Fox Paine Circon each intends to pursue potential acquisitions it
considers appropriate at any time they become available.
INFORMATION ABOUT THE TRANSACTION PARTICIPANTS
FOX PAINE MEDIC ACQUISITION CORPORATION AND FOX PAINE
Fox Paine Medic Acquisition Corporation (which we have referred to as "Fox
Paine Maxxim" in this proxy statement) is the entity that will be merged with
Maxxim in the merger. It was formed by Fox Paine Capital Fund, L.P., a Delaware
limited partnership, a private investment fund, for the purpose of participating
in the merger transactions. Fox Paine Maxxim is engaging in the merger and the
Circon sale for the purpose of furthering Fox Paine's business and investment
strategy described below. Fox Paine Maxxim is not expected to have any
significant assets or liabilities, or engage in any business activities other
than those related to completing the merger, and it will cease to exist after
the merger. Throughout this proxy statement, we sometimes refer to Fox Paine
Capital Fund, L.P. and Fox Paine Maxxim together as "Fox Paine."
Fox Paine Capital Fund, L.P. is a private investment fund managed by Fox
Paine & Company, LLC. Fox Paine & Company, LLC, a Delaware limited liability
company, manages investment funds in excess of $500 million focused on investing
equity capital in management-led acquisitions, company expansion programs and
restructurings. Fox Paine Capital, LLC, a Delaware limited liability company is,
and its principal business is being, the sole general partner of Fox Paine
Capital Fund, L.P. Fox Paine Capital Fund, L.P., Fox Paine Capital, LLC and Fox
Paine & Company, LLC were each founded in 1997 by Saul A. Fox and W. Dexter
Paine, III. The principal executive offices of each of the Fox Paine entities
are located at 950 Tower Lane, Suite 1150, Foster City, California 94404.
Fox Paine Capital Fund, L.P. owns all of the equity of Fox Paine Maxxim and
all of the equity of Fox Paine Citron Acquisition Corporation, which is the
company that will buy Circon from Maxxim as part of the merger transactions. We
have referred to Fox Paine Citron Acquisition Corporation as "Fox Paine Circon"
in this proxy statement.
Fox Paine may permit institutional investors and funds managed by Fox
Paine, as well as individuals or entities having significant business
relationships with Maxxim and Circon, to purchase a portion of the equity of
Maxxim or Fox Paine Circon that would otherwise be purchased by Fox Paine in the
transactions described in this proxy statement. All other investors are expected
to pay the same price per share for their Maxxim or Fox Paine Circon shares as
Fox Paine does. The participation of any such additional investors would not
result in Fox Paine being the beneficial owner of less than a majority of the
equity interests in either Maxxim or Fox Paine Circon. See "Merger Financing."
Throughout this proxy statement, we refer to Fox Paine, together with the
additional permitted investors described above, if any, as the "Fox Paine
Investors."
Saul A. Fox is the founder and has been a managing member of Fox Paine &
Company LLC and of Fox Paine Capital, LLC since their respective formations in
1997. Mr. Fox has been a director and the President and Chief Executive Officer
of Fox Paine Maxxim since its formation on June 8, 1999. Prior to founding Fox
Paine, Mr. Fox was a general partner of Kohlberg Kravis Roberts & Co.
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W. Dexter Paine, III is the founder and has been a managing member of Fox
Paine & Company, LLC and of Fox Paine Capital, LLC since their respective
formations in 1997. Mr. Paine has been a director and vice president and
secretary of Fox Paine Maxxim since its formation on June 8, 1999. Prior to
founding Fox Paine, Mr. Paine was a general partner of Kohlberg & Company.
Jason B. Hurwitz has been a director and the treasurer of Fox Paine Maxxim
since its formation on June 8, 1999. Mr. Hurwitz has been employed at Fox Paine
& Company, LLC since June 1997 and has served as an associate, vice president
and, currently, a director. Mr. Hurwitz was an associate at McCown De Leeuw &
Co. from August 1996 to June 1997 and was an analyst at James D. Wolfensohn
Incorporated from July 1994 to July 1996.
During the last five years, none of Saul A. Fox, W. Dexter Paine, III and
Jason Hurwitz has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors ) nor been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction in which as a result
of such proceeding, such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws. Messrs. Fox, Paine and Hurwitz are citizens of the United
States and are principally employed by Fox Paine & Company, LLC. The business
address for Fox Paine Maxxim, Fox Paine Capital Fund, L.P., Fox Paine Capital,
LLC, Fox Paine & Company, LLC and Messrs. Fox, Paine and Hurwitz is 950 Tower
Lane, Suite 1150, Foster City, California 94404.
THE CONTINUING SHAREHOLDERS
The following Management Investors are executive officers of Maxxim and
will continue to be executive officers of the surviving corporation:
Kenneth W. Davidson has served as a director of Maxxim since 1982, and
as Chairman of the Board of Directors, Chief Executive Officer and
President of Maxxim since November 1, 1986. Mr. Davidson is also a director
of Henley Healthcare, Inc., a manufacturer of products used in physical
therapy, Encore Orthopedics, Inc., a designer and manufacturer of
implantable orthopedic devices, and of Bovie Medical Corporation, a
manufacturer and marketer of electrosurgical medical devices.
Peter M. Graham has served as Senior Executive Vice President of
Maxxim since January 1999, and 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 Executive Vice President, Research and
Development of Maxxim since January 1999, and as Vice President since March
1988. Mr. Lamont was Group Vice President from July 1993 through December
1998, and President of the Argon Medical division from January 1992 through
July 1993.
Alan S. Blazei has served as Executive Vice President and Controller
since January 1999 and Vice President and Controller of Maxxim since
December 1990. In July 1997, Mr. Blazei was elected Treasurer of Maxxim.
Henry T. DeHart III has served as Executive Vice President,
Manufacturing Operations of Maxxim since January 1999 and as Vice President
since November 1993. Mr. DeHart was Executive Vice President, Manufacturing
Operations, Case Management from June 1995 through December 1998, and
President of Boundary Healthcare division from December 1992 through July
1995.
Joseph D. Dailey has served as Executive Vice President, Information
Services of Maxxim since January 1999 and Vice President, Information
Services since August 1994. Previously, he had served as Director of
Information Services since January 1992.
Jack F. Cahill has served as Executive Vice President, Sales and
Marketing of Maxxim since January 1999 and as Vice President since May
1995. Mr. Cahill was Executive Vice President Sales and Marketing, Case
Management from June 1995 through December 1998, President of the Sterile
Design
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division from May 1994 through June 1995, and Executive Vice President,
Sterile Design from July 1993 through May 1994.
Suzanne R. Garon has served as Executive Vice President, Human
Resources of Maxxim since January 1999 and as Vice President since January
1997. Previously, she had served as Vice President Human Resources, Case
Management since August 1995. Ms. Garon was Manager of Human Resources,
Sterile Design from July 1993 through August 1995.
Ernest J. Henley, Ph.D. has served as a director of Maxxim since 1976, and
served as a consultant to Maxxim 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. Dr. Henley will continue to
serve as a director of Maxxim and Circon after the Merger.
Davis C. Henley, who is not an executive officer of Maxxim, has served as a
Vice President of Maxxim since May 1996. During this time he has focused on
special projects and business development. Previously, since at least 1994, Mr.
Henley served as President of Henley Healthcare, a division of Maxxim.
Each of the Continuing Shareholders, except for Messrs. Davidson, Graham
and Lamont, is a citizen of the United States of America. Messrs. Davidson,
Graham and Lamont are citizens of Canada. During the last five years, none of
the Continuing Shareholders has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) nor been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
in which as a result of such proceeding any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws. The business address for each of the
Continuing Shareholders is c/o Maxxim Medical, Inc., 10300 49th Street North,
Clearwater, Florida 33762.
MERGER FINANCING
GENERAL
It is expected that completion of the merger transactions will require
total funding of approximately $793.0 million for the following uses:
(1) to make payments to Maxxim shareholders and holders of Maxxim stock
options of approximately $367.8 million in cash consideration for the
merger;
(2) to retire certain existing indebtedness of Maxxim of approximately
$254.7 million;
(3) to purchase approximately $100.0 million principal amount of Maxxim's
10 1/2% senior subordinated notes due August 1, 2006, in a debt tender
offer to be consummated concurrently with the merger;
(4) to retain $14.9 million of existing equity of the Continuing
Shareholders in Maxxim;
(5) to pay the fees and expenses incurred in connection with the merger
transactions (other than the Circon sale) of approximately $52.2
million, including any debt tender premium and consent fee paid in
connection with the debt tender offer; and
(6) $3.4 million to fund short-term working capital requirements.
It is expected that such financing needs will be funded from the following
sources:
(1) $285.0 million in senior secured credit facilities committed by The
Chase Manhattan Bank, of which $235.0 million is expected to be funded
at closing;
(2) $150.0 million in new senior subordinated notes to be issued by a
subsidiary of Maxxim in a private placement (or, if the subsidiary is
unable to sell these senior subordinated notes, $150.0 million in
senior subordinated bridge loans committed by The Chase Manhattan
Bank);
(3) $50.0 million in senior unsecured notes to be issued by Maxxim in a
private placement;
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(4) $208.0 million in cash from the sale of Circon to Fox Paine Circon
immediately before the merger (the financing for this $208.0 million is
described on page 48 under "-- Financing of the Circon Sale");
(5) $130.4 million of cash equity provided by the Fox Paine Investors; and
(6) $19.6 million of existing equity from the Continuing Shareholders
(consisting of $14.9 million of shares of Maxxim common stock retained
in the merger and $4.7 million of new shares of Maxxim common stock
purchased from the proceeds of the cash-out of Maxxim options in the
merger) (see "Special Factors -- Interests of Certain Persons in the
Merger -- Continuing Shareholders -- Treatment of Continuing Shares and
Options -- Option Rollover" on page 36).
Under the merger agreement, Fox Paine Maxxim may change the terms or
components of the financing for the merger described above and may enter into
new, replacement or additional financing arrangements as long as in doing so Fox
Paine Maxxim does not materially delay completion of the merger or materially
affect Fox Paine Maxxim's ability to complete the merger. In addition, Fox Paine
may, with the approval of the lenders, reallocate or revise its aggregate equity
contributions to Maxxim and Fox Paine Circon in order to facilitate completion
of the merger transactions. In such case, the Continuing Shareholders' equity in
Maxxim and Fox Paine Circon will be adjusted accordingly.
SENIOR BANK LOANS
Commitment; Structure; Amortization; Interest; Maturity.
In connection with the merger, Fox Paine Maxxim received a commitment from
The Chase Manhattan Bank to provide up to $285.0 million in senior secured
credit facilities to a newly formed wholly-owned subsidiary of Maxxim that will
be the borrower (the "Borrowing Subsidiary"). Immediately prior to or concurrent
with the merger, Maxxim will contribute all of its assets (which consist
primarily of the stock of Maxxim's other subsidiaries) to the Borrowing
Subsidiary.
It is expected that the senior secured credit facilities will consist of
three term loans and a revolving credit facility, as follows:
- an $80.0 million Tranche A term loan, which will mature six years after
the effective date of the merger and will be amortized on a schedule to
be agreed upon by Maxxim and the lenders. The loan will bear interest, at
the Borrowing Subsidiary's option, at the adjusted LIBOR rate plus 2.75%
per annum or at the alternate base rate described below plus 1.75% per
annum, in each case subject to adjustments to be agreed upon by Maxxim
and the lenders;
- a $77.5 million Tranche B term loan, which will mature seven-and-one-half
years after the effective date of the merger and will be amortized on a
schedule to be agreed upon by Maxxim and the lenders (but providing for
only nominal installments until the final six months of the loan). The
loan will bear interest, at the Borrowing Subsidiary's option, at the
adjusted LIBOR rate plus 3.25% per annum or at the alternate base rate
plus 2.25% per annum;
- a $77.5 million Tranche C term loan, which will mature eight-and-one-half
years after the effective date of the merger and will be amortized on a
schedule to be agreed upon by Maxxim and the lenders (but providing for
only nominal installments until the final six months of the loan). The
loan will bear interest, at the Borrowing Subsidiary's option, at the
adjusted LIBOR rate plus 3.50% per annum or at the alternate base rate
plus 2.50% per annum; and
- a $50.0 million revolving credit facility, which will mature six years
after the effective date of the merger. The revolving credit facility
will bear interest, at the Borrowing Subsidiary's option, at the adjusted
LIBOR rate plus 2.75% per annum or at the alternate base rate plus 1.75%
per annum, in each case subject to adjustments to be agreed upon by
Maxxim and the lenders.
The alternate base rate is the highest of The Chase Manhattan Bank's prime
rate, the federal funds effective rate plus 1/2%, and the base CD rate plus 1%.
Under some circumstances, the maturity of each facility
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can be moved to an earlier date. If any of Maxxim's currently outstanding
10 1/2% senior subordinated notes remain outstanding after the debt tender offer
or more than $150 million of senior subordinated notes are issued by the
Borrowing Subsidiary in connection with the merger, then the amount of the term
loans will be reduced by the amount of the outstanding notes or the amount of
new senior subordinated notes in excess of $150 million.
It is expected that the $50.0 million available under the revolving credit
facility will be available to be drawn upon for general corporate purposes.
Guarantees; Security.
The Borrowing Subsidiary's obligations under the term loans and the
revolving credit facility will be unconditionally guaranteed by Maxxim and by
each of Maxxim's subsidiaries other than the Borrowing Subsidiary, Circon and
its subsidiaries and any foreign subsidiary of Maxxim whose guaranty would
result in adverse tax consequences to Maxxim. The Borrowing Subsidiary's
obligations under the term loans and the revolving credit facility and the
guarantee obligations referred to above will be secured by (1) a perfected first
priority pledge of all capital stock of the Borrowing Subsidiary and, subject to
certain exceptions, all capital stock held by Maxxim or any of Maxxim's
subsidiaries of each of Maxxim's subsidiaries, other than Circon and its
subsidiaries, and (2) subject to certain exceptions, a perfected first priority
security interest in all or substantially all of the tangible and intangible
assets of Maxxim, the Borrowing Subsidiary and each of their subsidiaries, other
than Circon and its subsidiaries.
Availability.
The availability of the term loans and the revolving credit facility will
be subject to various conditions precedent including:
- There not having occurred since December 31, 1998, any material adverse
change in the business, results of operations, conditions (financial or
otherwise), assets, liabilities or prospects of Maxxim and its
subsidiaries.
- There not having occurred and being continuing a material disruption of
or material adverse change in financial, banking or capital market
conditions that, in Chase's reasonable judgment, could materially impair
the syndication of the senior secured facilities or the senior
subordinated notes described below.
- The pro forma adjusted consolidated EBITDA of the Borrowing Subsidiary
and its subsidiaries (other than Circon and its subsidiaries) being not
materially less than $73.2 million for the 12 months ending July 30,
1999.
- Completion by Maxxim of the debt tender offer and consent solicitation
for its 10 1/2% senior subordinated notes described on page 54 under "The
Merger -- Retirement/Amendment of Maxxim Notes."
- Availability of the other debt and equity funding for the merger
transactions.
- The merger transactions being completed, in accordance with the terms of
the merger agreement (without any waiver or amendment that is adverse to
the lenders and not reasonably satisfactory to the loan agents),
concurrently with, or immediately after, the first drawing of funds under
the term loans and revolving credit facility.
The term loans are subject to mandatory prepayments upon the occurrence of
certain events, and the Borrowing Subsidiary may prepay any of the borrowings in
whole or in part at any time. Amounts repaid or prepaid under the term loans
cannot be reborrowed. Amounts repaid under the revolving credit facility will be
available for reborrowing on a revolving basis, subject to customary terms and
conditions.
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Representations and Warranties; Covenants; Events of Default.
The term loans and the revolving credit facility will contain customary
representations and warranties and customary affirmative and negative covenants,
including covenants related to delivery of financial information, corporate
obligations and financial audits, as well as financial covenants, including
covenants related to maximum leverage and minimum interest coverage. The term
loans and the revolving credit facility will contain customary default
provisions, including the nonpayment of principal or interest when due, cross-
defaults, non-compliance with covenants, breach of representations and
warranties, bankruptcy, and changes of control.
SENIOR SUBORDINATED NOTES/SENIOR SUBORDINATED CREDIT FACILITY
It is expected that the Borrowing Subsidiary will issue $150.0 million in
unsecured senior subordinated notes in a private placement exempt from
registration under the Securities Act pursuant to Rule 144A before or at the
same time as the completion of the merger. The senior subordinated notes will
have a 10-year term and will be subordinated to all of the Borrowing
Subsidiary's existing and senior indebtedness, including indebtedness under the
senior secured credit facilities described above. It is expected that the senior
subordinated notes will be guaranteed, on a senior subordinated basis, by each
of the Borrowing Subsidiary's subsidiaries. The senior subordinated notes will
not have been registered for sale under the Securities Act and will not be
eligible for offer or sale in the U.S. absent registration or an exemption from
the registration process. The Holdco Note Purchaser (described below under
"Holding Company Notes") has agreed to purchase $30 million of the senior
subordinated notes if they are issued in the private placement referred to
above.
If Maxxim is unable to issue the senior subordinated notes at or before the
completion of the merger, The Chase Manhattan Bank has committed to bridge the
issuance of the senior subordinated notes with a senior subordinated loan
facility of approximately $150.0 million. The bridge loan, if made, would mature
on the first anniversary of the merger and would accrue interest at an annual
rate that would be based initially on a spread over the three-month adjusted
LIBOR rate in effect at the time of issuance. If the bridge loan is not paid in
full on or before the first anniversary of the merger, the loan must either be
extended by the lenders or exchanged by the lender for exchange notes that the
Borrowing Subsidiary would be required to register for public sale in compliance
with applicable securities laws.
The bridge loan, if made, may be prepaid by the Borrowing Subsidiary at any
time, in whole or in part, upon ten days' prior notice to The Chase Manhattan
Bank.
The Borrowing Subsidiary's obligations under the bridge loan would be
unconditionally guaranteed, on a senior subordinated basis, by Maxxim and by
each of Maxxim's subsidiaries other than the Borrowing Subsidiary, Circon and
its subsidiaries, and any foreign subsidiary of Maxxim whose guaranty would
result in adverse tax consequences to Maxxim.
The availability of the bridge loan would be subject to various conditions
precedent including those applicable to the senior secured facilities described
above.
At the time of the merger, the indenture relating to Maxxim's currently
outstanding 10 1/2% senior subordinated notes due August 1, 2006 (as amended as
described on page 54 under "The Merger -- Retirement/Amendment of Maxxim Notes")
will be assigned to the Borrowing Subsidiary and any of Maxxim's 10 1/2% senior
subordinated notes that are not tendered and purchased in the tender offer
described on page 54 under "The Merger -- Retirement/Amendment of Maxxim Notes"
will become obligations of the Borrowing Subsidiary. Maxxim also will continue
to be liable for the repayment of the Notes.
HOLDING COMPANY NOTES
A third party not affiliated with Maxxim, Fox Paine or any of the
Continuing Shareholders (the "Holdco Note Purchaser") has agreed to purchase $50
million face amount of senior unsecured notes of Maxxim in a private placement,
the proceeds of which will be used for completion of the merger transactions.
These holding company notes will mature 11 years from the date of issuance and
will carry an interest rate of 14.0%
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per year, payable semi-annually. For the first five years from the date these
holding company notes are issued, interest that becomes payable will be added to
the then outstanding principal amount of the notes, and will not be payable in
cash. After five years from the issuance date, interest will be payable in cash
unless cash interest cannot be paid without violating the terms of the Borrowing
Subsidiary's senior or senior subordinated debt. The issuance of the senior
unsecured notes is subject to certain customary conditions, including those
applicable to the senior secured facilities and the senior subordinated loan
described above. The senior unsecured notes will not have been registered for
sale under the Securities Act and will not be eligible for offer or sale in the
U.S. absent registration or an exemption from the registration process.
EQUITY COMMITMENT
In connection with the merger agreement, Fox Paine Capital Fund, L.P. has
committed to contribute the sum of approximately $130.4 million to Fox Paine
Maxxim in return for 5,015,385 shares of Fox Paine Maxxim's common stock. In
addition, the Continuing Shareholders, who will retain 571,331 shares of Maxxim
common stock (valued at $14.9 million), have agreed to purchase an additional
182,209 shares of Maxxim common stock (valued at $4.7 million) using the
after-tax net proceeds from the cash-out of their Maxxim stock options in the
merger (see "Special Factors -- Interests of Certain Persons in the Merger").
The equity commitments are conditioned upon the bank and debt financing being
completed on terms acceptable in form and substance to Fox Paine Maxxim and upon
all of the conditions to Fox Paine Maxxim's obligation to consummate the merger
having been satisfied without waiver. Portions of Fox Paine's equity commitment
may be purchased by certain affiliated investment funds or other minority
investors comprising the Fox Paine Investors, including the Holdco Note
Purchaser which has agreed to purchase approximately $6.0 million of the equity
in Maxxim to be purchased by Fox Paine on the same terms and conditions as Fox
Paine. In addition, the Holdco Note Purchaser will receive warrants to purchase
shares of Maxxim common stock in connection with its purchase of the senior
unsecured notes.
FINANCING OF THE CIRCON SALE
In exchange for all of the capital stock of Circon, Fox Paine Circon will
pay to Maxxim $208.0 million in cash and $2.0 million of common stock of Fox
Paine Circon. Fox Paine expects to obtain the $208.0 million of cash, plus an
additional $20.1 million for transaction costs, from the following sources:
- $127.5 million in senior secured credit facilities committed by The Chase
Manhattan Bank, of which $102.5 million is expected to be funded at
closing;
- $35.0 million in senior unsecured notes to be issued by Fox Paine Circon
in a private placement;
- $81.25 million of cash equity provided by the Fox Paine Investors; and
- $9.26 million of cash equity contributed by the Continuing Shareholders
from the proceeds of the sale of Maxxim shares in the merger.
Senior Bank Loans.
The Chase Manhattan Bank has committed to provide up to $127.5 million in
senior secured credit facilities to Circon, consisting of:
- a $35.0 million Tranche A term loan, which will mature five years after
the effective date of the merger and will be amortized on a schedule to
be agreed upon by Maxxim and the lenders. The loan will bear interest, at
Circon's option, at the adjusted LIBOR rate plus 3.00% per annum or at
the alternate base rate described below plus 2.00% per annum, in each
case subject to adjustments to be agreed upon by Circon and the lenders;
- a $67.5 million Tranche B term loan, which will mature seven years after
the effective date of the merger and will be amortized on a schedule to
be agreed upon by Maxxim and the lenders (but providing for only nominal
installments until the final six months of the loan). The loan will bear
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interest, at Circon's option, at the adjusted LIBOR rate plus 3.75% per
annum or at the alternate base rate described below plus 2.75% per annum;
and
- a $25.0 million revolving credit facility, which will mature five years
after the effective date of the merger. The loan will bear interest, at
Circon's option, at the adjusted LIBOR rate plus 3.00% per annum or at
the alternate base rate described below plus 2.00% per annum, in each
case subject to adjustments to be agreed upon by Circon and the lenders.
The alternate base rate is the highest of The Chase Manhattan Bank's prime
rate, the federal funds effective rate plus 1/2%, and the base CD rate plus 1%.
The Circon senior secured facilities would be subject to guarantees by its
parent and subsidiaries, to security interests and arrangements, and to various
covenants and events of default, in each case similar in form to those
applicable to the Maxxim senior secured facilities described above. The
availability of the Circon senior secured facilities and the revolving credit
facility will be subject to various conditions precedent including conditions
similar in form to those applicable to the Maxxim senior secured facilities
described above.
Under the merger agreement, Fox Paine may change the terms or components of
the financing for the Circon sale described above and may enter into new,
replacement or additional financing arrangements as long as in doing so Fox
Paine does not materially delay completion of the merger or materially affect
Fox Paine Maxxim's ability to complete the merger. In addition, Fox Paine may,
with the approval of the lenders, reallocate its aggregate equity contributions
to Maxxim and Fox Paine Circon in order to facilitate completion of the merger
transactions. In such case, the Continuing Shareholders' equity in Maxxim and
Fox Paine Circon will be adjusted accordingly.
The Holdco Note Purchaser has agreed to purchase $35.0 million face amount
of senior unsecured notes of Fox Paine Circon in a private placement, the
proceeds of which will be used to finance the purchase of Circon by Fox Paine
Circon. These holding company notes will mature 11 years from the date of
issuance and will carry an interest rate of 14.0% per year, payable
semi-annually. For the first five years from the date these holding company
notes are issued, interest that becomes payable will be added to the then
outstanding principal amount of the notes, and will not be payable in cash.
After five years from the issuance date, interest will be payable in cash unless
cash interest cannot be paid without violating the terms of Circon's senior
debt. The issuance of the senior unsecured notes is subject to certain customary
conditions, including those applicable to the senior secured facilities
described above. The senior unsecured notes will not have been registered for
sale under the Securities Act and will not be eligible for offer or sale in the
U.S. absent registration or an exemption from the registration process.
Equity Commitments.
Fox Paine Capital Fund, L.P. has committed to contribute the sum of
approximately $81.25 million to Fox Paine Circon in return for 3,125,000 shares
of Fox Paine Circon common stock. In addition, the Continuing Shareholders will
purchase $9.26 million of Fox Paine Circon common stock from the proceeds of the
conversion of $9.26 million of Maxxim common stock in the merger and related
loans to cover taxes (see "Special Factors -- Interests of Certain Persons in
the Merger"). The equity commitments are conditioned upon the debt financing for
the merger being completed on terms acceptable in form and substance to Fox
Paine Maxxim and upon all of the conditions to Fox Paine Maxxim's obligation to
consummate the merger having been satisfied without waiver. Portions of Fox
Paine's equity commitment may be purchased by certain affiliated investment
funds or other minority investors comprising the Fox Paine Investors, including
the Holdco Note Purchaser, which has agreed to purchase approximately $4.0
million of the equity in Fox Paine Circon to be purchased by Fox Paine on the
same terms and conditions as Fox Paine. In addition, the Holdco Note Purchaser
will receive warrants to purchase shares of Fox Paine Circon common stock in
connection with its purchase of the senior unsecured notes.
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THE SPECIAL MEETING
GENERAL
This proxy statement is being furnished to Maxxim shareholders as part of
the solicitation of proxies by the Maxxim board for use at a special meeting to
be held on November 3, 1999, starting at 3:30 p.m., local time, at the Feather
Sound Country Club, 2201 Feather Sound Drive, Clearwater, Florida. The purpose
of the special meeting is for Maxxim shareholders to consider and vote upon a
proposal to approve the Agreement and Plan of Merger, dated as of June 13, 1999,
as amended by Amendment No. 1 to Merger Agreement, dated as of October 1, 1999,
between Maxxim and Fox Paine Maxxim. A copy of the merger agreement is attached
to this proxy statement as Appendix A. This proxy statement and the enclosed
form of proxy are first being mailed to Maxxim shareholders on or about October
5, 1999.
RECORD DATE AND VOTING
The holders of record of Maxxim shares as of the close of business on
September 8, 1999, are entitled to receive notice of, and to vote at, the
special meeting. On the record date, there were 14,276,682 shares of Maxxim
common stock outstanding. The holders of a majority of the outstanding shares of
Maxxim common stock on September 8, 1999, represented in person or by proxy,
will constitute a quorum for purposes of the special meeting. A quorum is
necessary to hold the special meeting. Any shares of Maxxim common stock held in
treasury by Maxxim or by any of its subsidiaries are not considered to be
outstanding for purposes of determining a quorum. Once a share is represented at
the special meeting, it will be counted for the purpose of determining a quorum
at the special meeting and any adjournment or postponement of the special
meeting, unless the holder is present solely to object to the special meeting.
Any shareholder of Maxxim has the right to dissent from approval of the
merger agreement, and, subject to strict compliance with certain requirements
and procedures set forth in Articles 5.11, 5.12 and 5.13 of the Texas Business
Corporation Act, to receive payment of the "fair value" of that shareholder's
shares of Maxxim common stock. See "Appraisal Rights." The Continuing
Shareholders have waived their rights to seek appraisal for their shares.
REQUIRED VOTE
Each share of Maxxim common stock outstanding on September 8, 1999,
entitles the holder to one vote at the special meeting. Completion of the merger
requires the approval of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Maxxim common stock. You must
vote your shares (1) by returning the enclosed proxy or (2) by appearing at the
special meeting and voting.
As of September 8, 1999, the Continuing Shareholders owned, in the
aggregate, 1,125,402 shares of Maxxim common stock, or approximately 8% of the
outstanding shares of Maxxim common stock on that date. The Continuing
Shareholders have agreed to vote their shares for and against approval of the
merger agreement in the same proportions as the public shareholders (other than
the Continuing Shareholders) voting on the proposal. See "-- Voting Agreements"
below. In addition, the other directors and executive officers of Maxxim who, as
of the record date, own in the aggregate 40,100 shares of Maxxim common stock,
or approximately .3% of the outstanding shares of Maxxim common stock, have
informed Maxxim that they intend to vote all of their shares of Maxxim common
stock "FOR" the approval of the merger agreement.
