<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 13E-3 THEREUNDER)
MAXXIM MEDICAL, INC.
(NAME OF ISSUER)
MAXXIM MEDICAL, INC.
FOX PAINE MEDIC ACQUISITION CORPORATION
FOX PAINE CAPITAL FUND, L.P.
KENNETH W. DAVIDSON
PETER M. GRAHAM
DAVID L. LAMONT
HENRY T. DEHART III
JACK F. CAHILL
ALAN S. BLAZEI
JOSEPH D. DAILEY
SUZANNE R. GARON
ERNEST J. HENLEY
DAVIS C. HENLEY
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
57777G 10 5
(CUSIP NUMBER OF CLASS OF SECURITIES)
<TABLE>
<S> <C>
SAUL A. FOX KENNETH W. DAVIDSON
FOX PAINE MEDIC ACQUISITION CORPORATION CHAIRMAN OF THE BOARD, PRESIDENT AND
950 TOWER LANE, SUITE 1150 CHIEF EXECUTIVE OFFICER
FOSTER CITY, CALIFORNIA 94404 MAXXIM MEDICAL, INC.
(650) 525-1300 10300 49TH STREET NORTH
CLEARWATER, FL 33762
(727) 561-2100
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
WITH COPIES TO:
<TABLE>
<S> <C> <C>
MITCHELL S. PRESSER, ESQ. PAUL R. LYNCH, ESQ. MICHAEL E. GIZANG, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ SHUMAKER, LOOP & KENDRICK, LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
51 WEST 52ND STREET 101 E. KENNEDY BLVD., SUITE 2800 919 THIRD AVENUE
NEW YORK, NEW YORK 10019 TAMPA, FL 33602 NEW YORK, NEW YORK 10022
(212) 403-1000 (813) 229-7600 (212) 735-2000
</TABLE>
<PAGE> 2
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
CALCULATION OF FILING FEE
<TABLE>
======================================================================================================================
<S> <C>
Transaction Valuation * Amount of Filing Fee
$373,802,475 $74,760
======================================================================================================================
</TABLE>
* For purposes of calculating the fee only. Calculated in accordance with Rule
0-11(b)(2) under the Securities Exchange Act of 1934, as amended. Assumes the
purchase of 13,732,826 shares of Common Stock, par value .001 per share, of
Maxxim Medical, Inc. at $26.00 per share and the purchase of the underlying
options to purchase Common Stock for an aggregate of $16,748,999.
[X] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the
offsetting fee was previously paid. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing. Amount Previously Paid:
$74,760
Form or Registration No.: Preliminary Proxy Statement on Schedule 14A
Filing Party: Maxxim Medical, Inc.
Date Filed: July 26, 1999
<PAGE> 3
SCHEDULE 13E-3
INTRODUCTION
This Amendment No. 2 (this "Transaction Statement") to the
Rule 13e-3 transaction statement, first filed July 26, 1999, is being filed
with the Securities and Exchange Commission in connection with the merger of
Fox Paine Medic Acquisition Corporation, a Texas corporation ("Fox Paine
Medic"), with and into Maxxim Medical, Inc., a Texas corporation ("Maxxim"),
pursuant to 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, by
and between Fox Paine Medic and Maxxim (the "Merger Agreement"). Under the
Merger Agreement, Maxxim will continue as the surviving corporation and each
share of Maxxim common stock, par value $.001 per share, outstanding
immediately prior to the merger (together with the preferred stock purchase
rights associated with those shares), other than a portion of the shares held
by the Continuing Shareholders (as defined below), and shares held by
dissenting shareholders, will be converted into the right to receive $26.00 in
cash, without interest. The Continuing Shareholders are Kenneth W. Davidson,
Peter M. Graham, David L. Lamont, Alan S. Blazei, Henry T. Dehart III, Joseph
D. Dailey, Jack F. Cahill, Suzanne R. Garon, Ernest J. Henley and Davis C.
Henley, eight of whom are executive officers of Maxxim, one is a non-executive
director of Maxxim, and one is a vice president and significant shareholder of
Maxxim. As described in this Transaction Statement and in the documents
incorporated by reference herein, all of the Continuing Shareholders are
participating in the merger and will be treated differently than the other
Maxxim shareholders. Upon consummation of the merger, approximately 13% (before
giving effect to options and warrants) of the equity interests will be owned by
the Continuing Shareholders, and a majority of the equity interests will be
owned by the Fox Paine Capital Fund, L.P., a Delaware limited partnership (the
"Fox Paine Fund"). This Transaction Statement is being filed by Maxxim, Fox
Paine Medic, the Fox Paine Fund, and the Continuing Shareholders.
Concurrently with the filing of this Transaction Statement,
Maxxim has filed with the SEC Amendment No. 2 to its Proxy Statement on Schedule
14A (the "Proxy Statement") in connection with a special meeting of the
shareholders of Maxxim, at which meeting the shareholders will be asked to
approve the Merger Agreement. The following cross reference sheet is being
supplied pursuant to General Instruction F to Schedule 13E-3 and shows the
location in the Proxy Statement of the information required to be included in
response to the items of this statement. The information set forth in the Proxy
Statement, including all appendices thereto, is hereby expressly incorporated
herein by reference and the responses to each item are qualified in their
entirety by the provisions of the Proxy Statement.
The filing of this Transaction Statement shall not be
construed as an admission by Maxxim, Fox Paine Medic, the Fox Paine Fund, or the
Continuing Shareholders or any of their affiliates that Maxxim is "controlled"
by Fox Paine or Fox Paine Fund or any of their affiliates (the "Fox Paine
Entities") or that any of the Fox Paine Entities is an "affiliate" of Maxxim
within the meaning of Rule 13e-3 under Section 13(e) of the Securities Exchange
Act of 1934, as amended.
<PAGE> 4
CROSS REFERENCE SHEET
ITEM IN CAPTION OR LOCATION
SCHEDULE 13E-3 IN THE PROXY STATEMENT
Item 1(a) "Summary - The Participants"
Item 1(b) "Summary - The Special Meeting," "Historical Market
Information" and "The Special Meeting - Record Date and
Voting"
Item 1(c) - (f) "Historical Market Information" and "Merger Financing - Senior
Bank Loans"
Item 2(a) - (g) "Summary - The Participants," "Historical Market
Information" and "Information About the Transaction
Participants"
Item 3(a)(1) "Summary - Interests of Certain Persons in the Merger,"
"Historical Market Information" and "Special Factors -
Interests of Certain Persons in the Merger"
Item 3(a)(2) "Summary - Interests of Certain Persons in the Merger,"
"Historical Market Information," "Special Factors -
Background of the Merger" and "- Interests of Certain Persons
in the Merger"
Item 3(b) "Summary - Structure of the Transactions," "- The Voting
Agreements," "- Terms of the Merger Agreement," "- Interests
of Certain Persons in the Merger," "Special Factors -
Structure of the Transactions; Transaction Participants,"
"- Background of the Merger," "- Interests of Certain Persons
in the Merger," "The Special Meeting - Voting Agreements" and
"The Merger"
Item 4(a) "Questions and Answers about the Merger," "Summary -
Structure of the Transactions," "- Terms of the Merger
Agreement," "- Interests of Certain Persons in the Merger,"
"- Appraisal Rights," "Special Factors - Structure of the
Transactions; Transaction Participants," "- Interests of
Certain Persons in the Merger," "- Certain Effects of the
Merger; Conduct of Business After the Merger," "Merger
Financing," "The Merger," "Appraisal Rights" and Appendix A to
the Proxy Statement
Item 4(b) "Questions and Answers about the Merger," "Summary - Structure
of the Transactions," "- Terms of the Merger Agreement,"
"- Interests of Certain Persons in the Merger," "Special
Factors - Structure of the Transactions; Transaction
Participants," "- Interests of Certain Persons in the Merger,"
"The Merger - Merger Consideration" and "- Treatment of Maxxim
Stock Options"
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<PAGE> 5
Item 5(a) "Summary - Structure of the Transactions," "- Terms of the
Merger Agreement," "Special Factors - Structure of the
Transactions; Transaction Participants," "- Certain Effects of
the Merger; Conduct of Business After the Merger" "--Fox
Paine's and the Continuing Shareholders' Reasons for the
Merger" and "The Merger - Structure and Effective Time"
Item 5(b) "Merger Financing - Senior Bank Loans"
Item 5(c) "Special Factors - Interests of Certain Persons in the
Merger," "- Certain Effects of the Merger; Conduct of Business
After the Merger" and "The Merger - Directors and Officers"
Item 5(d) "Summary - Merger Financing," "Historical Market Information,"
"Merger Financing," "The Merger Treatment of Maxxim Stock
Options" and "- Retirement/Amendment of Maxxim Notes"
Item 5(e) *
Item 5(f) - (g) "Special Factors - Certain Effects of the Merger; Conduct of
Business after the Merger"
Item 6(a) "Summary - Merger Financing" and "Merger Financing"
Item 6(b) "The Merger - Expenses" and "- Estimated Fees and Expenses of
the Merger"
Item 6(c) "Summary - Merger Financing" and "Merger Financing"
Item 6(d) *
Item 7(a) "Questions and Answers about the Merger," "Summary - Structure
of the Transactions," "Special Factors - Structure of the
Transactions; Transaction Participants," "- Background of the
Merger," "- Recommendation of the Special Committee and of the
Full Maxxim Board; Fairness of the Merger," "--Fox Paine's and
the Continuing Shareholders' Reasons for the Merger,"
"-Interests of Certain Persons in the Merger," "The Merger -
Structure and Effective Time" and "- Consideration"
Item 7(b)-(c) "Special Factors - Background of the Merger,"
"- Recommendation of the Special Committee and of the Full
Maxxim Board; Fairness of the Merger," "- Fox Paine's and the
Continuing Shareholders' Reasons for the Merger" and
"Information about the Transaction Participants - Fox Paine
Medic Acquisition Corporation and Fox Paine"
Item 7(d) "Questions and Answers About the Merger," "Summary - Structure
of the Transactions," "- Terms of the Merger Agreement,"
"- Accounting Treatment," "- Merger Financing," "- Interests
of Certain Persons in the
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<PAGE> 6
Merger," "- Appraisal Rights," "Special Factors - Structure of
the Transactions; Transaction Participants," "--Fox Paine's
Reasons for the Merger," "- Interests of Certain Persons in
the Merger," "- Certain Effects of the Merger; Conduct of
Business After the Merger," "Merger Financing," "The Merger -
Structure and Effective Time," "- Merger Consideration,"
"- Treatment of Maxxim Stock Options," "- Retirement/Amendment
of Maxxim Notes," "- Directors and Officers," "Appraisal
Rights" and "Federal Income Tax Consequences"
Item 8(a) - (b) "Questions and Answers About the Merger," "Summary -
Recommendation to Shareholders," "- Fairness Opinion,"
"Special Factors - Background of the Merger,"
"- Recommendation of the Special Committee and of the Full
Maxxim Board," "Opinion of Lazard Freres & Co. LLC," "- Fox
Paine's and the Continuing Shareholders' Reasons for the
Merger," "- Position of the Continuing Shareholders as to
Fairness of the Merger" and "--Position of Fox Paine as to
Fairness of the Merger"
Item 8(c) "The Special Meeting - Required Vote"
Item 8(d) - (e) "Questions and Answers about the Merger," "Summary -
Recommendation to Shareholders," "Fairness Opinion," "Special
Factors - Background of the Merger," "- Recommendation of the
Special Committee and of the Full Maxxim Board; Fairness of
the Merger" and "- Opinion of Lazard Freres & Co. LLC"
Item 8(f) "Special Factors - Background of the Merger" and
"Recommendation of the Special Committee and of the Full
Maxxim Board; Fairness of the Merger"
Item 9(a)-(c) "Summary - Fairness Opinion," "Special Factors Background of
the Merger," "Recommendation of the Special Committee and of
the Full Maxxim Board; Fairness of the Merger," "Opinion of
Lazard Freres & Co. LLC" and Appendix B to Proxy Statement
Item 10(a)-(b) "Principal Shareholders and Stock Ownership of Management and
Others"
Item 11 "Summary - Structure of the Transactions" "- The Voting
Agreements," "- Terms of the Merger Agreement," "- Interests
of Certain Persons in the Merger," "Special Factors -
Structure of the Transactions; Transaction Participants,"
"- Interests of Certain Persons in the Merger," "The Special
Meeting - Required Vote," "- Voting Agreements" and "The
Merger"
Item 12(a) - (b) "Questions and Answers About the Merger," "Summary - The
Voting Agreements," "- Recommendation to Shareholders,"
"Special Factors - Background of the Merger,"
"- Recommendation of the Special Committee and of the Full
Maxxim Board; Fairness of the Merger," "- Fox Paine and the
Continuing Shareholders' Reasons for the Merger," "- Position
of the
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<PAGE> 7
Continuing Shareholders as to Fairness of the Merger,"
"--Position of Fox Paine as to Fairness of the Merger," "The
Special Meeting - Required Vote" and "- Voting Agreement"
Item 13(a) "Summary - Appraisal Rights," "The Special Meeting - Record
Date and Voting," "Appraisal Rights" and Appendix C to the
Proxy Statement
Item 13(b) - (c) *
Item 14(a) - (b) "Selected Historical Consolidated Financial Data" and
"Incorporation of Certain Documents by Reference"
Item 15(a) - (b) "The Special Meeting - Proxies; Revocation" and "The Merger -
Estimated Fees and Expenses of the Merger"
Item 16 Proxy Statement
Item 17(a) - (f) *
- -----------------
* Not applicable or answer is negative.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth in the section entitled "Summary - The
Participants" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Summary - The
Special Meeting," "Historical Market Information" and "The Special Meeting -
Record Date and Voting" of the Proxy Statement is incorporated herein by
reference.