The merger was not structured so that approval of at least a majority of
Maxxim shareholders not affiliated with Maxxim or Fox Paine Maxxim is required
to consummate the merger.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for customers have the authority to vote on "routine" proposals when
they have not received instructions from beneficial owners. Under the rules of
the New York Stock Exchange, brokers are precluded from exercising their voting
discretion with respect to the approval of non-routine matters such as the
merger proposal and thus, absent specific instructions from the beneficial owner
of such shares, brokers may not vote such shares with respect to the approval of
such proposals (i.e., "broker non-votes"). Abstentions and properly executed
broker non-votes
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will be treated as shares that are present and entitled to vote at the special
meeting for purposes of determining whether a quorum exists and will have the
same effect as votes against approval of the merger agreement.
PROXIES; REVOCATION
If you vote your shares of Maxxim common stock by signing a proxy, your
shares will be voted at the special meeting as you indicate on your proxy card.
If no instructions are indicated on your signed proxy card, your shares of
Maxxim common stock will be voted "FOR" the approval of the merger agreement.
You may revoke your proxy at any time before the proxy is voted at the special
meeting. A proxy may be revoked prior to the vote at the special meeting by
submitting a written revocation to the Secretary of Maxxim at 10300 49th Street
North, Clearwater, Florida 33762, or by submitting a new proxy, in either case,
dated after the date of the proxy that is being revoked. In addition, a proxy
may also be revoked by voting in person at the special meeting. However, simply
attending the special meeting will not revoke a proxy.
All expenses incurred in connection with solicitation of the enclosed proxy
will be paid by Maxxim. Officers and employees of Maxxim may solicit proxies by
telephone or in person. However, they will not be paid for soliciting proxies.
Maxxim also will request that persons and entities holding shares in their names
or in the names of their nominees that are beneficially owned by others send
proxy materials to and obtain proxies from those beneficial owners, and will
reimburse those holders for their reasonable expenses in performing those
services. Maxxim has retained MacKenzie Partners, Inc. to assist it in the
solicitation of proxies, using the means referred to above, at an anticipated
cost of $7,500, plus reimbursement of out-of-pocket expenses.
ADJOURNMENTS OR POSTPONEMENTS
Although it is not expected, the special meeting may be adjourned or
postponed for the purpose of soliciting additional proxies. Any adjournment or
postponement of the special meeting may be made without notice, other than by an
announcement made at the special meeting, by approval of the holders of a
majority of the outstanding shares of Maxxim common stock present in person or
represented by proxy at the special meeting, whether or not a quorum exists. Any
signed proxies received by Maxxim will be voted in favor of an adjournment or
postponement of the special meeting in these circumstances, unless either a
written note on the proxy delivered by the shareholder directs otherwise or the
shareholder has voted against the merger agreement. Thus, proxies voting against
the merger will not be used to vote for adjournment of the special meeting for
the purpose of providing additional time to solicit votes to approve the merger
agreement. Any adjournment or postponement of the special meeting for the
purpose of soliciting additional proxies will allow Maxxim shareholders who have
already sent in their proxies to revoke them at any time prior to their use.
VOTING AGREEMENTS
The following is a brief summary of the material provisions of the voting
agreements, as amended, between Fox Paine Maxxim and each of the Continuing
Shareholders. The summary is qualified in its entirety by reference to the
voting agreements, the form of which is attached as Appendix D to this proxy
statement.
General.
Concurrent with the execution and delivery of the merger agreement, Fox
Paine Maxxim entered into separate voting agreements with each of the Continuing
Shareholders pursuant to which, among other things, each Continuing Shareholder
agreed to vote all of his or her Maxxim shares in favor of the merger agreement
and the merger transactions. In connection with the settlement of certain
litigation relating to the merger agreement, Fox Paine Maxxim and the Continuing
Shareholders have amended their voting agreements to provide that the Continuing
Shareholders will vote their shares of Maxxim Common Stock for and against
approval of the merger agreement in the same proportions as the public
shareholders (other than the Continuing Shareholders) voting on the proposal.
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Voting.
Each Continuing Shareholder agreed, during the period beginning on June 13,
1999, and ending on the completion of the merger or the termination of the
merger agreement, to vote his or her Maxxim shares at any meeting of Maxxim
shareholders or in any other circumstances upon which such Continuing
Shareholder's vote, consent or other approval is sought:
(1) for and against approval of the merger agreement and the merger
transactions in the same proportions as the public shareholders (other
than Continuing Shareholders) voting on the proposal; and
(2) against any action or agreement that would interfere with the merger or
any other transaction contemplated by the merger agreement including,
- the adoption by Maxxim of a proposal regarding (a) the acquisition of
Maxxim by any person or group (including by merger or other business
combination); (b) the acquisition by a third party of 5% or more of
the assets of Maxxim and its subsidiaries; (c) the acquisition by a
third party of 5% or more of the outstanding voting stock of Maxxim;
(d) the repurchase by Maxxim or any of its subsidiaries of 5% or more
of the outstanding Maxxim shares; or (e) any other competing
acquisition transaction;
- any amendment of Maxxim's articles of incorporation or by-laws or
other proposal or transaction involving Maxxim or any of its
subsidiaries, which would in any manner impede, frustrate, prevent or
nullify the merger, the merger agreement or any of the transactions
contemplated by the merger agreement or change the voting rights of
any class of Maxxim's capital stock;
- any change in the control of Maxxim or Maxxim's board;
- any material change in the present capitalization or dividend policy
of Maxxim; or
- any other material change in Maxxim's corporate structure or business.
Other Agreements.
Each Continuing Shareholder has agreed that during the term of the voting
agreements, he or she will not sell, transfer, assign or otherwise dispose of
any of his or her Maxxim shares, enter into any voting arrangement with respect
to his or her Maxxim shares, or take any action that would prevent or disable
such shareholder from fulfilling his or her obligations under the voting
agreement.
Each Continuing Shareholder has also agreed that, during the term of the
voting agreements, he or she will not and will not permit his or her
representatives to solicit, initiate, encourage or facilitate, furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any competing acquisition transaction involving
Maxxim or enter into any agreement requiring or causing Maxxim to abandon or
fail to complete any of the transactions contemplated by the merger agreement.
However, the foregoing restrictions will not prevent any Continuing Shareholder
who is a director or officer of Maxxim from taking any action consistent with
his or her fiduciary duties to Maxxim and its shareholders or as may be provided
in the merger agreement, or if the Continuing Shareholder is an officer of
Maxxim, prohibit that person from participating in discussions with any third
party permitted by the merger agreement provisions described on pages 56 through
58 under "The Merger -- Prohibition Against Solicitation of Competing
Transactions" at any time during which Maxxim is permitted to engage (and is so
engaging) in such discussions with such third party pursuant to those provisions
of the merger agreement.
Termination.
The voting agreements may be terminated following the earlier to occur of
(1) the completion of the merger or (2) the termination of the merger agreement
in accordance with its terms.
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OTHER MATTERS TO BE CONSIDERED
Maxxim's board is not currently aware of any other business to be brought
before the special meeting. If, however, other matters are properly brought
before the special meeting or any adjournment or postponement of the special
meeting, the persons appointed as proxies will have discretionary authority to
vote the shares represented by duly executed proxies in accordance with their
discretion and judgment.
THE MERGER
The following is a brief summary of the material provisions of the merger
agreement, which may not contain all of the information that you would consider
to be important. The summary is qualified in its entirety by reference to the
merger agreement, a copy of which is attached as Appendix A to this proxy
statement.
STRUCTURE AND EFFECTIVE TIME
The merger agreement provides for the merger of Fox Paine Maxxim with and
into Maxxim. In the merger, Fox Paine Maxxim shares will be converted
automatically into Maxxim shares. Maxxim will continue as the surviving
corporation following the merger.
The merger agreement also provides that, concurrent with the merger, Maxxim
will sell all of the outstanding Circon shares to Fox Paine Circon, an affiliate
of Fox Paine Maxxim, for $208 million in cash plus $2 million of common stock of
Fox Paine Circon, or on other terms as Fox Paine Circon may request that do not
reduce the consideration to be paid to Maxxim shareholders in the merger.
The closing of the merger will occur on the second business day immediately
following the date upon which all conditions to the merger have been satisfied
or waived, or at such other time as the parties to the merger agreement agree.
The parties will file the articles of merger promptly after the satisfaction or
waiver of all conditions in the merger agreement. The merger will become
effective at the time a certificate of merger is issued by the Secretary of
State of the State of Texas in response to our filing of the articles of merger,
which is expected to occur on the closing date. We cannot assure you when, or
if, all the conditions of the merger will be satisfied or waived. See
"-- Conditions to the Merger." We expect, however, to complete the merger early
in November 1999.
MERGER CONSIDERATION
The merger agreement provides that each share of Maxxim common stock
outstanding immediately prior to the completion of the merger (together with the
associated preferred stock purchase rights under the Maxxim preferred stock
purchase rights agreement), other than those held and retained by the Continuing
Shareholders and shareholders who exercise their right to dissent with respect
to the merger, will be converted upon the completion of the merger into the
right to receive $26.00 in cash from Maxxim, without interest. All Maxxim shares
owned by or held in the treasury of Maxxim and all Maxxim shares owned by
Maxxim's subsidiaries will be canceled upon the completion of the merger and no
payment will be made for those Maxxim shares.
PAYMENT PROCEDURES
Fox Paine Maxxim will appoint a paying agent that will pay the merger
consideration in exchange for certificates representing Maxxim shares. Maxxim
will deposit sufficient cash with the paying agent in order to permit the
payment of the merger consideration. Promptly after the completion of the
merger, the paying agent will send Maxxim shareholders a letter of transmittal
and instructions explaining how to send their stock certificates to the paying
agent. The paying agent will mail checks for the appropriate merger
consideration, minus any withholding taxes required by law, to Maxxim
shareholders promptly following the paying agent's receipt and processing of
Maxxim stock certificates and properly completed transmittal documents.
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TREATMENT OF MAXXIM STOCK OPTIONS
The merger agreement provides that Maxxim will terminate Maxxim's employee
and director stock option plans immediately prior to the completion of the
merger and, following that termination, grant no additional Maxxim stock options
under those option plans.
Maxxim has agreed to take all actions necessary prior to the completion of
the merger so that, immediately prior to the completion of the merger:
- 416,212 of the 1,084,200 Maxxim options held by Continuing Shareholders
will be canceled without any consideration. These canceled options will
be replaced with Circon options following the merger; and
- all other outstanding Maxxim options, including 667,988 options held by
the Continuing Shareholders, will automatically be canceled and each
holder of a Maxxim option will receive a cash payment for each Maxxim
share subject to an option equal to the excess of $26.00 over the
exercise price of the option, less applicable withholding taxes.
RETIREMENT/AMENDMENT OF MAXXIM NOTES
The merger agreement provides that, within five business days of a request
from Fox Paine Maxxim, Maxxim will commence a tender offer to purchase all of
its 10 1/2% senior subordinated notes issued under a July 30, 1996 Indenture.
The aggregate principal amount of these notes outstanding is currently $100
million. As part of this tender offer, Maxxim will solicit consents from holders
of the notes to amendments to the terms of the notes and the indenture in order
to eliminate restrictions applicable to all of the transactions and financing
contemplated in the merger agreement and a number of other restrictive
provisions. The consent of holders of more than 50% of the outstanding principal
amount of the notes is needed to effect the amendments necessary to allow the
merger to occur. The tender offer is subject to several customary conditions.
DIRECTORS AND OFFICERS
The merger agreement provides that the directors of Fox Paine Maxxim
immediately before the completion of the merger will be the directors of the
surviving corporation. The officers of Maxxim immediately before the completion
of the merger will continue as the initial officers of the surviving
corporation.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by Maxxim
to Fox Paine Maxxim, including representations and warranties relating to:
- due organization, power and standing, and other corporate matters;
- subsidiaries;
- capital structure;
- authorization, execution, delivery and enforceability of the merger
agreement;
- required consents, approvals, licenses, permits, orders and
authorizations of governmental entities relating to the merger agreement;
- proper filing of all required SEC reports and financial statements and
the accuracy of information used in their preparation; financial advisor;
- absence of undisclosed liabilities;
- litigation;
- compliance with applicable law;
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- retirement and employee benefit matters;
- environmental compliance and liability;
- non-applicability of takeover laws and the Maxxim preferred stock
purchase rights agreement;
- conduct of business since November 1, 1998;
- brokers' and finders' fees with respect to the merger;
- tax matters;
- intellectual property rights;
- labor matters;
- receipt of a fairness opinion from Maxxim's financial advisor;
- title to assets;
- material contracts;
- product liability;
- suppliers and customers; and
- Year 2000 compliance.
The merger agreement also contains representations and warranties made by
Fox Paine Maxxim to Maxxim, including representations and warranties relating
to:
- due organization, power and standing and other corporate matters;
- authorization, execution, delivery and enforceability of the merger
agreement;
- required consents, approvals, licenses, permits, orders and
authorizations of governmental entities relating to the merger agreement;
and
- availability of financing.
The representations and warranties of each of the parties to the merger
agreement will expire upon completion of the merger.
COVENANTS; CONDUCT OF THE BUSINESS OF MAXXIM PRIOR TO THE MERGER
From June 13, 1999, through the completion of the merger, Maxxim and its
subsidiaries are subject to certain restrictions on their conduct and
operations. Maxxim has agreed, and has agreed to cause its subsidiaries, to
conduct their business in the ordinary course of business, consistent with past
practice. In addition, Maxxim has agreed that, except as provided under the
merger agreement or with the prior written consent of Fox Paine Maxxim, Maxxim
will not and will cause its subsidiaries not to:
- amend or propose to amend their respective articles of incorporation or
bylaws;
- authorize, issue, deliver, sell, pledge or dispose of any shares of its
capital stock, except as required by any existing employee stock
incentive or benefit plans;
- split, combine or reclassify any of its capital stock; or declare, set
aside or pay any dividends or other distribution related to its capital
stock; or redeem or otherwise acquire any of its securities or any
securities of its subsidiaries;
- incur any material indebtedness or issue any debt securities except for
borrowings under its existing credit agreement in the ordinary course of
business; or assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any other person; make any loans,
advances, capital contributions to, or investments in any other person,
except wholly owned subsidiaries or customary loans or advances to
employees in the ordinary course of business and consistent with past
practice and in amounts not material to Maxxim, or make any change in its
existing borrowing or lending arrangements for or on behalf of any such
person;
- adopt a plan of complete or partial liquidation or adopt resolutions
providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of Maxxim or any
of its subsidiaries;
- enter into, adopt or pay, agree to pay, grant, issue, accelerate or
accrue salary or other payments or benefit pursuant to, or amend or
terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, welfare, issuance or other
employee benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any director, officer or employee;
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- increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan
and arrangement (including the granting of stock appreciation rights or
performance units), except for normal increases in the ordinary course of
business consistent with past practices for employees (other than
officers and directors) that, in the aggregate, do not result in a
material increase in benefits or compensation expense to Maxxim;
- acquire, sell, transfer, lease, encumber or dispose of any assets outside
the ordinary course of business or any assets that are in the aggregate
material to Maxxim and its subsidiaries; or enter into any commitment or
transaction outside the ordinary course of business consistent with past
practice that would be material to Maxxim and its subsidiaries;
- make any change in accounting principles or practices, except insofar as
may have been required by a change in law or in generally accepted
accounting principles;
- revalue in any material respect its assets, including writing down the
value of inventory or writing-off notes or accounts receivable other than
in the ordinary course of business;
- acquire (by merger, consolidation, purchase of assets or otherwise) or
acquire any equity interest in any corporation, business organization or
division;
- enter into any material contract or agreement other than in the ordinary
course of business, consistent with past practice;
- authorize any new capital expenditures that, individually, is in excess
of $500,000, or, in total, are in excess of $5,000,000;
- make any tax election or settle or compromise any tax liability, except
in the ordinary course of business consistent with past practice;
- satisfy or discharge any claims, liabilities or obligations, other than
in the ordinary course of business consistent with past practice;
- cancel or terminate its insurance policy, other than in the ordinary
course of business and consistent with past practice and only if it has
obtained a comparable replacement insurance policy;
- terminate, amend, or modify any material contracts, other than in the
ordinary course of business and consistent with past practice;
- settle any pending or threatened material lawsuit or claim; or
- enter into any binding commitment or contract limiting Maxxim's ability
to competitively sell its products or services or engage in any line of
business.
PROHIBITION AGAINST SOLICITATION OF COMPETING TRANSACTIONS
The merger agreement provides that Maxxim will not, nor will it authorize
or permit any of its subsidiaries, directors, employees, officers, agents or
representatives, directly or indirectly, to:
- solicit, initiate, encourage, facilitate or provide non-public
information to facilitate any inquiries or proposals for any merger or
business combination involving Maxxim or to acquire all or any capital
stock of Maxxim or any material portion of its assets; or
- negotiate, explore or otherwise engage in discussions or negotiations
regarding any alternative or competing transaction or enter into any
agreement, arrangement or understanding that requires or would cause
Maxxim to abandon, terminate or fail to complete the transactions
provided for in the merger agreement, including the merger.
However, if prior to the completion of the merger, Maxxim receives an
unsolicited written proposal with respect to a competing transaction that Maxxim
did not initiate, solicit or encourage and that does not otherwise breach any
confidentiality, exclusivity, or standstill agreements entered into by Maxxim
before the merger agreement and that the Maxxim board or a special committee of
the board determines in good faith by
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majority vote could reasonably be expected to result in a third party making a
proposal for a superior transaction, then Maxxim may participate in discussions
or negotiations with that person regarding that specific proposal. Under those
circumstances, Maxxim may also furnish confidential information to the person
making the competing acquisition proposal, but only pursuant to a customary
confidentiality agreement, the terms of which are no less favorable to Maxxim
than the most favorable confidentiality agreement entered into by Maxxim on or
after January 1, 1999. However, Maxxim is not permitted to furnish to any
competitor or potential competitor information about Maxxim or its subsidiaries,
including sensitive information on pricing, volume, sales and marketing, unless:
(1) Maxxim's board or a special committee of the board determines in its
reasonable judgment, after consultation with Maxxim's management, that
disclosure of such information would not be materially competitively
disadvantageous to Maxxim and its subsidiaries or (2) confirmatory review of
such sensitive information is the only remaining condition to Maxxim and the
competitor entering into an acquisition agreement relating to an acquisition
transaction that is superior to the transactions contemplated by the merger
agreement.
In any event, Maxxim is required to keep Fox Paine Maxxim apprised of the
status of any proposal relating to a competing transaction, including promptly
providing to Fox Paine Maxxim any sensitive information provided to any
competitor or potential competitor. In addition, Maxxim is permitted to amend
the terms of any existing standstill agreement solely to permit the other party
to make written proposals to Maxxim's board.
If Maxxim receives a bona fide written proposal for a superior transaction,
Maxxim may terminate the merger agreement and engage in that superior
transaction, but only if (1) Maxxim first provides written notice to Fox Paine
Maxxim advising it that Maxxim intends to terminate the merger agreement and
identifying the superior transaction (and attaching a copy of the related
acquisition agreement) and (2) not less than five full business days later,
Maxxim delivers to Fox Paine Maxxim a written notice of termination and pays to
Fox Paine Maxxim a termination fee of $19 million.
A proposal for a transaction will only be deemed to be "superior" under the
merger agreement if:
- the transaction was not initiated, solicited or encouraged by Maxxim or
its representatives in violation of the merger agreement and does not
violate any confidentiality, exclusivity, or standstill agreements
entered into by Maxxim before the merger agreement (as such agreements
may be amended to permit the other party to make a written proposal to
Maxxim's board);
- Maxxim's board has determined in good faith, after consultation with its
financial and legal advisors, that the transaction is more favorable to
Maxxim's shareholders from a financial point of view than the merger
agreement transactions (after taking into account any adjustment to the
merger agreement transactions proposed by Fox Paine Maxxim in response to
the competing transaction), is likely to and capable of being
consummated, and is in the best interest of Maxxim's shareholders; and
- Maxxim has received (1) advice of its outside legal counsel that failure
to enter into such proposed transaction will constitute a breach of the
directors' fiduciary duties under applicable law and (2) a written
opinion from Maxxim's financial advisor that the competing transaction is
more favorable from a financial point of view to Maxxim's shareholders
(other than Fox Paine Maxxim and the Continuing Shareholders) than the
merger agreement transactions (after taking into account any adjustment
to the transactions contemplated by the merger agreement proposed by Fox
Paine Maxxim in response to the competing transaction).
The Maxxim board has agreed to recommend that Maxxim shareholders vote to
approve the merger agreement and the transactions contemplated by the merger
agreement, and to use its best efforts to obtain shareholder approval of the
merger agreement and the transactions contemplated by the merger agreement.
Maxxim has agreed that neither Maxxim's board nor any committee of its
board may withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Fox Paine Maxxim, the Maxxim board's recommendation, or
approve or recommend any competing transaction. However, the Maxxim board may
withdraw or modify its recommendation if it receives the advice of its outside
legal counsel that failure to do so will result in breach of the directors'
fiduciary duties under applicable law. In such event, Maxxim's
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board must provide Fox Paine Maxxim with five days' prior written notice of its
intention to withdraw or modify its recommendation regarding approval of the
merger agreement and the transactions contemplated by the merger agreement.
ACCESS TO INFORMATION
Until the completion of the merger, Maxxim will provide Fox Paine Maxxim
and its authorized representatives and its financing sources with reasonable
access to all of Maxxim's employees, plants, offices, warehouses and other
facilities and properties, and to all books and records. In addition, Maxxim
will permit Fox Paine Maxxim and its representatives to make any inspections (at
Fox Paine Maxxim's expense) that Fox Paine Maxxim may reasonably request, and
provide Fox Paine Maxxim access to all financial and operating data and other
information with respect to the business and properties of Maxxim and its
subsidiaries as Fox Paine Maxxim may from time to time reasonably request.
COOPERATION AND REASONABLE EFFORTS TO COMPLETE THE MERGER
In connection with the merger agreement, Maxxim and Fox Paine Maxxim have
agreed to use their reasonable efforts to take all actions necessary or
advisable so that the transactions contemplated by the merger agreement may be
completed, including cooperation in the arrangement of financing and the
satisfaction of conditions to the merger.
INDEMNIFICATION AND INSURANCE
Fox Paine Maxxim has agreed that the indemnification and exculpation
provisions of Maxxim's articles of incorporation and bylaws as in effect upon
the completion of the merger will, to the extent they relate to matters arising
before the completion of the merger, remain in force after the merger.
Fox Paine Maxxim has agreed that, for a period of six years after the
completion of the merger, it will cause Maxxim to maintain in effect the current
policies of directors' and officers' liability insurance maintained by Maxxim
with respect to matters arising on or before the completion of the merger. If
the cost of maintaining such insurance would exceed 150% of the current annual
premiums paid by Maxxim for such insurance, Fox Paine Maxxim is only required to
cause Maxxim to obtain as much comparable insurance as is available at an annual
premium of 150% of the current annual premium.
CONDITIONS TO THE MERGER
The obligations of Maxxim and Fox Paine Maxxim to complete the merger are
subject to the satisfaction or waiver of the following conditions on or before
the completion of the merger:
(1) approval of the merger agreement by the holders of a majority of the
outstanding Maxxim shares;
(2) absence of any statute, rule, regulation, order or injunction of any
governmental entity or court prohibiting or restricting completion of
the merger; and
(3) termination or expiration of the applicable antitrust waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
In addition, the obligation of Maxxim to complete the merger is subject to
the satisfaction or waiver of the following additional conditions:
(1) the representations and warranties of Fox Paine Maxxim contained in the
merger agreement being true and correct in all material respects on and
as of the effective date of the merger (except to the extent that such
representations and warranties speak as of an earlier date);
(2) Fox Paine Maxxim having performed all of its obligations under the
merger agreement in all material respects; and
(3) Maxxim having received an independent solvency opinion (which may be
the same solvency opinion delivered to the lenders who are financing
the merger).
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<PAGE> 64
In addition, the obligations of Fox Paine Maxxim to complete the merger are
subject to the satisfaction or waiver of the following additional conditions:
(1) the representations and warranties of Maxxim contained in the merger
agreement being true and correct in all material respects on and as of
the effective date of the merger (except to the extent that such
representations and warranties speak as of an earlier date);
(2) Maxxim having performed all of its obligations under the merger
agreement in all material respects;
(3) the closing of the debt tender offer and the amendment of Maxxim's
10 1/2% senior subordinated notes described on page 54 under
"-- Retirement/Amendment of Maxxim Notes" occurring concurrently with
the closing of the merger;
(4) the closing of the Circon sale described on page 53 under "-- Structure
and Effective Time" occurring concurrently with the closing of the
merger, unless otherwise requested by Fox Paine Maxxim;
(5) Maxxim receiving a written opinion from its independent auditor to the
effect that the transactions contemplated in the merger agreement will
receive recapitalization accounting treatment;
(6) there not being pending any suit, action or proceeding that has a
reasonable likelihood of success, that
- seeks to prohibit or materially limit Fox Paine Maxxim's ownership or
operation of any material portion of Maxxim's businesses or assets, or
to compel Fox Paine Maxxim or Maxxim to dispose of or hold separate
any material portion of Maxxim's business or assets;
- would prohibit, restrict or significantly delay completion of the
merger;
- seeks damages from Fox Paine Maxxim or Maxxim that are material in
amount;
- would impose material limitations on the ability of Fox Paine Maxxim
to acquire or hold, or exercise full rights of ownership of, any
shares of Maxxim common stock, or prohibit Fox Paine Maxxim from
effectively controlling the business or operations of Maxxim and its
subsidiaries; or
- is reasonably likely to have a material adverse effect on Maxxim or
Fox Paine Maxxim.
(7) there not having occurred since June 13, 1999, any change, development
or event that has a material adverse effect on the business, condition,
results of operations, assets or liabilities of Maxxim and its
subsidiaries;
(8) all material consents, approvals or authorizations having been
obtained; and
(9) the financing for the merger having been obtained on terms and
conditions satisfactory to Fox Paine Maxxim.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the completion of the merger (regardless of any approval by
the shareholders of Maxxim):
(1) by mutual written consent of Maxxim and Fox Paine Maxxim;
(2) by either Maxxim or Fox Paine Maxxim, if any court or governmental
entity issues any judgment, injunction, order or decree that restrains
or prohibits the completion of the merger, and such judgment,
injunction, order or decree has become final and nonappealable;
(3) by either Maxxim or Fox Paine Maxxim, if the merger has not been
completed by December 31, 1999, unless the party seeking to terminate
has caused the failure of completion by failing to fulfill any of its
obligations under the merger agreement;
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<PAGE> 65
(4) by Maxxim, in order to enter into a superior transaction in compliance
with the provisions described on page 56 under "Prohibition Against
Solicitation of Competing Transactions," but only in strict compliance
with such provisions, including providing Fox Paine Maxxim with notice
of Maxxim's intention to terminate at least five full business days
prior to such termination, and payment to Fox Paine Maxxim of a
termination fee of $19 million;
(5) by either Maxxim or Fox Paine Maxxim, if there has been a material
breach of any representation, warranty or covenant made by the other
party, which would cause one of the conditions to the merger not to be
satisfied and which cannot be or has not been cured within 30 days from
the time the breaching party receives notice of the breach;
(6) by Fox Paine Maxxim, if
- Maxxim's board withdraws or modifies its recommendation that Maxxim
shareholders vote to approve the merger (or publicly announces its
intention to do so);
- Maxxim's board recommends any proposal for a competing acquisition
transaction;
- any person other than Fox Paine Maxxim and its affiliates becomes the
beneficial owner of 15% or more of Maxxim's common stock; or
- Maxxim breaches the provisions described on page 56 under
"-- Prohibition Against Solicitation of Competing Transactions"; or
(7) by either Maxxim or Fox Paine Maxxim, if Maxxim's shareholders fail to
approve the merger agreement at the special meeting.
TERMINATION FEES
The merger agreement obligates Maxxim to pay a fee to Fox Paine Maxxim
equal to $19 million if:
- Fox Paine Maxxim terminates the merger agreement because the merger has
not been completed by December 31, 1999, because of a failure by Maxxim
to fulfill any of its obligations under the merger agreement and, on or
before the termination of the merger agreement, any entity or group
publicly proposed, and did not withdraw, or publicly discloses its
intention to make a proposal for a competing acquisition transaction
involving Maxxim;
- Fox Paine Maxxim terminates the merger agreement for the reasons
described in paragraph 6 on page 59 under "-- Termination;"
- either party terminates the merger agreement for the reasons described in
paragraph 7 above under "-- Termination" and before the special meeting
at which the shareholders of Maxxim voted on the merger, any entity or
group had publicly proposed and not withdrawn or publicly disclosed its
intention to make a proposal for a competing acquisition transaction
involving Maxxim; or
- Maxxim terminates the merger agreement for the reasons described in
paragraph 4 on page 59 under "-- Termination."
EXPENSES
The merger agreement provides that all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated by the
merger agreement will be paid by Maxxim upon consummation of the merger. In
addition, if the merger agreement is terminated by Maxxim for the reasons
described in paragraph 4 or paragraph 7 above under "-- Termination" or by Fox
Paine Maxxim for the reasons described in any of paragraphs 5, 6 or 7 above
under "-- Termination," and the $19 million termination fee does not become
payable to Fox Paine Maxxim, then Maxxim will reimburse Fox Paine Maxxim for the
out-of-pocket fees and expenses incurred by, or on behalf of, Fox Paine Maxxim
in connection with the merger agreement, including fees and expenses payable to
financing sources and to counsel for Fox Paine Maxxim or its financing sources.
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AMENDMENT AND WAIVER
The merger agreement may be amended by the parties in writing at any time
before receipt of Maxxim shareholder approval. The merger agreement also may be
amended after receipt of Maxxim shareholder approval without the further
approval of Maxxim shareholders if no amendments are made which by law require
further approval by Maxxim shareholders. Prior to the completion of the merger,
either of the parties may, by written instrument, (1) extend the time for the
performance of any of the obligations or other acts of the other parties to the
merger agreement; (2) waive inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered pursuant to the
merger agreement; or (3) waive compliance with any of the agreements or
conditions in the merger agreement.
ESTIMATED FEES AND EXPENSES OF THE MERGER
Estimated fees and expenses incurred or to be incurred by Maxxim in
connection with the merger and related transactions are approximately as
follows:
<TABLE>
<S> <C>
Investment banking and financial advisory fees.............. $14,100,000
Financing fees and expenses................................. 15,300,000
Debt Tender Offer Premium, including accrued interest....... 14,400,000
Legal, accounting and printing fees and expenses............ 3,900,000
Paying Agent fees and expenses.............................. 25,000
Proxy solicitation fees and expenses........................ 42,000
SEC filing fee.............................................. 74,760
Miscellaneous expenses...................................... 4,358,240
Total....................................................... $52,200,000
</TABLE>
AMENDMENT TO RIGHTS AGREEMENT
In connection with its approval of the merger agreement, the board of
directors of Maxxim amended the rights agreement, dated as of July 10, 1997, by
and between Maxxim and Harris Trust and Savings Bank, as rights agent, to
provide that the approval, execution, delivery and performance of the merger
agreement and the voting agreements between Fox Paine Maxxim and the Continuing
Shareholders, and the announcement of the same, would not give rise to a
triggering event or distribution date as those terms are used in the rights
agreement.
APPRAISAL RIGHTS
In the event that the merger is approved, holders of Maxxim common stock on
September 8, 1999, who did not vote in favor of the merger agreement will have
the right to dissent from the merger and to demand an appraisal of the "fair
value" of their Maxxim shares in accordance with Articles 5.11 through 5.13 of
the Texas Business Corporation Act. The Texas Business Corporation Act provides
that fair value is to be determined by the courts. The judicial determination of
fair value, which will be determined as of the day immediately preceding the
special meeting, may be greater than or less than $26.00 and will be determined
without regard to any appreciation or depreciation that occurred in anticipation
of the merger.
ANY MAXXIM SHAREHOLDER CONTEMPLATING THE EXERCISE OF APPRAISAL RIGHTS IS
URGED TO REVIEW CAREFULLY THE PROVISIONS OF ARTICLES 5.11 THROUGH 5.13 OF THE
TEXAS BUSINESS CORPORATION ACT, PARTICULARLY WITH RESPECT TO THE PROCEDURAL
STEPS REQUIRED TO PERFECT THE RIGHT OF APPRAISAL. FAILURE TO COMPLY WITH THE
STATUTORY REQUIREMENTS WILL RESULT IN THE LOSS OF THE SHAREHOLDER'S APPRAISAL
RIGHTS. THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE APPRAISAL
RIGHTS STATUTE BUT IT IS NOT A COMPLETE STATEMENT OF THE RELEVANT PROVISIONS OF
TEXAS LAW AND
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SHOULD BE READ IN CONJUNCTION WITH THE FULL TEXT OF ARTICLES 5.11, 5.12 AND
5.13, WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX C, AND ANY
AMENDMENTS TO SUCH SECTIONS AS MAY BE ADOPTED AFTER THE DATE OF THIS PROXY
STATEMENT.
Filing Written Objection
Dissenting shareholders wishing to exercise their rights to appraisal with
respect to the merger must file with Maxxim, prior to the special meeting, a
written objection to the merger. The written objection must state that the
shareholder intends to dissent from the merger and demand a judicial
determination of the fair value of the dissenting Maxxim shares. The written
objection should include the dissenting shareholder's address and should be
addressed to Maxxim Medical, Inc., 10300 49th Street North, Clearwater, Florida
33762, Attention: Corporate Secretary. Neither an abstention from voting on the
merger agreement nor a vote against approval of the merger agreement will
satisfy the requirement that a written objection be filed with Maxxim before the
vote on the merger agreement.
No Voting in Favor of the Merger Agreement
Dissenting shareholders must not vote their shares of Maxxim common stock
in favor of the merger agreement or their appraisal rights will be waived. A
dissenting shareholder will not be deemed to have waived such dissenting
shareholder's appraisal rights by voting against the merger agreement or
otherwise not voting.
Notice by Maxxim
Within 10 days after the completion of the merger, Maxxim will notify each
holder of record who has complied with the provisions of Article 5.12, and whose
shares were not voted in favor of the merger agreement, that the merger has been
completed.
Written Demand
Within 10 days from the delivery or mailing of Maxxim's notice, any
dissenting shareholder that wishes to exercise appraisal rights must make a
written demand on Maxxim demanding it pay the shareholder the fair value of his
or her Maxxim shares. Such demand should be addressed to Maxxim Medical, Inc.,
10300 49th Street North, Clearwater, Florida 33762, Attention: Corporate
Secretary. The demand must state the number of shares owned by such dissenting
shareholder and the dissenting shareholder's estimate of the fair value of such
Maxxim shares. Any dissenting shareholder failing to make a demand within the
10-day period will lose his or her appraisal rights.
Notation of Certificates
Within 20 days after making a demand, the dissenting shareholder must
submit his or her stock certificates to Maxxim so that Maxxim can make an
appropriate notation on those certificates. If a dissenting shareholder fails to
submit the certificates within this 20-day period, the dissenting shareholder's
appraisal rights will be waived, unless a court, for good and sufficient cause,
determines otherwise.
Acceptance or Settlement of Demand
Within 20 days after receipt of a demand from a dissenting shareholder,
Maxxim will deliver or mail to each dissenting shareholder a written notice
either (i) stating that Maxxim accepts the amount claimed in the demand and
agrees to pay such amount within 90 days after completion of the merger, or (ii)
containing an estimate by Maxxim of the fair value of the shares together with
an offer to pay such amount within 90 days after completion of the merger. If
Maxxim responds to the demand with an estimate of the fair value of the shares
and the dissenting shareholder wishes to accept Maxxim's estimate, the
dissenting shareholder must deliver to Maxxim, within 60 days, his or her
endorsed certificates along with a written notice accepting Maxxim's estimate.
If, within 60 days after the completion of the merger, the dissenting
shareholder and Maxxim agree on the value of the shares, and the dissenting
shareholder delivers his or her endorsed
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certificates to Maxxim, Maxxim must pay the agreed value to the shareholder
within 90 days after the completion of the merger. Upon payment of the agreed
value, the dissenting shareholder will cease to have any interest in Maxxim.
Appraisal
If, within the 60 days after the completion of the merger, any one or more
of the dissenting shareholders and Maxxim do not agree on the fair value of the
shares, then any of such dissenting shareholders or Maxxim may, within 60 days
following the expiration of such 60-day period, file a petition in any court of
competent jurisdiction in Pinellas County, Florida, to obtain a judicial finding
and determination of the fair value of the dissenting shareholders' shares of
Maxxim common stock. Upon filing such a petition, a dissenting shareholder must
serve Maxxim with a copy. Within 10 days after being served with a copy of the
petition, Maxxim must file with the court a list of dissenting shareholders who
have demanded payment for their shares and with whom agreements as to the value
of their shares have not been reached. The clerk of the court will then notify
all dissenting shareholders as to the time and place of the hearing of the
petition. Maxxim and all notified dissenting shareholders will be bound by the
final judgment of the court.
After the hearing of the petition, if the court determines that any one or
more of the dissenting shareholders have complied with the requirements of
Articles 5.11 through 5.13, the court will appoint one or more qualified
appraisers who will determine the fair value of the dissenting shareholders'
shares and will file a report of that value with the clerk of the court. Each
party will have reasonable opportunity to submit to the appraisers pertinent
evidence as to the value of the shares. Any party may take exceptions to the
appraiser's report. The court will then determine the fair value of the shares
and will direct Maxxim, upon receipt from the dissenting shareholders of the
endorsed certificates relating to those shares, to pay the value so determined,
with interest. The interest will run from the 91st day after the completion of
the merger to the date of the judgment. Upon payment of the judgment, the
dissenting shareholders will cease to have any interest in Maxxim. The court
will allow the appraiser(s) a reasonable fee as court costs, which will be
allotted between the parties in the manner that the court determines to be fair
and equitable.
Rights as Shareholder
A dissenting shareholder who makes a demand for payment will not be
entitled to vote or to exercise any other rights as a Maxxim shareholder except
the right to receive payment pursuant to Article 5.12 and the right to maintain
an appropriate action to obtain relief on the ground that the merger would be or
was fraudulent.
Withdrawal of Rights
A dissenting shareholder may withdraw a demand at any time before Maxxim
has made the requested payment or before a petition has been filed requesting a
determination of the fair value of such dissenting shareholder's shares.
Exclusive Remedy
The Texas Business Corporation Act provides that, in the absence of fraud,
the foregoing procedures represent the exclusive remedy under Texas law for a
dissenting shareholder to object to the merger. If Maxxim complies with the
requirements of Articles 5.11 through 5.13, but the dissenting shareholder fails
to do so, such dissenting shareholder is not entitled to bring an action for the
recovery of the value of such dissenting shareholder's shares or for money
damages.
Any Maxxim shareholder who desires to exercise appraisal rights should
carefully review the Texas Business Corporation Act and is advised to consult
such shareholder's legal advisor before exercising or attempting to exercise
such rights.
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REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the
premerger notification rules issued by the Federal Trade Commission, Maxxim and
Fox Paine Maxxim were required to file notifications with the U.S. Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice in
connection with the merger and the acquisition of Circon, and the proposed
transactions could not be completed until after the applicable waiting period
expired or was earlier terminated by the U.S. federal antitrust regulatory
authorities. Maxxim and Fox Paine Maxxim filed the required notifications with
these federal antitrust regulatory authorities on July 6, 1999, and the waiting
period was terminated by the regulatory authorities on July 16, 1999.
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP
OF MANAGEMENT AND OTHERS
The following table sets forth, as of September 8, 1999, information as to
the beneficial ownership of Maxxim's common stock by (1) each person known to
have beneficial ownership of more than 5% of Maxxim's common stock, (2) each
person serving as a director or executive officer of Maxxim, (3) all of the
directors and executive officers as a group, and (4) each of the other
Continuing Shareholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
BENEFICIAL OWNER (1) NUMBER PERCENT
- -------------------- --------- -------
<S> <C> <C> <C>
Peter G. Dorflinger......................................... 419,936 (2) 2.9
Kenneth W. Davidson......................................... 437,468 (3) 3.0
Ernest J. Henley, Ph.D...................................... 326,949 (4) 2.3
Davis C. Henley............................................. 303,385 (5) 2.1
Peter M. Graham............................................. 221,500 (6) 1.5
David L. Lamont............................................. 173,250 (7) 1.2
Alan S. Blazei.............................................. 146,683 (8) 1.0
Henry T. DeHart III......................................... 96,100 (9) *
Jack F. Cahill.............................................. 95,400 (10) *
Joseph D. Dailey............................................ 60,500 (11) *
Richard O. Martin, Ph.D..................................... 19,000 (12) *
Martin Grabois, M.D......................................... 19,000 (13) *
Rob Beek.................................................... 17,200 (14) *
Henk R. Wafelman, Ing....................................... 11,000 (15) *
Suzanne R. Garon............................................ 10,240 (16) *
Donald R. DePriest.......................................... 5,000 (17) *
All executive officers and directors as a group (15
persons).................................................. 2,059,226 13.7
</TABLE>
- ---------------
* Less than 1%
(1) The address for all executive officers and directors and Davis C. Henley is
10300 49th Street North, Clearwater, Florida 33762.
(2) Includes 9,100 shares held of record and 410,836 shares purchasable under
currently exercisable options. Mr. Dorflinger is the former Vice President
and General Counsel of Sulzer Intermedics, Inc., a subsidiary of Sulzer
Medica USA, Inc., and holds a fully exercisable option to purchase all of
the 397,836 shares held of record by Sulzer Medica USA, Inc.
(3) Includes 241,368 shares owned of record by a family limited partnership
controlled by Mr. Davidson and 196,000 shares purchasable under currently
exercisable options.
(4) Includes 321,949 shares owned of record by Dr. Henley and 5,000 shares
purchasable under currently exercisable options.
(5) Includes 273,985 shares owned of record by Mr. Henley, 29,400 shares of
which Mr. Henley exercises voting and investment control as custodian.
(6) Includes 70,500 shares owned of record by Mr. Graham and 151,000 shares
purchasable under currently exercisable options.
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(7) Includes 57,250 shares owned of record by Mr. Lamont and 116,000 shares
purchasable under currently exercisable options.
(8) Includes 41,150 shares owned of record by Mr. Blazei, 3,533 shares over
which Mr. Blazei's spouse exercises voting and investment control as
custodian and 102,000 shares purchasable under currently exercisable
options.
(9) Includes 39,900 shares owned of record by Mr. DeHart and 56,200 shares
purchasable under currently exercisable options.
(10) Includes 44,000 shares owned of record by Mr. Cahill and 51,400 shares
purchasable under currently exercisable options.
(11) Includes 28,300 shares owned of record by Mr. Dailey and 32,200 shares
purchasable under currently exercisable options.
(12) Includes 6,000 shares owned of record by Dr. Martin and 13,000 shares
purchasable under currently exercisable options.
(13) Includes 6,000 shares owned of record by Dr. Grabois and 13,000 shares
purchasable under currently exercisable options.
(14) Includes 13,000 shares owned of record by Mr. Beek and 4,200 shares
purchasable under currently exercisable options.
(15) Includes 6,000 shares owned of record by Mr. Wafelman and 5,000 shares
purchasable under currently exercisable options.
(16) Includes 7,000 shares owned of record by Ms. Garon and 3,240 shares
purchasable under currently exercisable options.
(17) Includes 5,000 shares purchasable by Mr. DePriest under currently
exercisable options.
Saul A. Fox beneficially owns 50,000 Maxxim shares. To Maxxim's knowledge,
Mr. Fox intends to vote his Maxxim shares in favor of the merger agreement at
the special meeting. The Fox Paine Investors, Fox Paine Maxxim and Fox Paine
Circon do not have the power to vote Mr. Fox's shares.
There have been no transactions in Maxxim common stock effected during the
past 60 days by Maxxim or any of the Continuing Shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material U.S. federal income tax
considerations relevant to the merger that are generally applicable to holders
of Maxxim common stock. This discussion is based on currently existing
provisions of the Internal Revenue Code of 1986, existing and proposed U.S.
Treasury Regulations, and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences. Special tax consequences not
described below may be applicable to particular classes of taxpayers, including
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States or who are foreign corporations, foreign
partnerships, or foreign estates or trusts as to the United States, persons who
will own, actually or constructively, stock of Maxxim after the merger, and
holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation.
Your receipt of the merger consideration in the merger will be a taxable
transaction for U.S. federal income tax purposes. Your gain or loss per share
will be equal to the difference between $26 and your adjusted basis in that
particular share of Maxxim common stock. Such gain or loss generally will be a
capital gain or loss. In the case of individuals, trusts, and estates, such
capital gain will be subject to a maximum U.S. federal income tax rate of 20%
for shares of Maxxim common stock held for more than 12 months prior to the date
of the merger.
You may be subject to backup withholding at the rate of 31% with respect to
the merger consideration received by you, unless you (1) are a corporation or
come within certain other exempt categories and, when required, demonstrate this
fact or (2) provide a correct taxpayer identification number ("TIN"), certify as
to no loss of exemption from backup withholding, and otherwise comply with
applicable requirements of the backup withholding rules. To prevent the
possibility of backup U.S. federal income tax withholding on
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payments made pursuant to the merger, you must provide the Paying Agent with
your correct TIN by completing a Form W-9 or substitute Form W-9. If you do not
provide Maxxim with your correct TIN, you may be subject to penalties imposed by
the Internal Revenue Service as well as backup withholding. Any amount withheld
under these rules will be creditable against your U.S. federal income tax
liability. Maxxim (or its agent) will report to you and the IRS the amount of
any "reportable payments," as defined in Section 3406 of the Internal Revenue
Code, and the amount of tax, if any, withheld with respect thereto.
The foregoing tax discussion is included for general information only and
is based upon present law. the foregoing discussion does not discuss tax
consequences under the laws of states or local governments or of any other
jurisdiction or tax consequences to categories of shareholders that may be
subject to special rules, such as foreign persons, tax-exempt entities,
insurance companies, financial institutions, and dealers in stocks and
securities. The foregoing discussion may not be applicable to a shareholder who
continues to own, actually or constructively, stock of Maxxim after the merger
or who acquired his or her shares of Maxxim common stock pursuant to the
exercise of stock options or otherwise as compensation. You should consult your
own tax advisor as to the specific tax consequences of the merger to you,
including the application and effect of U.S. Federal, state, local, and other
tax laws and the possible effect of changes in such tax laws.
INDEPENDENT AUDITORS
The consolidated balance sheets as of November 1, 1998, and November 2,
1997, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three fiscal years in the period ended November
1, 1998, incorporated by reference in this proxy statement, have been audited by
KPMG LLP, independent auditors. A representative of KPMG LLP will be at the
special meeting to answer appropriate questions from shareholders and will have
the opportunity to make a statement, if so desired.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Maxxim hereby incorporates the following documents previously filed with
the SEC (SEC File No. 0-18208) into this proxy statement:
(1) Maxxim's Annual Report on Form 10-K for the fiscal year ended
November 1, 1998, as amended June 16, 1999;
(2) Maxxim's Quarterly Reports on Form 10-Q for the fiscal quarters
ended January 31, 1999, May 2, 1999 and August 1, 1999; and
(3) Maxxim's Current Reports on Form 8-K dated January 19, 1999 (as
amended on March 19, 1999 and June 16, 1999) and June 13, 1999.
Maxxim incorporates by reference in this proxy statement additional
documents that it may file with the SEC between the date of this proxy statement
and the date of the special meeting. These documents include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as its proxy statements. Any statements contained
in a document incorporated by reference in this proxy statement will be deemed
to be modified or superseded for purposes of this proxy statement to the extent
that a statement contained in this proxy statement (or in any other subsequently
filed document which also is incorporated by reference in this proxy statement)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to be a part of this proxy statement except as so modified
or superseded.
LEGAL PROCEEDINGS
A complaint was filed on June 15, 1999 in state court in Harris County,
Texas, and another was filed on June 25, 1999 in state court in Pinellas County,
Florida, each naming Maxxim, its directors and Fox Paine & Company as
defendants. Each complaint is brought on behalf of a purported class of public
shareholders of Maxxim and alleges that the consideration being offered in the
merger is unfair and inadequate, and that the
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directors of Maxxim breached their fiduciary duties by failing to obtain the
best price for Maxxim. As relief, each complaint seeks, among other things, an
injunction against completion of the merger, and damages in an unspecified
amount. The cases are titled Steiner v. Maxxim Medical, Inc., et al. No.
l999-30682 (281st Judl. Dist., Harris Cty., Tex) and Burnetti v. Maxxim Medical,
Inc., et al. No. 99-4347-CI-15 (6th Judl. Circ., Pinellas Cty., Fla). Counsel
for the plaintiffs in the Steiner action have represented that the plaintiffs
have voluntarily dismissed the action. On September 30, 1999, counsel for the
plaintiffs in the Burnetti action and counsel for defendants entered into a
memorandum of understanding providing that, subject to court approval and
certain other conditions, the claims asserted in the Burnetti case will be
settled, the action will be dismissed and defendants will receive a release of
all claims. The material terms of the memorandum of understanding provide that
the defendants file the Lazard Freres presentation to the special committee and
the board of directors with the Securities and Exchange Commission and disclose
in the proxy statement that the entity which indicated an interest in a
potential bid at a price as high as $27.50 did not pursue its interest in making
such a proposal, and that the Continuing Shareholders agree, prior to the merger
vote, that they will vote their shares for and against approval of the merger
agreement in the same proportions as votes are cast by the public shareholders
(other than the Continuing Shareholders).
Maxxim has been named as a defendant in various other lawsuits arising in
the ordinary course of business. We believe that the ultimate resolution of such
litigation will not have a material adverse impact on our results of operations
or financial position (see Note 5 of Notes to Consolidated Financial Statements
incorporated by reference from Maxxim's Annual Report on Form 10-K for the
fiscal year ended November 1, 1998).
Circon is involved in the following legal proceedings:
On May 28, 1996, two purported stockholders of Circon, Bart Milano and
Elizabeth Heaven, commenced an action in the Superior Court of the State of
California for the County of Santa Barbara, Case No. 213476, purportedly on
behalf of themselves and all others who purchased Circon's common stock between
May 2, 1995 and February 1, 1996, against Circon, Richard A. Auhll, Rudolf R.
Schulte, Harold R. Frank, John F. Blokker, Paul W. Hartloff, Jr., R. Bruce
Thompson, Jon D. St. Clair, Frederick A. Miller, David P. Zielinski, Winton L.
Berci, Jurgen Zobel, Trevor Murdoch and Warren G. Wood. That complaint alleged
that defendants violated Sections 11 and 15 of the Securities Act of 1933
Sections 25400-02 and 25500-02 of the California Corporations Code, and Sections
1709-10 of the California Civil Code, by disseminating allegedly false and
misleading statements relating to Circon's acquisition of Cabot Medical Corp. by
merger and to the combined companies' future financial performance. In general
the complaint alleged that defendants knew that synergies from the merger would
not be achieved, but misrepresented to the public that they would be achieved,
in order to obtain approval for the merger so they would be executives of a much
larger corporation. This alleged conduct allegedly had the effect of inflating
the price of Circon's common stock. On July 29, 1996, defendants filed demurrers
to the complaint on the ground that plaintiffs' allegations fail to state facts
sufficient to constitute a cause of action. On or about August 6, 1996,
plaintiffs served their response to defendants' demurrers, stating their
intention to file an amended complaint prior to the hearing on defendants'
demurrers. On September 20, 1996, plaintiffs voluntarily dismissed Rudolf R.
Schulte, Harold R. Frank, John F. Blokker and Paul W. Hartloff, Jr. from the
action, without prejudice. On September 30, 1996, plaintiffs, joined by a third
purported stockholder of Circon, Adam Zetter, filed a first amended complaint
against the remaining defendants. Plaintiffs' amended complaint is substantially
similar to the original complaint, but adds a new purported cause of action
under the unfair business practices provisions of the California Business &
Professions Code, Sections 17200, et seq. and 17500, et seq. Like the original
complaint, the amended complaint seeks compensatory and/or punitive damages,
attorneys' fees and costs, and any other relief (including injunctive relief)
deemed proper. On December 2, 1996, defendants filed demurrers to the amended
complaint again on the grounds that plaintiffs' allegations fail to state facts
sufficient to constitute a cause of action. On April 17, 1997, a hearing was
held regarding the defendants' demurrers to the first amended complaint. By
order dated May 28, 1997, the Superior Court overruled the defendants' demurrers
to the amended complaint. The parties are now engaged in discovery proceedings.
Circon believes plaintiffs' allegations to be without merit and intends to
vigorously defend the lawsuit. We believe that the ultimate resolution of such
litigation will not have a material adverse impact on our results of operations
or financial position.
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On August 15, 1996, an action captioned Steiner v. Auhll, et al., No. 15165
was filed in the Court of Chancery of the State of Delaware and shortly
thereafter, three substantially similar actions were filed by three other
shareholders of Circon. All four of these actions purported to be brought as
class actions on behalf of all Circon shareholders. On August 16, 1996, a
separate action captioned Krim v. Circon Corp., et al., No. 153767, was filed in
the Superior Court of California in Santa Barbara. The plaintiff in that action
also claimed to be a Circon stockholder and purported to bring his claim as a
class action. On September 27, 1996, that action was stayed by the Court in
favor of the actions pending in Delaware; the Court also encouraged the
plaintiff to refile his action in Delaware. By order dated September 18, 1996,
the four Delaware actions were consolidated under the caption In re Circon
Corporation Shareholders Litigation, Consol. C.A. No. 15165. The plaintiffs
allege certain wrongdoing on the part of the defendants in connection with the
hostile tender offer by U.S. Surgical Corporation announced on August 2, 1996.
Plaintiffs allege, among other things, that the defendants (i) breached their
fiduciary duties to the Circon stockholders by summarily rejecting the U.S.
Surgical offer and by failing to negotiate a friendly merger with U.S. Surgical;
(ii) engaged in actions which were not reasonable responses to the U.S. Surgical
offer, including the adoption on August 13, 1996, of a stockholders rights plan
and retention plans designed to provide for cash payments to Circon employees in
the event of a change of control; (iii) were subject to conflicts of interest
and motivated by their own self-interests and objectives designed to protect
their positions in Circon; (iv) manipulated the corporate machinery and impaired
the corporate democratic process by adopting the stockholders rights plan and
the retention plans; and (v) breached their duty of disclosure. On July 27,
1999, the parties filed a stipulation of settlement. In the stipulation, the
parties agreed that (i) as a result, in part, of the pendency and prosecution of
the case, defendants decided to explore strategic alternatives for Circon and
ultimately to approve the acquisition of Circon by Maxxim and (ii) the
consideration received by the Circon stockholders in connection with the
transaction with Maxxim represented the best price reasonably available. In
connection with the settlement, defendants have agreed that they will not oppose
plaintiffs' counsel's request for an award of attorneys' fees and expenses in an
aggregate amount not to exceed $800,000. The settlement and fee award are
subject to court approval. A hearing on the settlement is scheduled to take
place on October 20, 1999. The payment of such amount would be covered by
Circon's insurance.
OTHER MATTERS
Management knows of no other business to be presented at the special
meeting. If other matters do properly come before the meeting, or any
adjournment or postponement thereof, it is the intention of the persons named in
the proxy to vote on such matters according to their best judgment unless the
authority to do so is withheld in such proxy.
SHAREHOLDER PROPOSALS FOR PRESENTATION
AT THE 2000 ANNUAL MEETING
Your board of directors requests that any shareholder proposals intended
for presentation at the 2000 Annual Meeting be submitted to Peter M. Graham,
Secretary, in writing no later than October 31, 1999, for consideration for
inclusion in Maxxim's proxy materials for such meeting. Members of the Maxxim's
proxy committee will have discretionary voting authority with respect to all
shares represented by proxies held by them at the 2000 Annual Meeting for any
matters raised at that meeting about which Maxxim does not receive proper notice
prior to January 16, 2000. If the merger is completed, there will be no 2000
Annual Meeting.
WHERE YOU CAN FIND MORE INFORMATION
Maxxim files annual, quarterly, and current reports, proxy statements, and
other information with the SEC. You may read and copy any reports, statements,
or other information that Maxxim files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Maxxim
public filings are also available to the public from commercial document
retrieval services and at the Internet World Wide Website
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maintained by the SEC at http://www.sec.gov. Reports, proxy statements, and
other information concerning Maxxim also may be inspected at the offices of the
New York Stock Exchange at 20 Broad Street, New York, NY 10005.
The SEC allows Maxxim to "incorporate by reference" information into this
document, which means that Maxxim can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be a part of this document, except for
any information superseded by information contained directly in this document.
This document incorporates by reference certain documents that Maxxim has
previously filed with the SEC. These documents contain important business
information about Maxxim and its financial condition.
Maxxim may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through Maxxim or the SEC or the SEC's
Internet World Wide Web site described above. Documents incorporated by
reference are available from Maxxim without charge, excluding all exhibits
unless specifically incorporated by reference as an exhibit to this document.
Shareholders may obtain documents incorporated by reference in this document
upon written or oral request to the following address or telephone number:
MAXXIM MEDICAL, INC.
10300 49th Street North
Clearwater, Florida 33762
(727) 561-2100
Attention: Mary Lugris
Maxxim will send any document so requested to the requesting shareholder by
first class mail or other equally prompt means within one day of receiving such
request.
Maxxim has filed a Schedule 13E-3 with the SEC with respect to the merger.