(c)-(f) The information set forth in the section entitled "Historical
Market Information" and "Merger Financing - Senior Bank Loans" of the Proxy
Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(g) This statement is being filed jointly by Maxxim, Fox Paine
Medic, the Fox Paine Fund and the Continuing Shareholders. The information set
forth in the sections entitled "Summary - The Participants," "Historical Market
Information" and "Information About the Transaction Participants" of the Proxy
Statement is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the sections entitled "Summary -
Interests of Certain Persons in the Merger," "Historical Market Information" and
"Special Factors - Interests of Certain Persons in the Merger" of the Proxy
Statement is incorporated herein by reference.
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<PAGE> 8
(a)(2) The information set forth in the section entitled "Summary -
Interests of Certain Persons in the Merger," "Historical Market Information,"
"Special Factors - Background of the Merger" and "Interests of Certain Persons
in the Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the section entitled "Summary -
Structure of the Transactions," "The Voting Agreements," "- Terms of the Merger
Agreement," "- Interests of Certain Persons in the Merger," "Special Factors -
Structure of the Transactions; Transaction Participants," "- Background of the
Merger," "Interests of Certain Persons in the Merger," "The Special Meeting -
Voting Agreements" and "The Merger" of the Proxy Statement is incorporated
herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Proxy Statement under "Questions
and Answers about the Merger," "Summary - Structure of the Transactions,"
"- Terms of the Merger Agreement," "- Interests of Certain Persons in the
Merger," "- Appraisal Rights," "Special Factors - Structure of the Transactions;
Transaction Participants," "Interests of Certain Persons in the Merger,"
"- Certain Effects of the Merger; Conduct of Business After the Merger,"
"Merger Financing," "The Merger," "Appraisal Rights" and Appendix A to the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "Questions
and Answers about the Merger," "Summary - Structure of the Transactions,"
"- Terms of the Merger Agreement," "- Interests of Certain Persons in the
Merger," "Special Factors - Structure of the Transactions; Transaction
Participants," "- Interests of Certain Persons in the Merger," "The Merger -
Merger Consideration" and "- Treatment of Maxxim Stock Options" is incorporated
herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) The information set forth in the Proxy Statement under "Summary -
Structure of the Transactions," "Terms of the Merger Agreement," "Special
Factors - Structure of the Transactions; Transaction Participants," "Certain
Effects of the Merger; Conduct of Business After the Merger" "- Fox Paine's and
the Continuing Shareholders' Reasons for the Merger" and "The Merger - Structure
and Effective Time" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "Merger
Financing - Senior Bank Loans" is incorporated herein by reference.
(c) The information set forth in the Proxy Statement under "Special
Factors - Interests of Certain Persons in the Merger," "- Certain Effects of the
Merger; Conduct of Business After the Merger" and "The Merger - Directors and
Officers" is incorporated herein by reference.
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<PAGE> 9
(d) The information set forth in the Proxy Statement under "Summary -
Merger Financing," "Historical Market Information," "Merger Financing," "The
Merger - Treatment of Maxxim Stock Options" and "- Retirement/Amendment of
Maxxim Notes" is incorporated herein by reference.
(e) None.
(f)-(g) The information set forth in the Proxy Statement under "Special
Factors - Certain Effects of the Merger; Conduct of Business after the Merger,"
is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Proxy Statement under "Summary -
Merger Financing" and "- Merger Financing" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "The Merger
- - Expenses" and "- Estimated Fees and Expenses of the Merger" is incorporated
herein by reference.
(c) The information set forth in the Proxy Statement under "Summary -
Merger Financing" and "Merger Financing" is incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth in the Proxy Statement under "Questions
and Answers About the Merger," "Summary - Structure of the Transactions,"
"- Interests of Certain Persons in the Merger," "Special Factors Structure of
the Transactions; Transaction Participants," "- Background of the Merger,"
"- Recommendations of the Special Committee and of the Full Maxxim Board;
Fairness of the Merger," "- Fox Paine's and the Continuing Shareholders'
Reasons for the Merger," "- Interests of Certain Persons in the Merger,"
"The Merger - Structure and Effective Time" and "Consideration" is
incorporated herein by reference.
(b)-(c) The information set forth in the Proxy Statement under "Special
Factors - Background of the Merger," "- Recommendation of the Special Committee
and of the Full Maxxim Board; Fairness of the Merger," "- Fox Paine's and the
Continuing Shareholders' Reasons for the Merger" and "Information about the
Transaction Participants - Fox Paine Medic Acquisition Corporation and Fox
Paine" is incorporated herein by reference.
(d) The information set forth in the Proxy Statement under "Questions
and Answers About the Merger," "Summary - Structure of the Transactions,"
"- Terms of the Merger Agreement," "- Accounting Treatment," "- Merger
Financing," "Interests of Certain Persons in the Merger," "- Appraisal Rights,"
"Special Factors - Structure of the Transactions; Transaction Participants,"
"--Fox Paine's Reasons for the Merger," "- Interests of Certain
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<PAGE> 10
Persons in the Merger," "- Certain Effects of the Merger; Conduct of Business
After the Merger," "Merger Financing," "The Merger - Structure and Effective
Time," " Merger Consideration," "- Treatment of Maxxim Stock Options,"
"- Retirement/Amendment of Maxxim Notes," "- Directors and Officers," "Appraisal
Rights" and "Federal Income Tax Consequences" is incorporated herein by
reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth in the Proxy Statement under
"Questions and Answers About the Merger," "Summary - Recommendations to
Shareholders," "- Fairness Opinion," "Special Factors - Background of the
Merger," "Recommendations of the Special Committee and of the Full Maxxim Board;
Fairness of the Merger," "- Opinion of Lazard Freres & Co. LLC," "Fox Paine's
and the Continuing Shareholders' Reasons for the Merger," "- Position of the
Continuing Shareholders as to Fairness of the Merger," and "- Position of Fox
Paine as to the Fairness of the Merger" is incorporated herein by reference.
(c) The information set forth in the Proxy Statement under "The Special
Meeting - Required Vote" is incorporated herein by reference.
(d)-(e) The information set forth in the Proxy Statement under
"Questions and Answers about the Merger," "Summary - Recommendations to
Shareholders," "Special Factors - Background of the Merger," "- Recommendation
of the Special Committee and of the Full Maxxim Board; Fairness of the Merger"
and "- Opinion of Lazard Freres & Co. LLC" is incorporated herein by reference.
(f) The information set forth in the Proxy Statement under "Special
Factors - Background of the Merger" and "- Recommendation of the Special
Committee and of the Full Maxxim Board; Fairness of the Merger" is incorporated
herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in the Proxy Statement under "Summary
- - Fairness Opinion," "Special Factors - Background of the Merger,"
"-Recommendations of the Special Committee and of the Full Maxxim Board;
Fairness of the Merger," "- Opinion of Lazard Freres & Co. LLC" and Appendix B
to Proxy Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth in the Proxy Statement under
"Principal Shareholders and Stock Ownership of Management and Others" is
incorporated herein by reference.
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ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the Proxy Statement under "Summary -
Structure of the Transactions," "- The Voting Agreements," "- Terms of the
Merger Agreement," "- Interests of Certain Persons in the Merger," "Special
Factors - Structure of the Transactions; Transaction Participants,"
"- Interests of Certain Persons in the Merger," "The Special Meeting - Required
Vote," "- Voting Agreement" and "The Merger" is incorporated herein by
reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a)-(b) The information set forth in the Proxy Statement under
"Questions and Answers About the Merger," "Summary - The Voting Agreements,"
"- Recommendations to Shareholders," "Special Factors - Background of the
Merger," "- Recommendations of the Special Committee and of the Full Maxxim
Board; Fairness of the Merger," "- Fox Paine's and the Continuing Shareholders'
Reasons for the Merger," "- Position of the Continuing Shareholders as to
Fairness of the Merger," "- Position of Fox Paine as to Fairness of the
Merger," "The Special Meeting Required Vote" and "- Voting Agreement" is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Proxy Statement under "Summary -
Appraisal Rights," "The Special Meeting - Record Date and Voting," "Appraisal
Rights" and Appendix C to the Proxy Statement is incorporated herein by
reference.
(b) None.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a)-(b) The information set forth in the Proxy Statement under
"Selected Historical Consolidated Financial Data" and "Incorporation of Certain
Documents by Reference" is incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) The information set forth in the Proxy Statement under "The
Special Meeting - Proxies; Revocation" and "The Merger - Estimated Fees and
Expenses of the Merger" is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by
reference.
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<PAGE> 12
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(b)(1) Opinion of Lazard Freres & Co. LLC (included as Appendix B to
the Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999 under
cover of Schedule 14A)
(b)(2) Consent of Lazard Freres & Co. LLC dated July 20, 1999
(b)(3) Presentation of Lazard Freres & Co. LLC dated June 13, 1999
(c)(1) Agreement and Plan of Merger, dated as of June 13, 1999, by and
between Fox Paine Medic Acquisition Corporation and Maxxim Medical,
Inc.(included as Appendix A to the Proxy Statement filed by Maxxim Medical, Inc.
on October 5, 1999 under cover of Schedule 14A)
(c)(2) Form of Voting Agreement, by and between Fox Paine Medic
Acquisition Corporation and each of 10 shareholders of Maxxim Medical, Inc.
(included as Appendix D to the Proxy Statement filed by Maxxim Medical, Inc. on
October 5, 1999 under cover of Schedule 14A)
*(c)(3) Investor Participation Agreement, dated as of June 13, 1999, by
and among Fox Paine Medic Acquisition Corporation and each of 10 shareholders of
Maxxim Medical, Inc., in their individual capacities
(c)(4) Form of First Amendment to Voting Agreement, by and between Fox
Paine Medic Acquisition Corporation and each of 10 shareholders of Maxxim
Medical, Inc. (included as Appendix D to the Proxy Statement filed by Maxxim
Medical, Inc. on October 5, 1999 under cover of Schedule 14A)
(c)(5) Amendment No. 1 to Merger Agreement, dated October 1, 1999, by
and between Fox Paine Medic Acquisition Corporation and Maxxim Medical, Inc.
(included as Appendix A to the Proxy Statement filed by Maxxim Medical, Inc. on
October 5, 1999 under cover of Schedule 14A)
(c)(6) Amended and Restated Investor Participation Agreement, dated as
of September 30, 1999, by and among Fox Paine Medic Acquisition Corporation and
each of 10 shareholders of Maxxim Medical, Inc., in their individual capacities.
(d)(1) Letter to shareholders (included in Amendment No. 2 to the Proxy
Statement filed by Maxxim Medical, Inc. on October 5, 1999 under cover of
Schedule 14A)
(d)(2) Notice of special meeting of shareholders (included in Amendment
No. 2 to the Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999
under cover of Schedule 14A)
(d)(3) Proxy Statement (incorporated by reference to Amendment No. 2 to
the Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999 under
cover of Schedule 14A)
(d)(4) Form of proxy (incorporated by reference to Amendment No. 2 to
the Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999 under
cover of Schedule 14A)
(d)(5) Press release issued by Maxxim and Fox Paine & Company, LLC
dated as of June 14, 1999 (incorporated by reference to the Current Report on
Form 8-K filed by Maxxim Medical, Inc. on June 16, 1999)
(e) Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act
(included as Appendix C to the Proxy Statement filed by Maxxim
Medical, Inc. on October 5, 1999 under cover of Schedule 14A)
(f) Not applicable.
- ------------
* Previously filed as an exhibit to the Schedule 13E-3 filed by Maxxim Medical,
Inc. on July 26, 1999.
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<PAGE> 13
SIGNATURE
After due inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this Transaction Statement is true,
complete and correct.
MAXXIM MEDICAL, INC.
Date: September 30, 1999 By: /s/ Kenneth W. Davidson
-------------------------------------
Kenneth W. Davidson,
Chairman of the Board, President and
Chief Executive Officer
FOX PAINE MEDIC ACQUISITION CORPORATION
Date: September 30, 1999 By: /s/ Saul A. Fox
-------------------------------------
Saul A. Fox
Chief Executive Officer
FOX PAINE CAPITAL FUND, L.P.