As permitted by the SEC, this proxy statement omits certain information
contained in the Schedule 13E-3. The Schedule 13E-3, including any amendments
and exhibits filed or incorporated by reference as a part thereof, is available
for inspection or copying as set forth above. Statements contained in this proxy
statement or in any document incorporated herein by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete and in each instance reference is made to such contract or
other document filed as an exhibit to the Schedule 13E-3 or such other document,
and each such statement shall be deemed qualified in its entirety by such
reference.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM MAXXIM, PLEASE DO SO AT LEAST
FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO RECEIVE
TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE YOUR MAXXIM SHARES AT THE SPECIAL MEETING.
MAXXIM HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED
OCTOBER 4, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF
THIS DOCUMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
By Order of the Board of Directors
/s/ PETER M. GRAHAM
----------------------------------
Peter M. Graham,
Secretary
Clearwater, Florida
Dated: October 4, 1999
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APPENDIX A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER,
DATED AS OF JUNE 13, 1999,
BETWEEN
FOX PAINE MEDIC ACQUISITION CORPORATION
AND
MAXXIM MEDICAL, INC.
<PAGE> 77
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER, ITS EFFECTS ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS, AND THE DEBT OFFER................ A-1
Section 1.1. The Merger.................................................. A-1
Section 1.2. Effective Time.............................................. A-2
Section 1.3. Effects of the Merger....................................... A-2
Section 1.4. Articles of Incorporation and Bylaws........................ A-2
Section 1.5. Directors................................................... A-2
Section 1.6. Officers.................................................... A-2
Section 1.7. Subsequent Actions.......................................... A-2
Section 1.8. Effect of the Capital Stock................................. A-3
Section 1.9. Dissenting Shares........................................... A-3
Section 1.10. List of Stock Options; Cancellation of Stock Options........ A-4
Section 1.11. Payment for Shares.......................................... A-4
Section 1.12. The Senior Notes Offer and Solicitation..................... A-6
Section 1.13. Company Action.............................................. A-7
ARTICLE II ASSET DROPDOWN.............................................. A-7
Section 2.1. Asset Dropdown.............................................. A-7
Section 2.2. Non-Assignment Under Certain Circumstances.................. A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-8
Section 3.1. Organization and Qualification; Subsidiaries................ A-8
Section 3.2. Capitalization of the Company and its Subsidiaries.......... A-9
Section 3.3. Authority Relative to this Agreement; Consents and
Approvals................................................... A-10
Section 3.4. SEC Reports; Financial Statements........................... A-10
Section 3.5. Debt Offer Documents; Proxy Statement; Form S-4............. A-11
Section 3.6. Consents and Approvals, No Violations....................... A-11
Section 3.7. No Default.................................................. A-12
Section 3.8. No Undisclosed Liabilities; Absence of Changes.............. A-12
Section 3.9. Litigation.................................................. A-12
Section 3.10. Compliance with Applicable Law.............................. A-12
Section 3.11. Employee Benefit Matters.................................... A-13
Section 3.12. Environmental Laws and Regulations.......................... A-14
Section 3.13. Rights Agreement; State Takeover Statute Inapplicable....... A-15
Section 3.14. Brokers..................................................... A-15
Section 3.15. Absence of Certain Changes.................................. A-15
Section 3.16. Taxes....................................................... A-16
Section 3.17. Intellectual Property....................................... A-17
Section 3.18. Labor Matters............................................... A-17
Section 3.19. Opinions of Financial Advisors.............................. A-18
Section 3.20. Titles to Properties; Encumbrances.......................... A-18
Section 3.21. Material Contracts.......................................... A-18
Section 3.22. Product Liability........................................... A-20
Section 3.23. Suppliers and Customers..................................... A-20
Section 3.24. Title and Condition of Properties........................... A-20
Section 3.25. Information in Financing Documents.......................... A-21
Section 3.26. Year 2000 Compliance........................................ A-21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER................. A-21
Section 4.1. Organization................................................ A-21
Section 4.2. Authority Relative to this Agreement........................ A-21
Section 4.3. Consents and Approvals; No Violations....................... A-21
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.4. Proxy Statement; Offer Documents............................ A-22
Section 4.5. Financing................................................... A-22
Section 4.6. Brokers..................................................... A-22
ARTICLE V COVENANTS................................................... A-22
Section 5.1. Shareholders Meeting........................................ A-22
Section 5.2. Proxy Statement............................................. A-23
Section 5.3. Conduct of Business of the Company.......................... A-23
Section 5.4. No Solicitation............................................. A-25
Section 5.5. Access to Information....................................... A-27
Section 5.6. Additional Agreements, Reasonable Efforts................... A-28
Section 5.7. Public Announcements........................................ A-29
Section 5.8. Indemnification............................................. A-29
Section 5.9. Recapitalization............................................ A-29
Section 5.10. Financial Statements........................................ A-29
Section 5.11. Certain Agreements with Management.......................... A-29
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER.................... A-30
Section 6.1. Conditions to the Merger.................................... A-30
Section 6.2. Conditions to Each Party's Obligations to Effect the
Merger...................................................... A-31
ARTICLE VII TERMINATION; AMENDMENT; WAIVER.............................. A-32
Section 7.1. Termination................................................. A-32
Section 7.2. Effect of Termination....................................... A-32
Section 7.3. Fees and Expenses........................................... A-32
Section 7.4. Amendment................................................... A-33
Section 7.5. Waiver...................................................... A-33
ARTICLE VIII MISCELLANEOUS............................................... A-33
Section 8.1. Nonsurvival of Representations and Warranties............... A-33
Section 8.2. Entire Agreement; Assignment................................ A-33
Section 8.3. Validity.................................................... A-34
Section 8.4. Notices..................................................... A-34
Section 8.5. Governing Law............................................... A-35
Section 8.6. Descriptive Headings........................................ A-35
Section 8.7. Parties in Interest......................................... A-35
Section 8.8. Counterparts................................................ A-35
ANNEX A Terms and Conditions to the Debt Offer...................... A-36
EXHIBIT A-1 Equity Commitment Letter to Purchaser
EXHIBIT A-2 Equity Commitment Letter to Circon Buyer
EXHIBIT B Holdco Commitment Letter
EXHIBIT C OpCo Financing Commitment Letters
SCHEDULES Schedules 1.8(b) and 1.10(c) Company Disclosure Letter
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 13, 1999 (this
"Agreement"), is made by and between Fox Paine Medic Acquisition Corporation, a
Texas corporation ("Purchaser"), and Maxxim Medical, Inc., a Texas corporation
(the "Company").
WHEREAS, the respective Boards of Directors of the Company and Purchaser
have determined that the merger of Purchaser with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair to and in the best interests of their respective
shareholders, and such Boards of Directors have approved such Merger, pursuant
to which each share of common stock, par value $.001 per share (together with
the associated Preferred Share Purchase Rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of July 10, 1997 (the "Rights Agreement"), by and
between the Company and Harris Trust and Savings Bank as rights agent, the
"Company Common Stock"), issued and outstanding immediately prior to the
Effective Time (as defined in Section 1.2) will (except for shares of Company
Common Stock owned, directly or indirectly by the Company or Purchaser, except
for those shares owned by the Specified Shareholders (as defined herein) which
are to be retained pursuant to Section 1.8(b) hereof, and except for any shares
of Common Stock as to which dissenters rights are exercised and perfected
pursuant to applicable law) be converted into the right to receive $26.00 in
cash (the "Per Share Amount");
WHEREAS, the Merger and this Agreement require the vote of a majority of
the shares of the Company Common Stock for the approval thereof (the "Company
Shareholder Approval");
WHEREAS, Purchaser is a newly formed corporation formed by Fox Paine
Capital Fund, L.P. and certain related parties;
WHEREAS, as a condition and inducement to Purchaser's willingness to enter
into this Agreement and consummate the transactions contemplated hereby,
Purchaser has required each of Kenneth W. Davidson, Peter M. Graham, David L.
Lamont, Henry T. DeHart, Jack F. Cahill, Alan S. Blazei, Joseph D. Dailey,
Suzanne R. Garon, Ernest J. Henley, and Davis C. Henley (collectively, the
"Specified Shareholders"), all but one of which is a member of the Company's
senior management or a member of Company's Board of Directors, to enter into a
voting agreement, dated even herewith (the "Voting Agreement"), pursuant to
which, among other things, each Specified Shareholder agrees to vote all shares
of Company Common Stock beneficially owned by him or her (including without
limitation shares of Company Common Stock issued upon conversion of options of
the Company beneficially owned by the Specified Shareholder) in favor of the
Merger;
WHEREAS, Purchaser and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, the parties hereto intend that the Merger be treated as a
recapitalization for financial reporting purposes.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER, ITS EFFECTS ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS, AND THE DEBT OFFER
Section 1.1. The Merger. Subject to the conditions of this Agreement and
in accordance with the Business Corporation Act of the State of Texas (the
"TBCA"), the Company and Purchaser shall consummate a merger (the "Merger")
pursuant to which (i) Purchaser shall merge with and into the Company and the
separate corporate existence of Purchaser shall thereupon cease, (ii) the
Company shall be the successor or the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Texas, and (iii) the
corporate existence of the Company, with all of its rights, privileges,
immunities, powers and franchises, shall continue
A-1
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unaffected by the Merger. Purchaser may, upon notice to the Company, modify the
structure of the Merger if Purchaser determines it advisable to do so because of
tax or other considerations, and the Company shall promptly enter into any
amendment to this Agreement necessary or desirable to accomplish such structure
modification, provided that no such amendment shall reduce the Per Share Amount
or materially delay the Closing (as defined below) and, provided, further, that
in the event of any such modification of structure, for purposes of determining
whether the condition set forth in Section 6.1(b)(i) has been satisfied, the
accuracy of the Company's representations and warranties shall be determined
(unless the Company otherwise reasonably agrees) as if such modification had not
been made.
Section 1.2. Effective Time. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VI, the parties hereto shall
cause (i) articles of merger (the "Articles of Merger") to be executed and filed
on the Closing Date (or on such other date as Purchaser and the Company may
agree) with the Secretary of State of the State of Texas in such form as
required by, and executed in accordance with the relevant provisions of the
TBCA, and (ii) all other filings or recordings required by the TBCA in
connection with the Merger. A closing for the Merger (the "Closing") will be
held at the offices of Wachtell, Lipton, Rosen & Katz, counsel to Purchaser, at
3:30 p.m. New York City time (or such other place as the parties may agree) on
second business day after satisfaction or waiver of the conditions set forth in
Article VI (other than those that are to be satisfied on the Closing Date) (the
"Closing Date"). The Merger shall become effective at such time as a Certificate
of Merger is duly issued by the Secretary of State of the State of Texas (the
time the Merger becomes effective being referred to herein as the "Effective
Time").
Section 1.3. Effects of the Merger. At the Effective Time, the Merger
shall have the effects as set forth in the applicable provisions of the TBCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Articles of Incorporation and Bylaws. (a) The articles of
incorporation of the Company in effect immediately prior to the Effective Time
shall be the articles of incorporation of the Surviving Corporation until
amended in accordance with its terms and applicable law.
(b) The bylaws of Purchaser in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with its terms and applicable law.
Section 1.5. Directors. The directors of Purchaser immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the articles of incorporation and bylaws
of the Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
Section 1.6. Officers. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
each to hold office in accordance with the articles of incorporation and bylaws
of the Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
Section 1.7. Subsequent Actions. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Purchaser acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Purchaser, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
A-2
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Section 1.8. Effect of the Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Company,
Purchaser or any holder of any shares of Company Common Stock ("Shares") or any
shares of capital stock of Purchaser:
(a) Each share of common stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into one share
of the common stock, par value $.001 per share, of the Company following
the Merger.
(b) Each issued and outstanding share of Company Common Stock held by
the Specified Shareholders immediately prior to the Effective Time, other
than as set forth in Schedule 1.8(b) hereto, shall not be canceled as
provided below but be retained by such holder and remain outstanding and
unaffected by the Merger.
(c) Each share of Company Common Stock that is owned by or held in the
treasury of the Company or owned by any subsidiary of the Company
immediately prior to the Effective Time, shall automatically be canceled
and retired and shall cease to exist, and no cash, Company Common Stock or
other consideration shall be delivered or deliverable in exchange therefor.
(d) Shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than (i) any shares to be issued
pursuant to Section 1.8(a), (ii) any shares to remain outstanding pursuant
to Section 1.8(b), (iii) any shares to be canceled pursuant to Section
1.8(c) and (iv) any Dissenting Shares (as defined below)), together with
the Associated Rights, held by each shareholder of the Company shall be
converted into the right to receive (i) an amount in cash (the "Merger
Consideration") equal to the product of (A) the number of such shares of
Company Common Stock owned by such shareholder prior to the Effective Time,
and (B) the Per Share Amount. The Merger Consideration shall be payable to
the holder of shares of Company Common Stock, without interest thereon,
upon the surrender of the certificate or certificates formerly representing
such Shares in the manner provided in Section 5.2 and less any required
withholding of taxes. From and after the Effective Time, all such Shares so
converted into the Merger Consideration shall no longer be outstanding and
shall be deemed to be canceled and retired and shall cease to exist, and
each holder of a certificate or certificates formerly representing any such
Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor upon the surrender of
such certificate or certificates in accordance with Section 1.11, or the
right, if any, to receive payment from the Surviving Corporation in
accordance with Articles 5.11, 5.12 and 5.13 of the TBCA. Anything
contained herein to the contrary notwithstanding, with respect to any
Person (as defined in Section 2.2) (other than any Specified Shareholder)
who has purchased shares of Company Common Stock pursuant to the terms of
the Company's Senior Management Stock Purchase Plan and who as of the
Effective Time has an amount outstanding and unpaid under a promissory
note(s) entered into between such Person and the Company under such plan,
the Company shall withhold from the aggregate Merger Consideration payable
to any such Person in respect of shares of Company Common Stock canceled in
the Merger (subject to obtaining any required consent of any such Person)
the amount necessary to satisfy the outstanding obligation under the
promissory note(s) in full (including the amount equal to any imputed
interest if such Person authorized the Company to do so).
Section 1.9. Dissenting Shares. Anything in this Agreement to the contrary
notwithstanding, shares of Company Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders who
have the right to dissent with respect to the Merger pursuant to Article 5.11 of
the TBCA ("Dissenting Shares") shall not be converted into or be exchangeable
for the right to receive the Merger Consideration, but the holders of such
Dissenting Shares shall be entitled to receive payment of the fair value of such
Dissenting Shares in accordance with the provisions of the TBCA, unless and
until such holders shall have failed to perfect or shall have effectively
withdrawn or lost such right under the TBCA. If any such holder shall have
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's shares of Company Common Stock shall thereupon be converted into and
become exchangeable only for the right to receive, as of the Effective Time, the
Merger Consideration without any interest thereon. The Company shall give
Purchaser (i) prompt notice of any written demands received by the Company for
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payment of fair value in respect of any shares of Company Common Stock,
attempted written withdrawals of such demands, and any other instruments served
pursuant to the TBCA and received by the Company relating to shareholders'
rights to dissent with respect to the Merger and (ii) the opportunity to direct
all negotiations and proceedings with respect to any exercise of such rights
under the TBCA. The Company shall not, except with the prior written consent of
Purchaser, voluntarily make any payment with respect to any demands for payment
of fair value for capital stock of the Company, offer to settle or settle any
such demands or approve any withdrawal of any such demands.
Section 1.10. List of Stock Options; Cancellation of Stock Options. (a)
The Company has heretofore provided Purchaser a true and complete list (the
"Stock Option List") of each option to purchase shares of Company Common Stock
(the "Stock Options") granted under each employee and director stock option
plan or arrangement (the "Company Stock Plans") outstanding as of the date
hereof (along with the exercise prices thereof). The Company represents and
warrants that as of the date hereof, other than as previously disclosed in the
Stock Option List, no outstanding Stock Options are held by any Specified
Shareholder. Stock Options held by any Specified Shareholder and any other
person permitted by Purchaser in writing after the date hereof to participate
in the option rollover (collectively, the "Rollover Participants") are referred
to as "Rollover Options".
(b) The term "Option Cancellation Time" shall mean the time that is
immediately prior to the Effective Time.
(c) At the Option Cancellation Time, 448,336 Rollover Options (as specified
in Schedule 1.10(c) (the "Canceled Rollover Options")) shall be canceled, and
shall be of no further force or effect.
(d) At the Option Cancellation Time, each then outstanding Stock Option
(whether vested or unvested), other than any Canceled Rollover Option, shall be
canceled and, in consideration of such cancellation, the Company shall pay to
the holder in full satisfaction of such Stock Option, subject to any applicable
withholding tax, an amount in cash equal to the product of (i) the excess, if
any, of the Per Share Amount over the exercise price per share of Company Common
Stock of such Stock Option and (ii) the number of shares of Company Common Stock
subject to such Stock Option.
(e) The Company (i) shall take all actions necessary, including seeking
written consents from each holder (other than the Rollover Participants), to
cause the actions and effects specified in Section 1.10 to occur, and (ii) shall
take all actions necessary to provide that, effective as of the Option
Cancellation Time, (A) except as necessary in connection with the treatment of
Rollover Options, each of the Company Stock Plans shall be terminated and no new
options shall be granted thereunder, (B) the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any of its subsidiaries shall
be amended to provide that no new issuances or grants may be made thereunder,
and (C) no holder of Stock Options will have any right to receive any shares of
capital stock of the Company or, if applicable, the Surviving Corporation, upon
exercise of any Stock Option.
Section 1.11. Payment for Shares. (a) Prior to the Effective Time,
Purchaser shall designate a bank or trust company reasonably acceptable to the
Company to act as paying agent in connection with the Merger (the "Paying
Agent") pursuant to a paying agent agreement providing for the matters set forth
in this Section 1.11 and otherwise reasonably satisfactory to the Company. At
the Effective Time, the Company shall deposit, or cause to be deposited, in
trust with the Paying Agent for the benefit of holders of shares of Company
Common Stock, the aggregate consideration to which such holders shall be
entitled at the Effective Time pursuant to Section 1.8(d). Such funds shall be
invested as directed by the Company or the Surviving Corporation pending payment
thereof by the Paying Agent to holders of the shares of Company Common Stock.
Earnings from such investments shall be the sole and exclusive property of the
Company and the Surviving Corporation and no part thereof shall accrue to the
benefit of the holders of the shares of Company Common Stock.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose shares
were
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converted pursuant to Section 1.8(d) into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent and shall be
in such form and have such other provisions not inconsistent with this Agreement
as Purchaser may specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration (together, the "Transmittal Documents"). Upon surrender of a
Certificate or Certificates for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Purchaser, together with such
letter of transmittal, duly executed, the holder of such Certificate or
Certificates shall be entitled to receive in exchange therefor (as promptly as
practicable) the Merger Consideration in respect of all shares of Company Common
Stock formerly represented by such Certificate or Certificates, without any
interest thereon, pursuant to Section 1.8(d). The Certificate(s) so surrendered
shall forthwith be canceled. If payment of the Merger Consideration is to be
made to a Person other than the Person in whose name the surrendered Certificate
or Certificates are registered, it shall be a condition of payment that the
Certificate(s) so surrendered shall be properly endorsed or shall otherwise be
in proper form for transfer, that the signatures on the Certificate(s) or any
related stock power shall be properly guaranteed and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
the payment of the Merger Consideration to a Person other than the registered
holder of the Certificate(s) surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not applicable. Until surrendered in accordance with the provisions of and as
contemplated by this Section 1.11, any Certificate (other than Certificates
representing shares of Company Common Stock subject to Sections 1.8(a), (b) and
(c) and other than Dissenting Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
in cash without interest as contemplated by this Section 1.11. Upon the
surrender of Certificates in accordance with the terms and instructions
contained in the Transmittal Documents, the Company shall cause the Paying Agent
to pay the holder of such Certificates in exchange therefor cash in an amount
equal to the Merger Consideration (other than Certificates representing
Dissenting Shares and Certificates representing shares of Company Common Stock
subject to Sections 1.8(a), (b) and (c)).
(c) At the Effective Time, the stock transfer books of the Company shall be
closed and there shall not be any further registration of transfers of any
shares of capital stock thereafter on the records of the Company. If, after the
Effective Time, Certificates (other than Dissenting Shares or those subject to
Sections 1.8(a), (b) and (c)) are presented to the Surviving Corporation, they
shall be canceled and exchanged for the consideration provided for, and in
accordance with the procedures set forth, in this Section 1.11. No interest
shall accrue or be paid on any cash payable upon the surrender of a Certificate
or Certificates which immediately before the Effective Time represented
outstanding shares of Company Common Stock.
(d) From and after the Effective Time, the holders of Certificates
evidencing ownership of shares of Company Common Stock outstanding immediately
prior to the Effective Time (other than those subject to Section 1.8(b)) shall
cease to have any rights with respect to such shares of Company Common Stock
except as otherwise provided herein or by applicable law.
(e) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed, the Surviving Corporation shall pay or cause to be
paid in exchange for such lost, stolen or destroyed Certificate the relevant
portion of the Merger Consideration in accordance with Section 1.8(d) for shares
of Company Common Stock represented thereby. When authorizing such payment of
any portion of the Merger Consideration in exchange therefor, the board of
directors of the Surviving Corporation may, in its discretion and as a condition
precedent to the payment thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Surviving Corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the Surviving
Corporation with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(f) Promptly following the date which is one year after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any cash (including any interest received with respect thereto),
Certificates and other documents in its possession relating to the Merger, which
had been made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and
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thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or similar laws) only as general
creditors thereof with respect to any portion of the Merger Consideration
payable upon due surrender of their Certificates, without any interest thereon.
(g) The Merger Consideration paid in the Merger shall be net to the holder
of shares of Company Common Stock in cash, subject to reduction only for any
applicable Federal withholding taxes or, as set forth in Section 1.11(b), stock
transfer taxes payable by such holder.
(h) Anything to the contrary in this Section 1.11 notwithstanding, none of
the Paying Agent, Purchaser or the Surviving Corporation shall be liable to any
holder of a Certificate formerly representing Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If Certificates are not surrendered prior to two years
after the Effective Time, unclaimed funds payable with respect to such
Certificates shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any Person previously entitled thereto.
Section 1.12. The Senior Notes Offer and Solicitation. (a) Provided that
this Agreement shall not have been terminated in accordance with Section 7.1 and
none of the events set forth in Annex A shall have occurred or be existing, the
Company shall promptly after the date of this Agreement, but in no event later
than five business days from the date a request is made by the Purchaser (which
request shall not be made prior to the sixth business day following the date of
this Agreement), commence an offer to purchase all of the outstanding aggregate
principal amount of the Company's 10 1/2% Senior Subordinated Senior Notes (the
"Senior Notes") issued pursuant to that certain Indenture, dated as of July 30,
1996, among the Company, certain of its subsidiaries, and First Union National
Bank of North Carolina, as Trustee (the "Senior Notes Indenture"), on the terms
and conditions set forth in and attached as Annex A hereto, and such other
customary terms and conditions as are reasonably acceptable to Purchaser (the
"Debt Offer"). Without limiting the foregoing, the Debt Offer (and the
provisions of Annex A hereto), shall include the solicitation of consents to
amendments to the terms of the Senior Notes and the Senior Notes Indenture that
shall be reasonably satisfactory to Purchaser and shall include, without
limitation, the elimination of the negative covenants contained therein and the
elimination of any restrictions applicable to the transactions contemplated by
this Agreement or any of the financing contemplated thereby (the "Senior Notes
Amendments"). The Company shall waive any of the conditions to the Debt Offer
and make any other changes in the terms and conditions of the Debt Offer as
reasonably requested by Purchaser, and the Company shall not, without
Purchaser's prior written consent, waive any condition to the Debt Offer, make
any changes to the terms and conditions of the Debt Offer set forth in Annex A
or make any other changes in the terms and conditions of the Debt Offer. The
Company covenants and agrees that, subject to the terms and conditions of this
Agreement, including, but not limited to, Annex A, it will accept for payment
and thereafter pay for, as promptly as practicable after expiration of the Debt
Offer, Senior Notes and consents concurrently with the consummation of the
Merger.
(b) Subject to Section 7.1, the Company shall, from time to time at the
direction of Purchaser, extend the Debt Offer.
(c) Promptly following the date of this Agreement, the Company shall
prepare an offer to purchase the Senior Notes and forms of the related letter of
transmittal (collectively, the "Debt Offer to Purchase") and summary
advertisement, as well as all other information and exhibits (collectively, the
"Debt Offer Documents"). Purchaser and the Company will cooperate with each
other in the preparation of the Debt Offer Documents. All mailings to the
holders of Senior Notes in connection with the Debt Offer shall be subject to
the prior review, comment and approval of Purchaser. The Company will use its
reasonable efforts to cause the Debt Offer Documents to be mailed to the holders
of the Senior Notes within five business days from the date a request is made by
Purchaser (which request shall not be made prior to the sixth business day
following the date of this Agreement). The Debt Offer Documents will comply in
all material respects with the provisions of applicable state and federal laws.
Each of Purchaser and the Company agrees promptly to correct any information
provided by it for use in the Debt Offer Documents if and to the extent that it
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps
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necessary to cause the Debt Offer Documents as so corrected to be disseminated
to holders of Senior Notes as and to the extent required by applicable state and
federal laws.
Section 1.13. Company Action. (a) The Company hereby approves of and
agrees to undertake the Debt Offer and represents and warrants that the Board of
Directors of the Company (the "Company Board"), at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, (i) determined
that this Agreement, which provides, among other things, for the Debt Offer, the
Circon Sale (as defined in Section 5.6(d)) and the Merger, is advisable, fair
to, and in the best interests of, the shareholders of the Company, (ii) resolved
to recommend approval and adoption of the plan of merger (within the meaning of
Article 5.03 of the TBCA) contained in this Agreement by such shareholders of
the Company, (iii) approved the Merger and all of the other Transactions, for
purposes of Article 13.03 of the TBCA and taken all necessary steps to render
Article 13.03 of the TBCA inapplicable to the Transactions contemplated hereby,
(iv) resolved to elect, to the extent permitted by law, not to be subject to any
state takeover law other than Article 13.03 of the TBCA that may purport to be
applicable to the Transactions contemplated hereby, (v) has taken all action
under the Rights Agreement to make the representations and warranties contained
in Section 3.13 true and correct in all respects, and (vi) resolved to
recommend, and recommended, that the shareholders of the Company approve and
adopt this Agreement and the Merger. The determinations, resolutions and
recommendations referred to in the immediately preceding sentence are
collectively referred to herein as the "Company Board Recommendation". The
Company shall include a statement of such recommendation and approval in the
Proxy Statement (as defined in Section 3.5). The Company further represents that
Lazard Freres & Co. LLC (the "Financial Advisor") has delivered to the Board its
written opinion that, as of the date of such opinion, the Per Share Amount to be
received in the Merger by the holders of Shares (other than Purchaser and the
Specified Shareholders) is fair from a financial point of view to such holders.
The Company agrees to, and has been authorized by the Financial Advisor to,
permit the inclusion of the fairness opinion (or a reference thereto) in the
Proxy Statement.
(b) The Company shall take all action as may be necessary to effect the
Debt Offer as contemplated by this Agreement, including, without limitation,
promptly mailing the Debt Offer Documents to the record holders and beneficial
owners of the Senior Notes.
ARTICLE II
ASSET DROPDOWN
Section 2.1. Asset Dropdown. If requested by Purchaser in order to
facilitate the financing contemplated hereby, the Company shall organize, or
cause to be organized under the laws of the State of Delaware a corporation
("Company Sub") and thereafter maintain its good standing under the laws of the
State of Delaware and qualify it to do business in such jurisdictions as may be
necessary to comply with the terms of Section 3.1. Purchaser shall be afforded
the opportunity to review and approve all documents prepared in connection with
the formation of Company Sub. In accordance with the first sentence of this
Section 2.1, as so requested, immediately before or concurrent with the
Effective Time, subject to satisfaction or waiver of all conditions to the
Merger, the Company shall sell, convey, assign, transfer and deliver to Company
Sub, and the Company shall cause Company Sub to acquire from the Company, all of
the rights, title and interests of the Company in and to all of the assets,
properties, operations and businesses and all other rights and privileges of
every nature, kind and description, whether tangible or intangible (including
goodwill), whether accrued, contingent or otherwise, of the Company as such
assets, properties, operations, businesses, rights and privileges may exist on
the date and time of the transfer (collectively, the "Company Assets");
provided, however, that the Company shall retain sufficient cash or cash
equivalents in order to finance the consummation of the Merger. The transfer of
the Company Assets contemplated by this Section 2.1 shall be effected by
appropriate bills of sale and other evidences of transfer or assignment, all in
forms reasonably satisfactory to the Company and Purchaser. Simultaneously
therewith, the Company shall assign to Company Sub, and shall cause Company Sub
to assume and agree to pay, perform and be liable and responsible for, any and
all of its liabilities, obligations, debts whatsoever of the business of the
Company, whether mature or unmatured, liquidated or unliquidated, fixed or
contingent, including as the "Company" under Section 5.2 of the Senior
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Notes Indenture ("Liabilities"). The assumption of Liabilities by Company Sub
pursuant to this Section 2.1 shall be evidenced by an assumption agreement or
other comparable document in form and substance reasonably satisfactory to the
Company and Purchaser.
Section 2.2. Non-Assignment Under Certain Circumstances. Anything
contained in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to sell, convey, assign, transfer or deliver
("Transfer") any interest in any instruments, commitments, contracts, leases,
permits or other agreements or arrangements or any claim, right or benefit, or
any Liability arising thereunder or resulting therefrom ("Instruments"), if such
a Transfer or an attempt to make such a Transfer without authorization,
approval, consent or waiver of a third person ("Authorizations") would
constitute a breach or violation thereof or affect adversely the rights of
Company Sub or the Company thereunder; and any transfer hereunder of such
Instruments that requires Authorizations shall be made subject to such
Authorizations being obtained. In the event that any such Authorizations are not
obtained on or prior to the Effective Time, the Company shall use commercially
reasonable efforts to obtain any such Authorization after the Effective Time,
and the Company shall, to the fullest extent permitted by law and any
instruments (including by acting as an agent of Company Sub), hold such
instruments in trust for the exclusive use and benefit of Company Sub such that
Company Sub receives the interest of the Company in the benefits therefrom until
such time as such Authorizations are obtained. "Person" or "person" means and
includes natural persons, corporations, limited partnerships, limited liability
companies, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and all
Governmental Entities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 3.1. Organization and Qualification; Subsidiaries. (a) Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its businesses as now being conducted, except where the failure to be in good
standing or to have such power, authority and governmental approvals, would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company has heretofore delivered to Purchaser accurate and complete copies of
the articles of incorporation and bylaws, as currently in effect, of the Company
and accurate and complete copies of the certificate or articles of incorporation
and bylaws (or other governing document), as currently in effect, of each of its
Subsidiaries. As used in this Agreement, the term "Subsidiary" shall mean, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated or domestic or foreign to the United States of
which (i) such Person or any other Subsidiary of such Person is a general
partner (excluding such partnerships where such Person or any Subsidiary of such
Person do not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries. The term "Company Material Adverse Effect" means any event,
change, circumstance or effect that is or could reasonably be expected to be
materially adverse to (a) the business, results of operations, condition
(financial or otherwise), assets or liabilities of the Company and its
Subsidiaries, taken as a whole, or (b) the ability of the Company to consummate
any of the transactions contemplated by this Agreement, including the Debt
Offer, the Circon Sale and the Merger (collectively, the "Transactions"). The
schedule of disclosures delivered by the Company to Purchaser together with the
execution of this Agreement (the "Company Disclosure Schedule") sets forth in
Section 3.1(a) a complete list of the Company's Subsidiaries.
(b) Each of the Company and its Subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business
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conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in aggregate, have a Company Material
Adverse Effect.
(c) Except as set forth in Section 3.1(c) of the Company Disclosure
Schedule, the Company does not own any equity or similar interest in any Person.
Section 3.2. Capitalization of the Company and its Subsidiaries. (a) The
authorized capital stock of the Company consists of: 40,000,000 shares of
Company Common Stock and 20,000,000 shares of preferred stock, par value $1.00
per share (the "Preferred Stock"). As of June 9, 1999, 14,276,682 shares of
Company Common Stock are issued and outstanding, no shares of the Preferred
Stock are outstanding. All of the Shares have been validly issued, and are fully
paid, nonassessable and free of preemptive rights. As of June 9, 1999, a total
of 1,498,920 Shares are reserved for issuance pursuant to outstanding Stock
Options under the Company Stock Plans, and no other Shares are subject to
issuance pursuant to Stock Options. Set forth in Section 3.2(a) of the Company
Disclosure Schedules is a complete and accurate list of the Company Stock Plans
and the number of Shares reserved for issuance pursuant to Stock Options
outstanding as of June 9, 1999 under each such Company Stock Plan, and no other
Shares are subject to issuance pursuant to such Company Stock Plans. Since June
9, 1999, no shares of the Company's capital stock have been issued other than
pursuant to Stock Options set forth on the Stock Option List and, since June 9,
1999, no stock options have been granted. Except as set forth above and except
for the Rights to, among other things, purchase Series A Participating Preferred
Stock issued pursuant to the Rights Agreement, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or any of its
Subsidiaries, and no obligations of the Company or any of its Subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or any
of its Subsidiaries or other similar rights (collectively, "Company
Securities"). There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
(b) Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding, capital stock of, or other ownership interests
in, each Subsidiary of the Company, is owned by the Company, directly or
indirectly, free and clear of any Lien or any other limitation or restriction
(including any restriction on the right to vote or sell the same, except as may
be provided as a matter of law). All such shares have been validly issued, fully
paid and non-assessable, and have been issued free of preemptive rights. There
are no securities of the Company or any of its Subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from the Company or any
of its Subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any capital stock or other ownership interests in, or
any other securities of, any Subsidiary of the Company. There are no contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any Subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including, without limitation, any
security) any option, claim, mortgage, lien, pledge, charge, security interest
or encumbrance or restrictions of any kind in respect of such asset.
(c) The Shares and the Rights constitute the only class of equity
securities of the Company or any of its Subsidiaries registered or required to
be registered under the Exchange Act.
(d) Other than the Voting Agreements, there are no voting trusts or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party with respect to the voting of the capital stock of the Company or any of
the Subsidiaries.
(e) Other than the Outstanding Indebtedness, there is no outstanding
Indebtedness of the Company or any of its Subsidiaries. Except as identified in
Section 3.2(e) of the Company Disclosure Schedule, no such Indebtedness of the
Company or its Subsidiaries contains any restriction upon (i) the prepayment of
such
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Indebtedness, (ii) the incurrence of Indebtedness by the Company or its
Subsidiaries, respectively, or (iii) the ability of the Company or its
Subsidiaries to grant any Liens on its properties or assets.
(f) For purposes of this Agreement, "Indebtedness" shall include (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices, and
excluding ordinary operating leases), (ii) any other indebtedness which is
evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under conditional sale or other title retention agreements relating
to property purchased, (iv) capital lease or sale-leaseback obligations, (v) all
liabilities secured by any Lien on any property (other than ordinary operating
leases), and (vi) any guarantee or assumption of any of the foregoing in clauses
(i) through (v) or guaranty of minimum equity or capital or any make-whole or
similar obligation. The term "Outstanding Indebtedness" means (a) the Senior
Notes, (b) Indebtedness not in excess of $265,000,000 as of the date hereof
under that certain Third Amended and Restated Credit Agreement, dated as of
January 4, 1999 (the "Credit Agreement"), by and among the Company, NationsBank,
N.A., as Agent, The Bank of Nova Scotia and First Union Bank, as managing
agents, and certain other banks named therein, and (c) capitalized leases
outstanding on the date hereof not in excess of $10,500,000 in the aggregate.
The aggregate principal amount of the outstanding Senior Notes does not exceed
$100,000,000, and there is no accrued but unpaid interest thereon other than
interest accruing since the last regular interest payment date.
Section 3.3. Authority Relative to this Agreement; Consents and
Approvals. (a) The Company has all the necessary corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions in
accordance with the terms hereof (subject to obtaining the necessary approval
and adoption of this Agreement and the Merger by the shareholders of the
Company). The execution, delivery and performance of this Agreement by the
Company and the consummation by it of the Transactions have been duly and
validly authorized by the Board and, except for obtaining the approval of the
Company's shareholders in connection with the Merger as contemplated by Section
5.1 hereof, no other corporate action or corporate proceedings on the part of
the Company is necessary to authorize the execution and delivery by the Company
of this Agreement and the consummation by it of the Transactions. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
due and valid authorization, execution and delivery by Purchaser, constitutes a
valid, legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
(b) The Board has duly and validly approved, and taken all corporate
actions required to be taken by the Board for the consummation of, the
Transactions, including, without limitation, all actions required to ensure that
the representations and warranties set forth in Section 3.13 are, and shall
remain, true and correct in all respects.
(c) No approval of the shareholders of the Company is required (by the
Company's articles of incorporation or bylaws, or by applicable law) with
respect to the entering into of this Agreement or the consummation of any of the
Transactions other than the approval of the Merger by holders of a majority of
the outstanding shares of Company Common Stock.
Section 3.4. SEC Reports; Financial Statements. (a) Since January 1, 1996,
the Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it with the SEC pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the SEC's rules
and regulations promulgated thereunder, and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the SEC's rules and regulations promulgated
thereunder (any such documents filed since January 1, 1996 and prior to the date
hereof being collectively, the "Company SEC Documents"). The Company SEC
Documents, including without limitation, any financial statements or schedules
included therein, at the time filed, or in the case of registration statements
on their respective effective dates, (i) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the rules and regulations promulgated thereunder and (ii) did
not at the time filed (or, in the case of registration statements, at the time
of effectiveness), contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. No
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Subsidiary of the Company is required to file any form, report or other document
with the SEC. The financial statements included in the Company SEC Documents
(the "Financial Statements") (i) have been prepared from, and are in accordance
with, the books and records of the Company and its Subsidiaries, (ii) complied
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, (iii) have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) ("GAAP") and (iv) fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its Subsidiaries as of the times and for the periods referred
to therein, except that any such Financial Statements that are unaudited,
interim financial statements were or are subject to normal and recurring year
end adjustments.
(b) The Company has heretofore made available to Purchaser, in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of its three most recently completed fiscal years, (ii) all
definitive proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since January 1, 1996 and (iii) all other
reports (other than Quarterly Reports on Form 10-Q) or registration statements
filed by the Company with the SEC since January 1, 1996.
Section 3.5. Debt Offer Documents; Proxy Statement; Form S-4. None of the
information included in (i) the Debt Offer Documents, shall, at the time the
Debt Offer Documents or any amendments or supplements thereto are first
published, sent or given to holders of the Senior Notes contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, (ii) the
registration statement on Form S-4 to be filed, if necessary, with the
Securities and Exchange Commission (the "SEC") by the Company in connection with
any issuance of Company Common Stock in connection with the Merger (such Form
S-4, as amended or supplemented, is herein referred to as the "Form S-4") will,
at the time the Form S-4 is filed with the SEC, and at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (iii) the proxy statement to be sent to the shareholders of
the Company in connection with the Shareholders Meeting (as defined in Section
5.1) (such proxy statement, as amended or supplemented, is herein referred to as
the "Proxy Statement") will, at the date it is first mailed to the Company's
shareholders or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. If the
filing of the Form S-4 is required, the Form S-4 will, as of its effective date,
and the prospectus contained therein will, as of its date, comply as to form in
all material respects with the requirements of the Securities Act and the rules
and regulations promulgated thereunder. The Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to statements made therein based on information
supplied in writing by Purchaser specifically for inclusion in the Proxy
Statement. For purposes of this Agreement, the parties agree that statements
made and information in the Debt Offer Documents, the Form S-4 (if one is filed)
and the Proxy Statement relating to the federal income tax consequences of the
transactions herein contemplated to holders of Company Common Stock shall be
deemed to be supplied by the Company and not by Purchaser.
Section 3.6. Consents and Approvals, No Violations. Except as set forth in
Section 3.6 of the Company Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any federal, state, local or
foreign court or tribunal or administrative, governmental or regulatory body,
agency or authority (a "Governmental Entity"), is required on the part of the
Company or any of its Subsidiaries for the execution, delivery and performance
by the Company of this Agreement or the consummation by the Company of the
Transactions, except (i) in connection with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) pursuant to the applicable requirements of the Securities Act and
the Exchange Act and the SEC's rules
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and regulations promulgated thereunder, (iii) the filing and if applicable,
recordation of the Articles of Merger pursuant to the TBCA, (iv) such filings as
are or may become necessary or desirable in connection with the organization and
capitalization of Company Sub, or (v) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Company Material Adverse Effect. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the Transactions will (A) conflict with or result in any
breach of any provision of the respective articles of incorporation or bylaws
(or similar governing documents) of the Company or of any its Subsidiaries, (B)
except as set forth in Section 3.6 of the Company Disclosure Schedule, result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound, other than breaches or defaults under the Credit Agreement
upon consummation of the Debt Offer without repayment thereof, or (C) violate
any order, writ, injunction, decree, law, statute, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets, except in the case of (B) or (C) for violations, breaches or defaults
which would not, individually or in the aggregate, have a Company Material
Adverse Effect.
Section 3.7. No Default. None of the Company or any of its Subsidiaries is
in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its articles of incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company,
any of its Subsidiaries or any of their respective properties or assets, except
in the case of (ii) or (iii) for violations, breaches or defaults that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except (i)
for liabilities incurred pursuant to the terms of the Agreement, or (ii) as set
forth in the Company SEC Documents filed since November 1, 1998, neither the
Company nor any of its Subsidiaries has, or has incurred since November 1, 1998,
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that have a Company Material Adverse Effect or, other than in the
ordinary course of business and consistent with past practices, that would be
required in accordance with GAAP to be reflected or reserved against on a
consolidated balance sheet, or in the notes thereto, of the Company and its
Subsidiaries prepared in accordance with GAAP.
Section 3.9. Litigation. Except as disclosed in the Company SEC Documents
or in Section 3.9 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against, affecting or involving the Company or any of its
Subsidiaries or any of their respective properties or assets before any
Governmental Entity with respect to which there is a reasonable likelihood of an
adverse determination which would have a Company Material Adverse Effect. Except
as disclosed in the Company SEC Documents or in Section 3.9 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject
to any outstanding order, writ, injunction or decree which has a Company
Material Adverse Effect.
Section 3.10. Compliance with Applicable Law. Except as set forth in
Section 3.10 of the Company Disclosure Schedule, the Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (including under applicable regulations
adopted by the U.S. Food and Drug Administration and the U.S. Food, Drug and
Cosmetic Act) necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted ("Company Permits") except
where the failure to hold such permits, licenses, variances, exemptions, orders
and approvals would not, individually or in the aggregate, have a Company
Material Adverse Effect. There has not occurred any material default under, or
violation of, or failure of compliance under, any such Company Permit. Except as
set forth in Section 3.10 of the Company Disclosure Schedule, the businesses of
the Company and its
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Subsidiaries are not being, and have not been, conducted in violation of any
law, ordinance or regulation of any Governmental Entity (including under
applicable regulations adopted by the U.S. Food and Drug Administration and the
U.S. Food, Drug and Cosmetic Act) except for violations or possible violations
which individually or in the aggregate will not have a Company Material Adverse
Effect. Except as set forth in Section 3.10 of the Company Disclosure Schedule,
no investigation or review by any Governmental Entity (including under
applicable regulations adopted by the U.S. Food and Drug Administration and the
U.S. Food, Drug and Cosmetic Act) with respect to the Company or any of its
Subsidiaries or any of their respective products is, or during the past three
years has been, pending or, to the knowledge of the Company, threatened nor, to
the knowledge of the Company, has any Governmental Entity indicated an intention
to conduct the same. This Section 3.10 shall not be applicable to compliance
with Environmental Laws (on permits required thereunder), which is the subject
of Section 3.12.
Section 3.11. Employee Benefit Matters. (a) All employee or director
benefit plans, arrangements or agreements, whether or not written, including
without limitation any employee welfare benefit plan within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any employee pension benefit plan within the meaning of Section 3(2)
of ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program or
agreement that is or has since January 1, 1994 (or prior to such date if such
plan, program or arrangement could result in any liability of the Company or any
Subsidiary after the date of this Agreement) been sponsored, maintained or
contributed to for the benefit of any current or former employee or director of
the Company or any Subsidiary are listed in Section 3.11(a) of the Company
Disclosure Schedule (the "Company Benefit Plans"). True and complete copies of
(i) the Company Benefit Plans (or, in the case of any unwritten Company Benefit
Plan, a description thereof) and any amendment thereto, (ii) the most recent
summary plan description (or similar document) for each Company Benefit Plan,
(iii) the three most recent Annual Reports (Form 5500 Series) and accompanying
schedules, if any, and (iv) the most recent determination letter from the IRS
(if applicable) for such Company Benefit Plan have been made available to the
Purchaser.
(b) Except as set forth in Section 3.11(b) of the Company Disclosure
Schedule, (i) each Company Benefit Plan has been maintained and administered in
all material respects in compliance with its terms and with all applicable laws
including, but not limited to, ERISA, and the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) each Company Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service (the "IRS") to be so qualified (or such qualification is pending, or
such plan is maintained under a prototype plan approved by the IRS), and, to the
knowledge of the Company, no event has occurred that could reasonably be
expected to adversely affect the qualified status of such Company Benefit Plan;
(iii) neither the Company nor any of its Subsidiaries has incurred or is
reasonably likely to incur any liability or penalty under Sections 4975 or 4976
of the Code or Sections 409 or 502(i) of ERISA; (iv) there are no pending, nor
has the Company or any of its Subsidiaries received notice of any threatened,
claims against or otherwise involving any of the Company Benefit Plans (other
than routine claims for benefits); (v) no Company Benefit Plan is under audit or
investigation by the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation, and to the knowledge of the Company, no such audit or
investigation is pending or threatened; (vi) all contributions or other payments
required to be made as of the date of this Agreement to or pursuant to the
Company Benefit Plans have been made or accrued for in the Company's Financial
Statements; (vii) neither the Company nor any entity under "common control" with
the Company within the meaning of Sections 414(b), (c), (m) or (o) of the Code
or Section 4001 of ERISA ("ERISA Affiliate") has at any time contributed to, or
been required to contribute to, any "pension plan" (as defined in Section 3(2)
of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code,
including without limitation, any "multi-employer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA) (a "Multiemployer Plan"); (viii) no Company
Benefit Plan is subject to the laws of any jurisdiction other than the United
States; (ix) neither the Company nor any of its Subsidiaries has any obligation
for retiree health or life benefits; (x) the Company or its Subsidiaries may
amend or terminate any of the Company Benefit Plans without incurring any
liability thereunder; (xi) all amounts of deferred compensation benefits under
any Company Benefit Plan have been properly accrued on the Financial Statements
of the Company and its Subsidiaries to the extent required under GAAP; and
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(xii) each Company Benefit Plan which is an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA is either insured pursuant to a
contract of insurance whereby the insurance company bears any risk of loss with
respect to such claims or covered under a contract with a health maintenance
organization (an "HMO") pursuant to which the HMO bears the liability for such
claims.
(c) Except as set forth in Section 3.11(c) of the Company Disclosure
Schedule, the consummation of the Transactions will not (either alone or upon
the occurrence of any additional or subsequent events) (i) constitute an event
under any Company Benefit Plan, trust, or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any current or former employee, officer or director of
the Company or any Subsidiary, or (ii) result in the triggering or imposition of
any restrictions or limitations on the right of the Company or the Purchaser to
amend or terminate any Company Benefit Plan and receive the full amount of any
excess assets remaining or resulting from such amendment or termination, subject
to applicable taxes. Except as set forth in Section 3.11(c) of the Company
Disclosure Schedule, no payment or benefit which will or may be made by the
Company, any of its Subsidiaries, the Purchaser or any of their respective
affiliates with respect to any employee, officer or director of the Company or
its Subsidiaries will be characterized as an "excess parachute payment," within
the meaning of Section 280G(b)(1) of the Code, and no amount of any such payment
or benefit will fail to be deductible by the Company by reason of Section 162(m)
of the Code.
(d) Except as set forth in Section 3.11(d) of the Company Disclosure
Schedule, with respect to each Company Benefit Plan that is subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived; (ii) the fair market
value of the assets of each such Company Benefit Plan equals or exceeds the
actuarial present value of all accrued benefits under such Plan (whether or not
vested), based upon the actuarial assumptions used to prepare the most recent
actuarial report for such Plan; (iii) no reportable event within the meaning of
Section 4043(c) of ERISA for which the 30-day notice requirement has not been
waived has occurred, and the consummation of the transactions contemplated by
this agreement will not result in the occurrence of any such reportable event;
(iv) all premiums to the Pension Benefit Guaranty Corporation (the "PBGC") have
been timely paid in full; (v) no liability (other than for premiums to the PBGC)
under Title IV of ERISA has been or is expected to be incurred by the Company or
its Subsidiaries; and (vi) the PBGC has not instituted proceedings to terminate
any such Company Benefit Plan and, to the Company's and each of its Subsidiary's
knowledge, no condition exists that presents a risk that such proceedings will
be instituted or which would constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any such
Company Benefit Plan.
(e) None of the Company and its Subsidiaries nor any ERISA Affiliate has
incurred any "withdrawal liability" (as defined in Part I of Subtitle E of Title
IV of ERISA) ("Withdrawal Liability"), as a result of a complete or partial
withdrawal from a Multiemployer Plan, that has not been satisfied in full. With
respect to each Company Benefit Plan that is a Multiemployer Plan: (i) if the
Company or any of its Subsidiaries or any of their respective ERISA Affiliates
were to experience a withdrawal or partial withdrawal from such plan, no
Withdrawal Liability would be incurred that would have a Company Material
Adverse Effect; and (ii) none of the Company and its Subsidiaries, nor any of
their respective ERISA Affiliates has received any notification, nor has any
reason to believe, that any such Company Benefit Plan is in reorganization, has
been terminated, is insolvent, or may reasonably be expected to be in
reorganization, to be insolvent, or to be terminated.
Section 3.12. Environmental Laws and Regulations. (a) Except as set forth
in the Company SEC Documents or Section 3.12 of the Company Disclosure Schedule,
(i) the Company and each of its Subsidiaries is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or emissions, discharges, releases, disposal, or handling of any
pollutants or toxic or hazardous substances, wastes or materials (including,
without limitation, petroleum, and petroleum products, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon or lead or lead-based
paints or materials (collectively, "Environmental Laws"), except for non-
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compliance that individually or in the aggregate would not have a Company
Material Adverse Effect, which compliance includes, but is not limited to, the
possession by the Company and its Subsidiaries of all permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof; (ii) neither the Company nor
any of its Subsidiaries has received written (or, to the Company's knowledge,
oral) notice of, or, is the subject of, any material action, cause of action,
claim, investigation, demand or notice by any such Person alleging liability
under or non-compliance with any Environmental Law (an "Environmental Claim")
including, without limitation, relating to any contractor, subcontractor or
agent of the Company or for the business, or relating in any way to any prior
facilities, locations, or business of the Company or any of its Subsidiaries;
and (iii) there are no conditions or circumstances that are reasonably likely to
result in any liability of the Company or any of its Subsidiaries under any
Environmental Law, prevent or interfere with any such compliance thereunder in
the future including, without limitation, relating to any contractor,
subcontractor or agent of the Company or for the business, or relating in any
way to any prior facilities, locations, or business of the Company or any of its
Subsidiaries, except for any such conditions or circumstances that individually
or in the aggregate would not have a Company Material Adverse Effect. There are
no permits or other governmental authorizations held by the Company or required
for the Company's business that are required to be transferred or reissued, or
that are otherwise prohibited from being transferred or reissued, pursuant to
any Environmental Laws as a result of the transactions contemplated by this
Agreement. The Company has provided to Purchaser all environmental assessments,
reports, data, results of investigations, or compliance or other environmental
audits conducted by or for the Company, or otherwise relating to the Company's
or any Subsidiary's business or properties (owned, leased or operated).
(b) There are no Environmental Claims which individually or in the
aggregate would have a Company Material Adverse Effect that are pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries or, to the knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
or is reasonably likely to have been retained or assumed either contractually or
by operation of law.
Section 3.13. Rights Agreement; State Takeover Statute Inapplicable. (a)
The Company has taken all necessary action so that none of the execution of
this Agreement or the Voting Agreements, the making of the Debt Offer, the
acquisition of Senior Notes or consents pursuant to the Debt Offer, or the
consummation of the Merger or the Circon Sale or the other Transactions will
(i) cause the Rights issued pursuant to the Rights Agreement to become
exercisable, (ii) cause Purchaser or any of its affiliates to become an
Acquiring Person (as such term is defined in the Rights Agreement) or (iii)
give rise to a Distribution Date or a Triggering Event (as each such term is
defined in the Rights Agreement). The Company has delivered to Purchaser true
and complete copies of all amendments to the Rights Agreement that fulfill the
requirements of this Section 3.13 and such amendments are in full force and
effect.
(b) As of the date hereof and at all times through and including the
Effective Time, Article 13.03 of the TBCA shall be inapplicable to the
Transactions contemplated by this Agreement and all future transactions between
the Company and any of Purchaser and, to the extent the Specified Shareholders,
or any of them, could be deemed to be or become (by virtue of the Transactions)
an "affiliated shareholder" or an "affiliate or associate of the affiliated
shareholder" (as such terms are used in Article 13.03 of the TBCA), the
Specified Shareholders.
Section 3.14. Brokers. No broker, finder or investment banker (other than
the Financial Advisor, a true and correct copy of whose engagement agreement has
been delivered to Purchaser) is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company. The fees to which the Financial Advisor shall be
entitled to in connection with the transactions contemplated by this Agreement
and the portion thereof heretofore paid are set forth in Section 3.14 of the
Company Disclosure Schedule.
Section 3.15. Absence of Certain Changes. Except as set forth in Section
3.15 of the Company Disclosure Schedule or disclosed in the Company SEC
Documents filed prior to the date hereof, since November 1, 1998, the Company
and each of its Subsidiaries have conducted its businesses only in the
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ordinary course of business and consistent with past practice and (a) there has
not been any Company Material Adverse Effect and (b) the Company has not taken
any of the actions set forth in paragraphs (a) through (q) of Section 5.3.
Section 3.16. Taxes. (a) The Company and each of its Subsidiaries on or
prior to the date of this Agreement has filed or has had filed on its behalf,
and will file or will have filed on its behalf prior to the Effective Time, in a
timely manner (within any applicable extension periods) with the appropriate
governmental entity all income and other material Tax Returns (as defined
herein) required to be filed with respect to Taxes (as defined herein) of the
Company and each of its Subsidiaries, and such Tax Returns are correct and
complete in all material respects. The most recent financial statements
contained in the Company SEC Documents provide an adequate accrual for the
payment of Taxes for all periods covered by such financial statements.
(b) All material Taxes with respect to the Company and its Subsidiaries
have been paid in full to the extent required to be so paid or have been
provided for in accordance with GAAP on the Company's most recent balance sheet
(as of the date of such balance sheet) which is part of the Company SEC
Documents.
(c) There are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any federal, state, local or foreign income
or other material Tax Returns required to be filed by or with respect to the
Company and its Subsidiaries.
(d) No deficiency, delinquency or default for any Tax has been claimed,
proposed or assessed against the Company or any of its Subsidiaries which has
not been abated or paid in full, and neither the Company nor any Subsidiary has
received written notice of any such deficiency, delinquency or default nor does
the Company otherwise have knowledge of any threat of any governmental entity to
assert such deficiency, delinquency or default or any facts or circumstances
that would form a basis of such threat. No audit by any tax authority is pending
or, to the Company's knowledge, threatened with respect to any Tax Returns filed
by, or Taxes due from, the Company or any of its Subsidiaries.
(e) There are no liens for Taxes upon the assets of the Company or any of
its Subsidiaries except statutory liens for current Taxes not yet due.
(f) No power of attorney has been executed by, or on behalf of, the Company
or any of its Subsidiaries with respect to any matter relating to Taxes which is
currently in force.
(g) Neither the Company nor any of its Subsidiaries is a party to or bound
by or has any obligation under any written or unwritten Tax sharing, Tax
indemnity or similar agreement or arrangement.
(h) There are no outstanding requests for any extension of time within
which to file any Tax Return or within which to pay any Taxes.
(i) Neither the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Code.
(j) Except as set forth in Section 3.16(j) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has been a member of
an affiliated group filing a consolidated federal income tax return (other than
the affiliated group of which the Company is the common parent) or has any
liability for the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(k) The Company is not, and during the preceding 5-year period has not
been, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(l) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority and (ii) "Tax Return" shall
mean any report, return, document, declaration
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or other information or filing required to be supplied to any taxing authority
or jurisdiction with respect to Taxes.
Section 3.17. Intellectual Property. (a) Except as set forth on Section
3.17(a) of the Company Disclosure Schedule, and except for such failures to own
or have the right to use as would not have a Company Material Adverse Effect,
the Company owns or has the right to use all intellectual property rights used
in the conduct of its business, including without limitation all patents and
patent applications, trademarks, trademark registrations and applications,
copyrights and copyright registrations and applications, computer programs,
technology, know-how, trade secrets, proprietary processes and formulae
(collectively, the "Intellectual Property"). Other than as would not have a
Company Material Adverse Effect, the Company owns or has the right to use all
such Intellectual Property free and clear of all Liens.
(b) Section 3.17(b) of the Company Disclosure Schedule sets forth a list of
all material license agreements under which the Company or any of its
Subsidiaries has granted or received the right to use any Intellectual Property,
and the Company is not in material default under any such license.
(c) Except as set forth in Section 3.17(c) of the Company Disclosure
Schedule, no Person has a right to receive a royalty or similar payment in
respect of any item of Intellectual Property pursuant to any contractual
arrangements entered into by the Company or otherwise. No former or present
employees, officers or directors of the Company hold any right, title or
interest, directly or indirectly, in whole or in part, in or to any Intellectual
Property.