By: Fox Paine Capital, LLC
its general partner
Date: September 30, 1999 By: /s/ Saul A. Fox
-------------------------------------
Name: Saul A. Fox
Title: Member
Date: September 30, 1999 /s/ Kenneth W. Davidson
-------------------------------------
Kenneth W. Davidson
Date: September 30, 1999 /s/ Peter M. Graham
-------------------------------------
Peter M. Graham
Date: September 30, 1999 /s/ David L. Lamont
-------------------------------------
David L. Lamont
Date: September 30, 1999 /s/ Henry T. DeHart III
-------------------------------------
Henry T. DeHart III
Date: September 30, 1999 /s/ Jack F. Cahill
-------------------------------------
Jack F. Cahill
Date: September 30, 1999 /s/ Alan S. Blazei
-------------------------------------
Alan S. Blazei
Date: September 30, 1999 /s/ Joseph D. Dailey
-------------------------------------
Joseph D. Dailey
-11-
<PAGE> 14
Date: September 30, 1999 /s/ Suzanne R. Garon
-------------------------------------
Suzanne R. Garon
Date: September 30, 1999 /s/ Ernest J. Henley
-------------------------------------
Ernest J. Henley
Date: September 30, 1999 /s/ Davis C. Henley
-------------------------------------
Davis C. Henley
-12-
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(b)(1) Opinion of Lazard Freres & Co. LLC (included as Appendix B to the
Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999
under cover of Schedule 14A)
(b)(2) Consent of Lazard Freres & Co. LLC dated July 20, 1999
(b)(3) Presentation of Lazard Freres & Co. LLC dated June 13, 1999
(c)(1) Agreement and Plan of Merger, dated as of June 13, 1999, by and
between Fox Paine Medic Acquisition Corporation and Maxxim Medical,
Inc. (included as Appendix A to the Proxy Statement filed by Maxxim
Medical, Inc. on October 5, 1999 under cover of Schedule 14A)
(c)(2) Form of Voting Agreement, by and between Fox Paine Medic Acquisition
Corporation and each of 10 shareholders of Maxxim Medical, Inc.
(included as Appendix D to the Preliminary Proxy Statement filed by
Maxxim Medical, Inc. on October 5, 1999 under cover of Schedule
14A)
*(c)(3) Investor Participation Agreement, dated as of June 13, 1999, by and
among Fox Paine Medic Acquisition Corporation and each of 10
shareholders of Maxxim Medical, Inc., in their individual capacities
(c)(4) Form of First Amendment to Voting Agreement, by and between Fox Paine
Medic Acquisition Corporation and each of 10 shareholders of Maxxim
Medical, Inc. (included as Appendix D to the Proxy Statement filed by
Maxxim Medical, Inc. on October 5, 1999 under cover of Schedule
14A)
(c)(5) Amendment No. 1 to Merger Agreement, dated October 1, 1999, by and
between Fox Paine Medic Acquisition Corporation and Maxxim Medical,
Inc. (included as Appendix A to the Proxy Statement filed by Maxxim
Medical, Inc. on October 5, 1999 under cover of Schedule 14A)
(c)(6) Amended and Restated Investor Participation Agreement, dated as of
September 30, 1999, by and among Fox Paine Medic Acquisition
Corporation and each of 10 shareholders of Maxxim Medical, Inc., in
their individual capacities
(d)(1) Letter to shareholders (included in Amendment No. 2 to the Proxy
Statement filed by Maxxim Medical, Inc. on October 5, 1999 under cover
of Schedule 14A)
(d)(2) Notice of special meeting of shareholders (included in Amendment No. 2
to the Proxy Statement filed by Maxxim Medical, Inc. on October 5,
1999 under cover of Schedule 14A)
(d)(3) Proxy Statement (incorporated by reference to Amendment No. 2 to the
Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999 under
cover of Schedule 14A)
(d)(4) Form of proxy (incorporated by reference to Amendment No. 2 to the
Proxy Statement filed by Maxxim Medical, Inc. on October 5, 1999
under cover of Schedule 14A)
(d)(5) Press release issued by Maxxim and Fox Paine & Company, LLC dated as
of June 14, 1999 (incorporated by reference to the Current Report on
Form 8-K filed by Maxxim Medical, Inc. on June 16, 1999)
</TABLE>
-13-
<PAGE> 16
<TABLE>
<S> <C>
(e) Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act
(included as Appendix C to the Proxy Statement filed by Maxxim
Medical, Inc. on October 5, 1999 under cover of Schedule 14A)
(f) Not applicable.
</TABLE>
- ------------------
* Previously filed as an exhibit to the Schedule 13E-3 filed by Maxxim
Medical, Inc. on July 26, 1999.
-14-
<PAGE> 1
EXHIBIT (b)(2)
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10020
----
TELEPHONE (212) 632-6000
FACSIMILE (212) 632-6060
NEW YORK
July 20, 1999
The Board of Directors and the Special Committee
of the Board of Directors
Maxxim Medical, Inc.
10300 49th Street
North Clearwater, FL 33762
We hereby consent to the reference to the opinion of our Firm in the Proxy
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ Stephen H. Sands
-----------------------------
Stephen H. Sands
Managing Director
<PAGE> 1
EXHIBIT (b)(3)
===============================================================================
PROJECT MEDIC
PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
===============================================================================
LAZARD FRERES & CO. LLC JUNE 13, 1999
<PAGE> 2
PROJECT MEDIC Table of Contents
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. MARKET PERSPECTIVES ON MEDIC
Trading Statistics................................................................................... 1
Analyst Perspectives................................................................................. 4
II. VALUATION AND PROCESS
Projections.......................................................................................... 5
Summary of Process................................................................................... 7
Summary Valuation.................................................................................... 8
Analysis at Various Prices........................................................................... 9
Implied Valuation - Equity Comparables, Transactions and Premiums.................................... 10
Summary DCF Analysis................................................................................. 13
Implied Valuation - LBO Transactions................................................................. 14
Summary LBO Analysis................................................................................. 15
APPENDICES
A. Equity Comparables................................................................................... 16
B. Health Care Transactions Comparables................................................................. 17
C. LBO Transactions Comparables......................................................................... 18
D. Characteristics of Comparable LBO Transactions....................................................... 19
E. Weighted Average Cost of Capital Analysis............................................................ 20
</TABLE>
<PAGE> 3
PROJECT MEDIC I. Market Perspectives
- -------------------------------------------------------------------------------
DEVELOPMENTS AT MEDIC SINCE JUNE 8, 1998
[Line graph showing price of Medic stock from June 8, 1998 to June 8, 1999,
with the dates of the following key developments noted:
6/29/98 - Medic completes acquisition of Winfield Medical
9/3/98 - Medic reports $0.37 Q3 EPS matching First Call consensus
11/21/98 - Medic announces plan to acquire Circon for $243 million in cash and
debt
1/5/99 - Medic signs credit agreement with Nationsbank to fund acquisition of
Circon
1/7/99 - Medic reports $0.39 Q3 EPS vs. $0.40 First Call consensus
3/3/99 - Medic reports $0.40 Q1 EPS versus $0.42 First Call consensus
6/3/99 - Medic reports $0.42 Q2 EPS matching First Call consensus]
[Bar graph showing trading volume (in thousands) of Medic shares from 6/8/98 to
6/8/99]
-1-
<PAGE> 4
PROJECT MEDIC I. Market Perspectives
- -------------------------------------------------------------------------------
THREE YEAR TRADING PERFORMANCE
[Line graph comparing three-year trading performance of S&P Medical
Supply & Device, S&P Small Cap, Russell 2000 and Medic]
[Bar graph tracking share price and trading volume (in thousands)
of Medic from 6/7/96 to 6/8/99]
- 2 -
<PAGE> 5
PROJECT MEDIC I. Market Perspectives
- -------------------------------------------------------------------------------
VOLUME TRADED AT VARIOUS SHARE PRICES
<TABLE>
<CAPTION>
LAST 90 DAYS
[Bar graph illustrating volume of Medic shares traded at various prices during the last 90 days]
Shares Traded (thousands) Share Price % of Traded Volume Weighted Average Prices Per Share
- ------------------------ ----------- ------------------ ----------------------- ---------
<S> <C> <C> <C> <C>
1,212.5 $15-$16 24.5% 30 Days $16.37
1,702.2 $16-$17 34.4% 60 Days 16.60
1,316.4 $17-$18 26.6% 90 Days 16.90
369.0 $18-$19 7.5%
350.4 $19-$20 7.1%
</TABLE>
Trading Volume over period represents 34.5% of total shares outstanding
Last 12 Months
(Bar graph illustrating volume of Medic shares traded at various price during
the last twelve months)
<TABLE>
<CAPTION>
Shares Traded (thousands) Share Price % of Traded Volume Weighted Average Prices Per Share
- ------------------------ ----------- ------------------ ----------------------- ---------
<S> <C> <C> <C> <C>
1,212.5 $15-$16 7.3% 180 Days $20.12
1,702.2 $16-$17 10.3% 270 Days 21.06
2,202.1 $17-$18 13.3% 360 Days 21.98
1,672.9 $18-$19 10.1%
722.9 $19-$20 4.4%
513.6 $20-$21 3.1%
337.1 $21-$22 2.0%
660.1 $22-$23 4.0%
293.9 $23-$24 1.8%
402.3 $24-$25 2.4%
1,527.5 $25-$26 9.2%
1,823.6 $26-$27 11.0%
1,556.8 $27-$28 9.4%
1,114.1 $28-$29 6.7%
861.5 $29-$30 5.2%
</TABLE>
Trading Volume over period represents 115.8% of total shares outstanding
Note: Based on 14.3 million primary shares outstanding
Memo: In March 1998 Medic issued 4.0 million primary shares in a stock offering
at $24.00
-3-
<PAGE> 6
PROJECT MEDIC I. Market Perspectives
- -------------------------------------------------------------------------------
ANALYST PERSPECTIVES
<TABLE>
<CAPTION>
PRICE
FISCAL YEAR EPS LT EPS -------------------
--------------- GROWTH AT
ANALYST DATE RATING 1999 2000 RATE REPORT TARGET
- ---------- --------- ---------- -------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bear Stearns
6/4/99 Attractive $1.75 $2.05 17.0% $17.81 $30.00
Bank of America Securities
6/3/99 Buy 1.75 2.07 15.0% 17.69 30.00
Wachovia Securities
4/9/99 Neutral 1.75 2.05 15.0% 18.25 NA
Everen Securities
3/4/99 Outperform 1.74 2.18 17.0% 16.94 38.00
--------------------------------------------------------------------------
Average of Set FY Estimates $1.75 $2.09 16.0%
IBES FY Estimates 1.75 2.09 15.0%
--------------------------------------------------------------------------
<CAPTION>
<S> <C>
Comments
-------------------------------------------------------------------------------
Bear Stearns "We continue to rate Medic shares Attractive. We are fine tuning
our F1999 EPS estimates to $1.75, to reflect the penny shortfall in 2Q. Our
F2000 estimate is being lowered to $2.05 from $2.12 to reflect our modified
sales and margin assumptions post-Circon... Our 12-18 month price target remains
$30, which assumes Medic can trade 17x our F1999 estimate of $1.75, roughly in
line with its 15%-18% long term growth rate. Medic shares have been under
tremendous pressure in the past quarter after a disappointing 1Q99. We feel that
at current price levels, Medic shares are very inexpensive."
Bank of America Securities "We modestly raise our 1999 earnings per share
estimate and have become more confident that the company can reach our fiscal
2000 target of $2.07. While we realize that this company traffics in the back
waters of the medical products field, has lower growth and margins, it should
still carry a respectable multiple of 15-plus - a $30
Wachovia Securities "Our Neutral rating reflects current price competition in
the custom procedure tray business, which was apparently started by a small
competitor. We believe the stock may remain depressed until concerns over the
price competition dissipate."
Everen Securities "We believe the decline in the stock price was an
overreaction. Medic is in higher margin businesses today than in the past and
can reignite growth in its tray business moving forward. We therefore are
confident in the fundamentals of the story and our new estimate of $1.74, down
from $1.77, accounting for the $0.03 shortfall in Q1."
</TABLE>
-4-
<PAGE> 7
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
SUMMARY MEDIC PROJECTIONS - MANAGEMENT CASE
($ in millions, except per share)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 1,
-----------------------------------------------------------------------------------------------------
HISTORICAL PROJECTED 1999 PF -
--------------------- ------------------------------------------------------------------- 2003
1998 PF(A) LTM PF(B) 1999 E(C) 1999 PF(A) 2000 2001 2002 2003 CAGR
---------- --------- --------- ---------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Items:
Revenues $ 675.0 $ 679.9 $ 674.6 $ 701.8 $ 733.9 $ 768.2 $ 804.1 $ 841.8 4.7%
% Growth -- -- -- 4.0% 4.6% 4.7% 4.7% 4.7%
EBITDA 82.9 97.5 104.0 106.1 114.0 119.1 124.4 130.0 5.2%
% Margin 12.3% 14.3% 15.4% 15.1% 15.5% 15.5% 15.5% 15.4%
EBIT 52.6 67.3 72.5 72.9 80.7 84.6 88.8 93.2 6.4%
% Margin 7.8% 9.9% 10.7% 10.4% 11.0% 11.0% 11.0% 11.1%
Net Income (pre one-times) 8.3 18.3 25.7 24.0 29.8 33.4 38.1 43.0 15.7%
% Growth -- -- -- 189.5% 24.3% 12.2% 13.8% 13.0%
Fully Diluted EPS $ 0.64 $ 1.25 $ 1.75 $ 1.63 $ 1.99 $ 2.23 $ 2.54 $ 2.87 15.1%
% Growth -- -- -- 156.9% 21.8% 12.2% 13.8% 13.0%
Cash Flow Items:
Capital Expenditures (45.0) (35.0) (25.0) (25.0) (15.8) (16.6) (17.4) (18.3)
Change in Working Capital 5.2 0.0 (5.2) (5.2) (6.9) (7.8) (8.2) (8.6)
</TABLE>
- --------------------------
(a) Pro Forma as if Citron had been acquired on November 1, 1997. 1998 data is
from 8-K dated 3/19/99, adjusted to eliminate $4.5 million of expenses
related to Citron tender offer expenses and write down of intangibles.
(b) Latest twelve months for the period ending April 30, 1999, pro forma for
Citron acquisition.
(c) Management's guidance to research analysts.
-5-
<PAGE> 8
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
COMPARISON OF PROJECTIONS
($ in millions, except per share)
<TABLE>
<CAPTION>
Revenues [Bar graph comparing Management and Wall Street
average estimates of revenues]
KEY PROJECTIONS PARAMETERS Year Average of Street Management Estimates
- ------------------------------------------------------------------------ ---- ----------------- --------------------
<S> <C> <C> <C>
- - 1999 revenue growth is slower than Wall Street 1998A -- 675
estimate, but management expects to hit earnings targets 1999 689 675
based on additional synergies from Citron. 2000 761 734
2001 -- 768
- - No acquisitions assumed in management model. 2002 -- 804
- - Management believes that 5% projected revenues growth is an
aggressive target to hit without acquisitions.
</TABLE>
<TABLE>
<CAPTION>
EBITDA [Bar graph comparing Management and Wall Street
average estimates of EBITDA]
PRODUCT LINE EXPECTATIONS
- ------------------------------------------------------------------------
PRODUCT LINE 1998 SALES 1999 GROWTH MARGIN EXPECTATION Year Average of Street Management Estimates
- ---------------- ------------ ---------------- -------------------- ---- ----------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Custom Trays $308 Slight decrease ~24%/Flat 1998A -- 83
1999 107 104
Gloves 110 12% increase ~31%/up 100 bp 2000 121 114
2001 -- 119
Circon 153 4-6% increase ~56%/Flat 2002 -- 124
All Other 105 8-12% increase ~25%/up 100-150 bp
</TABLE>
EPS [Bar graph comparing Management, Wall Street
average, and IBES estimates of EPS]
<TABLE>
<CAPTION>
Year Average of Street Management Estimates IBES
---- ----------------- -------------------- ----
<S> <C> <C> <C>
1998A .64
1999 1.75 1.75 1.75
2000 2.09 1.99 2.09
2001 2.42 2.24 2.40
2002 2.81 2.54 2.76
</TABLE>
Notes: Average of Street consists of DLJ, Everen, and Bear Stearns
research reports pro forma for Citron acquisition, with EPS
beyond 2000 projected at 16.0%. IBES EPS beyond 2000 projected
at 15.0%. Management estimates are pro forma for Citron, except
for 1999 which includes partial year impact for comparability
to analyst projections.
-6-
<PAGE> 9
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
SUMMARY OF PROCESS
<TABLE>
<CAPTION>
SENT SIGNED
PARTIES CONFIDENTIALITY CONFIDENTIALITY INDICATION OF
CONTACTED AGREEMENT AGREEMENT INTEREST COMMENT
---------------- --------------- --------------- ------------- --------------------------------
<S> <C> <C> <C> <C>
Strategic
A
B
C X X Not interested in Citron
D
E X X Not interested in Citron
F
G X Interested in Citron
H X
Financial
1 X X X $25.00 - $27.50
2 X X X $23.00 - $26.00
</TABLE>
-7-
<PAGE> 10
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
SUMMARY VALUATION OF MEDIC
($ in millions, except per share)
VALUE PER SHARE OF MEDIC
[Bar graph summarizing valuation per share of Medic]
<TABLE>
<CAPTION>
Comparison Field High/Low Range Mean/Median Range
- ---------------- -------------- -----------------
<S> <C> <C>
Comparable Companies(a) $33-$17 $24-$25 52 week high - $30.63
Precedent Transactions(b) $42-$18 $25-$28 Offer Price - $26.00
Premiums Paid(c) $27-$17 $21-$22 Current Price-$19.25
% of 52 week high(c) $35-$24 $29-$30 52 week low - $14.88
DCF Valuation(d) $35-$23 $28-$30
LBO Transactions(e) $37-$18 $28-$29
LBO Valuation(f) $26-$23
</TABLE>
(a) Range of implied values assuming low and high multiples for Arrow
International, ConMed, Dexter, Mentor, Owens & Minor and Safeskin.
(b) Range of implied values assuming low and high multiples for selected
comparable healthcare transactions. See Appendix B.
(c) Range of implied values assuming 30 day premiums and 52 week highs for
selected comparable healthcare transactions.
(d) Assumes EBITDA exit multiples of 6.5x to 8.5x, perpetual growth rates of 3%
- 5% and discount rate of 11%.
(e) Range of implied values for selected medical LBOs. See Appendix C.
(f) Assumes LBO IRR of 25% to 30% based on 6.5x to 8.5x EBITDA exit multiples
in Year 5 and 5.7x pro forma Debt/LTM EBITDA.
-8-
<PAGE> 11
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
ANALYSIS AT VARIOUS PRICES
($ in millions, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Stock Price $ 19.25 $ 24.00 $ 26.00 $ 28.00 $ 31.00
% Premium to Current 0.0% 24.7% 35.1% 45.5% 61.0%
Treasury Adjusted Shares 14.6 14.8 14.9 15.0 15.1
EQUITY VALUE $ 281.4 $ 356.2 $ 387.7 $ 419.3 $ 466.6
ENTERPRISE VALUE $ 649.8 $ 724.7 $ 756.2 $ 787.8 $ 835.0
</TABLE>
ENTERPRISE VALUE AS A MULTIPLE OF:
<TABLE>
<CAPTION>
SELECTED COMPARABLE COMPANIES (A)
---------------------------------------------------------
MEDIC
DATA GROUP ARROW OWENS &
Revenue ------- MEDIAN INT'L CONMED DEXTER MENTOR MINOR SAFESKIN
------ ----- ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000E $733.9 0.89x 0.99x 1.03x 1.07x 1.14x 2.14x 2.14x 2.22x NA 1.24x 0.18x 2.58x
1999E 701.8 0.93 1.03 1.08 1.12 1.19 2.26 2.26 2.38 NA 1.42 0.20 3.15
LTM (b) 679.9 0.96 1.07 1.11 1.16 1.23 2.05 2.46 2.50 0.94 1.64 0.21 3.33
EBITDA
2000E $114.0 5.7x 6.4x 6.6x 6.9x 7.3x 6.6x 7.0x 8.3x NA 5.2x 6.2x 9.7x
1999E 106.1 6.1 6.8 7.1 7.4 7.9 7.4 8.0 8.8 NA 6.2 6.7 13.3
LTM (b) 97.5 6.7 7.4 7.8 8.1 8.6 9.0 9.0 9.2 6.0 10.0 7.7 11.5
EBIT
2000E $ 80.7 8.1x 9.0x 9.4x 9.8x 10.4x 8.0x 8.1x 10.7x NA 6.3x 7.9x 12.8x
1999E 72.9 8.9 9.9 10.4 10.8 11.5 9.0 9.4 11.6 NA 7.6 8.5 17.3
LTM (b) 67.3 9.7 10.8 11.2 11.7 12.4 11.9 11.5 12.3 8.5 13.2 9.9 14.8
EQUITY VALUE AS A MULTIPLE OF:
Net Income
2000E $ 29.8 9.4x 12.0x 13.0x 14.1x 15.7x 11.7x 11.5x 14.9x 15.0x 10.8x 10.8x 11.8x
1999E 24.0 11.7 14.9 16.2 17.5 19.5 15.3 13.2 17.8 18.0 12.8 12.9 17.5
LTM (b) 18.3 15.4 19.5 21.2 22.9 25.5 15.7 16.0 19.1 15.5 19.8 14.9 14.0
</TABLE>
- ------------------------------------------------
(a) Comparable companies are calendarized to a December 31 year end.
(b) Medic latest twelve months pro forma financial information for period May
1, 1998 and May 1, 1999.
-9-
<PAGE> 12
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
IMPLIED VALUATION - EQUITY COMPARABLES
($ in millions, except per share data)
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
NORMALIZED MULTIPLES (A) PER SHARE (B)
-------------------------------- MEDIC --------------------------------------
LOW MEDIAN HIGH DATA LOW MEDIAN HIGH
----- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
2000E 1.24x -- 2.14x 2.22x $ 733.9 $ 37.11 -- $82.23 $86.22
1999E 1.42 -- 2.26 2.38 701.8 43.08 -- 83.28 88.91
LTM 0.94 -- 2.05 2.50 679.9 18.46 -- 70.13 91.19
EBITDA
2000E 5.2x -- 6.6x -- 8.3x $ 114.0 $ 15.28 -- $26.17 -- $39.26
1999E 6.2 -- 7.4 -- 8.8 106.1 19.63 -- 28.39 -- 38.32
LTM 6.0 -- 9.0 -- 10.0 97.5 14.83 -- 34.50 -- 41.63
EBIT
2000E 6.3x -- 8.0x -- 10.7x $ 80.7 $ 9.61 -- $18.72 -- $33.60
1999E 7.6 -- 9.0 -- 11.6 72.9 12.50 -- 19.46 -- 32.71
LTM 8.5 -- 11.9 -- 14.8 67.3 14.02 -- 29.63 -- 42.78
Net Income
2000E 10.8x -- 11.7x -- 15.0x $ 29.8 $ 21.95 -- $23.81 -- $30.52
1999E 12.8 -- 15.3 -- 18.0 24.0 21.04 -- 25.14 -- 29.45
LTM 14.0 -- 15.7 -- 19.8 18.3 17.58 -- 19.69 -- 24.78
MEAN(c) $16.67 -- $23.62 -- $33.98
MEDIAN(c) 17.45 -- 24.47 -- 33.16
High(c) 21.95 -- 34.50 -- 42.78
LOW(c) 9.61 -- 18.72 -- 24.78
</TABLE>
- -----------------------------
(a) See Appendix A for comparables.
(b) Assumes 14.6 million treasury adjusted diluted shares outstanding and net
debt of $368.5 million.
(c) Revenue multiples excluded from summary multiples. LTM multiples excluded
from the calculation of Mean and Median.
-10-
<PAGE> 13
PROJECT MEDIC II. Valuation
- --------------------------------------------------------------------------------
Implied Valuation - Healthcare Transactions
($ in millions, except per share data)
<TABLE>
<CAPTION>
Implied Equity Value
Normalized Multiples (a) Per Share (b)
-------------------------------- Medic ----------------------------------------
Low Median High Data Low Median High
----- ------ ---- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenue 0.89x -- 1.78x -- 2.73x $679.9 $16.33 -- $57.66 -- $101.59
LTM EBITDA 7.2 -- 9.2 -- 10.7 97.5 22.81 -- 36.30 -- 46.06
LTM EBIT 8.6 -- 11.0 -- 14.6 67.3 14.38 -- 25.23 -- 42.03
LTM Net Income 14.4 -- 18.2 -- 25.3 18.3 18.02 -- 22.80 -- 31.66
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Mean(c) $18.40 -- $28.11 -- $39.92
Median(c) 18.02 -- 25.23 -- 42.03
High(c) 22.81 -- 36.30 -- 46.06
Low(c) 14.38 -- 22.80 -- 31.66
</TABLE>
- --------------------
(a) See Appendix B for comparable transactions.
(b) Assumes 14.6 million treasury adjusted diluted shares outstanding and
net debt of $368.5 million.
(c) Revenue multiples excluded from summary multiples.
- 11 -
<PAGE> 14
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
Implied Valuation - Premiums Paid
($ in millions, except per share data)
<TABLE>
<CAPTION>
Acquisition
Price Range
Number of --------------------------- Medic
Transactions Low Median High Data
------------ ----- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Acquisition Price as % of 52-week High (a)
Selected Healthcare Transactions 8 78.4% -- 94.6% -- 113.5% $30.63
Selected Healthcare LBO Transactions 7 93.8% -- 96.6% -- 99.5% 30.63
Acquisition Price as % Premium to One Month Prior (a)
Selected Healthcare Transactions 7 9.2% -- 19.6% -- 67.4% $16.00 (b)
Selected Healthcare LBO Transactions 7 5.5% -- 16.8% -- 43.5% 16.00 (b)
Selected LBO Transactions Since 1998 12 8.6% -- 32.5% -- 106.1% 16.00 (b)
<CAPTION>
Implied Valuation
------------------------------
Low Median High
------ ------ ------
<S> <C> <C> <C> <C> <C>
Acquisition Price as % of 52-week High (a)
Selected Healthcare Transactions $24.02 -- $28.96 -- $34.76
Selected Healthcare LBO Transactions 28.73 -- 29.57 -- 30.48
Acquisition Price as % Premium to One Month Prior (a)
Selected Healthcare Transactions $17.48 -- $20.89 -- $26.79
Selected Healthcare LBO Transactions 16.87 -- 19.71 -- 22.96
Selected LBO Transactions Since 1998 17.38 -- 23.03 -- 32.97
</TABLE>
(a) See data in Appendices B and C.