(d) There are no claims or suits pending or, to the knowledge of the
Company, threatened, and the Company has received no notice of any claim or suit
(i) alleging that the conduct of the Company's business infringes upon or
constitutes the unauthorized use of the proprietary rights of any third party or
(ii) challenging the ownership, use, validity or enforceability of the
Intellectual Property. To the knowledge of the Company, no Intellectual Property
of the Company is being violated or infringed upon by any third party. Except as
set forth in Section 3.17(d) of the Company Disclosure Schedule, there are no
settlements, consents, judgments, orders or other agreements which restrict the
Company's rights to use any Intellectual Property.
Section 3.18. Labor Matters. (a) (i) There is no labor strike, dispute,
slowdown, stoppage or lockout pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries and
during the past five years from the date of this Agreement there has not been
any such action, (ii) except as set forth in Section 3.18(a) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company or any of its
Subsidiaries, (iii) except as set forth in Section 3.18(a) of the Company
Disclosure Schedule, none of the employees of the Company or any of its
Subsidiaries is represented by any labor organization and the Company does not
have any knowledge of any union organizing activities among the employees of the
Company or any of its Subsidiaries within the past five years, and (iv) there
are no complaints, lawsuits or other proceedings pending or, to the knowledge of
the Company, threatened in writing in any forum by or on behalf of any present
or former employee of the Company or any of its Subsidiaries, any applicant for
employment or classes of the foregoing alleging breach by the Company or its
Subsidiaries of any express or implied contract or employment, any laws
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship,
which, individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect.
(b) The Company and its Subsidiaries and each member of their respective
business enterprises has complied with the Worker Adjustment and Retraining
Notification Act (the "WARN Act") and any similar state, local or foreign law or
regulation. There has not occurred a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company or its Subsidiaries,
and none of the Company's or its Subsidiaries' employees has suffered an
"employment loss" (as defined in the WARN Act) during the six month period prior
to the date of this Agreement.
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(c) With respect to any collectively bargained agreement to which the
Company or any of its Subsidiaries is a party and that has been renewed or
renegotiated after November 1, 1998, the terms, including the costs to the
Company or its Subsidiaries, of such new or renegotiated agreement are not less
favorable in any material respect to the Company or its Subsidiaries than the
terms of the agreement as in effect prior to any such renewal or renegotiation.
Section 3.19. Opinions of Financial Advisors. The Financial Advisor has
delivered its written opinion, to the Board to the effect that, as of the date
of such opinion, the Per Share Amount to be received in the Merger by the
holders of Shares (other than Purchaser and the Specified Shareholders) is fair
from a financial point of view to such holders, a copy of which opinion has been
delivered to Purchaser.
Section 3.20. Titles to Properties; Encumbrances. Except for matters or
conditions which, individually or in the aggregate, could not be reasonably
expected to have a Company Material Adverse Effect,
(a) Section 3.20(a) of the Company Disclosure Schedule sets forth a
complete list of all real property (including land, buildings and other
improvements) owned by the Company or its Subsidiaries (the "Owned Real
Property"), such description including, for each parcel of Owned Real Property,
the address thereof, the approximate acreage thereof, and the use thereof. The
Company or its Subsidiaries has good and marketable title to the Owned Real
Property, free and clear of all Liens, other than Permitted Liens (as defined
below). For purposes of this Agreement, "Permitted Liens" means (i) mechanics',
carriers', workers', repairers', material-men's, warehousemen's, landlords' and
other similar Liens arising in the ordinary course of the Company's business,
(ii) Liens arising or resulting from any action taken by or on behalf of
Purchaser, (iii) Liens for current Taxes not yet due or payable or for
supplemental Taxes for which the Company has not received a written notice of
assessment, and (iv) any other covenants, conditions, restrictions,
reservations, rights, non-monetary Liens, easements, encumbrances, encroachments
and other matters affecting title which could not, individually or in the
aggregate, be reasonably expected to result in a Company Material Adverse
Effect.
(b) The Real Property constitutes, in the aggregate, all of the real
property used to conduct the Business in the manner conducted subsequent to
October 31, 1998. The term "Real Property" means the Owned Real Property, any
property subject to a Real Property Lease (as defined in Section 3.21(a)(viii)),
and any property subject to a lease or agreement of that would have been
included within the meaning of the term Real Property Lease if not for the
minimum dollar amounts set forth in Section 3.21(a)(viii).
(c) Except as set forth in Section 3.20(c) of the Company Disclosure
Schedule, each of the Real Properties (i) is in satisfactory operating condition
and repair and is structurally sound, with no material alterations or repairs
being required thereto under applicable law or insurance company requirements;
(ii) consists of sufficient land, parking areas, driveways and other
improvements and lawful means of access and utility service to permit the use
thereof in the manner and for the material purposes to which it is presently
devoted; and (iii) is otherwise suitable and adequate in all material respects
for its current use, operation and occupancy.
(d) There are no pending or, to the Company's knowledge, threatened
proceedings regarding the amount of the Taxes on, or the assessed valuation of,
any Real Property, or relating to eminent domain or the condemnation of any
portion of the Real Property, or impact fees, special assessments or similar
matters with respect thereto.
Section 3.21. Material Contracts. (a) Except for contracts filed as
exhibits to the Company's Annual Report on Form 10-K for the year ended November
1, 1998 (the "Company 1998 10-K"), Section 3.21(a) of the Company Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral agreements) of the Company and each of its Subsidiaries
(such contracts and agreements, together with all contracts and agreements
disclosed in Section 3.17(b) of the Company Disclosure Schedule or filed as
exhibits to the Company 1998 10-K, being "Material Contracts"):
(i) each contract, agreement and other arrangement for the purchase of
inventory, spare parts, other materials or personal property with any
supplier or for the furnishing of services to the Company and each of its
Subsidiaries or otherwise related to the businesses of the Company and each
of its Subsidiaries
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under the terms of which the Company or any of its Subsidiaries: (A) are
likely to pay or otherwise give consideration of more than $1,000,000 in
the aggregate during the calendar year ended December 31, 1999 or (B) are
likely to pay or otherwise give consideration of more than $2,000,000 in
the aggregate over the remaining term of such contract;
(ii) each contract, agreement and other arrangement for the sale of
inventory or other property or for the furnishing of services by the
Company or any of its Subsidiaries which: (A) is likely to involve
consideration of more than $1,000,000 in the aggregate during the calendar
year ended December 31, 1999 or (B) is likely to involve consideration of
more than $2,000,000 in the aggregate over the remaining term of the
contract;
(iii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising contracts and agreements to which the
Company or any of its Subsidiaries is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company
or any of its Subsidiaries is a party and which are not cancelable without
penalty or further payment in excess of $200,000 and without more than 30
days' notice;
(v) all contracts and agreements relating to Indebtedness of the
Company or any of its Subsidiaries or to any direct or indirect guaranty by
the Company or any of its Subsidiaries of Indebtedness of any other Person,
other than any such contracts or agreements as do not involve more than
$50,000 individually or $250,000 in the aggregate;
(vi) all contracts, agreements, commitments, written understandings or
other arrangements with any Governmental Entity, to which the Company or
any of its Subsidiaries is a party (other than arrangements entered into in
the ordinary course of business with hospitals or other medical facilities
owned or operated by any such Governmental Entity);
(vii) all contracts and agreements containing any provision or
covenant limiting or purporting to limit the ability of the Company or any
of its Subsidiaries to (i) sell any products or services of or to any other
Person, (ii) engage in any line of business or (iii) compete with or to
obtain products or services from any Person or limiting the ability of any
Person to provide products or services to the Company or any of its
Subsidiaries, in each case in any geographic area or during any period of
time;
(viii) all contracts and agreements (each, a "Real Property Lease")
relating to the lease of real property used by the Company or its
Subsidiaries requiring annual payments in excess of $200,000 or aggregate
payments over the remaining term of the contract or agreement in excess of
$1,000,000; and
(ix) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company and its
Subsidiaries, taken as a whole, or the conduct of the business of the
Company and its Subsidiaries, taken as a whole, or the absence of which
would, in the aggregate, have a Company Material Adverse Effect.
(b) Except as would not have a Company Material Adverse Effect, each
Material Contract: (i) is legal, valid and binding on the Company or its
respective Subsidiary party thereto and, to the knowledge of the Company, the
other parties thereto, and is in full force and effect and (ii) upon
consummation of the Transactions, except to the extent that any consents set
forth in Section 3.6 of the Company Disclosure Schedule are not obtained, shall
continue in full force and effect without penalty or other adverse consequence.
Except as would not have a Company Material Adverse Effect, neither the Company
nor any of its Subsidiaries is in breach of, or default under, any Material
Contract. As of the date hereof, neither the Company nor any Subsidiary has
received any written or, to the Company's knowledge, oral notice of a material
default (which has not been cured), offset or counterclaim under any Material
Contract, or any other written or, to the Company's knowledge, oral
communication calling upon it to comply with any provision of any Contract or
asserting noncompliance therewith or asserting the Company or any subsidiary has
waived or altered its rights thereunder, nor has the Company or any Subsidiary
received any written or, to the
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Company's knowledge, oral notice that any party to any Material Contract intends
or is threatening to terminate or fail to exercise any renewal or extension of
any Material Contract.
(c) No other party to any Material Contract is, to the knowledge of the
Company, in material breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase any of the properties or assets of the
Company or any of its Subsidiaries, other than inventory in the ordinary course
of business consistent with past practice.
Section 3.22. Product Liability. (a) Except as set forth in Section 3.22
of the Company Disclosure Schedule, (i) there is no notice, demand, claim,
action, suit inquiry, hearing, proceeding, notice of violation or investigation
of a civil, criminal or administrative nature by or before any Governmental
Entity pending against or involving the Company or any of its Subsidiaries or
concerning any product relating to the businesses of the Company and its
Subsidiaries which is pending or, to the Company's knowledge, threatened,
relating to or resulting from an alleged defect in design, manufacture,
materials or workmanship of any product designed, manufactured, distributed, or
sold by or on behalf of the Company or any of its Subsidiaries (past or
present), or any alleged failure to warn, or from any alleged breach of express
or implied warranties or representations, (ii) to the Company's knowledge,
during the past five years, there has not been any Occurrence and (iii) other
than any product not designed or manufactured by the Company or any of its
Subsidiaries the Recall of or subsequent corrective action for which would not
have a Company Material Adverse Effect, during the past five years, there has
not been any product recall or post-sale warning (collectively, "Recalls") by
the Company or any of its Subsidiaries concerning any products relating to the
businesses of the Company and its Subsidiaries which were designed,
manufactured, marketed, distributed, or sold by the businesses of the Company
and its Subsidiaries (past or present), or to the of the Company's knowledge,
any investigation or any action that would require the consideration by the
Company's corrective action committee, made by any Person or entity concerning
whether to undertake or not to undertake any Recalls. The term "Occurrence"
shall mean any accident, happening or event which is caused or allegedly caused
by any alleged hazard or alleged defect in manufacture, design, materials or
workmanship including, without limitation, any alleged failure to warn or any
breach of express or implied warranties or representations with respect to, or
any accident, happening or event otherwise involving, a product (including any
parts or components) relating to the businesses of the Company and its
Subsidiaries designed, manufactured, distributed, or sold by or on behalf of the
Company and its Subsidiaries which results or is alleged to have resulted in
injury or death to any Person or damage to or destruction of property, or other
consequential damages, at any time.
(b) Section 3.22(b) of the Company Disclosure Schedule contains a true and
complete list of (i) all products designed, manufactured, marketed, distributed
or sold by the Company or any of its Subsidiaries that have been recalled or
withdrawn (whether voluntarily or otherwise) at any time during the past four
years, other than any product not designed or manufactured by the Company or any
of its Subsidiaries the Recall or withdrawal of or subsequent corrective action
for which would not have a Company Material Adverse Effect, and (ii) all
proceedings known to the Company (whether completed or pending) at any time
during the past three years seeking the recall, withdrawal, suspension or
seizure of any product sold by the Company or any of its Subsidiaries.
Section 3.23. Suppliers and Customers. Since November 1, 1998, except as
set forth in Section 3.23 of the Company Disclosure Schedule, no material
licensor, vendor, supplier, licensee or customer of the Company or any of its
Subsidiaries has canceled or otherwise modified (in a manner materially adverse
to the Company) its relationship with the Company or its Subsidiaries and, to
the Company's knowledge, (i) no such Person has notified the Company of its
intention to do so, and (ii) the Company does not expect that the consummation
of the Transactions will adversely affect any of such relationships.
Section 3.24. Title and Condition of Properties. The Company and its
subsidiaries own good and sufficient title, free and clear of all Liens, to all
of the personal property and assets shown on the Company Balance Sheet or
acquired after November 1, 1998, except for (A) assets which have been disposed
of to nonaffiliated third parties since November 1, 1998 in the ordinary course
of business, (B) Liens reflected in
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the Company Balance Sheet, (C) Liens or imperfections of title which are not,
individually or in the aggregate, material in character, amount or extent and
which do not materially detract from the value or materially interfere with the
present or presently contemplated use of the assets subject thereto or affected
thereby, and (D) Permitted Liens. All of the machinery, equipment and other
tangible personal property and assets owned or used by the Company or its
Subsidiaries are in good condition and repair, except for ordinary wear and tear
not caused by neglect, and are usable in the ordinary course of business, except
for any matter otherwise covered by this sentence which does not have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 3.25. Information in Financing Documents. None of the information
supplied or to be supplied by the Company for the purpose of inclusion or
incorporation by reference in any syndication and other materials to be
delivered to potential financing sources in connection with the transactions
contemplated by this Agreement (the "Financing Documents") will, at the date
delivered, contain any untrue statement of material fact contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.26. Year 2000 Compliance. The Company has adopted and
implemented a commercially reasonable plan to provide (x) that the change of the
year from 1999 to the year 2000 will not materially and adversely affect the
information and business systems of the Company or its Subsidiaries and (y) that
the impacts of such change on the vendors and customers of the Company and its
Subsidiaries will not have a the Company Material Adverse Effect. In the
Company's reasonable best estimate, no expenditures materially in excess of
currently budgeted items previously disclosed to Purchaser will be required in
order to cause the information and business systems of the Company and its
Subsidiaries to operate properly following the change of the year 1999 to the
year 2000. The Company reasonably expects that it will resolve any issues
related to such change of the year in accordance with the timetable set forth in
such plan (and in any event on a timely basis in order to be resolved before the
September 30, 1999). Between the date of this Agreement and the Effective Time,
the Company shall continue to use reasonable best efforts to implement such
plan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
Section 4.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all requisite corporate or similar power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be in good standing or to have such corporate or
similar power and authority would not in the aggregate have a Purchaser Material
Adverse Effect. Purchaser was formed on June 9, 1999 solely for the purpose of
engaging in the Transactions contemplated hereby. The term "Purchaser Material
Adverse Effect" means any event, change, circumstance or effect that is or could
reasonably be expected to be materially adverse to the ability of Purchaser to
consummate the Transactions.
Section 4.2. Authority Relative to this Agreement. Purchaser has all
necessary power and authority to execute and deliver this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement and
the consummation of the Transactions have been duly and validly authorized by
the board of directors and stockholders of Purchaser, and no other corporate or
similar proceedings on the part of Purchaser are necessary to authorize this
Agreement or to consummate the Transactions. This Agreement has been duly and
validly executed and delivered by Purchaser and, assuming due and valid
authorization, execution and delivery by the Company, constitutes a valid, legal
and binding agreement of Purchaser, enforceable against Purchaser in accordance
with its terms.
Section 4.3. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, and the filing and recordation of an
articles of
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merger as required by the TBCA, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Purchaser of this Agreement or the consummation by
Purchaser of the Transactions, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Purchaser Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by Purchaser nor the
consummation by Purchaser of the Transactions will (i) conflict with or result
in any breach of any provision of the Articles of Incorporation or bylaws of
Purchaser or any of Purchaser's Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Purchaser or any of Purchaser's Subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Purchaser or any of Purchaser's
Subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for violations, breaches or defaults which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
Section 4.4. Proxy Statement; Offer Documents. None of the information
supplied by Purchaser in writing specifically for inclusion in the Proxy
Statement or Form S-4 (if one is filed) or any of the Debt Offer Documents will,
at the respective times filed with the SEC and/or are first published or sent or
given to holders of Shares and/or Senior Notes, and in the case of the Proxy
Statement, at the time that it or any amendment or supplement thereto is mailed
to the Company's shareholders and, in the case of the Form S-4 (if one is
filed), at the time it becomes effective, at the time of the Shareholders'
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 4.5. Financing. (a) At the Effective Time and subject to
satisfaction of the conditions in Article VI, (i) Purchaser will have cash funds
from the issuance of equity of not less than $107,000,000, and (ii) the Circon
Buyer will have cash funds from the issuance of equity of not less than
$75,000,000 (in each case pursuant to the equity commitment letters attached
hereto as Exhibits A-1 and A-2, respectively).
(b) Attached hereto as Exhibits B and C, respectively, are (i) a commitment
letter (the "Holdco Commitment Letter") from Fox Paine Capital Fund, L.P. with
respect to its obligation to purchase $50,000,000 of the Company's Senior Notes
and (ii) commitment letters and related documentation (the "OpCo Financing
Commitment Letters" and together with the Holdco Commitment Letter, the
"Commitment Letter") from lenders relating to such debt financings as is
necessary, together with the funds referred to in paragraph (a) and subparagraph
(b)(i) above, to consummate the Debt Offer, the Merger and the other
Transactions (the "Debt Funding").
(c) Purchaser represents that the terms and conditions of the Commitment
Letters are acceptable in form and substance to Purchaser.
Section 4.6. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission payable by the Company in
connection with the Transactions based upon arrangements made by and on behalf
of Purchaser other than any payable upon consummation of the Debt Offer and the
Merger.
ARTICLE V
COVENANTS
Section 5.1. Shareholders Meeting. The Company, acting through the Board,
will, as promptly as practicable following the date of this Agreement and in
consultation with Purchaser, (i) duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of considering and approving this
Agreement and the transactions contemplated hereby (the "Shareholders Meeting")
and (ii) (A) include in the Proxy Statement the unanimous recommendation of the
Board that the shareholders of the Company vote
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in favor of the approval of this Agreement and the other Transactions
contemplated hereby and the written opinion of the Financial Advisor that the
consideration to be received by the shareholders of the Company (other than
Purchaser, its stockholders and the Specified Shareholders) pursuant to the
Merger is fair to such shareholders and (B) use its best efforts to obtain the
necessary approval of this Agreement and the transactions contemplated hereby by
its shareholders.
Section 5.2. Proxy Statement. Promptly following the date of this
Agreement, the Company shall prepare the Proxy Statement, and, if necessary, the
Company shall prepare and file with the SEC the Form S-4, in which the Proxy
Statement would be included. If the Form S-4 is filed, the Company shall use its
best efforts as promptly as practicable to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company shall use its best efforts to cause the Proxy Statement to be mailed to
the Company's shareholders as promptly as practicable or, if the Form S-4 is
filed, as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. If the S-4 is filed, the information provided by the Company
for use in the Form S-4, and to be supplied by Purchaser in writing specifically
for use in the Form S-4, shall, at the time the Form S-4 becomes effective and
on the date of the Shareholders Meeting referred to above, be true and correct
in all material respects and shall not omit to state any material fact required
to be stated therein or necessary in order to make such information not
misleading, and the Company and Purchaser each agree to correct any information
provided by it for use in the Proxy Statement or the Form S-4 which shall have
become false or misleading. Purchaser and the Company will cooperate with each
other in the preparation of the Proxy Statement and the Form S-4 (if one is
filed); without limiting the generality of the foregoing, the Company will
immediately notify Purchaser of the receipt of any comments from the SEC and any
request by the SEC for any amendment to the Proxy Statement or the Form S-4 or
for additional information. All filings with the SEC, including the Proxy
Statement and the Form S-4 (if filed) and any amendment thereto, and all
mailings to the Company's shareholders in connection with the Merger, including
the Proxy Statement, shall be subject to the prior review, comment and approval
of Purchaser (which approval by Purchaser shall not be unreasonably withheld).
Purchaser will furnish to the Company the information relating to it required by
the Exchange Act and the rules and regulations promulgated thereunder to be set
forth in the Proxy Statement. The Company agrees to use its best efforts, after
consultation with the other parties hereto, to respond promptly to any comments
made by the SEC with respect to the Form S-4 (if filed) or Proxy Statement and
any preliminary version thereof filed by it and cause such Proxy Statement to be
mailed to the Company's shareholders at the earliest practicable time.
Section 5.3. Conduct of Business of the Company. Except as expressly
contemplated by this Agreement, the Board will not permit the Company or any of
its Subsidiaries to conduct its operations otherwise than in the ordinary course
of business consistent with past practice. Without limiting the generality of
the foregoing, and except as otherwise expressly contemplated by this Agreement,
the Board will not, without the prior written consent of Purchaser, permit the
Company or any of its Subsidiaries to:
(a) amend or propose to amend its articles of incorporation or bylaws;
(b) authorize for issuance, issue, sell, deliver, or agree or commit
to issue, sell or deliver, dispose of, encumber or pledge (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any securities,
except as required by agreements with the Company's employees under the
Company Stock Plans as in effect as of the date hereof or pursuant to the
Rights Agreement, or amend any of the terms of any such securities or
agreements outstanding as of the date hereof, except as specifically
contemplated by this Agreement;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any of its securities or any
securities of its Subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under the Credit Agreement in the
ordinary course of business and in amounts not material to the Company and
its Subsidiaries taken as a whole; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person; (iii) make any loans,
advances or capital contributions to, or investments in, any other Person
(other than
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to wholly owned Subsidiaries of the Company or customary loans or advances
to employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or advance)
or make any change in its existing borrowing or lending arrangements for or
on behalf of any such Person, whether pursuant to an employee benefit plan
or otherwise; (iv) pledge or otherwise encumber shares of capital stock of
the Company or any of its Subsidiaries; or (v) mortgage or pledge any of
its material assets, tangible or intangible, or create or suffer to exist
any material Lien thereupon;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or
any of its Subsidiaries;
(f) (i) except as may be required by law or as contemplated by this
Agreement, enter into, adopt or pay, agree to pay, grant, issue, accelerate
or accrue salary or other payments or benefits pursuant to, or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance, welfare, insurance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit
or welfare of any director, officer or employee in any manner, or (ii)
(except for normal increases in the ordinary course of business consistent
with past practice for employees (other than officers and directors) that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company, and as required under existing
agreements or in the ordinary course of business consistent with past
practice) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance
units);
(g) except as contemplated by Section 5.6(d), acquire, sell, transfer,
lease, encumber or dispose of any assets outside the ordinary course of
business or any assets which in the aggregate are material to the Company
and its Subsidiaries taken as a whole, or enter into any commitment or
transaction outside the ordinary course of business consistent with past
practice which would be material to the Company and its Subsidiaries taken
as a whole;
(h) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than in the ordinary course of business;
(j) (A) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (B) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to the Company and
its Subsidiaries taken as a whole; (C) authorize any new capital
expenditure or expenditures which, individually, is in excess of $500,000
or, in the aggregate, are in excess of $5,000,000; or (D) enter into or
amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited hereunder;
(k) make any Tax election or settle or compromise any Tax liability of
the Company or any of its Subsidiaries, except if such action is taken in
the ordinary course of business consistent with past practice, and, in any
event, the Company shall consult with Purchaser before filing or causing to
be filed any Tax Return of the Company or any of its Subsidiaries and
before executing or causing to be executed any agreement or waiver
extending the period for assessment or collection of any Taxes of the
Company or any of its Subsidiaries;
(l) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice;
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(m) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to Purchaser
except in the ordinary course of business and consistent with past practice
unless the Company shall have obtained a comparable replacement policy;
(n) except in the ordinary course of business consistent with past
practice, terminate, amend or modify, or waive any material provision of,
any of the Material Contracts;
(o) settle or compromise any pending or threatened material suit,
action or claim;
(p) enter into any agreement containing any provision or covenant
limiting the ability of the Company or any of its Subsidiaries to (i) sell
any products or services of or to any other Person, (ii) engage in any line
of business or (iii) compete with or to obtain products or services from
any Person or limiting the ability of any Person to provide products or
services to the Company or any of its Subsidiaries, in each case in any
geographic area or during any period of time; or
(q) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.3(a) through 5.3(p) or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made or would result in
any of the conditions set forth in Article VI not being satisfied.
Section 5.4. No Solicitation. (a) The Company agrees that, during the term
of this Agreement, it shall not, and shall not authorize or permit any of its
Subsidiaries or any of its or its Subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
the Company, or acquisition of any capital stock (other than upon exercise of
Stock Options which are outstanding as of the date hereof) or any material
portion of the assets (except for acquisitions of assets in the ordinary course
of business consistent with past practice) of the Company and its Subsidiaries,
or any combination of the foregoing (a "Competing Transaction"), or negotiate,
explore or otherwise engage in discussions with any Person (other than
Purchaser, persons controlling Purchaser, or their respective directors,
officers, employees, agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or understanding requiring
or causing it to abandon, terminate or fail to consummate the Debt Offer, the
Merger or any of the other Transactions contemplated by this Agreement; provided
that, prior to the Effective Time, if the Company receives a written proposal
for a Competing Transaction (x) that was not initiated, solicited or encouraged
after the date of this Agreement by the Company, its Subsidiaries or any of its
or their directors, officers, employees, agents or representatives and does not
violate or breach any confidentiality, exclusivity or standstill agreement
executed by the Company prior to the date of this Agreement (provided that the
Company may amend any standstill or similar provision of any such agreement
solely to provide or make clear that such third party may deliver to the Board a
written proposal for a Competing Transaction) and (y) that the Board or a
special committee thereof determines in good faith by majority vote could
reasonably be expected to result in a third party making a proposal for a
Superior Transaction (as defined in Section 5.4(b)), and subject to compliance
with the last two sentences of this Section 5.4(a), the Company may (A) furnish
information with respect to the Company to the Person making such proposal
pursuant to a customary confidentiality agreement the terms of which shall be no
less favorable to the Company than the confidentiality agreement entered into by
the Company on or after January 1, 1999 that is most favorable to the Company,
and (B) participate in discussions or negotiations with such Person regarding
such proposal. The activities referred to in clauses (A) and (B) of the previous
sentence, if undertaken in strict compliance with all of the terms and
conditions of the previous sentence, are referred to herein as "Permitted
Discussions". In no event shall the Company furnish (or authorize any of its
Subsidiaries, or any of its or its Subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to furnish) to any competitor
or potential competitor of the Company or its Subsidiaries information about the
Company or any of its Subsidiaries unless the Board or a special committee
thereof determines in its reasonable judgment, after consultation with
management, that disclosure of such information would not be materially
competitively disadvantageous to the Company and its Subsidiaries, including,
without limitation, pricing, volume, sales and marketing information ("Sensitive
Information"); provided that
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the Company may provide Sensitive Information to a competitor or potential
competitor of the Company if confirmatory review of Sensitive Information is the
only remaining condition to the Company and such competitor or potential
competitor entering into an Acquisition Agreement (as defined in Section 5.4(b))
with respect to a Superior Transaction that has been approved by the Board and
approved (subject only to such confirmatory review) by the board of directors
(or similar governing body) of such competitor or potential competitor. The
Company shall, and shall cause its Subsidiaries and their respective directors,
officers, employees, agents and representatives immediately to cease all
existing activities, discussions and negotiations with any parties conducted
heretofore with respect to any of the foregoing. Neither the Board nor any
committee thereof shall (A) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Purchaser, the Company Board Recommendation,
or (B) approve or recommend, or propose publicly to approve or recommend, any
Competing Transaction. Notwithstanding the foregoing, in the event that prior to
the Effective Time the Board receives the advice of its outside legal counsel
that failure to do so will result in breach of its fiduciary duties to the
shareholders of the Company under applicable law, the Board may (subject to this
and the following sentences of this Section 5.4(a)) withdraw or modify the
Company Board Recommendation, provided that it gives Purchaser five days' prior
written notice of its intention to do so. Any such withdrawal or modification of
the Company Board Recommendation shall not change the approval of the Board for
purposes of causing any state takeover statute or other state law to be
inapplicable to the transactions contemplated hereby, or change the obligation
of the Company to present the Merger for approval and adoption by shareholders
of the Company or to hold the Debt Offer open. From and after the execution of
this Agreement, the Company shall immediately advise Purchaser in writing of the
receipt, directly or indirectly, of any inquiries, discussions, negotiations, or
proposals relating to a Competing Transaction (including the specific terms
thereof and the identity of the other party or parties involved) and promptly
furnish to Purchaser a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto. The Company
shall keep Purchaser fully apprised of the status of any proposal relating to a
Competing Transaction on a current basis, including, without limitation,
promptly providing to Purchaser any Sensitive Information provided to any
competitor or potential competitor pursuant to this paragraph (a).