(b) Medic closing price on May 10, 1999.
- 12 -
<PAGE> 15
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
Summary Discounted Cash Flow Analysis
($ in millions, except per share data)
<TABLE>
<CAPTION>
Projected Year Ended November 1,
----------------------------------------------------------------------
1999 (a) 2000 2001 2002 2003
--------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EBITDA (Including Synergies) (b) $53.1 $114.0 $119.1 $124.4 $130.0
Less: D&A (16.6) (33.3) (34.5) (35.6) (36.8)
--------- ------ ------ ------ ------
EBIT $36.4 $ 80.7 $ 84.6 $ 88.8 $ 93.2
Less: Taxes (17.8) (35.1) (36.6) (38.2) (40.0)
--------- ------ ------ ------ ------
Tax Rate 39.0% 39.0% 39.0% 39.0% 39.0%
Unlevered Net Income $ 18.6 $ 45.6 $ 48.0 $ 50.6 $ 53.2
Capital Expenditures $(12.5) $(15.8) ($16.6) ($17.4) ($18.3)
Depreciation & Amortization 16.6 33.3 34.5 35.6 36.8
Change in Working Capital (2.6) (6.9) (7.8) (8.2) (8.6)
--------- ------ ------ ------ ------
Unlevered Free Cash Flow $20.1 $ 56.2 $ 58.1 $ 60.6 $ 63.2
========= ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
EBITDA Valuation
- ----------------------------------------------------------------------------------------------------------
NPV of Terminal Value @ Enterprise Value @ Equity Value Per Share (c) @
NPV of EBITDA Exit Multiple of EBITDA Exit Multiple of EBITDA Exit Multiple of
Discount Future ----------------------- ----------------------- -----------------------------
Rate Cash Flows 6.5x 7.5x 8.5x 6.5x 7.5x 8.5x 6.5x 7.5x 8.5x
- -------- ---------- ---- ---- ---- ---- ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.0% $198 $550 $635 $720 $749 $833 $918 $25.89 $31.66 $37.43
11.0% 194 528 610 691 722 803 884 24.07 29.61 35.15
12.0% 189 507 586 664 696 774 853 22.34 27.66 32.97
</TABLE>
<TABLE>
<CAPTION>
Perpetual Growth Valuation of Unlevered Free Cash Flows
- ----------------------------------------------------------------------------------------------------------------
NPV of Terminal Value @ Enterprise Value @ Equity Value Per Share (c) @
NPV of Perpetual Growth Rate of Perpetual Growth Rate of Perpetual Growth Rate of
Discount Future ------------------------ ------------------------ -----------------------------
Rate Cash Flows 3.0% 4.0% 5.0% 3.0% 4.0% 5.0% 3.0% 4.0% 5.0%
- -------- ---------- ----- ----- ----- ----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.0% $198 $605 $713 $864 $804 $911 $1,062 $29.65 $36.99 $47.26
11.0% 194 509 587 691 702 780 885 22.73 28.06 35.17
12.0% 189 434 493 569 623 682 758 17.35 21.37 26.54
</TABLE>
(a) Income and cash flow data is pro rata for six months from May 1, 1999
to November 1, 1999.
(b) Assumes annualized synergies of $5.0 million per year.
(c) Assumes 14.6 million treasury adjusted diluted shares outstanding and
net debt of $368.5 million.
- 13 -
<PAGE> 16
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
Implied Valuation - LBO Transactions
($ in millions, except per share data)
<TABLE>
<CAPTION>
Implied Equity Value
Normalized Multiples (a) Per Share (b)
------------------------------- Medic -----------------------------------
Low Median High Data Low Median High
----- ------ ----- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Revenue 0.87x -- 1.94x -- 2.73x $679.9 $15.26 -- $65.03 -- $101.59
LTM EBITDA 7.2 -- 8.6 -- 9.5 97.5 22.81 -- 32.33 -- 37.96
LTM EBIT 8.6 -- 11.8 -- 13.5 67.3 14.38 -- 28.93 -- 36.81
LTM Net Income 14.4 -- 18.7 -- 23.4 18.3 18.02 -- 23.41 -- 29.30
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Mean(c) $18.40 -- $28.22 -- $34.69
Median(c) 18.02 -- 28.93 -- 36.81
High(c) 22.81 -- 32.33 -- 37.96
Low(c) 14.38 -- 23.41 -- 29.30
</TABLE>
(a) See Appendix C for comparable transactions.
(b) Assumes 14.6 million treasury adjusted diluted shares outstanding and
net debt of $368.5 million.
(c) Revenue multiples excluded from summary multiples.
- 14 -
<PAGE> 17
PROJECT MEDIC II. Valuation
- -------------------------------------------------------------------------------
SUMMARY LBO ANALYSIS - RECAPITALIZATION
($ in millions, except per share data)
<TABLE>
<CAPTION>
Key Assumptions
- ----------------------------------------------------------------
<S> <C>
% Shares Repurchased 87.3%
Management Carry 5.0%
Assumed Non-Public Annual Savings $ 10.0
Options Proceeds 5.8
Senior Bank Debt @ 8.1% 309.8
Subordinated Debt @ 11.0% 250.0
PIK Preferred Stock @ 14.0% & 3.0% Warrants 50.0
Equity Balance
</TABLE>
<TABLE>
<CAPTION>
Equity IRR Assuming Exit at End of Year 5
- -------------------------------------------------------------------------------
Purchase Price Per Share
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$22.00 $23.00 $24.00 $25.00 $26.00 $27.00
------ ------ ------ ------ ------ ------
EBITDA 6.5x 19.5% 17.3% 15.3% 13.5% 11.9% 10.4%
Exit 7.5x 26.5% 24.1% 22.0% 20.1% 18.4% 16.8%
Multiple 8.5x 32.2% 29.7% 27.5% 25.5% 23.7% 22.0%
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Credit Statistics
- ------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
LTM (a) 1999 2000 2001 2002 2003
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total Debt/EBITDA 5.7x 5.0x 4.1x 3.7x 3.2x 2.8x
EBITDA/Interest 1.9 2.1 2.5 2.8 3.1 3.5
EBITDA - CapEx / Interest 1.2 1.6 2.2 2.4 2.7 3.0
Total Debt & Pref. /EBITDA 6.3x 7.4x 5.5x 4.7x 4.3x 3.9x
Senior Debt Paydown 0.0% 4.8% 15.4% 27.1% 40.3% 54.9%
</TABLE>
(a) Latest twelve months estimate for the period between May 1, 1998 and
May 1, 1999.
- 15 -
<PAGE> 18
PROJECT MEDIC APPENDIX A
- --------------------------------------------------------------------------------
Equity Comparables
<TABLE>
<CAPTION>
Group Group Group Group ARROW
Mean Median High Low MEDIC INTL CONMED DEXTER
----- ------ ----- ----- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Ended 1/31/99 2/28/99 3/31/99 3/31/99
LFY Ended 11/1/98 8/31/98 12/31/98 12/31/98
Current Market Information
Ticker ARRO US CNMD US DEX US
Exchange NASDAQ NASDAQ NYSE
Share Price on 6/9/99 $ 19.25 $26.38 $ 31.38 $ 38.63
52 Week High 30.63 33.00 35.75 41.50
52 Week Low 14.88 18.63 19.75 23.50
Indicated Dividend -- 0.22 -- 1.04
Fully Diluted Shares Outstanding 14.53 23.17 15.70 23.14
Equity Value (a) $ 279.8 $611.2 $ 492.6 $ 893.6
Enterprise Value (b) 641.8 671.4 868.5 1,087.3
Enterprise Value/Sales
2000E 1.9x 2.1x 2.2x 1.2x 0.8x 2.1x 2.2x NA
1999E 2.0 2.3 2.4 1.4 0.9 2.3 2.4 NA
LTM 1.9 2.0 2.5 0.9 1.2 2.5 2.5 0.9
Enterprise Value/EBITDA
2000E 6.7x 6.6x 8.3x 5.2x 5.4x 7.0x 8.3x NA
1999E 7.4 7.4 8.8 6.2 6.3 8.0 8.8 NA
LTM 8.4 9.0 10.0 6.0 6.5 9.0 9.2 6.0
Enterprise Value/EBIT
2000E 8.2x 8.0x 10.7x 6.3x 7.2 8.1 10.7 NA
1999E 9.3 9.0 11.6 7.6 8.6 9.4 11.6 NA
LTM 11.7 11.9 14.8 8.5 9.4 11.5 12.3 8.5
Price to Earnings
2000E 12.5x 11.7x 15.0x 10.8x 9.0x 11.5x 14.9x 15.0x
1999E 15.4 15.3 18.0 12.8 10.8 13.2 17.8 18.0
LTM 16.6 15.7 19.8 14.0 13.8 16.0 19.1 15.5
Long-Term Growth Rate (c) 11.1% 13.8% 18.8% 13.8%
Summary Capitalization 1/31/99 2/28/99 3/31/99 3/31/99
-------- ------- ------- -------
Cash and Equivalents $ 7.0 $ 5.1 $ 4.2 $ 126.4
Short-Term Debt 22.6 53.6 25.4 71.0
Long-Term Debt 346.4 11.7 354.6 164.0
Minority Interest -- -- -- 85.0
Preferred Stock -- -- -- --
Common Stock 275.3 264.0 182.2 443.2
-------- ------- ------- -------
Total Book Capitalization (d) $644.4 $329.2 $562.2 $ 763.2
======== ======= ======= =======
Total Debt / Total Capitalization 57.3% 19.8% 67.6% 30.8%
<CAPTION>
OWENS &
MENTOR MINOR SAFESKIN
-------- -------- --------
<S> <C> <C> <C>
LTM Ended 12/31/98 3/31/98 3/31/99
LFY Ended 3/31/98 12/31/98 12/31/98
Current Market Information
Ticker MNTR US OMI US SFSK US
Exchange NASDAQ NYSE NASDAQ
Share Price on 6/9/99 $ 15.56 $ 10.88 $ 11.38
52 Week High 27.63 17.25 47.13
52 Week Low 9.38 9.50 7.13
Indicated Dividend 0.10 0.20 --
Fully Diluted Shares Outstanding 25.08 32.68 55.42
Equity Value (a) $ 390.4 $ 355.4 $ 630.4
Enterprise Value (b) 382.1 636.7 734.5
Enterprise Value/Sales
2000E 1.2x 0.2x(*) 2.6x(*)
1999E 1.4 0.2 (*) 3.2 (*)
LTM 1.6 0.2 (*) 3.3 (*)
Enterprise Value/EBITDA
2000E 5.2x 6.2x 9.7x(*)
1999E 6.2 6.7 13.3 (*)
LTM 10.0 7.7 11.5 (*)
Enterprise Value/EBIT
2000E 6.3 7.9 12.8 (*)
1999E 7.6 8.5 17.3 (*)
LTM 13.2 9.9 14.8
Price to Earnings
2000E 10.8x 10.8x 11.8x
1999E 12.8 12.9 17.5
LTM 19.8 14.9 14.0
Long-Term Growth Rate (c) 19.2% 15.0% 21.0%
Summary Capitalization 12/31/98 3/31/98 3/31/99
-------- ------- -------
Cash and Equivalents $ 13.8 $ 0.7 $ 7.0
Short-Term Debt 5.5 -- 6.0
Long-Term Debt -- 150.0 105.0
Minority Interest -- -- --
Preferred Stock -- 132.0 --
Common Stock 152.1 165.2 122.3
------- ------- -------
Total Book Capitalization (d) $ 157.6 $ 447.2 $233.3
======= ======= =======
Total Debt / Total Capitalization 3.5% 33.5% 47.6%
</TABLE>
(*) Excluded from summary multiples as outliers.
- 16 -
<PAGE> 19
PROJECT MEDIC Appendix B
- ------------------------------------------------------------------------------
HEALTHCARE TRANSACTIONS COMPARABLES
($ in millions except per share data)
<TABLE>
<CAPTION>
DATES: PRICE PER SHARE/ TRANSACTION VALUE/ LTM
ANNOUNCED EQUITY VS. ---------------- ----------------------
CLOSED BUYER/TARGET TRANS. VALUE LTM EPS BOOK VALUE EBIT EBITDA SALES
------ ------------ ------------ ------- ---------- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
5/27/99 The Carlyle Group $ 164.8 15.4x 5.1x 8.6x 7.5x 2.2x
NA EMPI Inc. 162.82
4/30/99 Chase Capital (Chase Manhattan Corp.) $ 201.0 NA NA 12.4x NA 1.9x
NA Donjoy (Smith & Nephew) 201.0
12/23/98 Kimberly-Clark Corporation 778.3 24.9* 4.4* 14.4* 12.3* 4.7*
NA Ballard Medical Products 703.7
11/20/98 Maxxim Medical, Inc. 207.1 25.3 1.9 16.5* 10.7 1.6
1/8/99 Circon Corporation 241.4
10/9/98 Cardinal Health Inc. 4,768.8 44.6* 12.5* 24.1* 15.8* 1.3*
2/3/99 Allegiance Corporation 5,603.8
5/20/98 Maxxim Medical, Inc. 31.50 NA NA NA NA 1.5
6/29/98 Winfield Medical 36.8
2/12/98 Freeman Spogli & Co., and Management 162.3 14.4 7.2 8.6 7.2 1.8
4/7/98 Hudson Respiratory Care Inc. 182.0
12/22/97 Tyco International Ltd. 1,770.0 21.8 NA 14.6 9.5 1.8
3/3/98 Sherwood-Davis & Geck 1,770.0
11/27/97 Conmed Corporation 370.0 NA NA 10.1 NA 1.7
12/31/97 Linvatec Corp. (Bristol-Myers 386.6
9/4/97 Kimberly-Clark Corporation 407.8 16.8 4.2 11.0 9.0 2.2
12/18/97 Tecnol Medical Products Inc. 407.9
7/11/97 Investor Group (Freemont Partners) 821.3 19.6 4.1 12.7 9.5 2.7
11/6/97 Kinetic Concepts, Inc. 780.4
1/28/97 McKesson Corporation 347.0 NM NM 15.9* 12.6* 0.5*
2/24/97 General Medical Inc. 775.0
2/26/96 Maxxim Medical, Inc. 112.0 15.7 6.6 11.3 9.5 0.9
7/29/96 Sterile Concepts Holdings Inc. 139.6
6/1/95 Maxxim Medical, Inc. 75.0 NA NA NA NA 0.9
7/6/95 Medical Glove Division (Becton Dickinson) 75.0
7/14/94 Tyco International Ltd. 1,219.4 19.7 4.8 10.5 8.6 1.8
10/19/94 Kendall International Inc. 1,428.2
Mean: 18.6x 4.8x 11.1x 8.9x 1.8x
Median: 18.2 4.8 11.0 9.2 1.8
High: 25.3 7.2 14.6 10.7 2.7
Low: 14.4 1.9 8.6 7.2 0.9
<CAPTION>
DATES: PRICE AS
ANNOUNCED ONE MONTH EBIT/ SALES % OF 52
CLOSED BUYER/TARGET PREMIUM SALES GROWTH WEEK HIGH
------ ------------ ------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
5/27/99 The Carlyle Group 16.8% 25.7% 1.7% 93%
NA EMPI Inc.
4/30/99 Chase Capital (Chase Manhattan Corp.) NM 15.6% NA NM
NA Donjoy (Smith & Nephew)
12/23/98 Kimberly-Clark Corporation 14.3% 32.5% 0.17 90%
NA Ballard Medical Products
11/20/98 Maxxim Medical, Inc. 67.4% 9.7% NM 78%
1/8/99 Circon Corporation
10/9/98 Cardinal Health Inc. 24.1% 5.2% -4.0% 112%
2/3/99 Allegiance Corporation
5/20/98 Maxxim Medical, Inc. NM NA NA NM
6/29/98 Winfield Medical
2/12/98 Freeman Spogli & Co., and Management NM 21.3% 7.1% NM
4/7/98 Hudson Respiratory Care Inc.
12/22/97 Tyco International Ltd. NA 12.4% NA NA
3/3/98 Sherwood-Davis & Geck
11/27/97 Conmed Corporation NA 16.7% NA NA
12/31/97 Linvatec Corp. (Bristol-Myers
9/4/97 Kimberly-Clark Corporation NM 20.1% NA 83%
12/18/97 Tecnol Medical Products Inc.
7/11/97 Investor Group (Freemont Partners) 9.2% 21.4% 9.4% 97%
11/6/97 Kinetic Concepts, Inc.
1/28/97 McKesson Corporation NM 2.9% 25.8% NM
2/24/97 General Medical Inc.
2/26/96 Maxxim Medical, Inc. 55.3% 8.0% 11.5% 113%
7/29/96 Sterile Concepts Holdings Inc.
6/1/95 Maxxim Medical, Inc. NA NA NA NA
7/6/95 Medical Glove Division (Becton Dickinson)
7/14/94 Tyco International Ltd. 19.6% 16.7% NA 110%
10/19/94 Kendall International Inc.
Mean: 29.5% 16.0% 9.8% 97.1%
Median: 19.6% 16.7% 9.4% 94.6%
High: 67.4% 32.5% 25.8% 113.5%
Low: 9.2% 2.9% -4.0% 78.4%
</TABLE>
- -------------------------------------
(*) Excluded from summary multiples as outliers.
- 17 -
<PAGE> 20
PROJECT MEDIC Appendix C
- -------------------------------------------------------------------------------
LBO TRANSACTIONS COMPARABLES
($ in millions except per share data)
<TABLE>
<CAPTION>
Dates: Price Per Share/ Transaction Value/ LTM
Announced Equity vs. ---------------- ------------------------ One Month EBIT/ Sales
Closed Buyer/Target Trans.Value LTM EPS Book Value EBIT EBITDA Sales Premium Sales Growth
- ----------- ------------------------------------- ------------ ------- ---------- ------- ------- ------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/27/99 The Carlyle Group $ 164.8 15.4x 5.1x 8.6x 7.5x 2.2x 16.8% 25.7% 1.7%
NA EMPI Inc. 162.82
4/30/99 Chase Capital (Chase Manhattan Corp.) $ 201.0 NA NA 12.4x NA 1.9x NM 15.6% NA
NA Donjoy (Smith & Nephew) 201.0
3/3/99 Welsh, Carson Anderson & Stowe et al. 780.5 17.8 3.3 11.1 8.6 1.6 43.5% 14.4% 24.9%
NA Concentra Managed Care 989.5
1/27/99 Madison Dearborn Partners et al. 355.4 NA NA 6.4 * 5.5 * 0.5 * NA 8.1% NA
NA Team Health Grp (MedPartners) 355.4
3/13/98 Welsh Carson Anderson & Stowe et al. 227.8 38.1 * 2.4 22.4 * 10.6 * 2.5 36.3% 11.0% 70.3%
7/31/98 MedCath 372.7
2/12/98 Freeman Spogli & Co., and Management 162.3 14.4 7.2 8.6 7.2 1.8 NM 21.3% 7.1%
4/7/98 Hudson Respiratory Care Inc. 182.0
1/15/98 Bruckmann Rosser Sherrill & Co. 392.1 NM NM 18.1 * 8.9 3.4 * 25.4% 18.9% 8.6%
5/29/98 MEDIQ Incorporated 534.3
8/7/97 Thomas H. Lee Co. 1,041.7 23.4 9.4 13.5 9.3 0.6 * 5.5% 4.6% 54.6%
1/21/98 Fisher Scientific International Inc. 1,340.5
7/11/97 Fremont Partners et al. 821.3 19.6 4.1 12.7 9.5 2.7 9.2% 21.4% 9.4%
11/6/97 Kinetic Concepts, Inc. 780.4
6/24/97 Apollo Management, L.P. 77.29 20.5 2.8 14.1 * 7.5 4.0 * 8.0% 28.3% 23.5%
9/29/97 SMT Health Services Inc. 85.10
11/29/94 River Medical Acquisition Corp. (DLJ) 200.0 NA NA NA NA 0.9 NA NA NA
12/31/94 Ivac Corporation (Eli Lilly) 200.0
Mean: 18.5x 4.9x 11.2x 8.4x 1.9x 20.7% 16.9% 25.0%
Median: 18.7 4.1 11.8 8.6 1.9 16.8% 17.3% 16.5%
High: 23.4 9.4 13.5 9.5 2.7 43.5% 28.3% 70.3%
Low: 14.4 2.4 8.6 7.2 0.9 5.5% 4.6% 1.7%
<CAPTION>
Dates: Price as
Announced % of 52
Closed Buyer/Target Week High
- ---------- ------------------------------------- ---------
<S> <C> <C>
5/27/99 The Carlyle Group 93%
NA EMPI Inc.
4/30/99 Chase Capital (Chase Manhattan Corp.) NM
NA Donjoy (Smith & Nephew)
3/3/99 Welsh, Carson Anderson & Stowe et al. 46.5%
NA Concentra Managed Care
1/27/99 Madison Dearborn Partners et al. NA
NA Team Health Grp (MedPartners)
3/13/98 Welsh Carson Anderson & Stowe et al. 93.8%
7/31/98 MedCath
2/12/98 Freeman Spogli & Co., and Management NM
4/7/98 Hudson Respiratory Care Inc.
1/15/98 Bruckmann Rosser Sherrill & Co. 107.4%
5/29/98 MEDIQ Incorporated
8/7/97 Thomas H. Lee Co. 99.5%
1/21/98 Fisher Scientific International Inc.
7/11/97 Fremont Partners et al. 96.6%
11/6/97 Kinetic Concepts, Inc.
6/24/97 Apollo Management, L.P. 98.9%
9/29/97 SMT Health Services Inc.
11/29/94 River Medical Acquisition Corp. (DLJ) NA
12/31/94 Ivac Corporation (Eli Lilly)
Mean: 90.8%
Median: 96.6%
High: 107.4%
Low: 46.5%
</TABLE>
- --------------------------------
* Excluded from summary multiples as outliers.
- 18 -
<PAGE> 21
PROJECT MEDIC Appendix D
- -------------------------------------------------------------------------------
CHARACTERISTICS OF COMPARABLE PUBLICLY DISCLOSED LBO TRANSACTIONS
($ in millions)
<TABLE>
<CAPTION>
DATES: ONE MGMT SPECIAL OWNERSHIP
ANNOUNCED EQUITY VS. MONTH LED COMMITTEE OF INTERESTED
CLOSED BUYER/TARGET TRANS. VALUE PREMIUM BUYOUT APPOINTED PROCESS PARTIES
- ---------- -------------------------- ------------ ------- ------- --------- -------------------- ----------------
Fox Paine & Co LLC 387.7 62.5% Yes Yes Management offer led Mgmt 12.6%
Medic 756.2 to limited auction All Ben. 12.6%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/99 Management and Trivest 254.2 28.8% Yes Yes Offer from management Mgmt 37.9%
NA Winsloew Furniture Inc 254.1 led to limited auction Trivest 20.2%
2/3/99 Management and Vestar 510.9 15.4% Yes Yes Management offer led Mgmt 12.5%
NA St John Knits Inc 496.4 to limited auction Vestar 7.3%
11/23/98 Management 81.1 14.5% Yes Yes Mgmt merger agreement Mgmt 20.3%
NM Hudson General 44.3 led to unsolicited offers GAMCO 49.6%
10/22/98 Welsh Carson 192.1 86.9% No Yes Limited auction Mgmt 10.6%
NA Centennial Healthcare Corp 285.7 WCAS 25.3%
7/24/98 Blackstone and Veritas 142.9 75.8% No No Initial Blackstone offer NA
9/21/98 Republic Engineered Steels 394.1 led to full auction
6/24/98 Apollo Management LP 195.2 56.5% No Yes Full auction Mgmt 18.8%
8/28/98 MTL Inc 248.4 Apollo 24.7%
6/23/98 Investor Group 158.0 39.1% No No Full auction Mgmt 17.0%
NA Celadon Group Inc 249.5 All Ben. 60.8%
4/21/98 Jupiter Partners LP 232.5 17.8% No No Limited auction Mgmt 46.0%
8/25/98 PCA International Inc. 271.3 All Ben. 70.7%
3/13/98 Management 85.5 15.9% Yes Yes Management offer led NA
NA Pollo Tropical Inc. 88.7 to limited auction
3/13/98 Welsh Carson 227.8 36.3% No Yes Full auction Mgmt 24.4%
7/31/98 MedCath 372.7 WCAS 7.5%
2/17/98 Investor Group 146.8 8.6% No Yes Full auction Mgmt 25.6%
8/17/98 Bell Sports 215.2 All Ben. 54.2%
1/15/98 Bruckmann Rosser Sherrill 392.1 25.4% No Yes Full auction Mgmt 73.5%
5/29/98 MEDIQ Incorporated 534.3
12/22/97 Clayton, Dubilier & Rice 889.5 30.4% Yes Yes Bilateral negotiations Mgmt 2.5%
5/21/98 Dynatech Corp. 842.2 with management All Ben. 14.8%
8/7/97 Thomas H. Lee Co. 1,041.7 5.5% No No Unsolicited offer led Mgmt 7.3%
1/21/98 Fisher Scientific Int. Inc. 1,340.5 to full auction All Ben. 17.8%
7/11/97 Fremont Partners et al. 821.3 9.2% No No Full auction Mgmt 54.9%
11/6/97 Kinetic Concepts, Inc. 780.4 RCBA 9.5%
6/24/97 Apollo Management, L.P. 77.3 8.0% No No Full auction Mgmt 19.7%
9/29/97 SMT Health Services Inc. 85.1 All Ben. 34.7%
6/6/96 Investor Group 2,136.8 22.0% No Yes Full auction Mgmt 2.2%
10/1/96 AT&T Capital Corp. 9,196.9
4/23/96 Investment Group (Mgmt) 697.3 -4.0% No Yes Limited auction that Mgmt 23.0%
8/22/96 Sterling Chemicals, Inc. 820.2 expanded to a full auction
10/26/95 Investment group (Mgmt) 1,330.1 -12.9% No Yes Full auction Mgmt 0.1%
3/28/96 Riverwood International Inc. 2,305.6 Manville 81.3%
--------------------------------------------------
Mean (excluding Medic) 25.2%
Median (excluding Medic) 17.8%
--------------------------------------------------
<CAPTION>
DATES: BREAKUP BREAKUP FEE + EXP.