(b) If prior to the Effective Time the Board shall determine in good faith,
after consultation with its financial and legal advisors, that any bona fide
written proposal from a third party for a Competing Transaction received after
the date hereof that was not initiated, solicited or encouraged by the Company
or any of its Subsidiaries or their respective directors, officers, employees,
agents or representatives in violation of this Agreement and that does not
violate or breach any confidentiality, exclusivity or standstill agreement
executed by the Company prior to the date of this Agreement (as any such
agreement may be amended in accordance with Section 5.4(a)) is more favorable to
the shareholders of the Company from a financial point of view than the
transactions contemplated by this Agreement (including any adjustment to the
terms and conditions of such transaction proposed in writing by Purchaser in
response to such Competing Transaction), is likely to and capable of being
consummated, and is in the best interest of the shareholders of the Company, and
the Company has received (x) advice of its outside legal counsel that failure to
enter into such a Competing Transaction will constitute a breach of the Board of
Directors' fiduciary duties under applicable law and (y) a written opinion (a
copy of which has been delivered to Purchaser) from the Financial Advisor (or
any other nationally recognized investment banking firm), that the Competing
Transaction is more favorable from a financial point of view to the shareholders
of the Company (other than Purchaser and the Specified Shareholders) than the
transactions contemplated by this Agreement (including any adjustment to the
terms and conditions of such transaction proposed in writing by Purchaser) (a
"Superior Transaction"), the Company may terminate this Agreement and enter into
a letter of intent, agreement-in-principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") with respect to such
Superior Transaction provided, that, prior to any such termination, (i) the
Company has provided Purchaser written notice that it intends to terminate this
Agreement pursuant to this Section 5.4(b), identifying the Superior Transaction
then determined to be more favorable and the parties thereto and delivering a
copy of the Acquisition Agreement for such Competing Transaction in the form to
be entered into, and (ii) at least five full business days after the Company has
provided the notice referred to in clause (i) above (provided that the opinions
referred to in clauses (x) and (y) above shall continue in effect without
revision or modification), the
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Company delivers to Purchaser (A) a written notice of termination of this
Agreement pursuant to this Section 5.4(b), and (B) a check or wire transfer of
same day funds in an amount equal to the Purchaser Expenses (as the same may
have been estimated by Purchaser in good faith prior to the date of such
delivery (subject to an adjustment payment between the parties upon Purchaser's
definitive determination of such expenses)) plus the amount of the Termination
Fee as provided in Section 7.2, and (C) Purchaser receives a written
acknowledgment from the Company and from the other party to a Superior
Transaction that the Company and such other party have irrevocably waived any
right to contest such payments.
Section 5.5. Access to Information. (a) Between the date hereof and the
Effective Time, the Company will give Purchaser and its authorized
representatives and Persons providing or committed or proposing to provide
Purchaser or the Company with financing for the Transactions and their
representatives, reasonable access to all employees, plants, offices, warehouses
and other facilities and properties and to all books and records of the Company
and its Subsidiaries, will permit Purchaser and its authorized representatives
to make such inspections (including any physical inspections or soil or
groundwater investigations), at Purchaser's expense, as they may reasonably
request and will cause the Company's officers and employees and those of its
Subsidiaries to furnish Purchaser with such financial and operating data and
other information with respect to the business and properties of the Company and
any of its Subsidiaries as Purchaser may from time to time reasonably request.
(b) Prior to the Effective Time, the Company and its accountants, counsel,
agents and other representatives shall cooperate with Purchaser by providing
information about the Company which is necessary for Purchaser and its
accountants, agents, counsel and other representatives to participate in and to
assist the Company in preparing the Financing Documents and such other documents
and other reasonable requests with respect to such documents. Notwithstanding
anything in this Agreement to the contrary, to the extent reasonably appropriate
to assist the success of the financing for the Transactions, Purchaser may
disclose, or cause its representatives to disclose, and at the request of
Purchaser, the Company shall disclose information concerning the Company and its
Subsidiaries and their respective businesses, assets and properties, and the
Transactions in the Financing Documents and to prospective financing sources in
connection with the Transactions.
(c) Except as otherwise agreed to by the Company, until the earlier of the
Effective Time and the second anniversary of the date hereof, and
notwithstanding termination of this Agreement, Purchaser will keep, and will
instruct its officers, employees, independent accountants, counsel, financial
advisers and other representatives and affiliates (x) to keep, all Confidential
Information (as defined below) confidential, (y) not to disclose any
Confidential Information to any Person other than the directors, officers,
employees, affiliates or agents of Purchaser and of Persons controlling
Purchaser, and then only on a confidential basis, and (z) to use Confidential
Information solely in connection with (A) the evaluation of, preparation for,
and consummation of the Transactions and (B) seeking or obtaining financing for
the Transactions; provided, however, that Purchaser may disclose Confidential
Information (i) as required by law, rule, regulation or judicial process,
including as required to be disclosed in connection with the Merger, the Debt
Funding or any other Transaction, (ii) to its financing sources and to
Purchaser's and such financing sources' attorneys, accountants, and financial
advisors or (iii) as requested or required by any Governmental Entity. For
purposes of this Agreement, "Confidential Information" shall include all
confidential information about the Company which has been furnished by the
Company to Purchaser or the directors, officers, employees, affiliates or agents
of Purchaser or Persons controlling Purchaser pursuant to or in connection with
the negotiation, execution and consummation of this Agreement; provided,
however, that Confidential Information does not include information which (x) is
or becomes generally available to the public other than as a result of a
disclosure by Purchaser not permitted by this Agreement, (y) was available to
Purchaser on a non-confidential basis prior to its disclosure to Purchaser by
the Company or (z) becomes available to Purchaser on a non-confidential basis
from a Person (other than the Company) who, to the knowledge of Purchaser, is
not otherwise bound by a confidentiality agreement with the Company or is not
otherwise prohibited from transmitting the relevant information to Purchaser.
The provisions of this paragraph (c) are referred to herein as the
"Confidentiality Provisions".
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Section 5.6. Additional Agreements, Reasonable Efforts. (a) Prior to the
Effective Time, upon the terms and subject to the conditions of this Agreement,
each of Purchaser and the Company, agrees to use its reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under any applicable laws, rules or regulations
to consummate and make effective the Transactions as promptly as practicable
including, but not limited to, (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Transactions
and the taking of such actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party or
Governmental Entity, (ii) the preparation of any Financing Documents reasonably
requested by Purchaser and (iii) the satisfaction of the other parties'
conditions to the consummation of the Debt Offer or the Closing. In addition, no
party hereto shall take any action after the date hereof that would reasonably
be expected to materially delay the obtaining of, or result in not obtaining,
any permission, approval or consent from any Governmental Entity necessary to be
obtained prior to the consummation of the Closing. The Company agrees to use its
reasonable efforts to assist Purchaser in connection with structuring or
obtaining any financing for Purchaser and/or the Company and its Subsidiaries in
connection with consummation of the Transactions, and Purchaser shall use its
reasonable efforts to obtain such financing for Purchaser and/or the Company and
its Subsidiaries. At the request of Purchaser from time to time, the Company
agrees to use its reasonable efforts to cause members of its senior management
to participate in any "roadshow" or other presentations to potential investors
in connection with the obtaining of any financing for Purchaser and/or the
Company and its Subsidiaries in connection with the Transactions.
(b) Prior to the Effective Time, each party shall promptly consult with the
other parties hereto with respect to, provide any necessary information with
respect to and provide the other (or its counsel) copies of, all filings made by
such party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement and the
Transactions. Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the Transactions. If
any party hereto or affiliate thereof receives a request for additional
information or documentary material from any such Governmental Entity with
respect to the Transactions, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. To the extent that transfers of Company Permits are required as a
result of execution of this Agreement or consummation of the Transactions, the
Company and Purchaser shall use all reasonable efforts to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require Purchaser or any of its affiliates to (i) enter into any
agreement with any Governmental Entity or to consent to any order, decree or
judgment requiring Purchaser to hold separate or divest, or to restrict the
dominion or control of Purchaser or any of its affiliates over, any of the
assets, properties of businesses of Purchaser, its affiliates or the Company or
any of its Subsidiaries, in each case as in existence on the date hereof, or
(ii) defend against any litigation brought by any Governmental Entity seeking to
prevent the consummation of the Transactions.
(d) The parties hereto agree that substantially concurrent with the
Closing, unless otherwise requested by Purchaser, the Company shall, or shall
cause its appropriate Subsidiary to, sell and convey all of the outstanding
capital stock of Circon to an affiliate of Purchaser (the "Circon Buyer") on the
terms previously disclosed to the Company by Purchaser and as contemplated by
the Financing Documents and the Management Rollover Plan (as defined in Section
6.1(b)) or on such other terms as Purchaser shall reasonably request, and the
parties hereto agree to execute any agreement, amendment or other documentation
necessary or desirable to accomplish such structure modification (including
modifications to any financing arrangements) (collectively, the "Circon Sale");
provided that the Company shall not be required to take any action or enter into
any agreement or amendment that would have the effect of reducing the Per Share
Amount or otherwise reducing the consideration to be received by holders of
Company Common Stock (other than Purchaser or the Specified Shareholders).
(e) Provided that any such action does not have a Purchaser Material
Adverse Effect or materially delay the Closing, then any other provision of this
Agreement to the contrary notwithstanding, Purchaser may amend or revise the
Commitment Letters, amend, increase, decrease or replace any component of the
Debt Funding or other financings referred to in Section 4.5, or enter into new,
replacement or additional financing
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arrangements, through itself or any affiliate of itself or of persons
controlling Purchaser, in connection with the Debt Funding or other financings
referred to in Section 4.5 or otherwise to facilitate the transactions
contemplated by this Agreement.
Section 5.7. Public Announcements. Purchaser and the Company, as the case
may be, will consult with each other before issuing any press release or
otherwise making any public statements with respect to the Transactions,
including, without limitation, the Debt Offer and the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation (and shall give reasonable consideration given to the comments of
the other), in each case except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange, as determined by Purchaser or the Company, as the case may be.
Section 5.8. Indemnification. (a) Purchaser agrees that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its Subsidiaries as provided in their
respective charters or bylaws or otherwise in effect as of the date hereof with
respect to matters occurring prior to the consummation of the last to occur of
any of the Transactions shall survive such consummation and shall continue in
full force and effect.
(b) Purchaser shall cause the Company or the Surviving Corporation, as the
case may be, to maintain in effect for not less than six years from the
Effective Time, the policies of the directors' and officers' liability and
fiduciary insurance most recently maintained by the Company with respect to
matters occurring prior to the Effective Time to the extent available; provided
that (i) the Surviving Corporation may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less advantageous
to the beneficiaries thereof so long as such substitution does not result in
gaps or lapses in coverage, and (ii) such policies may in the sole discretion of
the Company after the Effective Time be one or more "tail" policies for all or
any portion of the full six year period; and, provided, further, that in no
event shall the Company or the Surviving Corporation, as the case may be, be
required to expend more than an amount per year equal to 150% of the current
annual premiums paid by the Company (the "Premium Amount") to maintain or
procure insurance coverage pursuant hereto and further provided that if the
Surviving Corporation is unable to obtain the insurance called for by this
Section 5.8(b), the Surviving Corporation will obtain as much comparable
insurance as is available for the Premium Amount per year.
Section 5.9. Recapitalization. The Company shall cooperate with any
reasonable requests of Purchaser or the SEC related to the reporting of the
Transactions as a recapitalization for financial reporting purposes including,
without limitation, to assist Purchaser and its affiliates with any presentation
to the SEC with regard to such reporting and to include appropriate disclosure
with regard to such reporting in all filings with the SEC and mailing to the
shareholders of the Company made in connection with the Debt Offer or the
Merger. In furtherance of the foregoing, the Company shall provide to Purchaser
for the prior review of Purchasers advisors any description of Transactions
which is meant to be disseminated.
Section 5.10. Financial Statements. The Company shall promptly prepare at
the end of each month and promptly deliver to Purchaser upon completion the
balance sheet, income statement and statement of cash flows prepared in
accordance with GAAP of the Company and Circon for each month ended between the
date of this Agreement and the Effective Time. The Company shall promptly
prepare all reasonably requested financial statements required to be included in
the Financing Documents.
Section 5.11. Certain Agreements with Management. (a) Neither Purchaser
nor any of its affiliates shall enter into any agreement, arrangement or
understanding that would have the effect (i) of prohibiting any Specified
Shareholder who is an officer of the Company from participating in Permitted
Discussions with any third party at any time during which the Company is
permitted to engage (and is so engaging) in such discussions with such third
party pursuant to Section 5.4(a), or (ii) of prohibiting or preventing any
Specified Shareholder, at any time after any termination of this Agreement in
accordance with its terms, from participating in (as a shareholder, employee, or
both) a Superior Transaction.
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(b) Neither Purchaser nor any of its affiliates shall enter into any
agreement, arrangement or understanding with any or all of the Specified
Shareholders if such agreement, arrangement or understanding would jeopardize
the ability of the condition set forth in Section 6.1(b)(vi) to be satisfied.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions to the Merger. (a) The obligation of the Company
to consummate the Merger is subject to the satisfaction (or waiver) at or prior
to the Effective Time of each of the following conditions:
(i) Accuracy of Representations and Warranties. All representations
and warranties made by Purchaser herein shall be true and correct in all
material respects (except for representations qualified by materiality or
Purchaser Material Adverse Effect which shall be correct in all respects)
on the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material respects
(except for representations qualified by materiality or Purchaser Material
Adverse Effect which shall be correct in all respects) only as of such
specific date or time.
(ii) Compliance with Covenants. Purchaser shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(iii) Officer's Certificates. The Company shall have received
certificates of Purchaser, dated as of the Closing Date, signed by an
executive officer of Purchaser to evidence satisfaction of the conditions
set forth in Section 6.1(a)(i) and (ii).
(iv) Solvency Opinion. The Company shall have received an independent
solvency opinion substantially similar to (or, if addressed to the Company,
a copy of) the insolvency letter to be delivered to the lenders pursuant to
the terms of the Commitment Letters.
(b) The obligation of Purchaser to consummate the Merger is subject to the
satisfaction (or waiver) at or prior to the Effective Time of each of the
following conditions:
(i) Accuracy of Representations and Warranties. All representations
and warranties made by the Company herein shall be true and correct in all
material respects, (except for representations qualified by materiality or
Company Material Adverse Effect which shall be correct in all respects) on
the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material respects
(except for representations qualified by materiality or Company Material
Adverse Effect which shall be correct in all respects) only as of such
specific date or time.
(ii) Compliance with Covenants. The Company shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(iii) Officer's Certificate. Purchaser shall have received a
certificate of the Company, dated as of the Closing Date, signed by an
executive officer of the Company to evidence satisfaction of the conditions
set forth in Section 6.1(b)(i) and (ii).
(iv) Debt Offer. The conditions to the Debt Offer set forth in Annex
A shall have been satisfied, the terms of the Senior Notes and the Senior
Notes Indenture shall have been amended in accordance with the Senior Notes
Amendments, and the Company shall concurrently with the Closing, purchase
all Senior Notes validly tendered and not withdrawn pursuant to the Debt
Offer.
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(v) Circon Closing. Unless otherwise requested by Purchaser, the
closing of the Circon Sale shall occur substantially concurrently with the
Closing.
(vi) Recapitalization Accounting. The Company shall have received
from the Company's regular independent auditing firm a letter in form and
substance reasonably satisfactory to Purchaser to the effect that the
transactions contemplated by this Agreement will receive recapitalization
accounting treatment and such letter has not been modified in a manner
adverse to Purchaser or withdrawn.
(vii) No Litigation. There shall not be pending any suit, action or
proceeding by any Governmental Entity or any other person that has a
reasonable likelihood of success, (i) seeking to prohibit or impose any
material limitations on Purchaser's ownership or operation of all or a
material portion of their or the Company's businesses or assets (or those
of any of its Subsidiaries or affiliates), or to compel Purchaser or the
Company or their respective Subsidiaries and affiliates, before or after
the Effective Time, to dispose of or hold separate any material portion of
the business or assets of the Company and its Subsidiaries, taken as a
whole, (ii) prohibiting, restricting or significantly delaying consummation
of the Debt Offer or the Merger or the performance of any of the other
Transactions, or seeking to obtain from Purchaser (or its affiliates) or
the Company (or its affiliates) any damages that are material,
respectively, in relation to Purchaser (assuming Purchaser has assets equal
to the amount of cash it is required to have at the Effective Time pursuant
to Section 4.5(a)) or the Company and its Subsidiaries as taken as a whole,
(iii) seeking to impose material limitations on the ability of Purchaser or
its affiliates, or render Purchaser or its affiliates unable, to acquire or
hold or to exercise effectively all rights of ownership of shares of
Company Common Stock, or effectively to control in any material respect the
business, assets or operations of the Company, its Subsidiaries or
Purchaser or any of their respective affiliates, or (iv) which otherwise is
reasonably likely to have a Company Material Adverse Effect or a Purchaser
Material Adverse Effect.
(viii) Company Material Adverse Effect. From and after the date of
this Agreement, there shall not have occurred any change, development or
event that constitutes or has a Company Material Adverse Effect.
(ix) Consents. There shall have been obtained any consent, permit or
approval the absence of which or the failure of which to be obtained
constitutes or has a Company Material Adverse Effect or Purchaser Material
Adverse Effect.
(x) Debt Funding. The Debt Funding shall have been obtained on terms
and conditions acceptable in form and substance to Purchaser (giving effect
to Purchaser's representations contained in Section 4.5(c)).
Section 6.2. Conditions to Each Party's Obligations to Effect the Merger.
(a) The respective obligations of each party hereto to effect the Merger is
further subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any and all of which may be waived in whole or in
part by the parties hereto to the extent permitted by applicable law:
(i) Shareholder Approval. The Company Shareholder Approval shall have
been validly obtained under the TBCA and the Company's articles of
incorporation and bylaws.
(ii) Statutes; Court Orders. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits,
restrains, enjoins or restricts the consummation of the Merger; and there
shall be no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the Merger.
(iii) HSR Approval. Any waiting period applicable to the Merger or
the Circon Sale under the HSR Act shall have terminated or expired.
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ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time
notwithstanding any requisite approval and adoption of this Agreement and the
Transactions by the shareholders of the Company:
(a) by mutual written consent duly authorized by the Board of
Directors of each of the Company and the Purchaser;
(b) by Purchaser or the Company if (i) any Governmental Entity shall
have issued a final order, decree or ruling (which order, decree or ruling
the parties hereto shall use all reasonable efforts to lift) or taken any
other final action restraining, enjoining or otherwise prohibiting the Debt
Offer, the Circon Sale or the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable, or (ii) the
Effective Time shall not have occurred on or before December 31, 1999 (the
"Outside Date"); provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(ii) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date;
(c) by the Company, pursuant to and in strict compliance with Section
5.4(b);
(d) by Purchaser, if (i) there shall have been a material breach of
any of the Company's representations, warranties or covenants which breach
(A) would give rise to the failure of a condition set forth in Section
6.1(b) or Section 6.2 and (B) cannot be or has not been cured within 30
days following written notice of such breach, (ii) the Board shall
withdraw, modify, or change (including by amendment of the Proxy Statement)
the Company Board Recommendation or shall have publicly indicated its
intention to do so in a manner adverse to Purchaser, (iii) the Board shall
have recommended any proposal in respect of a Competing Transaction, (iv)
any Person or group (as defined in Section 13(d)(3) of the Exchange Act)
other than Purchaser or any of its respective subsidiaries or affiliates
shall have become the beneficial owner of more than 15% of the outstanding
shares of Company Common Stock (either on a primary or a fully diluted
basis), or (v) the Company shall otherwise have breached or taken any
action in violation of Section 5.4;
(e) by the Company if there shall have been a material breach of any
of Purchaser's representations, warranties or covenants which breach (A)
would give rise to the failure of a condition set forth in Section 6.1(a)
or Section 6.2 and (B) cannot be or has not been cured within thirty (30)
days following receipt of written notice of such breach; or
(f) by either Purchaser or the Company if at the Shareholders Meeting
(including any postponement or adjournment thereof) the Company Shareholder
Approval shall have not been obtained.
Section 7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 7.2 and Section 7.3 hereof; provided,
however, that nothing contained in this Section 7.2 shall relieve any party from
liability for any breach of this Agreement.
Section 7.3. Fees and Expenses. (a) In the event that (i) Purchaser shall
have terminated this Agreement pursuant to Section 7.1(b)(ii) and (A) the
failure of the Company to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Effective Time to occur on or
before the Outside Date and (B) on or prior to such time any entity or group
(other than Purchaser and its affiliates) shall have made and not withdrawn a
proposal that is or becomes publicly disclosed for (or publicly disclosed its
intention to make a proposal for) a Competing Transaction, (ii) Purchaser shall
have terminated this Agreement pursuant to Section 7.1(d)(ii), (iii), (iv) or
(v), (iii) either party shall have terminated this
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Agreement pursuant to Section 7.1(f) and on or prior to the Shareholders Meeting
any entity or group (other than Purchaser and its affiliates) shall have made
and not withdrawn a proposal that is or becomes publicly disclosed for (or
publicly disclosed its intention to make a proposal for) a Competing
Transaction, or (iv) the Company shall have terminated this Agreement pursuant
to 7.1(c) hereof, then the Company shall pay to Purchaser, a termination fee
(the "Termination Fee"), in cash, of $19,000,000, provided, however, that the
Company in no event shall be obligated to pay more than one such Termination Fee
with respect to all such agreements and occurrences and such termination. Any
Termination Fee that becomes payable shall be paid (x) in the case of clauses
(i) and (ii) above, within one business day following the occurrence of the
event giving rise to such payment, (y) in the case of clause (iii) above, at
least one business day prior to termination in the case of a termination by the
Company, and within one day following termination in the case of termination by
Purchaser, and (z) in the case of clause (iv) above, in accordance with Section
5.4(b).
(b) Provided that no Termination Fee has become payable to Purchaser, upon
the termination of this Agreement by the Company pursuant to Section 7.1(c) or
7.1(f) or by Purchaser pursuant to Section 7.1(b)(ii) (in the circumstance
referred to in Section 7.3(a)(i)), 7.1(d) or 7.1(f), the Company shall reimburse
Purchaser and its affiliates (not later than one business day after submission
of statements therefor (or at such earlier time as may be required pursuant to
Section 5.4(b)) for all actual documented out-of-pocket fees and expenses
actually and reasonably incurred by any of them or on their behalf in connection
with the any of the transactions contemplated by this Agreement (including,
without limitation, fees and expenses payable to financing sources, investment
bankers, counsel to any of the foregoing, counsel to Purchaser and its
affiliates and accountants) (the "Purchaser Expenses"), less any such expenses
previously reimbursed. The Company shall in any event pay the amount requested
within one business day of such request, subject to the Company's right to
demand a return of any portion as to which invoices are not received in due
course.
(c) Upon the consummation of the Merger, all costs and expenses incurred by
each party hereto in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, fees and disbursements of
counsel, financial advisors and accountants) shall be paid by the Company or the
Company shall promptly reimburse each such party, as the case may be.
(d) Except as specifically provided in this Section 7.3 each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated by this Agreement.
Section 7.4. Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time before or after approval of the Merger
by the shareholders of the Company (if required by applicable law), but after
any such approval, no amendment shall be made which requires the approval of
such shareholders under applicable law without such approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 7.5. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 8.2. Entire Agreement; Assignment. This Agreement (including the
schedules and exhibits hereto), (a) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
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parties with respect to the subject matter hereof, including, without
limitation, that certain letter agreement dated April 8, 1999, between the
Company and Fox Paine & Company, LLC, and (b) shall not be assigned by operation
of law or otherwise; provided, however, that Purchaser may assign any or all of
its rights and obligations under this Agreement to any Subsidiary or affiliate
of Purchaser, but no such assignment shall relieve Purchaser of its obligations
hereunder if such assignee does not perform such obligations.
Section 8.3. Validity. If any provision of this Agreement, or the
application thereof to any Person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other Persons or circumstances shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (including by facsimile with
written confirmation thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand, by FedEx or other
nationally recognized overnight commercial delivery service, or by facsimile
notice, confirmation of receipt received, addressed as follows, or to such other
address as may be hereafter notified by the respective parties hereto:
(a) If to Purchaser:
Fox Paine Medic Acquisition Corporation
c/o Fox Paine & Company, LLC
950 Tower Lane, Suite 1950
Foster City, California 94404
Attention: Saul A. Fox
Facsimile: 650-525-1396
With a copy, which will not constitute notice, to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Mitchell S. Presser
Facsimile: 212-403-2000
(b) If to the Company:
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, Florida 33762
Attention: Kenneth W. Davidson
Facsimile: 727-561-2180
With a copy, which will not constitute notice, to:
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, NY 10177
Attention: Herbert Henryson II
Facsimile: 212-986-0604
and
Shumaker, Loop & Kendrick, LLP
101 East Kennedy Boulevard
Barnett Plaza, Suite 2800
Tampa, FL 33602-5151
Attention: W. Thompson Thorn, III
Facsimile: 813-222-1705
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Section 8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof, except that matters pertaining to
the effectuation and effects of the Merger and the transactions provided for in
Section 2.1 shall be governed by and construed in accordance with the laws of
the State of Texas, without regard to the principles of conflicts of law
thereof. The parties hereto hereby agree and consent to be subject to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York in any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the Transactions. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by law, (i) any objection that it may now or
hereafter have to laying venue of any suit, action or proceeding brought in such
courts, and (ii) any claim that any suit, action or proceeding brought in such
courts has been brought in an inconvenient forum.
Section 8.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 5.8 and 7.3 nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 8.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
FOX PAINE MEDIC
ACQUISITION CORPORATION
By: /s/ SAUL A. FOX
------------------------------------
Name: Saul A. Fox
Title: Chief Executive Officer
MAXXIM MEDICAL, INC.
By: /s/ KENNETH W. DAVIDSON
------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and Chief
Executive Officer
By: /s/ DONALD R. DEPRIEST
------------------------------------
Name: Donald R. DePriest
Title: Director
[Signature Page to Merger Agreement]
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<PAGE> 114
ANNEX A
TERMS AND CONDITIONS TO THE DEBT OFFER
<TABLE>
<S> <C>
Transaction: Tender Offer and Consent Solicitation.
Issue: 10 1/2% Senior Subordinated Senior Notes due 2006
(the "Senior Notes").
Outstanding: $100 million principal amount.
Trustee: First Union National Bank of North Carolina
Dealer Managers:
Type of Tender: Any and all; subject to receipt of consents to the
Proposed Amendments (see below) from holders
sufficient to effect such Proposed Amendments.
Noteholders may consent without tendering, but may
not tender without consenting,
Consent Date: 10-20 business days after launch date.
Expiration Date: 20 business days after launch date.
Tender Consideration and Consent Fee: To be determined by Purchaser
Consents to Indenture Amendments: Company shall solicit consents to the following
Indenture amendments (the "Proposed Amendments")
(1) to eliminate certain restrictive covenants set
forth in Articles 4 and 5 of the Indenture,
including:
- Payment of Taxes and Other Claims (Sec. 4.06)
- Repurchase upon Change of Control (Sec. 4.07)
- Limitation on Asset Sales (Sec. 4.08)
- Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock (Sec. 4.09)
- Limitation on Restricted Payments (Sec. 4.10)
- Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries (Sec. 4.11)
- Limitation on Layering Debt (Sec. 4.12)
- Limitation on Liens (Sec. 4.13)
- Limitation on Ownership of and Liens on Capital
Stock (Sec. 4.14)
- Transactions with Affiliates (Sec. 4.15)
- Reports (Sec. 4.16)
- Unrestricted Subsidiaries (Sec. 4.17)
- Merger, Consolidation or Sale of Assets (5.01)
(2) to amend the Events of Default provisions (Sec.
6.01) and, if requested by Purchaser, the
provisions relating to defeasance (Art. VIII).
(3) to effect any other amendments requested by
Purchaser that can be effected other than by
unanimous vote of the holders of the Senior
Notes.