ANNOUNCED NO SHOP INDUCEMENTS BREAKUP EXPENSE FEE/EQUITY -------------------
CLOSED BUYER/TARGET PROVISION PRE-ANNOUNCEMENT FEE REIMBURSE. VALUE EQU. VAL. ENT. VAL.
- ---------- ---------------------------- --------- -------------------------- -------- ---------- ---------- --------- ---------
Fox Paine & Co LLC Yes No inducements $16.0 $3.0 * 4.1% 4.9% 2.5%
Medic
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/99 Management and Trivest Yes Reimburse expenses up to $6.0 $1.2 2.4% 2.8% 2.8%
NA Winsloew Furniture Inc $1.2 million
2/3/99 Management and Vestar Yes No inducements $14.0 $1.5 2.7% 3.0% 3.1%
NA St John Knits Inc
11/23/98 Management Yes No inducements None $1.8 NM 2.2% 4.0%
NM Hudson General
10/22/98 Welsh Carson Yes No inducements $3.0 NA 1.6% NA NA
NA Centennial Healthcare Corp
7/24/98 Blackstone and Veritas Yes No inducements None None NM NM NM
9/21/98 Republic Engineered Steels Tender offer
6/24/98 Apollo Management LP Yes Management presentations to $6.0 $1.5 3.1% 3.8% 3.0%
8/28/98 MTL Inc other bidders delayed
6/23/98 Investor Group Yes Three week exclusivity $6.5 $1.5 4.1% 5.1% 3.2%
NA Celadon Group Inc Expense reimbursement
4/21/98 Jupiter Partners LP Yes Exclusivity $6.0 Yes 2.6% 2.6% 2.2%
8/25/98 PCA International Inc.
3/13/98 Management Yes No inducements None None NM NM NM
NA Pollo Tropical Inc. Tender offer
3/13/98 Welsh Carson Yes No inducements $6.8 Yes 3.0% 3.0% 1.8%
7/31/98 MedCath
2/17/98 Investor Group Yes No inducements $2.5 $0.5 1.7% 2.0% 1.4%
8/17/98 Bell Sports
1/15/98 Bruckmann Rosser Sherrill Yes One week exclusivity ND ND NA NA NA
5/29/98 MEDIQ Incorporated
12/22/97 Clayton, Dubilier & Rice Yes No inducements $24.5 $5.0 2.8% 3.3% 3.5%
5/21/98 Dynatech Corp.
8/7/97 Thomas H. Lee Co. No No inducements $25.0 $12.0 2.4% 3.6% 2.8%
1/21/98 Fisher Scientific Int. Inc.
7/11/97 Fremont Partners et al. Yes Three weeks exclusivity $30.0 $2.0 3.7% 3.9% 4.1%
11/6/97 Kinetic Concepts, Inc. $24 million damages
provision if exclusivity
violated
6/24/97 Apollo Management, L.P. Yes No inducements $3.4 $1.8 4.4% 6.7% 6.1%
9/29/97 SMT Health Services Inc.
6/6/96 Investor Group Yes No inducements None None NM NM NM
10/1/96 AT&T Capital Corp.
4/23/96 Investment Group (Mgmt) Yes No inducements $8.0 None 1.1% 1.1% 1.0%
8/22/96 Sterling Chemicals, Inc.
10/26/95 Investment group (Mgmt) Yes No inducements $37.5 $6.7 2.8% 3.3% 1.9%
3/28/96 Riverwood International Inc.
-----------------------------------------------------
Mean (excluding Medic) 2.7% 3.3% 2.9%
Median (excluding Medic) 2.7% 3.2% 2.9%
-----------------------------------------------------
</TABLE>
* Breakup fee is $19.0 including expenses. Estimated expenses based on
capital structure, legal, filing, etc.
- 19 -
<PAGE> 22
PROJECT MEDIC Appendix E
WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
($ in millions, except per share data)
<TABLE>
<CAPTION>
Levered Unlevered Debt/Mkt. Cap. Market Equity
Ticker Company Beta(a) Beta(b) Ratio Debt(c) (i) Value(i)
- ------- ------------- -------- --------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ARRO US ARROW INTL 0.83 0.78 9.7% 65 611
CNMD US CONMED 0.81 0.55 43.5% 380 493
DEX US DEXTER 0.84 0.73 20.8% 235 894
MEDIC 0.99 0.55 56.9% 369 280
MNTR US MENTOR 1.25 1.24 1.4% 6 390
OMI US OWENS & MINOR 0.88 0.70 29.7% 150 355
SFSK US SAFESKIN 1.34 1.21 15.0% 111 630
------- --------- --------------
0.88 0.73 20.8%
</TABLE>
<TABLE>
<CAPTION>
Median
Assumptions
- ---------------------------------------
<S> <C>
Marginal Tax Rate 40.0%
Risk Free Rate of Return(d) 6.01%
Equity Risk Premium(e) 7.50%
</TABLE>
<TABLE>
<CAPTION>
Pre-Tax/After-Tax Cost of Debt
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
8.00% 8.25% 8.50% 8.75% 9.00% 9.25% 9.50% 9.75%
4.80% 4.95% 5.10% 5.25% 5.40% 5.55% 5.70% 5.85%
</TABLE>
<TABLE>
<CAPTION>
Median
Debt/ Debt/ Unlevered Levering Levered Cost of
Cap. Equity Beta Factor(f) Beta Equity(g) Weighted Average Cost of Capital(h)
------ ------ --------- --------- ------- --------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.0% 0.0% 0.73 1.00 0.73 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4% 11.4%
10.0% 11.1% 0.73 1.07 0.77 11.8% 11.1% 11.1% 11.1% 11.2% 11.2% 11.2% 11.2% 11.2%
20.0% 25.0% 0.73 1.15 0.83 12.3% 10.8% 10.8% 10.8% 10.9% 10.9% 10.9% 11.0% 11.0%
30.0% 42.9% 0.73 1.26 0.91 12.8% 10.4% 10.5% 10.5% 10.6% 10.6% 10.7% 10.7% 10.7%
40.0% 66.7% 0.73 1.40 1.02 13.6% 10.1% 10.2% 10.2% 10.3% 10.3% 10.4% 10.5% 10.5%
50.0% 100.0% 0.73 1.60 1.16 14.7% 9.8% 9.8% 9.9% 10.0% 10.1% 10.1% 10.2% 10.3%
60.0% 150.0% 0.73 1.90 1.38 16.3% 9.4% 9.5% 9.6% 9.7% 9.8% 9.9% 10.0% 10.0%
</TABLE>
Notes:
(a) Barra projected betas.
(b) Unlevered Beta = Levered Beta/[1+(1-Tax Rate)(Debt/Equity)]
(c) Debt includes Short-Term Debt and Long-Term Debt.
(d) Risk Free Rate is 30-Year Treasury Bond Yield as of June 09, 1999.
(e) Represents the long-horizon expected equity risk premium based on
simple differences of historical arithmetic mean returns from 1926-1996
(Ibbotson Associates' 1997 Yearbook).
(f) Levering Factor = [1 + (1-Tax Rate)(Debt/Equity)]
(g) Cost of Equity = (Risk Free Rate of Return)+(Levered Beta)(Equity Risk
Premium)
(h) Weighted Average Cost of Capital = (After-Tax Cost of
Debt)(Debt/Cap.)+(Cost of Equity)(Equity/Cap.)
(i) Reported in local currency.
- 20 -
<PAGE> 1
Exhibit (c)(6)
AMENDED AND RESTATED
INVESTOR PARTICIPATION AGREEMENT
THIS INVESTOR PARTICIPATION AGREEMENT (this "Agreement"), dated June
13, 1999, as amended and restated on September 30, 1999, is made by and among
Fox Paine Medic Acquisition Corporation, a Texas corporation ("Purchaser") and
the undersigned individuals, whose names are set forth on the signature page
below (collectively, the "Investors" and, together with Purchaser, the
"Parties"), acting in their individual capacities (other than Kenneth W.
Davidson, who is acting in his individual capacity and as general partner of
Davidson Management International Limited Partnership).
WHEREAS, concurrently herewith, Purchaser and Maxxim Medical, Inc., a
Texas corporation (the "Company"), are entering into an Agreement and Plan of
Merger, of even date herewith (the "Merger Agreement"), providing for a
recapitalization transaction that will result in Purchaser and the Investors
owning substantially all of the outstanding capital stock of the Company, as
more fully set forth therein;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
1. Parties to be Bound by Attached Term Sheet. The Parties, and each of
them, severally agree to all of the terms and conditions set forth in the term
sheet attached hereto as Annex A and the attachments thereto (the "Term Sheet")
and the stock and option treatment provided therein, and, unless and until
definitive documentation incorporating the terms set forth in the Term Sheet has
been executed and delivered, each of the Parties agrees that the Term Sheet
constitutes a binding agreement among the Parties, enforceable against each such
Party in accordance with its terms.
2. Execution of Definitive Documentation. Each Party agrees to
negotiate in good faith and use all reasonable efforts to prepare, execute and
deliver definitive agreements and other instruments implementing the terms set
forth in the Term Sheet on reasonable and customary terms; provided, however,
that no failure or delay in the delivery and execution of such definitive
agreements or instruments shall affect the validity, enforceability or binding
nature of the Term Sheet. Without limiting the foregoing, Purchaser agrees that
after Closing the Company will prepare, adopt and effectuate any employee
benefit plans, including stock option plans, and including issuing options to
purchase shares of its capital stock pursuant to such plans, as may be necessary
to effectuate the purposes and intent of the Term Sheet.
3. Merger Agreement. Each Investor hereby acknowledges that such
Investor has read the Merger Agreement and has had an opportunity to consult
with such Investor's counsel concerning the same, and the Investor accepts and
agrees to the terms and conditions of the Merger Agreement that relate to the
treatment of such Investor's shares of Company common stock (including as
provided in Section 1.8(b)) and such Investor's options to purchase shares of
Common Stock (including as provided in Section 1.10), and the Investor hereby
irrevocably waives any claim that the Merger Agreement, the Merger or any other
transaction contemplated by the Merger Agreement (including the Circon Sale (as
defined therein)) violates any right of
<PAGE> 2
the Investor under the Texas Business Corporation Act, any fiduciary obligation
owed by the Company or any of its directors or officers to the Investor, or any
obligation owed by the Company to the Investor pursuant to any agreement between
the Company and the Investor or pursuant to any employee benefit plan or stock
option or similar plan of the Company in which the Investor participates.
4. Miscellaneous. The Parties hereto agree as follows:
a) Amendments. This Agreement may not be amended except
by an instrument in writing signed by all of the Parties hereto; provided that
any Party may waive or amend any right of such Party hereunder.
b) 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.
c) 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.
d) Termination. In the event the Merger Agreement is
terminated in accordance with its terms prior to the occurrence of the Effective
Time, 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 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.
e) Obligations Several. The obligations of the Investors
hereunder shall be several and not joint and several.
-2-
<PAGE> 3
IN WITNESS WHEREOF, Purchaser, the Company, and each of the Investors
has executed this Agreement as of the date first written above.
FOX PAINE MEDIC ACQUISITION CORPORATION
By: /s/ Saul A. Fox
-----------------------------------
Name: Saul A. Fox
Title: Chief Executive Officer
(Investor Signatures appear on following page)
[Signature Page 1 of 2 to Investor Participation Agreement]
<PAGE> 4
INVESTORS:
/s/ Kenneth W. Davidson
---------------------------------------------
Name: Kenneth W. Davidson, in his individual
capacity and as general partner of
Davidson Management International
Limited Partnership
/s/ Peter M. Graham
---------------------------------------------
Name: Peter M. Graham
/s/ David L. Lamont
---------------------------------------------
Name: David L. Lamont
/s/ Henry T. DeHart
---------------------------------------------
Name: Henry T. DeHart
/s/ Jack F. Cahill
---------------------------------------------
Name: Jack F. Cahill
/s/ Alan Blazei
---------------------------------------------
Name: Alan Blazei
/s/ Joseph Dailey
---------------------------------------------
Name: Joseph Dailey
/s/ Suzanne Garon
---------------------------------------------
Name: Suzanne Garon
/s/ Ernest J. Henley
---------------------------------------------
Name: Ernest J. Henley
/s/ Davis C. Henley
---------------------------------------------
Name: Davis C. Henley
[Signature Page 1 of 2 to Investor Participation Agreement]
<PAGE> 5
AMENDED AND RESTATED
PROJECT MEDIC
MANAGEMENT/DIRECTOR EQUITY INVESTMENT AND STOCK AND COMPENSATION TERM SHEET
This term sheet sets forth the principal terms and conditions under which the
executive management team (the "Management Investors") and Ernest J. Henley and
Davis C. Henley (the "Other Investors", and together with the Management
Investors, the "Rollover Investors") of Maxxim Medical, Inc. ("Medic" or the
"Company") are to retain an equity interest in Medic and Circon Corporation
("Citron") upon the recapitalization of the Company and related transactions
(the "Recapitalization") by the investment funds managed by Fox Paine &
Company, LLC ("Fox Paine") and the Rollover Investors. It also sets forth the
principal terms and conditions of the ongoing stock and compensation
arrangements.
RECAPITALIZATION PRICE: $26 per share.
ROLLOVER INVESTORS: The names, share ownership, vested options, and
unvested options of each Rollover Investor are
summarized in Exhibit A. Exhibit B provides
additional detail concerning the split-up of Citron
from Medic and its effect on shares and options held
by the Rollover Investors. If, in order to
facilitate the Recapitalization, Fox Paine
reallocates its relative equity contributions
between Medic and Citron, the Rollover Investors
agree that their respective equity in Medic and
Citron will also be equitably adjusted in order to
preserve the proportionate ownership between the
Rollover Investors and Fox Paine currently reflected
in Exhibits A and B.
SHARE OWNERSHIP The Rollover Investors collectively own 927,318
AND ROLLOVER: shares of Medic common stock (excluding shares owned
by the Other Investors not being rolled over) (see
Exhibit A). Each Rollover Investor will retain the
number of shares in Medic and acquire with the
proceeds of the cashout of Medic shares in the
Merger the number of shares in Citron in each case
as set forth in Annex III to Exhibit B.
VESTED AND The Management Investors collectively hold options
UNVESTED OPTIONS: to purchase 1,084,200 shares of Medic common stock
(see Exhibit A). Upon the consummation of the
transaction, the Management Investors will receive a
cash payment in respect of 668,025 options (both
vested or unvested) equal to the difference between
the Recapitalization Price and the exercise price of
each such option (less applicable withholding taxes)
on the same basis as other Medic option holders are
being cashed out in the transaction (options at
various purchase prices to be cashed out
proportionately). The after-tax cash proceeds from
the cancellation of the 668,025 Medic options will
be required to be reinvested in Medic common stock
at the Recapitalization Price (the "Medic Additional
Shares"). Each Management Investor will receive a
new option in respect of the number of shares of
Medic common stock set forth on Annex III to Exhibit
B at an exercise price equal to the
<PAGE> 6
Recapitalization Price (the aggregate being 668,025
less the Medic Additional Shares purchased pursuant
to the prior sentence). The remaining 416,175
options in Medic held by the Management Investors
will be canceled and each Management Investor will
also receive new options in respect of a number of
shares of Citron equal to such canceled option
shares and with an exercise price equal to the
Recapitalization Price. In addition, the Management
Investors will be entitled to receive a cash bonus
payment of approximately $5.0 million in the
aggregate as provided for in item 3 of the "Option
Rollover Mechanics" section of Exhibit B hereto. New
options will be fully vested and permit cashless
exercise with "mature" shares (payment of the
exercise price with previously owned shares).
CITRON TAX LOAN: In connection with the Citron share rollover from
Medic shares, tax loans will be extended to the
Rollover Investors in an amount sufficient to cover
the taxes due on the Medic shares sold to rollover
into the Citron rollover shares. Interest on the
loans will be imputed at the minimum allowable rate
and will be "bonused" and grossed-up for the tax on
any bonus amounts. The Citron tax loans will be
mandatorily repayable from the after-tax proceeds of
the sale of Citron shares (and not required to be
repaid from the proceeds of the sale of Medic
shares), and shall not accelerate on termination of
employment.
EXISTING MANAGEMENT In May 1997, the Company issued 400,000 shares of
PROMISSORY NOTES: common stock pursuant to a Senior Management Stock
Purchase Plan at $13.00 per share. The stock was
issued in exchange for an aggregate of $4,498,000
currently outstanding principal amount in
non-interest bearing, full recourse promissory notes
(the "Management Promissory Notes") due May 23, 2000
from the participating managers who are Management
Investors. The Management Promissory Notes will
remain outstanding after the Recapitalization and be
extended until the tenth anniversary of the closing
(except that (x) Management Promissory Notes from
any employee who is not a Management Investor will
be required to be repaid by the employee in
connection with the cash-out of his or her options
provided for in the Merger Agreement and (y) the
Management Investors will be required to prepay the
Notes with the after-tax proceeds of any sales of
stock or options made after the Effective Time). The
50% profit recovery provision currently in place
shall be amended out of the documents. The
Management Promissory Notes will not accelerate on
termination of employment. The Management Promissory
Notes and related security arrangements will be
split pro rata between Medic and Citron.
NEW MANAGEMENT EQUITY The Company and Citron each will provide a New
INCENTIVE PLAN: Management Equity Incentive Plan (the "New Incentive
Plan") which will grant to the Management Investors,
as of the Effective Time, options (the "Option
Pool") to purchase up to 10% of the common equity of
the
<PAGE> 7
Company and Citron (in each case on a fully diluted
basis) at a strike price equal to the
Recapitalization Price. The New Incentive Plan will
generally provide for a ten year option term and
will permit cashless exercise with "mature" shares
(payment of the exercise price with previously owned
shares). EBITDA Targets will be adjusted equitably
to reflect acquisitions and dispositions. The Option
Pool will consist of (x) half performance-based
options ("Pool A Options") that vest according to
the schedule below and (y) half time-based options
that vest in equal increments on each of the first
through fifth anniversaries of the closing (the "Time
Based Options").
<TABLE>
<CAPTION>
VESTING SCHEDULE FOR POOL A COMPANY OPTIONS
------------------------------------------------------------
FISCAL EBITDA % OF OPTION POOL VESTING THROUGH
YEAR TARGET ACHIEVEMENT OF EBITDA TARGET
--------- ------ --------------------------------
(IN MILLIONS)
<S> <C> <C>
1999 $80.9 20%
2000 $84.3 20%
2001 $88.5 20%
2002 $92.9 20%
2003 $97.6 20%
<CAPTION>
VESTING SCHEDULE FOR POOL A CITRON OPTIONS
------------------------------------------------------------
FISCAL EBITDA % OF OPTION POOL VESTING THROUGH
YEAR TARGET ACHIEVEMENT OF EBITDA TARGET
--------- ------ --------------------------------
(IN MILLIONS)
<S> <C> <C>
1999 $24.6 20%
2000 $37.4 20%
2001 $38.9 20%
2002 $40.5 20%
2003 $42.1 20%
</TABLE>
Pool A Options that do not vest will become "Pool B
Options" and will vest at the earliest of: (i) the
next fiscal year in which the EBITDA Target is
achieved, (ii) Fox Paine's realization of its
investment in the Company or Citron, as the case may
be, provided that such realization yields an IRR to
Fox Paine of at least 30.0% after giving effect to
the vesting and exercise of the Pool B Options
pursuant to this clause (ii), or (iii) the ninth
anniversary of the date of grant. For the purposes
of the Pool B Options, a primary initial public
offering of the Company's or Citron's stock, as the
case may be (an "Initial Public Offering"), shall
not constitute a realization of Fox Paine's
investment in the Company or Citron, respectively.
The Time Based Options and the Pool A Options will
also vest and be exercisable, regardless of the
passage of time, upon Fox Paine's realization of an
IRR of at least 30.0%.
<PAGE> 8
ALLOCATION OF OPTION POOL: The total Option Pool will be granted to the
Management Investors, based on the recommendation of
Kenneth W. Davidson for approval by the Compensation
Committee of the Board of Directors.
TERMINATION OF NEW Stock options granted under the New Incentive Plans
INCENTIVE PLAN OPTIONS: that are unvested as of the date of a Management
Investor's termination of employment with the
Company, Citron and/or their respective subsidiaries
for any reason will be forfeited upon the date of
termination. Stock options (under old and new plans)
that are vested as of the date of termination may be
exercised for one year following the termination of
employment. Vested stock options that are not
exercised within one year of the date of termination
will be forfeited.
BONUSES: The Management Investors will receive aggregate
bonus compensation, as specified in Exhibit C.
EXISTING SEVERANCE Existing employment agreements and severance
AGREEMENTS/NEW agreements for the Management Investors will be
EMPLOYMENT terminated without payment and superseded by new
AGREEMENTS: employment agreements that will become effective
upon the consummation of the transaction. The
material terms of the new agreements are set forth
on Exhibit D.
TAG-ALONG RIGHT: If, at any time prior to an Initial Public Offering,
Fox Paine or a Rollover Investor (as the case may
be) accepts a third party offer to sell any or all
of its common stock in either company (other than to
a permitted transferee), Fox Paine and each other
Rollover Investor (as the case may be) will be able
to participate on a proportionate basis, based on
ownership, at the same price and on the same terms
in the sale of shares of such company.
DRAG-ALONG RIGHTS: Prior to an Initial Public Offering, if Fox Paine
sells at least 50% of its common stock in either
company in a bona fide arm's length transaction or
series of related transactions, Fox Paine may
require the Rollover Investors to sell a
proportional number (on an as-converted basis) of
their shares of common stock in that same company in
the same transaction (at the same price and on the
same terms, with appropriate adjustments for
warrants or options).
<PAGE> 9
REGISTRATION RIGHTS: After an Initial Public Offering, the Rollover
Investors will have one demand in Citron and two in
Medic, and Fox Paine will have five in each. All
such parties will have full piggybacks in each
other's demands, with no relative priority as to
cutbacks; cutbacks will be proportional based on
ownership among the parties, no matter who initiated
the demand. Fox Paine and Rollover Investors will
also have customary "piggyback" registration rights.
Expenses, in both demands and piggybacks, to be
borne by Medic or Citron, as the case may be. Other
customary registration rights provisions will apply,
including holdbacks, indemnification and
contribution provisions. If Fox Paine is permitted
to sell secondary shares in an Initial Public
Offering, the Rollover Investors will get a
proportionate opportunity.
RIGHT OF FIRST OFFER: Fox Paine and the Rollover Investors will have
reciprocal proportional rights of first offer
(seller to propose minimum sale price) on transfers
of shares (acceptance must be all shares offered or
none as to the group), other than transfers to
customary permitted transferees (including with
respect to Fox Paine, its investors and affiliates,
and including with respect to Rollover Investors,
family members and trusts for them), prior to an
Initial Public Offering. Permitted transferees step
into shoes of transferor for transfer restriction
and registration rights provisions.
LIQUIDITY UPON DEATH OR Citron Shares: The Management Investors will have
DISABILITY AND CERTAIN the right to "put" all of their Citron shares to
TERMINATIONS: Citron at fair market value, upon death or
disability or termination of employment for Good
Reason, or by the companies without Cause (each as
defined in the Employment Agreement).
Medic Shares: The Management Investors will have the
right to "put" their shares of Medic which were
acquired upon the exercise of stock options
(provided that the shares have been held for at
least six months), less the number of shares used to
exercise in cashless exercises, but including the
Medic Additional Shares (the governing objective
being to preserve recapitalization accounting) to
Medic at fair market value, upon death or disability
or termination of employment for Good Reason or by
the companies without Cause.
Notwithstanding the above, the put rights described
above will be subject to each company's available
cash flow, debt restrictions and any legal
restrictions on distributions of cash from the
relevant company. In the event the payments with
respect to put rights are not satisfied in whole or
in part immediately, the payments will be a
continuing obligation of the relevant company and
such rights will be satisfied before the payment of
any dividends or distributions to shareholders. Any
unpaid amounts upon exercise of a put right will
accrue interest at applicable "afr" rate. The put
rights terminate upon an Initial Public Offering.
<PAGE> 10
CALL RIGHT: Prior to an Initial Public Offering, Citron will
have call rights at fair market value with respect
to Citron stock only, upon a termination of
employment by the companies for Cause or by the
Management Investor voluntarily (without Good
Reason).
BOARD OF DIRECTORS: Each Company's Board of Directors will initially
consist of Kenneth W. Davidson (Chairman), Ernest J.
Henley, Ph.D. and one other member to be appointed
by the Rollover Investors and four members
designated by Fox Paine (not limiting Fox Paine or
the companies' rights to add additional directors).
The right to appoint Board members will terminate
upon an Initial Public Offering or significant
reduction in ownership percentage. While Ken
Davidson is CEO or Chairman of the Board, all three
Rollover Investor representatives will be designated
by him; thereafter, by plurality vote of shares held
by the Rollover Investors.
INDEMNITY: Following the consummation of the transaction, the
Board of Directors of each Company will adopt a
customary mandatory indemnification and expense
advancement policy for officers, subject to any
limitations imposed by applicable law.