Conditions:
</TABLE>
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") TO WHICH THIS ANNEX A IS
ATTACHED
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<PAGE> 115
Notwithstanding any other provision of the Debt Offer, the Company shall
not be required to accept for payment or pay for any Senior Notes tendered
pursuant to the Debt Offer, if (i) consents to the Proposed Amendments shall not
have been received (and be unrevoked) from holders of not less than a principal
amount of Senior Notes necessary to validly effect the Proposed Amendments, (ii)
the Debt Funding shall not be obtained concurrently with such acceptance for
payment and on terms acceptable in form and substance to Purchaser, (iii) the
Closing of the Merger shall not occur in accordance with the Merger Agreement
concurrently with such acceptance for payment, (iv) at any time on or after the
date of the Merger Agreement to which this Annex A is appended, and prior to the
acceptance for payment of Senior Notes, any of the conditions set forth below
shall exist; provided, however, that none of the conditions referred to in this
paragraph shall be waived by the Company without the consent of Purchaser (which
may be granted or withheld in its sole discretion); and provided, further, that
the following conditions shall be waived by the Company at the request of
Purchaser: (x) the conditions set forth in clauses (ii) and (iii) of this
preamble to this Annex A shall be waived by the Company at the request of
Purchaser, but only if sufficient funds to purchase all tendered Senior Notes
and accept all consents to the Proposed Amendments are available from debt or
equity financing on terms that the Company determines in its reasonable good
faith judgment will not jeopardize the likelihood of consummating any of the
transactions contemplated by the Merger Agreement, and (y) any or all of the
conditions set forth below in this Annex A (other than those set forth in
clauses (a)(i) (except as applicable to Purchaser only) and (d)):
(a) there shall be threatened or pending any action, suit or
proceeding or any statute, rule, regulation, judgment, order or injunction
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the Debt Offer, or any other action shall have been taken,
proposed or threatened, by any state or federal government or governmental
authority or by any court of competent jurisdiction, other than the routine
application to the Merger of waiting periods under the HSR Act, (i) seeking
to make the acceptance for payment of, or the payment for, some or all of
the Senior Notes illegal or otherwise prohibiting, restricting or
significantly delaying consummation of the Merger or the performance of any
of the other transactions contemplated by the Merger Agreement, or seeking
to obtain from Purchaser (or its affiliates) or the Company (or its
affiliates) any damages that are material, respectively, in relation to
Purchaser (assuming Purchaser has assets equal to the amount of cash it is
required to have at the Effective Time pursuant to Section 4.5(a)) or to
the Company and its Subsidiaries, taken as a whole, or (ii) which otherwise
is reasonably likely to have a Company Material Adverse Effect or Purchaser
Material Adverse Effect; or
(b) there shall have occurred any change or event that constitutes a
Company Material Adverse Effect; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
or the NASDAQ Stock Market for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii)
the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) the
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the territory of the United
States, (iv) any limitation (whether or not mandatory), by any U.S.
governmental authority or agency, likely to materially adversely affect,
the extension of credit by banks or other financial institutions, (v) a
change in general financial, bank or capital market conditions which
materially and adversely affects the ability of financial institutions in
the United States to extend credit or syndicate loans, (vi) from the date
of the Merger Agreement through the date of termination or expiration of
the Debt offer, a decline of 15% or more in the Dow Jones Industrial
Average or the Standard & Poor's 500 Index, or (vii) in the case of any of
the foregoing, existing at the date of the execution of the Merger
Agreement, a material acceleration or worsening thereof; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
the Trustee shall have objected in any respect to, or taken any action
that could, in the sole judgment of Purchaser, adversely affect the
consummation of any of the transactions contemplated by the Merger
Agreement or the ability of the Company to effect the Proposed Amendments,
or shall have taken any action that challenges the validity or
effectiveness of the procedures used by the Company in soliciting consents
to the Proposed Amendments or in making the Debt Offer.
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<PAGE> 116
AMENDMENT NO. 1 TO
MERGER AGREEMENT
This AMENDMENT NO. 1, dated as of October 1, 1999 (this "Amendment"), is by
and between Fox Paine Medic Acquisition Corporation, a Texas corporation
("Purchaser"), and Maxxim Medical, Inc., a Texas corporation (the "Company"),
and amends that certain Agreement and Plan of Merger, dated as of June 13, 1999
(the "Merger Agreement"), by and between Purchaser and the Company.
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Merger Agreement.
Section 2. Canceled Rollover Options. Section 1.10(c) of the Merger
Agreement is amended and restated in its entirety as follows:
"(c) At the Option Cancellation Time, 416,212 Rollover Options (as
specified in Schedule 1.10(c) (the "Canceled Rollover Options")) shall be
canceled, and shall be of no further force or effect."
Section 3. Schedules 1.8(b) and 1.10(c).
(a) Schedule 1.8(b) is amended, restated and replaced in its entirety by
the Schedule 1.8(b) attached as Exhibit 1 hereto.
(b) Schedule 1.10(c) is amended, restated and replaced in its entirety by
the Schedule 1.10(c) attached as Exhibit 2 hereto.
Section 4. Miscellaneous.
(a) This Amendment may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
(b) Section 8.5 of the Merger Agreement ("Governing Law") is incorporated
herein by reference.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
FOX PAINE MEDIC ACQUISITION
CORPORATION
By: /s/ SAUL A. FOX
------------------------------------
Name: Saul A. Fox
Title: Chief Executive Officer
MAXXIM MEDICAL, INC.
By: /s/ KENNETH W. DAVIDSON
------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
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<PAGE> 117
APPENDIX B
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10020
------
TELEPHONE (212) 632-6000
FACSIMILE (212) 632-6060
NEW YORK
June 13, 1999
The Board of Directors
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, FL 33762
Dear Members of the Board:
We understand that Maxxim Medical, Inc., a Texas corporation (the
"Company"), and Fox Paine Medic Acquisition Corporation, a Texas corporation
(the "Purchaser"), entered into an Agreement and Plan of Merger dated as of June
13, 1999 (the "Merger Agreement") pursuant to which the Purchaser will merge
with and into the Company with the Company being the surviving corporation (the
"Merger"). All capitalized terms used herein and not otherwise defined shall
have the same meanings ascribed to such terms in the Merger Agreement. Pursuant
to the Merger, each share of Company Common Stock (other than shares of Company
Common Stock owned directly or indirectly by the Company or Purchaser, shares of
Company Common Stock owned by the Specified Shareholders and shares of Company
Common Stock as to which dissenters rights are exercised and perfected pursuant
to applicable law) will be converted into the right to receive $26.00 in cash
(the "Per Share Amount").
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the Company Common Stock (other than the Purchaser
and the Specified Shareholders) of the Per Share Amount. In connection with this
opinion, we have among other things:
(i) Reviewed the financial terms and conditions of the draft Merger
Agreement dated June 10, 1999;
(ii) Analyzed certain historical business and financial information
relating to the Company;
(iii) Reviewed various financial forecasts and other data provided to
us by the Company relating to its business;
(iv) Held discussions with members of the senior management of the
Company with respect to the business, prospects and the strategic
objectives of the Company;
(v) Reviewed public information with respect to certain other
companies in lines of business we believe to be generally comparable to the
business of the Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be generally
comparable to those of the Company;
(vii) Reviewed the historical stock prices and trading volumes of the
Company Common Stock; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company or concerning the solvency of or
issues relating to solvency concerning the Company. With respect to financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of
the Company as to the future financial performance of the Company. We assume no
responsibility for and express no view as to such forecasts or the assumptions
on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. In rendering our opinion, we did not address the relative
merits of the Merger, any alternative potential transaction or the Company's
underlying decision to effect the Merger.
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<PAGE> 118
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement without any waiver of
any material term or condition by the Company and that the Merger will be
accounted for as a recapitalization. In addition, we have assumed that (i)
obtaining the necessary regulatory approvals for the Merger will not have an
adverse effect on the Company and (ii) there have been no material changes made
to the Merger Agreement from the draft Merger Agreement we reviewed for purposes
of rendering our opinion.
Lazard Freres & Co. LLC is acting as investment banker to the Special
Committee of the Board of Directors of the Company in connection with the Merger
and will receive a fee for our services, a substantial portion of which is
contingent upon the consummation of the Merger.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered to the Company's Board
of Directors in connection with its consideration of the Merger. This opinion is
not intended to and does not constitute a recommendation to any holder of the
Company Common Stock as to whether such stockholder should vote for the Merger,
if such vote is required under the Company's articles of incorporation and/or
applicable law. It is understood that this letter may not be disclosed or
otherwise referred to without our prior written consent, except for its
inclusion in filings the Company may be required to make with the Securities and
Exchange Commission and except as may otherwise be required by law or by a court
of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the Per
Share Amount to be received pursuant to the Merger is fair to the holders of the
Company Common Stock (other than the Purchaser and the Specified Shareholders),
from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ ALBERT H. GARNER
------------------------------------
Albert H. Garner
Managing Director
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APPENDIX C
TEXT OF ARTICLES 5.11, 5.12 AND 5.13 OF THE
TEXAS BUSINESS CORPORATION ACT
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and
the shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise
provided in the articles of incorporation) of all, or substantially all,
the property and assets, with or without good will, of a corporation if
special authorization of the shareholders is required by this Act and the
shareholders hold shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the
shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if:
(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation
system) or designated as a national market security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any
consideration that is different than the consideration (other than cash in
lieu of fractional shares that the shareholder would otherwise be entitled
to receive) to be provided to any other holder of shares of the same class
or series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that, immediately
after the effective time of the merger or exchange, will be part of a
class or series, shares of which are:
(i) listed, or authorized for listing upon official notice of
issuance, on a national securities exchange;
(ii) approved for quotation as a national market security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc., or successor entity; or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received; or
(c) any combination of the securities and cash describe in
Subdivisions (a) and (b) of this subsection.
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ART 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to dissent
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1)(a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the
surviving or new corporation (foreign or domestic) or other entity that is
liable to discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the action is effected, deliver
or mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in
the case of action other than a merger, and the surviving or new
corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger,
shall, within ten (10) days after the date the action is effected, mail
to each shareholder of record as of the effective date of the action
notice of the fact and date of the action and that the shareholder may
exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or
documents filed by the corporation with the Secretary of State to effect
the action. If the shareholder shall not have consented to the taking of
the action, the shareholder may, within twenty (20) days after the
mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The
fair value of the shares shall be the value thereof as of the date the
written consent authorizing the action was delivered to the corporation
pursuant to Section A of Article 9.10 of this Act, excluding any
appreciation or depreciation in anticipation of the action. The demand
shall state the number and class of shares owned by the dissenting
shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty
(20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic)
or other entity shall deliver or mail to the shareholder a written notice
that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay
that amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate
by the corporation (foreign or domestic) or other entity of the fair value
of the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was effected,
upon receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign
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or domestic) or other entity, as the case may be, payment for the shares
shall be made within ninety (90) days after the date on which the action
was effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
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F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
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APPENDIX D
FORM OF VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement"), dated as of June 13, 1999, is
made by and between Fox Paine Medic Acquisition Corporation, a Texas corporation
("Purchaser"), and the undersigned shareholder (the "Shareholder") of Maxxim
Medical, Inc., a Texas corporation ("Maxxim" or the "Company").
WHEREAS, concurrently herewith, Purchaser and the Company are entering into
an Agreement and Plan of Merger, of even date herewith (the "Merger Agreement"),
which provides that, among other things, upon the terms and subject to the
conditions thereof, (a) Purchaser will be merged (the "Merger") with and into
the Company, with the Company as the surviving corporation, and (b) each
outstanding share of common stock, $0.001 par value, of the Company (together
with the associated Preferred Share Purchase Rights issued pursuant to the
Rights Agreement, dated as of July 10, 1997, by and between the Company and
Harris Trust and Savings Bank as rights agent, the "Company Common Stock") shall
(except for certain shares of Company Common Stock referred to in Sections
1.8(a), 1.8(b) and 1.8(c) of the Merger Agreement, and except for any Dissenting
Shares (as defined in the Merger Agreement)) be converted into the right to
receive $26.00 in cash.
WHEREAS, the Shareholder beneficially owns a number of shares of Company
Common Stock and a number of options to purchase shares of Company Common Stock,
in each case as set forth on the signature page to this Agreement; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Purchaser has requested and required that the Shareholder enter into
this Agreement;
NOW, THEREFORE, to induce Purchaser to enter into, and in consideration of
its entering into, the Merger Agreement, and in consideration of the promises
and the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
1. Representations and Warranties of the Shareholder. The Shareholder
hereby represents and warrants to Purchaser that, as of the date hereof:
(a) Authority; No Conflicts. The Shareholder has the necessary
legal capacity, power and authority to execute and deliver this
Agreement, to perform the Shareholder's obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by and on behalf of the Shareholder, and,
assuming due authorization, execution and delivery by Purchaser,
constitutes a legal, valid and binding obligation of the Shareholder,
enforceable in accordance with its terms, subject to bankruptcy,
fraudulent conveyance, insolvency, moratorium or other similar laws
affecting the rights of creditors generally.
(b) The Subject Shares. The Shareholder is the beneficial owner of
(i) a number of shares of Company Common Stock (such shares, together
with any other shares of Company Common Stock of the Company of which
the Shareholder has or acquires beneficial ownership after the date
hereof and during the term of this Agreement, whether upon the exercise
of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise, being collectively referred to
herein as the "Subject Shares") and (ii) a number of options to purchase
shares of Company Common Stock (such options, together with any other
options, warrants or rights to purchase shares of Company Common Stock,
or other securities convertible into or exchangeable for shares of
Company Common Stock of which the Shareholder has or acquires beneficial
ownership after the date hereof and during the term of this Agreement,
whether by means of grant, purchase, dividend, distribution or
otherwise, being collectively referred to herein as the "Subject
Options") in each case, as of the date of this Agreement, as are set
forth on the signature page to this Agreement. Except as set forth on
Schedule 1 hereto: (i) the Shareholder has, and throughout the term of
this Agreement will have, good and marketable title to such Subject
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Shares and Subject Options free and clear of all encumbrances and liens;
(ii) other than the Subject Shares and Subject Options indicated on the
signature page to this Agreement, the Shareholder does not beneficially
own any shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company; and
(iii) the Shareholder has the sole right and power to vote and dispose
of the Subject Shares and Subject Options, and none of the Subject
Shares or Subject Options is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting or
transfer (other than the provisions of the Securities Act of 1933, as
amended) of such Subject Shares or Subject Options, except as
contemplated by this Agreement.
2. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Shareholder that Purchaser is a Texas
corporation, and is duly organized, validly existing and in good standing
under the laws of the State of Texas. Purchaser has the necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
and on behalf of Purchaser, and, assuming due execution and delivery by the
Shareholder, constitutes a legal, valid and binding obligation of Purchaser
enforceable in accordance with its terms, subject to bankruptcy, fraudulent
conveyance, insolvency, moratorium or other similar laws affecting the
rights of creditors generally.
3. Covenants of the Shareholder. The Shareholder agrees as follows:
(a) Voting in Favor of the Merger and/or the Circon Sale. At any
meeting of shareholders of the Company called to vote upon the Merger,
the Merger Agreement or any transaction contemplated thereby (including
the Circon Sale (as defined in the Merger Agreement)), or at any
adjournment thereof or in any other circumstances (including, without
limitation, a solicitation of written consents or proxies) upon which a
vote or other approval with respect to the Merger, the Merger Agreement
or any of the other transactions contemplated thereby (including the
Circon Sale (as defined therein)) is sought, the Shareholder shall vote
the Subject Shares in favor of the Merger Agreement, the approval of the
terms thereof, the Merger and all other transactions contemplated by the
Merger Agreement (including the Circon Sale).
(b) Voting Against Competing Transactions. At any meeting of
shareholders of the Company or at any adjournment thereof or in any
other circumstances upon which the Shareholder's vote, consent or other
approval as a shareholder is sought (including, without limitation, a
solicitation of written consents or proxies), the Shareholder shall vote
the Subject Shares against any action or agreement that would interfere
with the Debt Offer, the Merger or any other transaction contemplated by
the Merger Agreement (including the Circon Sale), including, but not
limited to, (A) the adoption by the Company of a proposal regarding (1)
the acquisition of the Company by merger, tender offer or otherwise by
any person or group, other than Purchaser or any designee thereof (a
"Third Party"), or any other merger, business combination or similar
transaction with any Third Party; (2) the acquisition by a Third Party
of 5% or more of the assets of the Company and its subsidiaries, taken
as a whole; (3) the acquisition by a Third Party of 5% or more of the
outstanding shares of Company Common Stock or any other class of equity
or voting securities of the Company; (4) the repurchase by the Company
or any of its subsidiaries of 5% or more of the outstanding shares of
Company Common Stock or (5) any other Competing Transaction (as defined
in the Merger Agreement); (B) any amendment of the Company's certificate
of incorporation or by-laws or other proposal or transaction involving
the Company or any of its subsidiaries, which amendment or other
proposal or transaction would in any manner impede, frustrate, prevent
or nullify the Debt Offer, the Merger, the Merger Agreement or any of
the transactions contemplated by the Merger Agreement (including the
Circon Sale) or change in any manner the voting rights of any class of
the Company's capital stock; (C) any change in the control of the
Company or its board of directors, other than as contemplated by the
Merger Agreement; (D) any material change in the present capitalization
or dividend policy of the Company other than as contemplated by the
Merger Agreement; or (E) any other material change in the Company's
corporate structure or business other than as contemplated
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by the Merger Agreement. The Shareholder further agrees not to commit or
agree to take any action in his or her capacity as a shareholder that is
inconsistent with the foregoing.
(c) Merger Agreement. The Shareholder acknowledges that such
Shareholder has read the Merger Agreement, including the exhibits
thereto, and has had an opportunity to consult with such Shareholder's
counsel concerning the same, and the Shareholder accepts and agrees to
the terms and conditions of the Merger Agreement that relate to the
treatment of the Subject Shares (including as provided in Section
1.8(b)) and the Subject Options, and the Shareholder hereby irrevocably
waives any claim that the Merger Agreement, the Merger or any other
transaction contemplated by the Merger Agreement (including the Circon
Sale) violates any right of the Shareholder under the Texas Business
Corporation Act, any fiduciary obligation owed by the Company or any of
its directors or officers to the Shareholder, or any obligation owed by
the Company to the Shareholder pursuant to any agreement between the
Company and the Shareholder or pursuant to any employee benefit plan or
stock option or similar plan of the Company in which the Shareholder
participates.
(d) Transfer Restrictions. In addition to its obligations under
Section 3(a) of this Agreement, the Shareholder further agrees not to
(i) sell, transfer, pledge, encumber, assign or otherwise dispose of or
hypothecate (including by gift or by contribution or distribution to any
trust or similar instrument or to any beneficiaries of such Shareholder
(collectively, "Transfer")), or enter into any contract, option or other
arrangement or understanding with respect to the Transfer of, any of the
Subject Shares or Subject Options for the term of this Agreement, (ii)
other than with respect to this Agreement, enter into any voting
arrangement or understanding with respect to the Subject Shares, whether
by proxy, voting agreement or otherwise, or (iii) take any action that
would reasonably be expected to make any of its representations or
warranties contained herein untrue or incorrect or could have the effect
of preventing or disabling such Shareholder from performing any of its
obligations hereunder. Anything in this Section 3(d) to the contrary
notwithstanding, nothing in the foregoing shall prohibit or prevent the
Shareholder from complying with any of the Shareholder's obligations in
respect of the Circon Sale provided for in the Merger Agreement or any
document executed by the Shareholder and Purchaser in connection
therewith.
(e) Appraisal Rights. Each Shareholder hereby irrevocably waives
any and all rights that he may have as to appraisal, dissent or any
similar or related matter with respect to the Merger, the Merger
Agreement or any transaction contemplated thereby, including, without
limitation, any rights otherwise available to such Shareholder pursuant
to Section 5.11 of the Texas Business Corporation Act.
(f) No Solicitation. The Shareholder agrees that, during the term
of this Agreement, he shall not, and shall not authorize or permit any
of such Shareholder's representatives, agents, affiliates or other
persons, directly or indirectly, to solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance
of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination
involving the Company, or acquisition of any capital stock (other than
upon exercise of Stock Options (as defined in the Merger Agreement)
which are outstanding as of the date hereof) or any material portion of
the assets (except for acquisition of assets in the ordinary course of
business consistent with past practice) of the Company and its
Subsidiaries (as defined in the Merger Agreement), or any combination of
the foregoing (a "Competing Transaction"), or negotiate, explore or
otherwise engage in discussions with any person (other than Purchaser,
persons controlling Purchaser, or their respective directors, officers,
employees, agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or understanding
requiring or causing the Company to abandon, terminate or fail to
consummate any of the transactions contemplated by the Merger Agreement.
Anything herein to the contrary notwithstanding, nothing in this
Agreement shall (i) prevent any director or officer of the Company from
taking any action consistent with his or her fiduciary duties to the
Company and its shareholders or as may be provided by the Merger
Agreement, or (ii) if Shareholder is an officer of the Company, prohibit
such Shareholder from participating in Permitted Discussions with any
third party at any time during which the Company is permitted to engage
(and
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is so engaging) in such discussions with such third party pursuant to
Section 5.4(a) of the Merger Agreement.
4. Stop Transfer Order. The Shareholder hereby authorizes and
requests the Company's counsel to notify the Company's transfer agent that
during the terms of this Agreement there is a stop transfer order with
respect to all of the Subject Shares and that this Agreement places limits
on the voting of the Subject Shares.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other party, except that Purchaser
may assign, in its sole discretion and without the consent of the
Shareholder, any or all of its rights, interests and obligations hereunder
to any affiliate of Purchaser. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their permitted assigns and their respective successors,
heirs, agents, representatives, trust beneficiaries, attorneys, affiliates
and associates and all of their respective predecessors, successors,
permitted assigns, heirs, executors and administrators.
6. Termination. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become
null and void and have no further legal effect immediately following the
earlier to occur of (x) the Effective Time (as defined in the Merger
Agreement) or (y) the termination of the Merger Agreement in accordance
with its terms. Nothing in this Section shall relieve any party of
liability for breach of this Agreement.
7. General Provisions. (a) Amendments. This Agreement may not be
amended except by an instrument in writing signed by each of the parties
hereto.
(b) Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (if confirmed), sent by overnight courier
(providing proof of delivery) or mailed by registered or certified mail
(return receipt requested), (i) if to the Purchaser, in accordance with
Section 8.4(a) of the Merger Agreement, and (ii) if to the Shareholder,
to the Shareholder's attention c/o of the Company at the address or
facsimile number set forth in Section 8.4(b) of the Merger Agreement.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more of the
counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that each party need not sign the
same counterpart.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
without regard to the conflicts of law principles thereof.
8. Enforcement. The parties agree that if any of the provisions of
this Agreement are not performed in accordance with their specific terms or
are otherwise breached, the parties would suffer irreparable harm that
monetary compensation would be inadequate to remedy. It is accordingly
agreed that the parties shall be entitled to an injunction or other forms
of equitable relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in
addition to any other remedy to which they are entitled at law or in
equity.
D-4
<PAGE> 127
IN WITNESS WHEREOF, Purchaser and the Shareholder have each executed this
Agreement as of the date first written above.
FOX PAINE MEDIC ACQUISITION
CORPORATION
By:
------------------------------------
Name:
Title:
SHAREHOLDER:
--------------------------------------
Print Name:
<TABLE>
<S> <C>
Number of shares of Company Common Stock beneficially owned
by the Shareholder as of the date hereof:
----------
Number of shares of Company Common Stock subject to options
to purchase shares of Company Common Stock held by the
Shareholder as of the date hereof:
----------
</TABLE>
[Signature Page to Voting Agreement]
D-5
<PAGE> 128
FIRST AMENDMENT TO THE
VOTING AGREEMENT
THIS FIRST AMENDMENT (the "Amendment"), dated as of September 30, 1999, to
the VOTING AGREEMENT (the "Agreement"), dated as of June 13, 1999, is made by
and between Fox Paine Medic Acquisition Corporation, a Texas corporation
("Purchaser"), and the undersigned shareholder (the "Shareholder") of Maxxim
Medical, Inc., a Texas corporation ("Maxxim" or the "Company").
WHEREAS, Purchaser and the Company entered into an Agreement and Plan of
Merger, dated as of June 13, 1999 (the "Merger Agreement"), which provides that,
among other things, upon the terms and subject to the conditions thereof, (a)
Purchaser will be merged (the "Merger") with and into the Company, with the
Company as the surviving corporation, and (b) each outstanding share of common
stock, $0.001 par value, of the Company (together with the associated Preferred
Share Purchase Rights issued pursuant to the Rights Agreement, dated as of July
10, 1997, by and between the Company and Harris Trust and Savings Bank as rights
agent, the "Company Common Stock") shall (except for certain shares of Company
Common Stock referred to in Sections 1.8(a), 1.8(b) and 1.8(c) of the Merger
Agreement, and except for any Dissenting Shares (as defined in the Merger
Agreement)) be converted into the right to receive $26.00 in cash; and
WHEREAS, in connection with the settlement of certain litigation relating
to the Agreement and Plan of Merger, by and between Purchaser and the Company,
dated as of June 13, 1999 (the "Merger Agreement"), the parties desire to enter
into this Amendment;
NOW THEREFORE, the parties hereto agree as follows:
1. Section 3(a) of the Agreement is hereby amended and restated in its
entirety:
Voting in favor of the Merger and/or the Circon Sale. At any meeting
of shareholders of the Company called to vote upon the Merger, the Merger
Agreement or any transaction contemplated thereby (including the Circon
sale (as defined in the Merger Agreement)), or at any adjournment thereof
or in any other circumstances (including, without limitation, a
solicitation of written consents or proxies) upon which a vote or other
approval with respect to the Merger, the Merger Agreement or any of the
other transactions contemplated thereby (including the Circon Sale (as
defined in the Merger Agreement)) is sought, the Shareholder shall vote the
Subject Shares for and against approval of the Merger Agreement, the Merger
and all other transactions contemplated by the Merger Agreement (including
the Circon sale (as defined in the Merger Agreement)) in the same
proportion as the Maxxim shareholders voting on the proposal (other than
the Specified Shareholders (as defined in the Merger Agreement)).
2. Capitalized terms used but not defined herein shall have the meaning
assigned to such terms in the Agreement.
3. All notices, requests and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (if
confirmed), sent by overnight courier (providing proof of delivery) or mailed by
registered or certified mail (return receipt requested), (i) if to the
Purchaser, in accordance with Section 8.4(a) of the Merger Agreement, and (ii)
if to the Shareholder, to the Shareholder's attention c/o of the Company at the
address or facsimile number set forth in Section 8.4(b) of the Merger Agreement.
4. This Amendment may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more of the counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that each party need not
sign the same counterpart.
5. This Amendment shall be governed by and construed in accordance with the
internal laws of the State of Delaware without regard to the conflicts of law
principles thereof.
6. The parties agree that if any of the provisions of this Amendment are
not performed in accordance with their specific terms or are otherwise breached,
the parties would suffer irreparable harm that monetary
D-6
<PAGE> 129
compensation would be inadequate to remedy. It is accordingly agreed that the
parties shall be entitled to an injunction or other forms of equitable relief to
prevent breaches of this Amendment and to enforce specifically the terms and
provisions of this Amendment, this being in addition to any other remedy to
which they are entitled at law or in equity.
IN WITNESS WHEREOF, Purchaser and the Shareholder have each executed this
Amendment as of the date first written above.
FOX PAINE MEDIC ACQUISITION
CORPORATION
By:
------------------------------------
Name:
Title:
SHAREHOLDER:
--------------------------------------
Print Name:
D-7
<PAGE> 130
MAXXIM MEDICAL, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
Proxy for the Special Meeting of Shareholders to be held
November 3, 1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby designates and appoints Peter M.
Graham, David L. Lamont and Alan S. Blazei, and each of them, with authority to
act without the others, as attorneys and proxies for the undersigned, with full
power of substitution, to vote all shares of Common Stock, $.001 par value per
share, of Maxxim Medical, Inc. that the undersigned is entitled to vote at the
Special Meeting of Shareholders of Maxxim Medical, Inc., to be held at 3:30
p.m. Eastern Time on November 3, 1999, or at any adjournment thereof, with all
the powers the undersigned would possess if personally present, such proxies
being directed to vote as specified below and in their discretion on any other
business that may properly come before the Meeting.
PROPOSAL 1. To approve the Agreement and Plan of Merger, dated as of June 13,
1999, as amended by Amendment No. 1 to Merger Agreement, dated as of October 1,
1999, between Fox Paine Medic Acquisition Corporation and Maxxim Medical, Inc.,
pursuant to which Fox Paine Medic Acquisition Corporation will be merged with
and into Maxxim and each share of Maxxim common stock, other than a portion of
the shares held by certain officers, directors and significant shareholders,
and shares held by dissenting shareholders, will be converted into the right to
receive $26.00 in cash, without interest.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 2. In their discretion, on such other business as may properly come
before the Meeting.
THE BOARD OF DIRECTORS OF MAXXIM RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE
EVEN IF YOU PLAN TO ATTEND THE MEETING. THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS
GIVEN,
<PAGE> 131
THIS PROXY WILL BE VOTED "FOR" THE APPROVAL OF THE AGREEMENT AND PLAN OF
MERGER.
Dated:
------------------ ------------------------------------
Signature of Shareholder
------------------------------------
Signature of Shareholder
Please sign this Proxy exactly as your name
appears on your stock certificate(s). JOINT
OWNERS SHOULD EACH SIGN PERSONALLY. When
signing as attorney, executor,
administrator, trustee, guardian, partner
or corporate officer, please give your full
title as such.
2
<PAGE> 132
NOTICE OF CHANGE IN
TIME OF SPECIAL MEETING
Please note that the time of the special meeting of the shareholders of
Maxxim Medical, Inc., to be held on November 3, 1999, as set forth on the Proxy
Card enclosed herewith, has been changed. The correct time, as stated in the
enclosed Notice of Special Meeting of Shareholders and Proxy Statement, is 3:30
p.m., local time.
